Americans have lived through their share of crises over the years. But few have changed our lives and created the level of uncertainty that COVID-19 has. It has disrupted the day-to-day experience of every Idea Grove employee, and I’m sure it has done the same for the staff at your agency as well.
No doubt, your agency employees are worrying daily about the possibility of layoffs, despite whatever assurances you provide them. Many PR firms already have lost half their retainer revenues—or more—during this pandemic. Some have shuttered altogether. And thousands of agency employees have lost their jobs.
Those of us who lead agencies know that our first priority is to do everything possible to retain clients and seek out new ones to sustain revenues. But it’s also important to bring your team along for the ride. They need to understand your financial situation well enough to ease their fears and participate more fully in finding solutions.
That’s where open-book management comes in.
Open-book management, or OBM, is the practice of opening the financials of the company to all employees. The agency teaches each team member how to read the agency’s financials, alllowing them ti understand how each team member’s everyday decisions impact those financials.
There are several flavors of OBM. My experience is with a methodology called “The Great Game of Business,” which is based on the best-selling book of the same name by Jack Stack. Under this system, employees are taught the rules of the game—how the company makes money—and how to keep score by tracking the financials. Everyone receives a stake in the outcome of the game through bonuses or other incentives.
How can OBM help you through a crisis? If every employee understands the rules of the game and how to keep score, and we have provided a stake in the outcome, then during times of hardship, everyone understands the financial realities of the company. They usually can forecast what must happen if clients or revenues are lost. This reduces resentment of management for tough decisions, because these decisions no longer come as a surprise. Everyone pulls together to get through the hardship.
I’ve experienced this firsthand. In the period before I first rolled out OBM, my company saw a financial hardship on the horizon and had a series of layoffs. It impacted morale negatively as you would guess it might.
Later, when a second financial hardship came, we had already implemented OBM. It was such a relief to the leadership team, because we no longer had to act alone to make the tough decisions. We pulled the entire company together and asked for their input.
We laid out the issue: Our monthly expenses were going to be greater than the cash we were generating, although 90 days from now we believed our cash flow would return to normal. What should we do?
After debate and discussion within every level of the organization, the team came to the consensus that they didn’t want a layoff. Instead, they agreed to a short-term salary reduction. Some employees took a 10 percent reduction in pay, and others took a 20 percent reduction in pay.
Leadership acknowledged this sacrifice by giving the team half or full days off on Fridays until we got through the crisis. In addition, the company promised to reimburse everyone for the salary reductions as soon as it was financially feasible.
We got through that hardship together, and before the end of the year we had paid back each person for the salary they had foregone.
We are currently in the process of implementing OBM at Idea Grove. I very much look forward to educating our team on the rules of the game and how to keep score during this time—and to providing every employee a stake in the outcome.
Particularly during a period of uncertainty, when no one knows how long the COVID-19 crisis will last, we encourage you to consider the same.
John Lacy is president and COO at Idea Grove, a unified PR and marketing agency for B2B technology clients.