Open-Book Management in Motion
When employees have access to all relevant financial information and critical data, they have a better understanding of how the company is doing as a whole and are more likely to make better decisions and perform their jobs more effectively. This is the basic concept of Open-Book Management. But, not all employees have a background in accounting. Just having access to the financial data that can include revenue, profit, cost of goods, cash flow, and expenses, may not be enough to help them truly grasp the picture of the entire company. It is important to invest time in making sure business education is also a part of an Open-Book Management strategy. After all, teaching employees how to make smart business decisions can have strong pay-offs, like increased revenues and lower employee turnover.
To put the concept of employee education into motion, Harrington Group recently held a Finance 101 course that was open to all of our associates. The course was led by our Chief Financial Officer, Pat Pickwick. As an added incentive, we even provided lunch to all attendees. Who can resist a free lunch?
Our Finance 101 course started out with defining the term accounting. According to the American Institute of Certified Public Accountants, accounting is “the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions, and events which are, in part at least, of financial character, and interpreting the results thereof.” Accounting is the process of communicating financial information about a business entity to users such as shareholders, managers, and employees. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable.
Following the introduction, participants examined sample transactions, leading to the trial balance, and ultimately the balance sheet and income statement. The accounting equation was also reviewed: Assets = Liabilities + Capital. After delving into a few accounting principles, including accrual accounting vs. cash basis, the matching principle, and revenue recognition, Harrington Group’s actual financial statements and critical numbers were dissected to help participants gain a better understanding of which factors impact the bottom-line and which ones they can influence the most by performing their job well.
Harrington Group’s Finance 101 course is an essential step in educating our associates so they can use the financial information that is given to them to make better decisions and perform their jobs more effectively. Because one of the keys to successful business education is repetition, we offer courses like this one several times a year.
By Jeff Harrington, CEO and Founder of Harrington Group, Inc.