Open Book Management Can Improve Sales Reps' Behavior
Question: I’d like to provide my salespeople information on costs, profits, etc., so that they have a healthy understanding and respect for our owner’s investment and risk, as well as their own value. Any suggestions as to how to go about it?
Answer: Yes, I’m an advocate of “open book management,” which is the term used to define this approach. What it means is that you share with your employees certain proprietary financial information and how their behavior influences those numbers. You do so on a regular basis.
A business is an enterprise whose effectiveness is measured by numbers. I believe that every member of that enterprise ought to have some idea of what those numbers are, and how they impact him or her.
You may, for example, have a monthly meeting to discuss company sales, expenses and net profits. You could use bar graphs to compare this month to last month, show year-to-date, or weigh both numbers against your current goals.
Don’t assume that everyone can understand a profit and loss statement. You’ll probably have to teach them how to decode the document.
I’d recommend that you put together a basic presentation, in which you define these terms, show the relationship between them and create a few scenarios that quantify how certain actions can impact the numbers.
I was recently at a dinner function with one of my clients where the company president spoke. He said, “A seven-tenths of a point in average gross margin would bring in an additional $75,000 in profit per day.” That’s a powerful example of what I’m talking about.
I don’t think it is necessary to show the entire line-by-line statement. That’s a layer of detail of which few people are interested in. Instead, use a few headings and keep it simple. If management is uncomfortable with providing absolute numbers, presenters may just want to use percentages.
Regardless, make it a point to show your employees the key measurements of how the business is doing, on a regular basis. Monthly works for me. Show it to them in a way that is simple and easy to understand. And, show them how their behavior can impact the bottom line.
Dave Kahle is one of the world’s leading sales authorities. He’s written 12 books, presented in 47 states and 10 countries, and has trained tens of thousands of salespeople and sales leaders. He can be reached at email@example.com. Visit www.davekahle.com for more information or sign up for his weekly Ezine.
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