The Viroqua Food Cooperative is undergoing a fundamental shift in the way we run our business and it relies on all the heads in the room.
A year ago I traveled with two other members of the VFC Management team, Jan Rasikas and Eric Speck, to Zingerman’s Zing Train in Ann Arbor, Michigan. We participated in a three day training based on the principles of Open Book Management. This concept was developed and implemented by Jack Stack at SRC Holdings and expressed in his book The Great Game of Finance. Zingerman’s Delicatessen implemented these same practices in the 1990’s and by 2003 was a completely Open Book Business.
My assumption walking into the training was that we were going to learn about creative ways to understand balance sheets, read profit-loss statements, and interpret financial statements. I was pleasantly surprised to discover I was completely wrong.
Open Book Management is a system in which everyone in the organization takes responsibility for the effective operation of the business, financial and otherwise.
This means the business is not being run by a solitary lone figure sitting in an office pulling strings like a puppet master and issuing commands. It also means that our financial information isn’t kept under lock and key and analyzed only by the select few in the inner circle. Instead, the creative forces of all the individuals performing the work are empowered to understand how the business works, why it works and most importantly, what we can do to make things better.
Sounds good, even revolutionary, but is it really possible? If Zingerman’s is any indication of the kind of success that is possible then the answer is a resounding YES! Currently the Zingerman’s Community of Businesses is a 45 million dollar industry with the same small origins as our own dear Co-op.
How does Open Book Management work? It starts with principles we call The Three Steps to Great Finance: Know and Teach the Rules, Keep Score and Share the Success.
Know and Teach the Rules
Every game has rules. If you don’t know the rules, it’s like sitting on the sidelines to a game of Punkin Chunkin or Bun Climbing (look it up, these are legitimate sports) and wondering what the point is. That’s why we have a Finance 101 Training for all staff that covers the 10 Rules of VFC Finance and our games. We are playing two games: Margin Minus Labor (MML) and Net Income.We report on the MML game every quarter and the Net Income at the end of the year. Understanding the rules is essential to creating success and winning brings great incentives!
Each week every department "huddles" to meet and discuss how they performed the week before. This is all players on the field, head in the game, making plays and strategizing the next move. This is also where we track our successes and our losses. We capture all of our data on a full size white board so the information is always available and in front of us. We measure and track all the components that affect our business. This can range from Sales and Labor to Out-of-Stocks and Spoilage. The real power of Open Book happens each week when we examine the key numbers for our business and share the story about what affected the numbers. Then we forecast numbers for the coming week based on weather, events, staffing issues, specials, etc. At every huddle we determine actions that need to be addressed, assign someone the task and then follow up on it. This creates an environment where things get done that make our store run more efficiently.
Share the Success
A game isn’t a game if there isn’t a victory celebration at the end when you‘ve won. That’s why it is so important that the Co-op, when reaching new financial heights, shares the success with the staff that made it happen. We are playing two games: one rewards the staff with a quarterly gain share for achieving our margin minus labor goals and the second game is based on year-end profit share. The games are played by the entire store, so we are all in it together. We win together, we lose together.
As Ari, cofounder of Zingerman’s said, Open Book is “Leadership by Paradox.” Empowering staff builds leadership, confidence and ownership of the work they perform day in and day out. It also makes it meaningful and more importantly, fun. We are just beginning to discover the true potential of Open Book Management in our organization.
Andrew Anderson, Store Manager