Open Book Finances

http://lincolnloop.com/blog/2012/may/21/open-book-finances/

by ipmb • 14 years ago

29 9 14 years ago

flurdy• 14 years ago

The benefits of open book finances is that everyone is aware of how well/bad the company is doing.

Not the usual cloak and dagger hush hush style, where no-one is aware they may actually be close to bankruptcy or that the actual money earner is product B not the glorified Product "Novergoingtowork".

Or that hardware cost was 1% of expenditure while salaries was 70% of which pointless meetings accounted for 30%...

Good idea. Open and honesty prevails. Now who dares opening their books publicly? To their customers and competitors...

sophacles• 14 years ago

Interesting thought experiment. Say I open the company books, maybe with some simple replacement -- "dev1" instead of "jane doe" and so on, as well as "vendorN", "customerN", ", etc., and maybe some sanitizing of the notes about the expenditures, (e.g. 10 servers instead of "inventory spec: 10 servers, cpu:x, mem:y").

What does that get me?

* Vendors can come to me and say "look you spend this much, we can cut that by 20%"

* customers relying on me can see I won't be going out of business soon (hopefully), and put more faith and $ into my product

* customers curious about why it costs so much to do $foo, can see the expenses.

* forces you to not over-aggrandize yourself

* others? (please chime in)

How does it hurt me?

* employee poaching becomes easier

* customers can start using this to lower thier costs and eat away at your margin

* a bad week/month can scare away customers

* vendors may try to collude and gouge you

* misunderstandings from the peanut gallery may get you a bad rep

So the single best feature I see from doing it, compared to the risks, is vendor competition becomes easier.

A question since I don't know - is there a small business/startup oriented RFP site/service that gets you the same sort of competition amongst vendors?

simonbarker87• 14 years ago

I've brought this idea up on occasion with one of my inlaws who runs a small business, nothing sexy but it makes money and is profitable and growing. He hates the idea, when I ask why he responds with "it's just not how it's done" I think it's a shame though as it is a family business with a few employees and I recon they would find those employees would feel much more empowered to see the business do well and feel more a part of it. It is after all their work as well which goes into make the business grow.

iRobot• 14 years ago

Another upside is you end up with a company full of auditors so its unlikely there is going to be much funny business going on.

MattRogish• 14 years ago

This is very important in startups (probably all size companies, but I've never worked at a xx,xxx person scale company to say).

Everyone wants to know this info and so if you don't share it explicitly someone has to construct an excel sheet or something every couple of weeks to send to the team. Why pay someone to do that when your interested coworkers can do it themselves?

Also, it makes things like giving everyone a company credit card much easier to manage - if Bob can see what Alice is buying on her card (and vice versa) it keeps everyone honest.

SkyMarshal• 14 years ago

I believe Apple tried this in its early years, some time after Jobs returned from India and prior to his ouster, and that it didn't work so well. There were problems with employees comparing salaries and feeling slighted at pay differences and whatnot.

I just recall reading that in one of the books about Jobs and Apple, but don't recall the details or which book. Anyone else more familiar with this episode in Apple's history?

ipmb2• 14 years ago

Everybody sets their own pay, so I don't think we run the same risk.

r00fus• 14 years ago

How do you prevent against sabotage/espionage?

One benefit of hidden finances is that someone new employee can't come in, run analysis on your books, then leave (while courting big $$) and make it themselves (and maybe poach key people who they know aren't asking for their fair value in pay).

There is a popular saying that someone's checkbook embodies their priorities... if this is the case, opening your finances would basically completely reveal your strategies and tactics. Why is Apple so secretive about their supply chain?

ipmb2• 14 years ago

We make our workplace and compensation such that nobody would want to leave. We have almost no turnover.

The only reason you leave is because you think you could do better or make more money. As it stands, people here would rather see Lincoln Loop do better and make more money (which directly benefits them) than try to start their own company.

Open Book Finances

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