– For the first time Agency Unfiltered has two featured guests. We’re joined by Mike and
Nikole Rose CEO and COO of Dallas based Mojo Media labs a diamond HubSpot agency partner. Mike and Nikole join us to talk about Open Book Financial
Management a practice in which Mojo shares their
financials with the team to have everyone think
like business owners. We talked about why they incorporated this financial transparency, how its impacted the organization
and how they’ve been able to level up the team’s financial literacy. Are you looking to lean in to OBM yourself to reap the benefits on your
own revenue growth and culture? There’s no better place
to start than this episode let’s do it. (hard rock music) – Well, hello both of you
another couchy episode of Agency Unfiltered, actually
I know we were just talking about this but the first time
we’ve ever had two guests, so very excited to be digging
with both of you today. – I’m sorry to you.(laughs) – It’ll be a whole new dynamic. – I’m sorry I can’t go
anywhere without Nikole. – Yeah that’s right, so we’re over here to talk about today Open Book Management, Open Book Financial Management. – Yep.
– Sounds like something Mojo leans into
pretty well and so I’m excited to unpack it maybe the
easiest place to start is to just explain what OBM is and why should the viewers today
care or why do they deserve to hear about it? – Sure, would you like to start? – No you go ahead. – So OBM acronym for Open Book Management or Open Book Financial Management
is essentially a practice to share the financials
within in our case the agency to hopefully have everybody think and act like business owners.
– It’s great. – Yeah, and so he hit upon
like why should agencies care and in why do we care? Is number one we wanted to
create a transparent agency, we believe that everybody
comes to work each day to want to do their best job and to
be able to help to contribute to the success of the company. And oftentimes the issues
start to become pretty apparent based out of the numbers that you see and so when those are
hidden when the team members don’t understand what
the numbers are saying they can’t help so much right? So this is a great way to be transparent but ultimately the idea
is to help a lot of people to think and act like owners so. – And on the transparent
side, we’re married so with that I think in the center of any healthy relationship is trust and rather you’re husband
and wife or your part of an agency or your a
spouse of outside the agency whatever the relationship is, really trust is the center point. So the way we demonstrate
trust in our agency is to share the numbers
and become very transparent is part of the process to establish trust. So we can’t think of another
way to be more transparent than to open up how the business
is performing financially whether it’s good or bad and
that’s just one of the pillars of transparency that we have which is OBM. – I love that, so it sounds
like if anything trust and transparency breeds buying in across the organization right? Like you feel, the trust piece okay this is great like I’m
a part of this business I’m thinking like a business
owner but then there’s buying for it to succeed in
and perform well right? Which I bet yields very positive results. – Absolutely yeah absolutely
and and it’s easier for the team members to understand why decisions are made right? Because they understand what’s happening so there’s agreement there’s
transparency and also we talk about those type of decisions and how they’re gonna impact the numbers. But one fundamental thing with OBM is more than just sharing the financials. So I wanna touch upon that really quickly because within Open Book
Management everybody in our company has a part and responsibility in actually managing the
numbers and so we’ll get into that a little bit later, so
it’s one thing to kind of share your P&L and open up
your books which we did that many years ago and
it didn’t have the impact that we were hoping. So this is a lot more
in-depth and exciting. – So it’s not just the
visibility here it is but it’s actually sounds
like owning a piece of it? And then so that actually
leads to my next question, so this is great right? I’m bought in, what
are the core components you mentioned numbers so what specifically are they having access
to, what do they look at, what numbers specifically do they own? Please unpack that a little bit. – Sure, I think before the
numbers though is really starting with general numbers;
Gross profit, Net income those kind of very simple things in order to really establish what
financial literacy is. A lot of people think
that if an agency owner… If the agency is making
a million dollars a year then clearly the agency owners
are making a million dollars a year and that’s not the way
it works, what you bring in is not what you bring home. So some of us take that
for granted and in order to establish a culture of
financial literacy we really start with the most basic and the
most fundamental of numbers and over time as people continue to play, practice the rituals
and whatnot then they start to understand that there’s
