Teaching Employees to Think and Act Like Owners
John P. "Jack" Stack, President and CEO, SRC Holdings Corp.
Jack Stack’'s books, seminars, mentoring, board leadership and financial support for entrepreneurial education has taught thousands – from factory workers and line managers to corporate and not-for-profit executives – how to think and act like owners.
Stack says he was in the right place at the right time in the late 1960s when most of his friends were in college or Vietnam and he went to work for International Harvester (IH) in Chicago. Starting as an hourly wage earner, he was promoted to salaried worker and eventually plant manager for Springfield Remanufacturing Corporation (SRC), an IH factory in Springfield, Missouri.
"It was like a training program in how hourly people think about management," he says.
Seeds for Giving Back
But it was the process of raising $9 million to purchase the nearly bankrupt factory that helped Stack understand what keeps managers and employees from working toward the same goals and planted the seeds for giving back to entrepreneurship by sharing this knowledge down the road.
"There's a report card for operations, and there's a report card for management," he says. "As an employee involved in operations, I was always evaluated on things like quality, safety factors or delivery cost. The banks, on the other hand, were interested in debt equity ratios, liquidity and net worth. Because we have broken work down into job descriptions, the majority of people think that there’s only one report card and if they do their jobs – nothing more and nothing less – the company will succeed."
Why has this state of affairs persisted for so long?
Because, says Stack, "most people believe that only a select group of people can understand financial ratios."
In 1979 at IH, that meant 114,500 people were accountable for making great trucks, farm tractors, engines, and construction equipment and only 500 were accountable for making a great company.
As president and CEO of SRC Holdings Corp., Stack turned the paradigm on its head through "open book management." Stack taught his initially reluctant employees common sense financials and how their jobs made a difference in the success of the company. Twenty-two years later, from an initial $100,000 in equity raised to purchase the factory, SRC employs more than 1,000 people with sales of over $200 million.
The Great Game of Business
By the late 1980s, Stack’s ideas about management caught the attention of INC Magazine. The magazine published a cover story about Stack and invited him to present at a conference, which led to a collaboration with Bo Burlingham in the 1992 publication of The Great Game of Business.
The book, selected as one of the 30 best business books of the year by Soundview Executive Book Summaries, not only generated sales but visitors to SRC seeking to learn more about Stack's eleven "Higher Laws of Business," the ultimate law being: When you appeal to the highest thinking, you get the highest level of performance.
Stack plows the royalties back into SRC and eventually created a subsidiary to conduct conferences and make consultants available to help other businesses implement the "great game."
"It's more than a metaphor," says Stack. "It's a way to get your people to think and act like owners. The thousands of companies that have implemented it have been successful. That’s what we get back from it. It’s our reinvestment in the community."
The Not-for-Profit Challenge
While entrepreneurs were clamoring to tap Stack's wisdom, not-for-profit organizations in the Springfield area were tapping out Stack's generosity. SRC's reputation for saying yes to community causes was well known and, up to a point, Stack admits, it served the company well.
"The more we gave, the more successful we became," he says. "However, people were coming to us two, three and four times in the same year. I got to the point where this huge sucking sound was turning me from a willing giver to a reluctant giver. I felt bad about it, and knew I had to figure out a better way."
He decided to teach not-for-profits how to succeed as businesses, offering to provide financial and technical support for a year to any organization interested in developing a revenue-producing product. Every deal Stack worked on was successful. After the year, however, none of the not-for-profits devoted sufficient attention to the ventures to sustain them. Stack responded by offering workshops on the fundamentals of entrepreneurship. Interest was paltry, but he didn't give up.
In 2002 while serving as campaign co-chair for United Way of the Ozarks, he established an Entrepreneurial Fund – the first of its kind – pledging $100,000 to support business projects and encourage innovation in the not-for-profit community. Investment capital would be provided from an endowment fund that would provide seed money to nonprofit agencies upon submission and approval of a business plan. The plan would include provision for repayment of the capital with interest. Funds accrued would be returned to the endowment fund thereby perpetuating the program. Stack also offered a limited number of sessions to train the agencies on how to put a business plan together and get a revenue-producing product off the ground.
Response from the not-for-profits was still lukewarm, but Stack has not given up. He’s hopeful that the collaboration he recently engineered between the United Way and the Drury University Students in Free Enterprise (SIFE) team will provide the necessary business and organizational skills that the not-for-profits seem to find so difficult to apply in their day-to-day operations.
"These students have won unbelievable international honors," says Stack. "So I said to them, 'What if I gave you capital and you provided the impetus to help me launch the not-for-profits to think like the for-profit sector?' The SIFE team is really excited about this and is currently working with a not-for-profit to put together a business plan."
An Essential Evolution
Stack doesn't harbor illusions that the road to self-sustaining not-for-profits will be easy. Nevertheless, he's a passionate believer that such an evolution is essential to avoid crises of global proportions and to sharing the gifts that entrepreneurship has brought to his own life and community.
To that end, he says, when Ernst & Young or the Kauffman Foundation ask him to do something, he's more than happy to give back.
"They're the premier organizations that understand that entrepreneurship is truly what will make the difference between the haves and the have-nots," he says. Stack is a national judge for the Ernst & Young Entrepreneur of the Year Awards Institute and has served as an advisor for this group since 1998. He also serves on the Drury University board of trustees and is a past president of the Springfield Business Development Corporation, a subsidiary of the Springfield Area Chamber of Commerce. In addition, he sits on several corporate boards.
More than 14 years ago, while chairing the Springfield Area Chamber of Commerce Education Committee, he helped create a curriculum to introduce third graders to the world of work by spending a day in various area businesses. The program was so successful it has since expanded to all freshmen in Springfield high schools.
Three years ago, Stack helped start a venture capital company, Quest Venture Capital.
"The idea was to raise capital for local entrepreneurs who couldn't get money to start businesses and invest in our community," he says. "We seeded the fund with $500,000 and were able to raise $6 million."
Nine out of the 10 companies in which the fund invested have been successful, returning 19 percent and leading Stack and his co-investors to start a second $10 million fund, of which $8 million has been raised so far.
Stack's latest book, A Stake in the Outcome: Building a Culture of Ownership That Will Enable You to Outperform the Competition, was published in March 2002.
Asked to explain what drives him to devote time and resources to entrepreneurship, Stack recalls watching an NBC White Paper on television some 24 years ago.
"In 1981, America was getting pummeled in the press because we were no longer productive and Japan was eating our lunch," he says. "Tom Brokaw warned if we don't do something about productivity in the U.S. today, our children will be the first in the history of the country to live worse than the previous generation. That one comment was the turning point in my life.
"I’m not going to leave my kids a screwed up world without trying to provide an alternative way to a better quality of life."
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.