Open Book Management

Hanover Co-op treats employees like owners

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The systems and culture of the Hanover Co-op have been developing for nearly 75 years. We have been fortunate to have had strong leadership committed to cooperative values and have been seen as an essential part of the life of our community. Yet our business culture has been marked by a top-down approach that leaves little space for innovation and broader worker participation outside of traditional roles. In 2005, we began to change that with the adoption of an initiative in open book management.

Open book is a business philosophy based on the idea that employees will work for the betterment of the organization if they understand how the business is run, they are allowed to have a hand in how that happens, and they have a stake in the outcome—that is, if they are treated like owners. Above all, open book management is based on sharing information about the business and sharing in the results of success.

At Hanover, we began our initiative studying open book, primarily from Great Game of Business by Jack Stack and Open Book Management by John Case. We also brought in Ari Weinzweig and Maggie Bayless from Zingerman’s in Ann Arbor, Mich., who gave us a seminar on “Fun, Flavorful Finance.” With a little knowledge and lots of hope, we set off.

Our first go-around (and first of many mistakes!) was to announce the initiative to everyone but to begin to implement on a pilot program basis with a couple of select departments that management thought were ready. This was certainly a way to test some ideas, but the result was that it moved some people along faster and kept others in the dark. Consequently, staff knowledge of the initiative was uneven, and results were slow to appear. At first, the test departments began to hold “huddles” or brief operational meetings to review trends and to make plans for the coming week. Operational results were shared with the group, and there was some degree of buy-in. Change was painfully slow, but we plugged along.

In an attempt to speed up our learning, over a two-year period we sent groups of enthusiastic people away to St. Louis to participate in a training event called “The Gathering of Games,” and they came back with lots of energy and enthusiasm to keep us going. Our strategy was to try and build a core group of people who would help us get to a critical mass of adherents.

Throughout our first couple of years, we kept asking ourselves how we would know if it was working and simply answered, “We’ll know.”

The more data you give, the more they want

Keeping employees informed about the business is contingent on giving them accurate information with which to make operational decisions. One image we used to get managers to think about sharing information was that of a bowler at a bowling ally who is forced to try and knock down the pins from behind a screen. Unable to see the pins, the bowler is unlikely to knock down many pins. The same held true for our staff. Unable to know what the results of their work were, it was unlikely they were going to really know if they were having success.

So we started sharing data. We showed folks where to find sales data, for example. Once they knew what their departments were doing in sales, we began to ask that they try to make sales projections. The leap from passively collecting data on what had happened to making predictions on what would happen was interesting and exciting. Suddenly people were more interested in the results and in why those results were what they were. Huddles became more about how to affect sales (or margins, or profitability, etc.) and less about all the things that were wrong with the department/world/life, etc. We began to sense it was working.

An early, unexpected benefit of our open book process involved the improvement in morale in one of the first pilot departments. As we shared data with the department about operations, the workers in that area became more interested in the elements that made them successful. As that interested group reached a critical mass within the department, peer pressure began to be exerted around negativity and workers who were “not on board” became increasingly alienated from the group. As things played out, an ultimatum was laid out—we want you to be here, but if you don’t want to join the rest of us in improving, you need to move on. Amazingly, the group forced behavioral changes that resulted in improved performance that has had a long-lasting effect.

Our open book initiative was not a panacea but is based on good management principles. Communicate often. Teach the fundamentals of business. Realize that everyone’s contribution matters. Easier said than done!

An early mistake we made involved semantics. We thought that a key element of involving workers in the management of the co-op was to ensure that supervisors supported staff so they could do their best work. It is a manager’s job in open book to provide staff with the tools to do a good job and to clear obstacles that prevent success. We called this element “servant leadership,” but not many of our middle managers were ready to be servants! Many of those managers had earned their positions by coming up through the ranks. They had done good work, and they expected to be treated like they treated their own bosses, with deference. Having achieved some status, they were not about to be servants (interpreting the word as “menial” or even “slave”).

Of course the idea of servant leadership is much more complicated, but we did not explain it very well and consequently spent far too much time undoing that mistake. Now we just refer to the supportive role managers must play to help department staff succeed.

Another of the early lessons we learned involved the sharing of information, which is really what an open book experience is all about. We knew sharing results was a good thing but did not realize how good or how much it would come to be expected. Steve Miller, our Hanover store manager, often told our management team that the more information we shared, the more people would want. He knew intuitively that our staff desired to do a good job but needed the tools to make it happen. We learned that lesson forcefully in the process of sharing departmental margins.

In the past, management would produce departmental profit-and-loss statements that were either not shared with managers or only shared when there was a big problem. Managers were, for the most part, passive observers until something appeared to be wrong. But as we got further into open book, we began to talk more about operational issues and to develop more expectations. Managers started to work on departmental improvements and to plan for success.