a difference between what a Fixed expense is and
what a Variable expense is and what Gross profit is
and what Net income is and overtime they can then see
how they fit into that hole it’s income and expense structure and then how to impact
the numbers positively. But for us we decided to open the books up to include everything, to
except for individual salaries but beyond that, – Just so that it makes sense yeah. – Yeah, well a lot of people
start with just very high up on what we would call
profit and loss statement and just sharing revenue and
revenue is an open book right? But really getting into
the fundamental numbers of the entire profit and loss statement is really important to us. – Mm-hmm, so the components
I think your question was kind of around the components of OBM and so you touched upon
the most important part which is really the critical number but you have to start with
creating a plan or a budget. So in essence creating what
your year is gonna look like and then for us from a line item ownership we actually have every
single line item on our P&L; that is managed and over
seen by somebody at Mojo. For example we’ve got one of our digital marketing specialists who manages the general office expenses. And so his responsibility
is to; one truly understand that number what goes into
it, he helps to forecast what we’re gonna be
spending every given month. And then if we have variable
expenses come up people have to pass them through him
and he really ultimately makes the call on whether or not we make those expenditures this month. And so it’s really
empowering, I mean it’s great it took a little while for
people to stop coming to us and saying well can I do this? It’s like well you know the numbers and so make a decision and people do it. So it’s from top to bottom that from a line item ownership perspective. – And our folks though they
may not know this coming in but they definitely know it
within the first few months of practicing the game is what
general ledger expenses are or what general ledger numbers are. So the GL numbers in the items are shared some of them are rolled up to like you mentioned
general office expense, some is under software-as-a-service. So as an agency we and
utilize a lot of software and that’s a big expense and
it only seems to always come in at $15 a month or $5 a
month or convenient payments of X which don’t seem to be a lot. But if you’re managing
software-as-a-service as a line item and you’ve
budgeted your number out for the entire year and
that one easy installment of $5 comes in and we
don’t make that decision, it goes to that person managing
that line item and then they make the decision whether
we should do it or not. If it’s within budget and
it makes sense he will, if not then they’ll try
to figure out okay team let’s come together, let’s
look at what we’re paying for and what we actually need
and see if we can make room for this tool that you might want. – Yeah, so the magic really
comes in on our weekly Huddle’s. So the entire company comes
together Monday at 11 a.m. and every person who owns
a line item comes prepared to share what their
forecast is for what that, how that month is gonna end out. So month one is where forecasting
is probably not gonna be as accurate as when we get
further along to the month and have a better idea but
at the end of the year, – Week one.
– Week one yes thank you. – Weekly meetings but it’s for that month? – Its for that month yes, exactly. So we all meet, everybody
reports out on their number and in essence we’re building
our P&L every single week. And so there’s variables,
we’re gonna know more maybe prospects have gotten
further in the pipeline so revenue, numbers are more
clear, expenses and so forth and so it’s really cool. Everybody comes to the
huddle it’s 20 minutes, we report on our numbers and then we break and as you can imagine
everybody is bought in from knowing the numbers but
we also all win together, we all lose together and so
based on hitting the goals of the company which for us
our critical number is profit before tax so basically
the bottom line profit. If we’re meeting our numbers
then everybody it’s tied to a bonus program and
everybody knows exactly what kind of bonus they’ll be able to get, so it’s basically a lookup
chart one through 20. – And that’s another part
of open-book is choosing your critical number. So some, we’ve decided
to choose bottom line or Net income or profit before
tax how everyone described it even some companies decide
to share Gross profit or whatever the case might be
but the lower you can go down on the profit and loss
statement, the more transparent you’re gonna become as an agency. – Mm-hmm, yep. – There’s two things I wanna unpack there. This is incredibly helpful, you’ve mentioned financial
literacy and then you mentioned like how each individual owns a number. So I wanna do both of those. The first one in regards
to financial literacy, how do you build a process or what is like the formal
training look like for new hires or anybody that’s gonna be
