Financial Transparency 2

A couple of interesting comments to the last post (as well as the original question) got me thinking some more. I’d like to go back to basics.

There are no specific practices and behaviors that are “lean principles.”
I believe the principles operate at a higher level. The principles have to do with creating a culture in which people naturally surface and solve problems, supported by the organizational and workplace structures.

In this case, “financial transparency” may, or may not, be found as an attribute of companies that are otherwise doing very well establishing this culture.

Financial transparency is a countermeasure, not a principle.

A countermeasure would be applied against a problem which, if not solved, prevents the organization from taking a step toward the ideal.

Some organizations’ paths may take them to or through a problem where financial transparency is the solution.

Some organizations may take other routes and never need to address that. For example, if they otherwise operate with 100% integrity, and there is solid trust.. is there a need to disclose everything?

So it is entirely possible that two, otherwise similar, organizations may have reached the same point on their journey by doing different things.

Now, there are some countermeasures which are nearly universal because they address issues nearly everyone has. (note that I say “nearly”.. never say “all” in this business.)

Without a culture of trust, for example, people in the organization really cannot contribute. They have to come to work, do exactly what they are told, and go home.. knowing full well that the things they did today are probably stupid. Doesn’t exactly help them feel like winners, does it?

But while financial transparency certainly reflects a degree of trust, it is neither necessary nor sufficient to generate it, and I guess that is the key point here.

5 Replies to “Financial Transparency 2”

  1. Mark,

    When you touched on “open book” management and such, I recalled stubling across something in my wanderings some time ago.

    Try looking up Jack Stack and his Springfield Remanufacturing Corp. He seems to have a unique view on the subject and quite succesful. I attached a link to a summary of what he and his employees have been doing.

    Take a look if you wish. I found these ideas very insightful, logical, and lean. It may also touch on your former topic regarding lean and management leadership. (Still pondering that one.) Hope you enjoy it!


  2. Ethan –
    Good link, good article.
    It certainly shows that financial transparency *can* be beneficial.

    The question is, I think, is financial transparency *required* – is a “lean” effort somehow inhibited, held back or hurt without it.

    In PDCA terms – is there evidence to refute the statement “Financial transparency is a necessary attribute of a “lean system.” Put that way, my feeling is that the issue is, at best, ambiguous.

    None of this reflects my personal feeling about whether financial transparency is a good thing. I think it is. But I am much less certain that it is a necessary attribute or “lean principle.”

    THANKS for the comment. 🙂

  3. Mark,

    I’m glad you enjoyed the article. It certainly inspires some thought. While I agree there is no direct line between “finacial transparency” and lean principles, I did draw a conclusion. Jack Stack’s employees understand exactly what their role is in the success of the company. As opposed to your description of the common occurance:

    “They have to come to work, do exactly what they are told, and go home. Knowing full well that the things they did today are probably stupid.”

    Instead, Jack’s folks feel like winners because they understand exactly what is required to succeed, and are unimpeded in doing so. I find myself frustrated in only “getting things done” with no concept of what my role is in carrying out the goals of the company. “That’s the way we do it” is not an explanation that builds trust and confidence. Once I know how and why, I become a powerful tool to the business.

    Leaders reinforce Lean’s success by not only informing their employees what to do, but by explaining exactly why those actions result higher proffits, and the benefits of such. Once realized, the good ideas tend to pour in, giving each employee a personal stake in success. Simply put: It feels good.

  4. I agree fully that financial transparency is *a way* to include Team Members in the objectives of the business, and help them see whether their actions help or hurt.

  5. Financial transparency is one way (numbers and accounting etc.). I’m suggesting being transparent physically as opposed to finacially. Instead of an employee simply pondering how best to perform his repetitive daily tasks, he may benefit from knowing how improving his method may physically effect the entire process. Sort of a “manufacturing transparency”. Excuse my thinking aloud.

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