How often do hostel owners share their profits with the receptionists? Definitely not often but, as you will learn today, the answer is not, “never.” Enter The Crash Pad Hostel in Chattanooga, Tennessee. Have you heard of Tennessee? When you think about The Crash Pad, put away all your stereotypes of “The South” in America.
The Crash Pad advertises itself as “an uncommon hostel.” From the guest perspective this is certainly true. The Crash Pad is a certified LEED Platinum, which means it uses fewer resources, reduces waste and negative environmental impacts, and was constructed to maximize health and productivity. No other hostel currently holds this certification.
Besides their incredibly cool building, step behind the reception desk and let’s talk about what really makes The Crash Pad one-of-a-kind. It’s called, “Open Book Management.”
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Open Book Management is a business concept created at an American factory. The factory was in big trouble financially, and in order to save the factory and prevent 119 people from losing their jobs, they radically re-programmed the way they operated. Traditionally in a factory there are lots of lower-paid workers who are being managed by a supervisor. There is often tension between managers and workers, with each side not being able to relate to the other. The people at the top just pass down orders to the people at the bottom.
At this factory, they decided to flip the script. Every employee was taught about the measures of success for the business. Whether it’s keeping track of how much toilet paper the factory uses or understanding how hourly labor affects profitability, all the employees learned how the numbers affected the factory’s success. They were then enabled and expected to use their knowledge and experience to improve the factory’s performance. Lastly, every employee was given a stake in the company’s success, so that when the factory was prosperous, the employees would be prosperous too.
This factory went on to be very successful, everyone’s jobs were saved, and the company next used their radical way of doing business to open other businesses where the company and the employees were successful.
The Crash Pad follows these same Open Book Management practices at their hostel. Let’s hear how it works from Max Poppel, owner of The Crash Pad.
"We meet once a week around our Beta Board. The Beta Board is our visual scorekeeper of Open Book Management. The board will look different for every company and industry because it has metrics specific to your business that you can track and impact. At the Crash Pad this includes:
The board can include anything that hopefully you can control. Taking the numbers down, looking at them, just thinking about them, that alone helps you improve.
We have a CRash pad Annual Plan (CRAP). Each line on our board is assigned an owner. If you own a line, you’re the one reporting on it every week. You need to know how that number got there and be able to look to the future.
For each line there are three colored numbers. The blue number is from the CRAP. The CRAP never changes throughout the year. The green number is the actual measured number. Because the CRAP never changes, and we now know more information, the red number is the forecast for the future of that number, which we update as time goes on.
The board is the center of Open Book Management. Besides measuring and putting the numbers up, you have to educate the staff on what the numbers are and how each staff member can affect them. We spend 20-30 minutes talking about it every week in addition to other happenings around the hostel."
"A lot of it is just keeping us on track. After we implemented the board we saw a direct impact. There is some truth to if you write stuff down and track it, it magically gets better. It's not a saving grace but it gets people thinking about how their everyday actions have effects on the bottom line.
We have a profit sharing component to this. We should all work together and make the hostel more successful. The Crashpad Annual Plan has baseline costs associated with it. At 49% occupancy, we will cover the costs of running the hostel. Of the hostel’s profits, 40% goes to the hostel for Retained Earnings, 20% goes for Capital Improvements, and 40% goes into a pot and is shared among the frontline employees. You can reverse-engineer these percentages based upon how much money you want employees to make. These are just the numbers we made up.We also have dedicated hours every week for our managers to work on initiatives that will make us money. We felt this is important since they have a stake in our success, so giving them time to try to make us more successful makes sense to us."
"For us, we just like the concept of tying pay to performance. We know that if we had a month with 80% occupancy that our staff are busting their asses. Working that hard can be soul-crushing, but it’s a lot better if it shows in your paycheck."
"In general we are all about communication. If you have an issue with someone then disagree without being disagreeable. We’re all about communication up the hierarchy and down. Open Book Management is an extra layer of communication. At a lot of hostels it’s only the owners who have the numbers and then top brass passes down barking orders and no one understands the new direction. Now, with Open Book Management, when we make changes at the hostel, everyone understands why."
"You need everyone to buy into the idea, to make it part of the culture. We had a small team so it was easy to get everyone on board. If you’re the manager and you don’t have the owner’s buy-in, it’s not going to happen. If you’re the owner you’ll still need to change the culture.
The real issue isn’t the size of the hostel, but the culture. If you don’t have the staff buy into the idea, it wont work. The more people you have at your hostel, the harder it is to change your culture."
I think that hostels are the perfect place for Open Book Management.
The first reason is that at many hostels, particularly smaller ones, the staff feel like a family. This is a great starting place for getting people to share in the work and also share in the success.
The second reason that hostels are a great place for OBM is that hostel employees have the power to shape the success of the hostel. Whether it’s looking for ways to cut waste or going the extra mile to provide great service and improve guest reviews, your employees can influence the success of the business, and they’re more likely to exert a positive influence if they know they will benefit too.
The third reason Open Book Management works well with hostel management is that it has huge potential to increase staff retention and keep employees motivated. In Dan Pink's bestselling book Drive: The Surprising Truth About What Motivates Us, he outlines that human motivation is driven by autonomy, mastery, and purpose. Open Book Management engages all three.
Autonomy is our desire to be self directed. Letting your staff influence the hostel's operations and strategic decisions, instead of just giving them orders, is a great way to make them feel autonomous.
Mastery is our urge to get better at skills. Doing mindless check-ins and check-outs at a hostel can quickly get boring. Giving your staff a real challenge, by making them responsible for a key hostel metric, will ignite the desire to achieve mastery.
Lastly, purpose is our desire to do something that has meaning and is important. Instead of just being motivated to collect a paycheck, Open Book Management gives hostel work purpose because it shows employees how their work directly contributes to the success of the business.
The Crash Pad Hostel really is an uncommon hostel. I can only imagine how many hostel owners would freak out at the idea of revealing to the staff all the financial details of the business. As uncommon as it is, The Crash Pad has been very successful.
Could Open Book Management be the secret to unleashing growth at your hostel too?
Byron has worked with hostels big and small, city and rural. His first job was as a receptionist in San Francisco and his favorite was leading the events for a 500-bed hostel in Sydney. Today he's a Market Manager at Cloudbeds. Besides all things hostel related, he enjoys motorcycle riding, especially because it's the perfect way to get from hostel to hostel!
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