becoming an owner for a number? Or how do you ensure that their financial literacy is top-notch ready to have the strategic
forecasting and budget huddle? – So the way we get people up
to speed on OBM particularly if they’re a new hire, a
new Mojo maker as we say, we don’t like to use the word employee, so we say Mojo makers,
they basically get paired with somebody who’s
been playing much longer or been practicing. So we’re moving into I
think our fourth year of practicing Open Book Management? So there’s some veterans on the team, so generally they’ll shadow somebody. A great example of
getting people up to speed are the interns. So we have interns every
summer and as you can imagine, the interns knowledge of
how a business operates may not be as great,
but when they do leave they know exactly how businesses run. So a good example would be an
intern would shadow somebody on a line item and help
them go through the exercise of forecasting that number
for the week, every week throughout the month
and that means they have to have access to the
budget, they have to look at the line items that are coming in from the charges perspective and be able to help forecast that number. Ultimately though we
start with the most basic of fundamentals like how
to manage a home budget or how to if you get a dollar,
how do you spend that dollar through the month if it
were to be sectioned off as those percent. So if your rent is 10%
and your food budget is 5% then how do you invest
this money moving forward? So it’s really not making it, a business is not complicated
I think we have a tendency to make it much more
complicated than it really is but really breaking it down
to its fundamental levels and then teaching that literacy it’s got just tremendous
impact on them personally because we’ve learned that
they then take it home and then start saying hey, how much are we putting away for this? Or how much are we saving for that? Or with decision-making
process are we going through to set ourselves up personally on a much more financial freedom? – Yeah their personal budgets
are probably way more wound up than what they have. – We hope that, that
happens because we just feel that people, our children
are so underserved in schools and not learning how budgets
work or how to save for money or save for future
expenses or going into debt like we’re hearing all the time. So if we can impact people
on a personal level at work that becomes a pretty special
thing and it really fits into our mission as an agency which is to help people grow smarter, so if we can help folks grow
smarter on the personal side as well as on the professional
side then we feel like we’ve accomplished our mission. – That’s great and the second
half of that question was how do we assign a Mojo
maker to a particular number? So is there a thought process? Or is it just based on what’s available? I mean what does the process
look like to assign person to number, if there’s one? – Yeah so what we try to
do is first of all someone will own a line item typically
for six months maybe a year if it’s really complex
and so we have a chance to kind of change it up and
sometimes when someone else gets a line item they might have a
new fresh perspective on it. – So it rotates its not
permanent or anything? – It rotates so but what
we try to do first is who would naturally be
closest to this expense to this line item? And so we try to go
there first and then some are just gonna be outside of
it like we have a travel budget well there’s no one on our team
who actually is responsible for managing all of our travel right? We’re an agency and so
from that perspective it’s who’s left, we oftentimes
will ask for volunteer who was interested in
wanting to know more about that information and things
like that and then we’ll assign. – So there’s obviously I think bigger higher priority numbers and then there’s like smaller secondary
numbers and so it’s assignment but then well whoever
wants to volunteer for some of those smaller ones is
that what we are saying? – Yeah, I mean I kind of and I wouldn’t say they’re
all important right? – Oh, sure you’re right about the cadence in which they need to be
updated might be different or? – I think we’ve really talked through this but I think one of the ways we
intuitively go through it is there are variable expenses
and then fixed expenses right? So a fixed expense might be
rent and rent is gonna be static all year long, so it’s easy to
forecast it on a weekly basis ’cause it’s fixed but
some of the variable costs are is something that goes to somebody a little bit more
experienced and all revenue for the most part is pretty much variable and in an agency you have retainers but then you have renewals
in turn and everything else. So we really break out the
revenue into I think four or five different line
items so we can spread that weight out but
generally somebody who’s a little bit more experienced
to have been playing a little bit longer we’ll
take a more variable line-item but then somebody who
with a fixed expense may or a fixed line item might be able to grow into by shadowing and then
