Question:
I’ve been hearing more about open-book management. It seems to have some advantages but is it legal/ethical to let people know about salary information, for example?
– Restaurant owner, Washington
Answer:
Open-book management is the idea, popularized by business writer and consultant John Case, that giving employees and other key stakeholders full access to a company’s financials makes them partners in the organization with a better understanding of overall goals and how their contributions—positive or negative—affect the total enterprise.
While the idea is not common in restaurants, restaurants are increasingly opening their books to employees. The idea is that if the restaurant business is so challenging (and of course it is), then employees and other key parties should know how their actions affect the bottom line. Seeing the impact of a recent promotion on revenue; discarded food driving up food cost percentage; or how unplanned overtime kills labor cost, may help stakeholders to become more invested in the operations of the business and gets them on board to make strides to achieve common goals.
In terms of the ethical quandary, one way to share the books is in aggregate blocks such as total salary and total hourly wages; another is to assign anonymous identifiers to each employee. Others argue that for true open-book accounting, all details are open. Employees may be surprised to see that managers and owners are not the Scrooges of their imagination, gleefully piling stacks of money.
One of the main challenges of open-book accounting is that it takes a patient and skilled manager to explain the numbers in a way that motivates and doesn’t alienate or upset those with access to the information. While the trend seems in its infancy in our industry, we may see more of it in the coming months and years.
More on open book management in restaurants here.