Open-Book Restaurant Management Poses Unique Pros & Cons

Open-book management has become more popular in many industries including restaurants and hospitality companies. Popularized by business consultant John Case, the concept involves granting access to a company’s financial details so that workers know how their actions, salaries and mistakes affect profit.

If you’re like most restaurant owners, you might consider such an idea ridiculous, anti-American, antibusiness and compromising to your security and privacy. Yet many entrepreneurs and business owners have adopted the style because it resonates well with modern transparency trends and helps employees to feel more vested in the companies where they work.

Even if you’re not ready to open your books completely to your employees, you can still empower your workers by showing how their actions affect profit. The restaurant business is challenging, and workers often get so frustrated that they don’t stop to consider their actions. For example, the following issues are common restaurant worker actions that increase costs:

• Unplanned overtime
• Discarded food
• Eating on the job
• Failing to rotate stock
• Making mistakes when writing up orders
• Failing to ask customers about details like how they want their meats cooked
• Providing big portions to get better tips
• Not including everything ordered on the guest check

Many restaurants are getting successful results from the controversial open-book management approach, but restaurant managers don’t need to reveal every detail to use the method. After all, some workers don’t understand accounting details very well. Restaurateurs or managers can explain how the numbers work to motivate workers and reveal the necessary details to support each issue they want to emphasize.

Pros and Cons of Open-Book Management

Open-book management has been used by some companies for years, and big companies
reveal major financial details in their annual reports and updates to stockholders. Transparency trends are becoming more popular in all kinds of industries — especially restaurants — where customers want to know how food is sourced and prepared.

The increasing popularity of open-book management is a natural result of better communications, digital computing resources and Internet information about business processes. Restaurants can motivate their employees by encouraging them to understand just how the businesses work and make or fail to make a profit.

Benefits of Management Transparency

Used strategically with practical limits, open-book management can inspire restaurant workers to consider their actions more carefully. Employees who are valued and given operating details are more likely to be loyal, work carefully and respond favorably to the rules. Other benefits of management transparency include:

• Encouraging a sense of ownership
• Showing the effects of thoughtless waste
• Providing documentation of how tight restaurant budgets are
• Showing workers how critical portioning is
• Explaining why overtime isn’t an option
• Giving workers enough details to foster creative thinking
• Maximizing workers’ value
• Sparking improvements in productivity

Disadvantages of Revealing Too Much Information

Social media sites have made the term “TMI” a common abbreviation for “too much information.” Some people don’t want to know how the sausage is made while others will try to use operating details to commit fraud or theft. The possible disadvantages of revealing too many operating details include:

• Creating security risks
• Fostering jealousy over hours, pay and other compensation details
• Overwhelming workers with financial details
• Encouraging some workers to make more demands
• Scaring employees if the business is in trouble
• Causing complacency if the restaurant is doing well
• Enabling fraudulent schemes
• Distracting staff from their regular duties

Sharing Information with Your Staff

Sharing information usually helps your employees see the big picture. Your workers are your greatest resource, so the more they know about the business, the easier it is for them to think of relevant and creative ways to cut costs and improve service. Management often looks at problems one way while the rank-and-file workers have a better understanding of ways to streamline operations and save money. Benefits of sharing information include:

• Creating a stronger bond of trust in managers
• Discouraging workers from making unreasonable demands
• Strengthening worker camaraderie
• Increasing transparency and preventing an “us vs. them” mentality

Restaurant workers tend to adopt the idea — even when they know it’s wrong — that their owners are tightfisted Scrooges who have more money than they could ever spend. Taking time to explain that most restaurant profit percentages are small is the first step to educating your staff about the business realities that affect their lives. You can inspire a sense of teamwork and community when you explain how things really work to your employees.