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In 2005 I sold my company Mordam Records and I read a book by John Case called "Open-Book
Management: The Coming Business Revolution." What amazed me about reading this book is
that John Case published this in 1995. What that meant to me is that I had started that
company Mordam Records in 1983 and the whole time I was running that business I was running
an open-book company. John Case said in 1995 that it was a coming revolution. And in 2005
it was still a coming revolution and now it 2013 I want to explain it to you. And if you
are not already familiar with open-book management I want to explain it to you and if you already
know a little bit about open-book management I want to encourage you to become a part of
the business 2.0 revolution. Because the world is calling on us to become authentic and transparent
now and open-book management is an amazing way to do it.
When I started my company in 1983 I didn't know there was a term "open-book management"
and didn't know that I was going to do it. I came from a culture where there was distain
for the rich getting richer and the poor getting poorer. Honestly I still have a distain for
that. There was also a prevailing idea amongst that music community that money is the root
of evil. Now clearly I do not agree that money is the root of evil, I do agree that money
can be evil. But I never really bought into that idea that money was the root of evil.
So for me the first concept, the first idea that I really grabbed a hold on in my business
is to avoid this idea of the rich getting richer and poor getting poorer. The divide
between capital and labor. How can we bridge that gap? And what I came
up with was a profit share basically. If I could tie compensation to the profitability
of my business then when I prosper everybody else will prosper. And if I can't prosper
than nobody else will prosper. It's seemed like the most fair and equitable idea that
I could possibly come up with. And now I understand that there is a whole school of organizational
design in business management designed around that idea. The second thing that occurred
to me once I set up the profit share and I looked at this division between capital and
labor in that way, what started to happen is that I had to teach people how to be smart
about money in a business. And in order to do that I had to share the numbers that I
was using to create the profit share. And as soon as I started sharing those numbers
the people in my business who were working with me became smarter. They became my peers.
They were just as interested in prospering as I was. And they were putting their chips
in with me with every brain cell they had. It made us more prosperous the smarter that
they got. Here are the five things that happen when
you open the books in your business. You will share your financial information among everything
else that you will be sharing and will be transparent and moving together as a tribe.
Everybody will have their eyes on their numbers in the same way that you do. Number two. Everybody
in the business is going to understand what are the key performance indicators. Now sometimes
key performance indicators are a part of the financial information. But what ends up happening
when people are looking at the numbers is that they start to identify the other things
that they are counting in your business. The other things that are key in your industry.
And they keep their eye on that alongside you. Number three. When you teach the language
of business and you close the divide between capital and labor people gain clarity about
speaking the language. Everybody gets smarter. Number four. When they get smarter and they
understand the language they start to think in the same way that you do. They start to
think like an owner. And when people are all thinking like an owner they are loving and
protecting your business in the same way that you do. I experienced that. Not by design,
by accident. But I can help you do this by design. And number five. When people are compensated
based on the profitability of your business, not only is it exciting to everybody in the
business, but it is one hundred percent scalable. Gone are the days where your employees get
richer than you. And welcome the days where the village prospers.