The Pros and Cons of Open-Book Management

You can’t talk strategic planning without talking statistical interpretation of success, and you can’t talk statistics in a closet all by yourself. In the small business of dentistry — which relies on the commitment and enthusiasm of its greatest asset: the team — it’s essential to keep the staff educated and engaged with your vision, values, and strategies! That requires forwarding the concept of open-book management as a key practice management tool to ensure your practice’s continuous improvement.

What is open-book management?

With open-book management, businesses share key financial and strategic details with employees to encourage out-of-the box thinking, because it helps them feel enrolled and committed to your long-term success. In other words, it creates a culture that is smart about the business of dentistry.

Now, if you’re like most leaders, you probably have some concerns about implementing open-book management in your practice. What makes this such a difficult concept to get behind — not only in dentistry but in all businesses small and large — is that unless they’re accountants, employees rarely if ever find it compelling to understand the numbers of any business. Let’s face it — we can barely get the dentist to look! And at worst, poorly executed numbers-sharing can result in competitiveness, frustration, lack of understanding, mistrust, and discord.

So why try? We know that when not tied to the bigger picture of accomplishment of vision, values, and goals, numbers by themselves can feel empty and only production-driven — they lack purpose and passion. But when done well, the numbers can create a self-motivated, inspired team that’s engaged in the practice because they feel informed and in control.

Jack Welch, former CEO of General Electric, said it this way: “Workers in an open-book setting feel a greater sense of ownership and urgency, often sparking improvements in processes and productivity, because they are all in the business effort together.” That makes this worth rising above the cons and sharing numbers with your team.

Where do you start? To avoid the very real pitfalls of open-book management gone wrong, it’s vital to set up a culture that will respond well to accountability and self-direction. To help you create this for your practice, may I suggest some helpful hints?

Teach the business of dentistry — not accounting

Your team is not interested in passing a CPA test; you’re inviting them to learn about where the practice is going so they can contribute in significant ways and be acknowledged for their efforts. Remembering the principles of “KISS” (keep it simple, silly) and “TMIS” (too much information, silly) are essential for successful integration.

Team training could mean simply sitting down with your staff to identify the key statistics that need to be tracked and their relevance when compared with the practice’s vision and goals for productivity, viability and quality of experience.

In an Inc. magazine article, CEO Jay Goltz described how he graphically introduced his team to the concept of expense management by leading a role-play: His vice president posed as a customer and (using a fist full of oversized bills) handed a volunteer employee $100 to make a purchase.

Goltz then began to lead a brainstorm with his team, asking questions like, “What do you think our ads in the Yellow Pages cost? Rent? Health insurance?” They would then break it down to estimates on how each cost related to the individual $100 purchase and take back the appropriate amount of dollar bills.

In the end, the volunteer was left with a paltry $5. Per Goltz, “It was easy for employees to see that the difference between making money and losing money is sliver-thin. I wanted them to get perspective on the expenses that are not obvious to them and use that information to make better decisions.”

What a simple, elegant way to introduce a team to what can be a complex topic! Imagine doing the same with a crown preparation or an implant: There would be a tremendous learning opportunity for both the dentist and the team.

Give your team the freedom to act

Hold your team accountable for the numbers they can control. How many times have you had a random thought in the middle of the night (while your profit-and-loss statement dances on your head) like, “Why don’t my staff worry about payroll like I do?”

Your team doesn’t worry about expense management because they haven’t made the connection between the statistics and what they can do to react to the statistics and create positive change. If you have a goal to keep your total employee expense at less than 30% of total office production and the staff is asking for a benefits increase, what average monthly production figure would support the increase?

Once you have the new goal broken all the way down to production per hour, brainstorm with the team what they can do from their job description to contribute to the accomplishment of the increase. Of course, then inspect what you expect, to make sure there is follow-through and success. A team that feels empowered to act on behalf of the strategic plan is a team that takes action.

Share the wealth!

For a team member to feel fully invested in the success of the practice, there needs to be a connection to their personal success as well. For open-book management to work, each employee must have a financial stake in how the business performs.

This isn’t a hostage situation, where every time the practice profits by a dollar, the team demands two. Self-directed team members who respect and honor their leaders want them to benefit and to reinvest in the practice as well. Scarcity and water-cooler conversations about the dentist taking advantage of employees wage-wise are the result of staff members feeling out of control and unable to affect their own future compensation.

For an open-book compensation model to be effective, all wages, benefits, and potential rewards must be tied to increases in profitability and individual demonstrated skill (merit). The great news is this can only be monitored through statistical interpretations of success, which brings us right back to why team members should participate in statistical analysis.

If you want an inspired, entrepreneurial team to take creative risks, solve problems in new ways, and work collaboratively to achieve consensus so the practice improves, there must be the potential for personal reward.

There’s no question that practicing the “art” of open-book management requires strong, effective leadership.

Right about now, most dentists are probably saying, “Can’t I just do the dentistry?” If you’ve been in private practice for more than a few weeks, you’ve probably figured out that to provide ideal, complete dental care and service, the business must function efficiently and profitably. Because the dentist is very often tied to the operatory — doing dentistry — you have to depend on your self-directed team leading and managing the patients and processes in the way you want, without micromanaging.

To accomplish this, they must be knowledgeable, competent and focused on the goals and strategies of your practice. How do you get there? Open the door to open-book management; the pros far outweigh the cons.