The Practice of Open-Book Management in Credit Unions

Following on the heels of the just-released Filene report The Power of Engagement through Open-Book Management, this report explores the big picture of how open-book management is used in credit unions today. Filene conducted a survey of credit union CEOs and managers to assess the extent to which they were using OBM practices in their organizations. Read the report to get the full picture.

Dennis Campbell

Dwight P. Robinson, Jr. Professor of Business Administration, Harvard Business School

Luis Dopico

Economist

John Case

Co-Author of Open-Book Management and Equity

Bill Fotsch

Founder and President of Open-Book Coaching

Report Number 447

From the Center for

Organizational Entrepreneurship

Executive Summary

My friend Larry loves chocolate chip cookies, and especially loves a recipe that I use, and he asked for the recipe, and I obliged. Then recently I got a call from Larry.

“I made your cookies, and they turned out terrible! What did I do wrong?”
“Did you follow the directions?”
“Yes, I used all of the ingredients on the list you gave me.”
“Well, tell me what you did, step by step.”

As Larry reviewed how he put each ingredient in the bowl in the order listed in the recipe, it occurred to me that he hadn’t followed the directions. Now he was left with a bowl of lumpy flour, sugar, butter, and chocolate chips.

When it comes to certain things, it’s important they be done carefully and with close attention to details. For instance, taxes. Assembling IKEA furniture. And, of course, baking. Add to this list: open-book management (OBM).

What Is the Research About?

Following the just-released Filene report The Power of Engagement through Open-Book Management, this report explores the big picture of how open-book management is currently used in credit unions today.

Filene conducted a survey of credit union CEOs and managers to assess the extent to which they were using OBM practices in their organizations. The survey revealed several key findings.

Although credit union leaders know about and are interested in OBM, few practice it in full. Credit unions use OBM approaches along a continuum, incorporating various aspects here and there, but rarely do they intentionally apply OBM in its more orthodox form. Using OBM in spirit translates to lower benefits for credit unions.

A key challenge in applying OBM to credit unions stems from the fact that credit unions, as not-for-profit organizations, seek to serve a number of goals, of which only several are easily measurable. The research revealed that although the majority of credit unions linked success to a combination of goals, credit unions could benefit from better defining specific goals, for specific periods of time.

What Are the Credit Union Implications?

Using OBM has the potential to help credit unions thrive by applying cooperative principles more deeply, increasing the participative quality of management, improving employee engagement and satisfaction, and empowering employees to work more effectively on behalf of their members while compensating them for their success.

Using OBM works. The more faithfully it is used, the better the results. The research indicates that credit unions using OBM practices perform better across a broad variety of key measures.
Although credit union leaders understand that setting clear organizational goals is a cornerstone of OBM, credit union employees generally lack a clear understanding of goals. For OBM to work well, employees need regular updates on metrics, visible tracking of goals, and even assistance in understanding financial statements.
Linking performance compensation to quarterly or monthly goals is preferable to annual bonuses and is necessary for OBM to work effectively.
Credit unions can benefit by defining “goals” or “winning” in such a way to meet the non- profit-driven goals that are unique to credit unions.

Much like my friend Larry trying to make cookies, simply using the ingredients of OBM without the proper ordering and approach can lead to a less-than-ideal outcome. This research helps you identify the right recipe for OBM in your organization.