playing with somebody like that. – Well and so I’ll give you an example. Our website project manager, so she has the website revenue line item. So she is the one who’s
responsible for it, so obviously she’s the closest to it. We have our senior lead developer and he is very passionate
about software-as-a-service and so he owns the
software-as-a-service line item. So he gets to evaluate all
the new tech that’s coming in to the agency and going are we using it? Who should be using it? And so we try to just
naturally assign to people who would be closest to it, our director of new business development owns the sales and marketing budget and so forth. So we try to do that first
but some things just don’t fit that way and then we take
volunteers who would like to own those and then go from there. – And to use an example
outside the agency world it’s pretty common in the OBM
community is take a restaurant for example, a restaurant may take put a bunch of expenses
under one line item or one general ledger code but
as people get more involved as they become more
comfortable with transparency, as employees learn how businesses
run and they’re thinking like owners, then they can
start unpacking some of those line items that are generally rolled up. So a restaurant example
is there was a waiter who then got the responsibility
of managing utensils down to the utensil expense side and
then he came up with an idea like an owner probably
would is, what if I were to ask people coming into
the restaurant, do you want a straw or do you not want a straw? By asking that question he
was able to save the company which is many different
locations thousands of dollars a month based on that
and that was eco-friendly and everything else but when it comes down to the expense side they were
able to save a lot of money because they were managing that line item. The same thing with throwing away utensils and saving utensils the
dishwasher was able to manage a line-item on saving utensils. So it’s really how far,
how deep and how broad you really wanna take it
which it gets exciting. – The restaurant example
makes a ton of sense, I’d be interested to
put you on the spot here has there been an agency
example where asking that sort of question or like having
that owner mindset allowed you to save money somewhere
or increase revenue or a fair profit margin
a particular aspect? – Every day.
– Always? – Every day and some examples
are small and some are larger but yeah this was a were
the first things that we saw when we implemented OBM
was one of the girls who was managing at the time
our general office expenses. Well, we buy coffee and we
go through a lot of coffee and what she ended up realizing
is that people were making these big bats of coffee
at the end of the day but maybe only taking one cup. So they were thrown away,
so she went out to the team and said, okay guys you know
what this coffee is expensive and we’re having to purchase
it now every few weeks instead of on a monthly basis and so from now on if you’re gonna be making
coffee at the end of the day you need to make sure it’s
gonna, people are gonna… Does that mean (bubbling)
right, so that’s a small… – And to role that even that
small thing up to a larger that small thing led to does every agents in the world offer snacks, free snacks? All this stuff and and our folks
don’t take that for granted you take coffee and you
roll it up into snacks as an agency I mean that’s
a pretty decent budget for us anyway, so being able to say hey, not if I’m gonna take a
snack or not but to know that this snack, these free
beer, wine, keg all this stuff that we have is provided
truly because we care and they see the expense
that, that from the agency is now incurring as a result of that and that becomes a pretty
special thing, right? I think though my favorite story
is going back to an intern, – Oh, yeah for sure this was good. – We have a line item recruiting fees so if we need to hire another Mojo maker there’s ways to go about to
attract and recruit new folks and one of the ways to do
that is as most people know is go through a placement agency
and that is very expensive to do so and long story
short we made an announcement in a staff meeting that
we hired this person and it was the intern. It was this intern who stood
up and just quickly said that, my line item is the recruiting fee, how did we get this person? Do we have to go through
a recruiting agency and if we did how much was that? ‘Cause I don’t want it
to impact my line item and the the result was no we
didn’t it was somebody referred this person to the
company and it was through that thought process to say how
can we reduce this line item or perhaps eliminate it
altogether by going through and having current happy employees refer the next happy employee and so that really drove that (murmurs) – That’s great, now in regards
I don’t know the cadence in which you have performance
reviews or how you assess your team, but obviously
I assume that they have their primary day job and then
they also have the number two so how does that factor
in to performance reviews and kind of how they’re
assessed as a team member? – You know that’s a good question,
