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Back in June I asked, do you want to improve your profit? And I argued for the practice of Open Book Management (OBM).

Here’s another reason for committing to OBM …

It’s August, and right now I’m sitting in the Michigan sun, watching the crowds enjoy their #488 Erin’s Evil Twins or #422 Eddie’s Big Deal sandwiches at Zingerman’s Deli, and I’m reminded of the winning combination – personality plus and open book management (OBM).

On this visit we are hosting our annual business education trip for high-achieving Kiwi restaurateurs – and Day 1 is already proving to be lively. Despite a few in the group having snuck off to a ‘techno rave’ last night, the purpose of Week One is to spend an intense week with Zingerman’s Community of Businesses – an example of OBM success.

Zingerman’s is a special hospitality community in many ways, and the community’s success with OBM is only a fraction of what we want this crew to fully understand and witness first-hand – OBM is, however, at the core of almost everything else.

That’s the thing with good business, all elements of the business uphold the personality of the thing as a whole.

Back in NZ, we are constantly reminded of the importance of OBM. Just now, I have read of the Wellington fallout of the Wagamama implosion.

The narrative never appears to take a breather, and I suppose it never will. Once the business has been firmly plonked into the receivership bucket, more workers are left  thousands of dollars out of pocket

And then you read the details …

In this case the GM of the Wellington site, Soraya Edwards is left blindsided and thousands of dollars out of pocket. She says  “ … then, boom, redundancy came out of nowhere.”

We’ve heard the same story over-and-over, and even in my own town (Christchurch, NZ) the story feels like a weekly news staple.

Over the ditch, there has been the highly publicised unravelling of George Calombaris. And while there has been a great deal of finger pointing and polemical anger – once we stop to think, most of us are left with compassion for every person involved; even Calombaris.

We don’t know all the details of the Calombaris stuff-up, but the questions I am left asking is how come this snuck up on his employees? How did the GM(s) not know, the managers, and even the average employee? At least, how did the underpayments go undetected and become so out-of-control over such a long period of time?

There is only one way the ‘Calombaris equation’ could have happened – by a company that was run in a highly hierarchical fashion and structured in such a way that financial responsibilities were kept separate from the day-to-day responsibilities of the team. The company must have been run as a closed and narrow system – where ‘back-of-house’ was totally separate from everything else going on.

Calombaris himself admits, “It’s called not having the proper infrastructure in the background to make sure that the classifications are being checked and done correctly.”

We would take the lesson further; it’s called not having the proper infrastructure in the foreground of the business to make sure that the classifications are being checked and done correctly.

Let the Calombaris lesson be our lesson, so we don’t trip ourselves up on an ‘exclusive way’ of doing business within our own business.

This is exactly the situation the OBM ameliorates.

Not only does practicing OBM drive profit and growth more effectively, but it creates a non-hierarchal and all-inclusive understanding of what is really going on in a business. It forces the conversations, financial involvement becomes more egalitarian and secrets become difficult to hide.

If a GM is blindsided by the financial position of the business, then the business simply isn’t being run properly – it is structurally and relationally unsound.

The lesson here is … don’t put yourself in that position.

A business that champions OBM does not separate the financial picture from everything else. Everyone is part of the financial conversation (the ‘Huddle’), and everyone becomes responsible for aspects of the whole. There is simply no such thing as a blindsided GM, or even a blindsided dishy.

The finances of the business become front-of-house and front-of-mind … for everyone, and to everyone’s empowerment.

Of course, the OBM protection is not absolute. Many businesses that practice OBM do not share their Balance Sheet, or any numbers that are deeper than top-line sales and relevant profit and loss percentages. Nevertheless, a highly evolved form of OBM makes the Calombaris situation almost impossible – and (as well as that) it’s simply a much better way of running a business, building relationship, developing knowledge and skills and treating your people.

OBM creates personality-plus because the financial awareness brings everyone alive.

Over the next week – I hope to have some of these forward-thinking Kiwi restaurateurs report directly on their exposure to OBM after seeing it practiced in such a highly evolved manner here in Ann Arbor Michigan. Watch this space, as they evolve their own approach back in NZ.

August 12 – James O’Connell (The Hospitality Company)