Meat managers at our two stores, working closely with merchandisers, instituted several initiatives to produce stronger margins for their departments. After quarterly inventories were taken, results were eagerly anticipated, to determine if the initiatives were producing results. Following one of the first inventories, results came in at exactly the levels they had been the previous quarter. The meat managers felt something was wrong and began to ask questions. As it turned out, the accounting department had indeed gotten indications that meat margins were dramatically improved, but were still conservatively booking the results at a lower margin (not a bad idea since they were largely unaware of all the work that had gone in to improving margins). The meat managers and merchandisers informed accounting about all the changes made and agreed that another inventory would be taken at the end of the month to confirm (or not) the anticipated margins. Departmental margins again came in at the higher level anticipated by the managers, providing not only excitement about the good work they had done to make those changes, but boosting morale as well. Higher margins and higher morale = win, win!

Fun and games

The name of the primary book we used to teach ourselves about open book is the Great Game of Business, and we try to bring an element of fun and games into our work environment. The games we play are all about some aspect of our business, whether it’s finding a way to reduce shrink in the deli, increase the use of reusable bags, or increase the in-stock ratio of the products in the grocery aisle. Each game revolves around some aspect of importance to the improvement of our business—financially, environmentally or socially. So, the games we play have alignment with our cooperative Ends and business goals.

Sometimes the games at the co-op are played for prizes, but the value of the prizes always has to be covered by the value of a successful outcome to the co-op. Often games are played for the pure fun of reaching goals. In 2008, the grocery department of our Hanover store wanted to get a handle on out-of-stocks. They did a study to find the baseline of items not in stock on a weekly basis. Working from that number, they developed a game to see if they could make measurable improvement on their target. Each week, they would meet to discuss what had happened the previous week and what they intended to do to improve their score the next week. They used a whiteboard to keep a track of their progress. Over the course of a six-week period they were able to effect a dramatic improvement in the score, from a baseline of 250 to a low of 73 at the end of their game. There was no week during the game when the out-of-stock number went up. At the end of the period, the department decided to have a party to celebrate. They had a potluck in our boardroom, decorated the room, played a version of “Let’s Make a Deal” with prizes and had a great time. Having fun at work while benefiting service for the co-op’s members = win, win!

Games have been used in many departments for many reasons—teaching co-op principles or co-op history, for example. And the benefit is often in multiple layers. Our Hanover store front-end department played a game in which cashiers used creative ways to depict positive customer experiences, and we discovered talented artists and writers in our midst. Our Lebanon front-end department is currently involved in a game to better understand the co-op’s board-stated Ends policies. The point is that having fun can work in many ways to benefit the co-op, not the least of which is a heightened sense of working for the team.

Keeping score

Keeping score is an important element of the open book initiative. We all know intuitively that the things we measure are the things that get attended to. Open book focuses on results. Did sales rise or fall? Did our margins increase or not? Are we making progress on environmental goals? We track our progress by the numbers.

With the current economic downturn going on, we began to add a new twist, which is departmental planning on a quarterly basis. Since each departmental plan has some goals, we can keep score on how well we are doing according to the plan. Keeping score allows us to monitor performance on a regular basis on the key numbers of importance to our departments. Having goals and knowing results on a regular basis is important to keeping up interest and keeping people involved. Those things create dynamism in the process.

A couple of years ago, we created a co-op-wide goal of increasing profitability and promised to share a part of the profits with our workers. Everyone was aware of that number; we were able to achieve a good level of profitability, and workers received a nice bonus, which was swell. But what was even better was that, in order to achieve better profitability, we were forced to better understand our business and our “triple bottom line.” So when the economy went into a tailspin in the last year, our staff was better able to do the things that needed to be done to avoid catastrophe.

Working to keep all staff informed

Planning, scoring, goal-setting and creating more teamwork have all been critical elements in our open book initiative. Updating all staff on the results has also been important to keeping the initiative alive. When we began our open book efforts, we started holding quarterly meetings with department managers to keep them informed about how we were doing as a business and a cooperative. We presented important financial indicators and information on our environmental and social goals as well. Our expectation was that the information would then be shared in departmental meetings. The reality was that critical information was not moving throughout the organization. As a result we made the decision to hold quarterly “drop-in” sessions with staff at all locations so that all workers could have the opportunity to hear
firsthand how we were faring on important numbers related to our triple bottom line.

Over the past five years, Steve Miller has become Hanover Co-op’s resident expert on open book. In his role as open book sage, Miller is fond of saying that the burden of communication is one hundred times what you thought was adequate before, and the more we learn about open book, the truer his statement becomes. As we have provided more information, we have built new expectations. The more information we have provided, the more is wanted. That is a good thing. If our desire is for staff to “own” their work and the results they achieve, then we need to provide them with information. And when they receive that information, they can then make changes to improve the co-op for our members.

This is a short snapshot of the work we have done in open book since 2005. We are excited enough about the results that we are committed to going forward to see if this can truly be a transformative process for our organization.

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