How would you react if someone asked you to share a copy of your profit-and-loss statement with all your employees? Most likely, you would turn three shades of red and, when you finally calmed down, ask the person if he is crazy.
Owners of privately held businesses usually keep financial details close to the vest. Can you blame them? Just imagine the fallout if an employee disclosed the information to outsiders – or used the information to start his own trucking company. Intense secrecy about financial matters is ingrained in most business owners, so the concept of “open-book management” is alien to them. But in difficult times, OBM may be the very key to your company’s survival.
OBM takes various forms, but at its heart is the idea of trust. It means teaching employees how to read financial statements – and giving them yours to read. Usually, OBM involves giving managers and employees financial rewards for helping you achieve certain profit levels.
Even if you don’t use OBM to provide financial incentives, it can improve your relationship with personnel. Many employees – and even managers – believe that ownership of a trucking company is a “gold mine.” They simply have no idea how hard it is to make a profit. They see hundreds of thousands of dollars in revenue coming in. They rarely see that almost all of those dollars immediately go out in expenses.
By sharing financial information, however, you suddenly gain allies in the fight for profits because everyone understands how thin profits can be. In this economy, you can’t afford to have anything but all of your resources – including the minds and efforts of key employees – dedicated to achieving profits. Employees can’t help you make profits if they aren’t trusted to know the targets and aren’t trained to understand the business.
Hi-Way Transport, a 65-power unit flatbed operation, recently adopted a form of OBM by setting up a critical circle of key company employees and sharing financial information weekly.
“It was scary at first,” says June Cummings, co-owner of the Tuscaloosa, Ala.-based carrier. “But what has resulted is a blossoming of ideas that are having immediate and positive impact on our company. Looking at what we have gained, I wish we had done it sooner.”
Kyle Bryan, dispatcher and manager of fleet operations, felt appreciated. “I saw it as a real indication that I was trusted and valued,” Bryan says. “This made me want even more to do a better job. What I’ve learned so far is how the little decisions we make every day can have a huge impact on our financial success. I look at the company in a totally different way now, and I feel like an owner.”
Cord Myrick, director of logistics, attended the meetings and found a huge improvement in the management style of the owners. “It’s like night and day, the improvement we’ve seen. They are now open to adopting many new ideas that we know will pay off.”
If you need some added comfort with OBM, consider confidentiality agreements. And take some time to learn about OBM; there’s a lot more to it than just sharing financial statements. But it might be just the thing you need to improve the bottom line.
See “How Open Book Management Can Help Your Business,” by Jenny C. McCune, Bankrate.com, at this site.
Also see How to Use Financial Statements, by Kenneth DeWitt, at www.smallcarrieruniversity.com.
Kenneth dewitt is a CPA and Certified Financial Planner who serves as a part-time chief financial officer for a variety of businesses, including trucking companies.