How to Start an AE Firm

Learning Series

July 11 2016 // 5:00 AM

Open or Closed Books for Your A/E Firm

Written by Jared Perry | @PAEVENjared

Part 6: Open or Closed Books for Your A/E Firm

What did you think of when you read the title to this article? My guess is you probably thought about sharing information. Or worse, you thought about hiding information. I think it’s important to address this before compensation plans, marketing plans, or general business plans of your firm. I advocate that you practice open book management with your employees from the get go. This concept is something I learned from a mentor about 10 years ago. I was telling him about my ambitions to open my own firm someday and he said that I should really read The Great Game of Business by Jack Stack.  He advocated that it would teach me about management and understanding the psychology of the employee. I was excited to check it out because I wanted to learn more about management and financials. However, the most powerful takeaway was what I learned about the employee. I was an employee at the time, so I didn’t think I needed any guidance there – wrong. I instantly saw both sides of the coin and how my actions, reactions, and wondering mind, might affect the company. If you haven’t read it – do it. You can buy it on Amazon right now for literally $2.00:  Great Game of Business

Okay, now that I’ve talked about the book, let me pitch the Great Game of Business (GGOB) to you. We have used open book management and GGOB at Sixmo Inc. since its inception and have grown 400% each year. We are also currently in the midst of setting up a second and third office location in 2016. Our office is comprised of men, women, 20 somethings, 30 somethings, 40 somethings, 50 somethings, and 60 somethings. We have republicans, independents, and democrats. We have different races and different orientations. We have smokers and non-smokers. Beer drinkers, wine drinkers, and non-drinkers. And guess what? This system works for all of them. They love it. So take your doubts about sharing information and forget them. The only way it doesn’t work is if you have something you want to hide or are too embarrassed to show others. That mindset is the epitome of the word “boss.” I don’t teach “bosses,” I inspire “leaders.” Teach your team how your business works and you will benefit greatly.

So when you say open books, what do you mean?

Everything. We open it all. We teach it all. Every single one of our employees knows what goes into a multiplier. They all know what pre-tax margin means. They know how much money we need to earn each week to keep the doors open and the lights on. They know everyone’s billability. They know which clients have outstanding invoices. They all know everyone’s salaries, including the two principals. The list goes on and on. When I say open books, I mean open books. 

I’ve heard a lot of people say they run open books and that they share information with their teams, but the truth is, they don’t. They share what they want to share. They share numbers that still leave an employee wondering “what does he or she really make?” When you only share half the truth, it leaves room for 50% of what is real to be exaggerated. In GGOB they refer to a study that determined that employees typically are off by a factor 6 when asked about how much their bosses make. Six times!! Can you imagine if you made six times what you actually make? Now understand that by not sharing numbers with your employees, that is what they think anyway. You are making 1/6th of what they think you are making. Am I starting to get through here?

Don’t get me wrong, I’m not advocating owners or managers making less money. I’m advocating educating your employees to understand how the company makes money and loses money. How what you do is valuable. How what their peers do is valuable. In the words of Tommy Lee Jones from Men In Black, “A person is smart, people are stupid.” If you invest time into teaching each employee how your business works, then you won’t have to worry about the rumor mill ruining your work environment and culture.

So how do you implement it?

One thing we do at Sixmo Inc. is have each employee read the book and then present a chapter every Wednesday at our weekly huddle. The newbies get the opportunity to tell everyone else what they are getting from the book and how they think it applies to the company. Everyone else gets to offer their insight and understanding of GGOB as they hear and re-hear the topics presented. We do this for each new employee we bring on. If there is a time where we don’t have a new employee starting, then the two principals will present the book. The idea and concept is to always have the principles of GGOB front and center. Top of mind is top of tongue.

One thing I’ve learned that is universal is that people love to learn. They don’t necessarily all like to read books, watch TV, or spend years and years in college, but they love to learn. This desire to learn is magnified when it relates to what one does every day. Take advantage of that, the results with shock you.

What if I take the time to teach them and then they leave?

Good. Let them spread the word about how an office should run. You have to realize that you created a work environment that will be extremely hard to match in today’s world. The grass on the other side isn’t always greener. Most of the time its brown or hardpan. Also, and here comes a wee bit of a rant… wait for it… you’re not going to believe this but… you want employees that “might” leave. If a candidate walks into your office for a job and just strikes you as a lifer – PASS. I want people that are motivated. I want to surround my A-listers with other A-listers. I don’t want employees who want to work at our firm because they heard we are growing and want a safe bet. I want people who want to come in and learn our system and then figure out ways to make it better. I want the BASF of employees (now that is a fresh reference). 

Bottom line, don’t be scared to hire great talent because it might one day walk out the door. If you find yourself saying goodbye (and you will), encourage the heck out of them. Help them find that new job or new career. Wouldn’t you want them to look back and think fondly of their time under your tutelage? I do. It would crush me if someone believed in their heart that I didn’t treat them fairly. I have to imagine it would affect you as well. So enjoy the time you have and embrace teaching your employees. I promise you that you will learn more from that then anything you can read in a book or in these articles.

Takeaways:
    

  1. Open book management teaches employees how the company makes money and loses money. If they depend on the company for a paycheck don’t you think they will try to help it make money?

  2. Don’t just open half or 3/4 of your books. Open them all the way. The truth shall set you free.

  3. Embrace teaching and leadership. Don’t worry about people leaving someday. The more motivated the employee, the more you will be able to push them to elevate themselves, those around them, and your company.


UP NEXT >> Part 7: Compensation Packages

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