The art of open-book management

In an open-book practice, team members see the operating costs of the practice and all the other numbers that are critical to its profitability. As a result, they understand why they're asked to solve problems, cut costs, improve productivity, and give clients better service. There are, needless to say, pros and cons to this approach.

Bob Levoy

Jack Welch, former CEO of General Electric and the co-author of Winning: The Answers (Collins, 2006), says that the more information you share with employees about costs and other competitive challenges, the better. "When people know what they're up against, they can feel a greater sense of ownership and urgency, often sparking improvements in processes and productivity," he says. "And the sense that 'we're all in this together' can certainly jump-start teamwork and innovation."

Nothing to hide

Dr. Kathleen Neuhoff, past president of AAHA, has had an open-book policy with her staff of 30 employees for 25 years. The whole team is shown certain figures, including total income, expenses, number of patients seen, income generated per patient, income generated per staff hour worked, income generated by each doctor individually, income per hour for all staff positions according to their skill level, and so on.

And, she says, they haven't had any problems with this approach. It gives her staff members a more realistic idea of the income earned by doctors than they would have at other practices. "Your staff knows how much money comes in. They're responsible for collections. If they don't see the expenses, they assume that nearly all the money ends up in the pockets of the doctors," she says. "When they find out how much we actually make, it's less than they thought."

Dr. Neuhoff pays her staff a percentage of the gross so their pay is directly affected by how well the practice performs. "Net can be manipulated, but the gross is directly affected by staff and they can see the results," she says.

Staff members also decide when to hire additional employees. "They understand that additional employees decrease the hourly income for the rest so they're willing at times to work a bit harder to cover maternity leaves, vacations, and so on, rather than hiring an additional employee," Dr. Neuhoff says. Sharing information this way demonstrates trust and respect that Dr. Neuhoff's team members reciprocate.

Go slowly

Welch warns that there are real perils involved with open-ing the books. "It's very hard to open them just a little bit. Once you start exposing costs to have them make sense, you need to expose revenues and profits as well," Welch says. "Are you comfortable with the team knowing how much the business makes? They'll naturally compare that number to what they make and eventually they'll be able to extrapolate how much of the pie you have—and they don't."

That gap may be something you're willing or even proud to explain. "If so, then there's probably no downside to sharing the financials," Welch says. But remember, he continues, every employee has a personal pay scale in his head that estimates what he and every one of his co-workers is worth—based on their output and performance. "If you get the sense that your information spree will upend those notions, then leave this particular deed undone for now," says Welch. "Find a perhaps less perilous way to get your team to care about their work the way you do."

Veterinary Economics Editorial Advisory Board member Bob Levoy is a seminar speaker based in Roslyn, N.Y., who focuses on profitability and practice growth. His newest book is 222 Secrets of Hiring, Managing and Retaining Great Employees in Healthcare Practices (Jones and Bartlett, 2006).