So the CEO of Esys Corp. established an open book policy to set his company apart from the competition.
It seems to be working, as the Auburn Hills-based automation engineering firm has grown from 66 employees and $12.2 million in 2004 revenue to 85 employees and an estimated $15 million in 2006 revenue.
Smart Business spoke with Marcus about how he grows his business by providing employee access to Esys’ financials.
How do you define your open book management environment?
Our consolidated monthly financial statement shows our revenue and expenditures but not people’s salaries. We share the financial status of the company and get everybody involved in the bottom line.
We use it as a motivational tool to reward people, so it’s also a profit-sharing program. We have a defined amount of net income that we want to make at year’s end, and we track it monthly.
Employees can say, ‘I’m on pace, and if we keep moving on this path, then I can get a bonus at the end of the year,’ They also know if they need to step it up a little if we’re falling behind.
How has this benefited the company?
It lets people know the health of the company. (Employees at other companies) work with blinders on every day, not knowing whether their jobs are secure or not secure. It’s been probably one of the better programs we’ve implemented.
The employees who come to us from our competitors are open to it because they’ve never seen it before. In our industry, it’s pretty much unheard of.
A lot of our competitors are privately held, and they feel threatened giving up that information. I think the benefit outweighs the risk.
How do you share financials with your employees?
We’ve developed a standard tracking form with a modified income statement, and it has graphical representation to some of the numbers on it. It’s available from everybody’s desktop so they can look at the information any time they want from their computer. We have monthly company meetings to review the numbers in detail, and my partners and I will answer any questions that come up.
It’s a lot easier to understand the impact of things if you can see it right there. For example, when people see what we spend on health insurance every month, they have a greater respect for what we’re up against.
Those bigger decisions get made intelligently when we can pull together groups and talk about those things, and everyone truly understands the impact.
It took us about a year to formulate this policy and figure out how we were going to operate it. When we started the company, we identified it in our business plan as being the key element to our success.
It was implemented in our second fiscal year, but it was planned from Day One.
How would implementing this policy benefit other CEOs?
It’s hard to ask people to manage and make good decisions if they don’t have all the information. It’s a necessity for privately held companies, but even in publicly held companies, where those numbers are somewhat disclosed, I don’t think that’s enough for the average employee to understand the health of the company and to put it in a context to which they can relate.
It’s hard for an individual employee at a major publicly held company to see how they impact their company’s annual report. When we break down certain things, like expenses for telephone usage, it provides information to which employees can relate.
What challenges have you faced as you’ve grown your company?
Our biggest growth challenge is to try and put in place the mechanisms to get the work done and to not overstep what we’re capable of executing. It’s getting the management in place and the correct people in place to take advantage of the next opportunity, versus bringing in that opportunity and potentially not doing a good job.
How do you ensure that you don’t overstep your capabilities?
We talk to customers and get a feel for the quality of work we’re putting out. If we don’t feel we can put quality individuals on different projects, we say no to our customers.
That’s a difficult thing to do, but we do it. If we sacrifice our quality, the ramifications of that far outweigh the momentary spike in revenue.
You’ve got to understand which projects you have to take and which ones you can afford to pass. Some companies don’t pass on anything as a rule, and they get themselves into trouble.
HOW TO REACH: Esys Corp., (248) 754-1900 or www.esyscorp.com