we don’t necessarily role in the OBM number to their
assessment if you will. Really their reward on good
or bad is the bonus plan where it’s tied to that
and so that’s really where the motivation is. And it’s kind of a game at our company to forecast really well. So it’s like who can get
closest to what the actuals are gonna be, right? And so everybody takes it very seriously because they don’t wanna be
the one line item that’s like so far off when we thought
we were gonna be hitting a 14% bonus that quarter but
because of their line item that wasn’t forecasted well we’re at five. So you don’t wanna be that guy. So from that perspective
it’s pretty self motivating and really the whole team was behind it, so there’s no true management
than it really needs to happen there from us around… – So its not like a formal
review piece but I think just the overall ownership
but then just, it sounds like there’s like a
gamification piece like almost like almost like (mumbles) – It’s great that you
mentioned the word game because that’s really what this is. We have gamified, this
isn’t boring, our meetings are exciting and it really is a game. In fact a part of Open Book
Management is called Mini Games and so Mini Games are
literally little Mini Games that you play to fix…
– On a quarterly basis. – On a quarterly basis to fix
a problem that can help you to reach your goals
and for us profit goals and so they could be any which thing. We had one Mini Game that was to… In essence people are getting
distracted by too many people come in interruptions things like that, so we implemented time blocking. So that everybody could
have like blocks of time it’s specified times of the day to make sure that everybody
could get their work done so we could be a lot more
efficient and effective and hit our due dates. And so we called it time
blocking as a beach. And the team made an entire
like physical game board every time we hit a good time block day, there’d be a little
flip-flop that’d be put on the game board little
mini prizes along the way to get there and so there’s lots of gamification within us. – So I think only two more
questions or so for you and so from an agency that
does not currently utilize OBM, it’s not currently a piece
of kind of their methodology or a process, how do I get started today? Where’s the easiest place to
get going and to implement this back home? – My take is I think it
starts with the culture. I mean we had to get
our culture right first. We had the wrong culture for
a lot of years and as a result we appreciate a great culture
because we’ve had a bad one. And we’ve tried to implement in the past and we had some failed attempts
for many different reasons but we had to really focus
on our mission, vision, values first and make sure that we have the right people on the team. Though they may not be in the right seats, we knew we had the right
people and with that then we were as we do as an agency. We were transparent and saying listen, this is where we wanna go this is where we ultimately wanna be, this
is the benefits behind it, we don’t have all the
answers, let’s sit down and figure this out together. So we started with a
design team for six months and then we slowly rolled
it out to everything else. – Yeah, so I couldn’t agree
more, I mean definitely culture having a good culture is I think an important foundational
element before rolling something like this out. But I tell agency owners, if
you’re not ready to jump in with both feet then you’re
not ready, don’t do it yet. To try to dip your toe in the
water and do little bits of it it’s not gonna be effective that’s kind of what I’ve witnessed with quite
a few companies who’ve done a little bit and they’re
like I don’t get it, this isn’t working. You have to be immersive
either all in or all out. And so but take it slow and
so the design team what Mike was referring to was basically
getting a group together of probably four or five and
planning out what your budget is gonna be and then just
rolling out all the pieces of it and then playing the game
amongst the design team for several months and
trying to do the Huddle’s. And it’s gonna be kind of
awkward and weird at first and then roll it out
to the entire company. – The design team is like a pilot group? – Yeah, exactly kind of the
group who’s building the program piece by piece before rolling
it out and then practicing it to see where the issues might be. – And this was a big
complicated topic and I can see if I’m listening or
watching this that it’s like it’s this might be too
difficult to implement or I don’t still don’t
understand the benefit of doing something like this,
but we have three pillars to our culture; it’s the Values,
it’s Open Book Management, there’s another piece called ROWE, Results Only Work Environment
but for OBM I would encourage at least to start learning
the topic because I promise there are people in your
agency right now who are breathing life into your company or they’re sucking the life out of it. And you the more people you
can get breathing fresh air into your company and not
