Open Books Test

In our opinion, there was nothing more dreaded in college than the open book test. The prof could throw just about any kind of curveball question, and you would have to answer in a cogent fashion, as you had all of the information at your fingertips. You had NO excuse if you messed up—where were you all semester, at some prolonged party? Didn’t you take good notes? Even worse, you couldn’t spit back past answers, oh no… higher order thinking was demanded.

Most ad agencies need to employ higher order thinking when it comes to opening their books to employees. We all seem to tick along with the idea that, “Hey, they’re not complaining, so everything must be hunky-dory. No one needs to know more than I want them to know. All is well in the world.” Good morning, smell the coffee, and welcome to the 21st Century. If your management attitude is to conceal rather than reveal, you may have a seething cauldron of employee discontent yawning under your second floor office! It’s all about transparency.

I’ve often said you should open your books. But… why should “they” be privy to all of your “private” information—all of those hard numbers? All that you worked so hard to build?

Well, first of all, the agency is way more than just you. If you think you are the only person contributing to the agency’s success, you either need new employees, or they need a new employer. Your employees work for your agency, and that “your” is collective. That means they have a stake in the long-term success of the agency. If you are concerned that your employees really do not care about your agency and its continued success, you’d better start placing some want ads.

Do they have a right to this information? Well, yes and no. They have no legal right, but they do have a need to know how things are going, and how they can contribute to making things go better. By passing on some basic information, you begin to vest employees in your company’s growth and future success. Seeing how they use, and react to, that information also gives you an idea how they will grow (or NOT grow) within your organization.

Share and Share Alike

You certainly do not have to open every page of your financial records, but it makes sense to give all of your employees certain information on a regular basis. Here are some examples:

Annual billings, broken down month by month, or quarter by quarter, with a comparison over a few years. Provide this quarterly, or semi-annually, whenever you want to rally (if numbers are off), or reward (if numbers are great) the troops. Break out data by department, so you can see where you are generating the most profit, and discuss what needs to be done to bring other departments in line.

Expenses. It’s easier for people to grasp what they’re spending when they see it in concrete form (like balancing a checkbook).

Projected earnings. If you are on pace to meet annual goals, celebrate; if you are behind, discuss what needs doing to get back on target.

AGI. Share year-to-date figures, compared against previous years and your goals. Be sure to show how payroll relates to AGI. This is important. Payroll is a huge chunk of agency overhead that eats up profits; employees who understand this tend to work a little harder to ensure those paychecks keep rolling in, especially if there are potential year-end profit-sharing contributions to look forward to. Never share individual salaries; lump payroll into a single line item and provide payroll-to-AGI as a percentage.

The Next Level

As your agency grows beyond a small group, cultivate a trusted cadre of managers. This group has a “need to know” beyond the basic information above. Here are some examples of what you can provide them.

Specific earnings – broken down by projects or clients. This allows managers to see which clients are most profitable, and can lead to new efficiencies within departments.

Departmental expenses – where they need to tighten the belt and where there is a cushion that might be used to buy needed equipment, software upgrades or training.

Project-based hits and misses – where estimates were dead on and where they went wrong.

Department goals – Each department should track how they are meeting/achieving goals set early in the year. Asking people to set and track their own goals makes it more likely they will achieve them.

The most important, and subtle, effect of opening your books to employees is TRUST. Making your operations more transparent to employees exhibits your trust and good faith in them—and they gain faith in you as a leader who views them as vital to the agency’s growth and success.

Open your books and let your people take notes. Present the information that is most important to their success, and to yours. Then watch them pass the test!