An interesting post by Jack Stack, long time proponent of “Open Book Management” in the NY Times reminded me of how emotions can undermine one’s ability to make better business decisions and can stand in the way of business success.
Jack interviewed fellow blogger and business owner Jay Goltz, about why he hasn’t utilized open book management since he seemed to be a perfect candidate for this innovative business strategy.
“Jack, I never had a problem with the concept of open-book management,” he said. “But I have always struggled with a few components of how you implement it. As long as I had those reservations, it was always easier to find an excuse and just push it to the back burner.”
Turns out that some of these reservations had more to do with emotional resistance than practical concerns. His own family history and the belief that was passed down to him by his immigrant grandparents, was that you should not reveal too much information, especially about how much money you’re making. This belief stood in the way of utilizing a strategy that has great potential and interfered with his ability to make better business decisions.
Jay is not alone, in fact his statement about pushing things to the back burner reminded me of many professionals I’ve worked with who have avoided implementing seemingly successful strategies because emotional factors get in the way of making better business decisions. Not surprising, these emotions often have to do with financial matters. Letting emotions guide decision making often stands in the way of business success; as was the case with Jenny.
Jenny runs a law firm in midtown Manhattan. She resisted hiring a bookkeeper for years. At first she fooled herself into thinking she would do it herself, but gave up after several years of good intentions.
Numerous opportunities had slipped through her fingers because she lacked the knowledge that a good set of books could empower her with, notably the opportunity to purchase the office space she had been renting at an insider’s price back in 2003, which she still regrets. Although she was in her mid 50′s, Jenny was hesitant to put too much into her retirement account, as she was always concerned that she wouldn’t have enough cash to cover overhead. As time went by she became more and more concerned with her ability to retire by her mid 60′s. Although the lack of financial information caused her to second guess herself, and she knew she didn’t have the time or bookkeeping skills to keep track of it herself, she simply could not let go and allow anyone to help.
When Jenny had to get her tax info. in order, it became a time consuming project to cobble together an entire years worth of receipts and other financial data by herself. When she received the returns back from her accountant, she was often plagued with concerns over why she hadn’t made more money or why she owed so much to the government.
We talked at length about her financial concerns and defined her idea of business success. She understood that there was a lot to be gained from delegating the bookkeeping to a skilled professional. We talked about what had influenced her emotional responses and she realized that it she was hearing an old tape of her mother’s fears playing over and over again in her head. Finally, she agreed to try to let go and hire a bookkeeping service to come in twice a month.
It took a little time for her to feel completely comfortable, but I’m pleased to report that today Jenny’s bank accounts are in balance. She knows exactly how much money she owes and what’s owed to her. She no longer fears her finances and feels much more in control.
As a result, Jenny has increased revenues, regularly takes a larger draw and is comfortable putting more money into her retirement account. She is confident in her ability to make better business decisions and looks forward to retiring in 7 years with ample income to live on.
Are emotions standing in the way of making better business decisions?
Susan Martin, Small Business Financial Management