What is OBM?

Extract from Vision Pursuit– Essential Business Reading Summaries – Open Book Management – John Case 1995

Open Book Management (OBM) is a way of running a business …
It gets rid of the old approach to management, in which bosses run the show and employees do what they are told. It takes the best new ideas – empowerment, quality, teams and so forth – and gives them a business logic.
Employees understand why they are being called on to solve problems and they have a reason to do so.

O’Connells OBM Pty Ltd conduct their OBM environment by:

• Tabling “operational data statistics” weekly for peer information and review. These are graphs of the critical numbers.
• Tabling and discussing of the firm’s full financial results, in a structured monthly management meeting forum and on a six monthly basis in a strategic planning setting.
• Having a profit share scheme, so that the team members have a “stake in the outcome”.

The results are evident, in that it gets team members to feel, and more importantly provides a forum for team members to think and act like business owners, giving team members the opportunity to contribute to the running and development of the business. As opposed to just reviewing the results of the business, team members are encouraged to comment on (and are rewarded for actively working towards) improving the efficiency and effectiveness of the business and therefore the financial results.

Three characteristics that differentiate an OBM business compared to a conventional business are:

1. Learning and understanding the financials –
   Equipped with an understanding of financial information, team members are able to focus on the critical numbers of the business – that is, those numbers that make a difference to the profitability and sustainability of the business.
2. Moving numbers in the right direction -
   OBM facilitates discussion and ideas. Input is encouraged from all team members across all facets of the business in an attempt to keep the business moving in the right direction.
3. Having a direct stake in the outcome -
   A profit share scheme is linked to OBM, which encourages and motivates, and recognises and rewards effort.

The idea behind the element of improving profit is not to work too hard (and burn out), but to “work smart”, by finding the good ways to do things and balancing work and play time.

The profit share scheme also promotes long-term thinking, and is a mechanism for continually achieving into the future. It acts as a motivational tool to encourage team members to continue creating, innovating and improving – ensuring lasting viability for the business.

Read more: Why implement OBM?