trying to be in it for what’s in it for me kind of
sucking the life out of it, it weeds those people out
really fast and that’s important just from a culture filter perspective but it really does drive
ultimately business results. And if you wanna figure
out a way to monetize a great culture or to show
from a quantitative perspective that you have a great
culture beyond just an NPS or Glassdoor rating, is really
the financial performance of the agency and we should
be running healthy businesses that there’s so many benefits to that. And owners work way too hard
way too long to not have a healthy profit margin and
everybody can play a role into that and if they do
then they all get the benefit and ultimately that’s what
we feel like it’s all about. – I think you both mentioned
a few times to the OBM, OBM community and so if
I wanted to learn more like what does the community look like? What are resources out
there that I can learn more if this is, to your point, this
is something I do wanna jump into with headfirst? – Yeah, so one website that
I’d recommend checking out is greatgame.com, I call
it great game of business and it’s in essence telling
the story of someone who helped to kind of create the concept of Open Book Management but
there’s all sorts of resources just googling Open Book Management well unlock all sorts of things. – And there’s an annual
gathering in Dallas every year called The Great Games. The Great Game Of Business and that too has just been very helpful
to find that community but it’s really not a well-known kind, it’s almost like an underground
kind of community right now and it should be more well known. I think it’s more prevalent
in the manufacturing space where there is more waste
that could potentially occur though our waste in our
agency world is time, so it’s not a product per se
but we have to monetize time and therefore we’re
finding other agency owners who have been playing this
and playing it longer than us and we love connecting
with those folks and seeing what they really have on
their huddle board as we say. Sometimes it’s not just
quantitative, sometimes it’s how many steps the folks
have taken for the past month for a healthy lifestyle or community, how much love you get from a client, from the client base on how
many loves you’ve got or, so it can be really kind of
organically grown over time to say hey we’re tracking this
and we’re forecasting this now let’s track this too and
it really becomes really fun when it starts to become life of its own. – The team members in our
agency are the Mojo makers and they own it and so just
to kind of prove that point, Mike and I don’t leave the Huddle’s, in fact we have a line item
and sometimes we’re there sometimes we’re not. But the team, we’ve got people who lead it and if they’re not there, they
turn over to someone else. So they’re managing the entire huddle and so it’s the collaboration
of the entire team. – And I think that’s a good point. I think it’s important to get
to a point in time very sure that the owners are not involved. And that’s when it can
take a life of its own in a very positive way and
there’s a lot more life being breathed into the
agency than being sucked out. – Yeah.
– That’s great, it’s the ideal state.
– That’s fantastic. – I’ve got final question for you both and you might have a unique
OBM esque answer to this but what do you think is the
weirdest part of agency life? – The weirdest part?
– The weird part. – For our agency it’s Mike, (laughing) – Good answer. (mumbles) – What would you say to
that, the weirdest part? – Agency life in general
if you’re not specializing we’re just in so many different businesses and we have the opportunity
to impact those businesses and I think one of the more
difficult things is from an agency perspective that is managing many different
clients, I think there’s this fascination if
you’re on the agency side, what it’s like to be on the client side or what’s it like to be
dealing with a single brand? But as a even working on
the client-side you’re gonna be most likely managing
multiple different channels with managed by many different agencies, so there’s always this multiplier effect but yeah I think it’s having
such a great impact on or maybe not depending
on how your team’s setup on your clients businesses, yeah. – Yeah, that’s great, awesome. Well that’s it for me I
appreciate you both coming on Agency Unfiltered, this is
an exciting episode obviously with two guests but it’s been
a lot of fun thank you both. – Thank you, appreciate it. – If you like what you
watched make sure to subscribe to our Agency Unfiltered
newsletter which will remind you when the next episode
drops as well as sends you a ton of other helpful strategically
curated agency content. You could also subscribe
to our channel on YouTube or Podcast on SoundCloud. And if you wanna keep the
conversation going tweet me @kevin_dunn, remember keep
it Unfiltered, stay weird. I’m Kevin Dunn and I’ll see you next time. (rock music)

Implementing Open Book Financial Management

Leave a Reply

Your email address will not be published. Required fields are marked *