Open Book Management - Critical Number

Beyond Open Book T H E G R E A T G A M E O F B U S I N E S S

The Front Line Drives the Bottom Line T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book

When Employees Think, Act & Feel Like Owners… Everybody Wins. T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book

Every employee is given the measures of business success and taught to understand them
Every employee is expected and enabled to act on their knowledge to improve performance
Every employee has a direct stake in the company’s success
Open Book Management T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book

In 1983 – a failing division of International Harvester Company
Today - 26 year employee owned company
320 Million in Sales
17 highly diversified business units
10 cents per share to $234 per share (FY 2007)
Great Game of Business – One of the most celebrated approaches to Open-Book Management
Background T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book

Great Game of Business Think (Educate) Feel (Engage) Act (Enable) T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book

Don’t know the most important goal Don’t feel empowered to act Don’t see how they make an impact Are not held accountable Wonder WIIFM T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book Disengaged Employees…

FOCUS ON THE CRITICAL NUMBER ACT ON THE RIGHT DRIVERS FOLLOW THE ACTION & KEEP SCORE PROVIDE A STAKE IN THE OUTCOME 90 DAY MINI-GAME CALLENGE Find a Common Goal Create Line-of-Sight Hold Each Other Accountable You Gotta Wanna! 1 2 3 4 T H E G R E A T G A M E O F B U S I N E S S Engaged Employees… Beyond Open Book

It’s the number that at any given time, is going to have the greatest impact on your business
It’s the number you must do well in order to succeed, or maybe even survive.
The CRITICAL NUMBER FOCUS ON THE CRITICAL NUMBER Find a Common Goal 1 What does Winning Mean in your business in the next 3 to 12 months? T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book

The RIGHT DRIVER T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book
It’s the number that directly impacts the financial outcome or Critical Number
It’s the number that reveals Cause-and-Effect and provides Line-of-Sight
How can you impact the
CRITICAL NUMBER?
ACT ON THE RIGHT DRIVERS Create Line-of-Sight 2

The Critical Number Return on Assets = Net Profit / Total Assets
Engineering
Control capital spending
Help the shop beat their standards
Reduce Design flaws & scrap
Materials
Reduce inventory levels
Make better buys
Eliminate obsolete material
Accounting
Focus on receivables
Manage cash
Manage interest payments
Educate employees
Operations
Beat the labor standard
Do it right the first time
Produce only what we need
General & Administrative
Watch expenses
Eliminate waste
Manage support
Reduce Overhead Spending
Sales
Increase sales
Don ’ t discount
Focus on high margin product
Sell what we have
Sally What is the Right Driver for Sally? ACT ON THE RIGHT DRIVERS Create Line-of-Sight 2

FOLLOW THE ACTION & KEEP SCORE 3 Purchase Variances Product XYZ Financial Statements Revenue Cost of Sales Profit Purchasing Materials Material Usage Material Receipts Purchase Variance Sally’s Scorecard Workgroup Scorecard Department Scorecard Financial Scoreboard Cascading the Score Line-of-Sight

HUDDLES
Evaluate Game Conditions
Check the Score
Plan the Next Play (manage deviations)
Get Fired Up
T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book FOLLOW THE ACTION & KEEP SCORE Hold Each Other Accountable 3

Numbers Focused
Enhance Teamwork
Promote Action
Educate the Team
Spread & Maintain Accountability
Forward Looking
T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book HUDDLES FOLLOW THE ACTION & KEEP SCORE Hold Each Other Accountable 3

Why Forecast?
It’s our early warning system - Alerts everyone to opportunities and emerging challenges
Line-of-sight, Cause-and-Effect
Sustains commitment
The ability to forecast accurately is an indication of how well employees understand their numbers
T H E G R E A T G A M E O F B U S I N E S S Beyond Open Book FOLLOW THE ACTION & KEEP SCORE Hold Each Other Accountable 3

T H E G R E A T G A M E O F B U S I N E S S Great Game of Business Beyond Open Book FOCUS ON THE CRITICAL NUMBER ACT ON THE RIGHT DRIVERS FOLLOW THE ACTION & KEEP SCORE PROVIDE A STAKE IN THE OUTCOME 90 DAY MINI-GAME CALLENGE Find a Common Goal Create Line-of-Sight Hold Each Other Accountable You Gotta Wanna! 1 2 3 4

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Open Book Management - Critical Number

by bgracely on Mar 11, 2009

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