True Capitalists Use Open Book Management

Question: What’s the difference between an Ayn Rand groupee and a true capitalist?

Answer: Ayn Rand groupees never smile (there’s no objective reason to), and true capitalists use open book management.

One definition of a capitalist is someone who practices and advocates capitalism. And true capitalists know having detailed, accurate, and actionable financial information is key to making good decisions about where to deploy your capital, financial or otherwise.

Why is it, then, that so many self described capitalists sit on top of their information castle like a seventeenth century despot, depriving their most trusted employees of this same actionable information? True capitalists should realize there are real benefits to sharing financial information through open book management.

What are those benefits? I’m glad you asked.

Decisions about capital – If you ever want to give up your iron grip on the purchasing process so you can take your hunting vacation without getting interrupted for approvals while you’re in your tree stand, you might want to delegate some purchasing authority. When you delegate purchasing authority, it really helps if the people making those decisions have an understanding of the current financial state of the company. A little information plus financial literacy goes a long way towards people making good decisions.

Raise the level – If you are committed to your team and you view them as more than an appointed royal court that you can replace on a whim, you should want to educate them, not keep them in the dark. One way to educate them is to make them understand exactly how the company makes it’s money. If they understand that, it then raises the level of the conversation because everyone is looking at the P&L and Balance Sheet and talking about facts.

Recruiting – My own made up (yet probably amazingly accurate) statistics tell me that eighty percent of recruiters agree that ninety percent of job seekers are looking for an open company culture. People want to know what’s going on, good or bad. Using open book management means you are an open culture and that in turn will help you find good people.

Engagement – Open book management reduces the stigma that your company is run by a secret society of robe wearing executives that meet in the basement of an abandoned boathouse and have silly secret handshakes. Having more people in the know means more employee engagement.

Creating other capitalists – How can you seriously call yourself a capitalist if you aren’t serious about creating other capitalists? How can you create other capitalists if you don’t educate people on the financials. Even if the people end up leaving, they will be better educated and more apt to contribute to the progress of this great capitalist nation.

Let’s face it, there are three things that keep America going: Freedom of speech, high fructose corn syrup, and capitalism. Let’s not mess up the third one by refusing to use open book management.

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