#TheSRCstory | WHY DO SO MANY EVERGREEN CEOS REVERE A GUY WHO FIXES DIESEL ENGINES?

Every fall, Tugboat Institute co-hosts its second major event of the year called the Tugboat Institute @ Evergreen Exemplar Visit. Last week, I traveled to Springfield, Missouri, along with 50 other Evergreen CEOs to learn about Jack Stack’s version of open-book management called the Great Game of Business (GGOB).

Why does his management approach resonate so deeply with us? Perhaps it is GGOB’s emphasis on People First and Pragmatic Innovation. Or perhaps it’s just the openness, honesty, empowerment and fundamental goodness that the system promotes—an echo of the employee relationship that many Evergreen leaders are working to build with their teams.

Stack doesn’t have an MBA or even a college degree, but he has been a gleeful student of business all his life. Like everybody’s favorite mad scientist, he’s been running experiments at his laboratory, Springfield-based SRC Holdings, best known for its skill at remanufacturing industrial engines.

In 1983, Stack and a few friends and fellow SRC employees put up $100,000 and borrowed $9 million at an 18 percent interest rate to buy the then-money-losing firm from dying International Harvester (IH). From the start, Stack took a radically different approach to managing SRC—one born of desperation, not genius, he insists. The day after the acquisition closed, Stack and his management team realized that they had forgotten to negotiate an IT agreement with IH. IH had turned off all their computer systems and access to all of their data from customer orders to payables.

So what did he do? He called all of his employees into the break room and line by line rebuilt their income statement and balance sheet together on a huge whiteboard. Everyone had to pitch in to help fill out the information. That “huddle” became the beginning of a weekly meeting with all employees to share the detailed financial information of the past week and to go over forecasts. They celebrated wins and addressed shortfalls.

He begged everybody—even the janitors—to help SRC get to profitability and to pay off the company’s bank debt. They didn’t have much time. He saw that few people understood the financials, so began training everyone on the team on the “rules of business,” using sports as the metaphor. How can a baseball team take the field if they don’t understand the rules of baseball? And, why will the team members engage if there isn’t a “scorecard” that shows whether they are winning or losing? And, why work hard and take the risk of suggesting improvements if they don’t have “a stake in the outcome?”

These three gamification ideas working together—teaching the rules of business, providing a clear scorecard and sharing in the success of winning—are the basis of the Great Game of Business.

Today, SRC’s equity is valued at hundreds of millions, the company has paid out over $100 million to retiring former employees, and thanks to its employee shareholder program, everyone in the company continues to benefit from SRC’s profitable growth. The 28 percent annualized return SRC has delivered over the past 33 years is superior to Berkshire Hathaway’s. More importantly, when we toured his facilities and watched his son lead a huddle, it was clear that people love working at SRC.

With the help of journalist and author Bo Burlingham, Stack has been hammering the drum of his version of open-book management for decades. Their 1992 book, The Great Game of Business, is a classic that every entrepreneur should read. Stack happily shared his wisdom with us over two exciting days, with Burlingham contributing a pearl of wisdom or a dig from time to time. From the first night we all gathered in the lobby of the Doubletree to learn about the great game, it was clear this was a group eager to play.

Like a lot of other Tugboaters, I was electrified when I first heard Stack tell his story, at Tugboat Summit in Sun Valley last year. I raced back to my bookkeeper and announced grandly that we would henceforth adopt open-book management. “What is it?” she asked. “I’m not exactly sure, but I want to try it,” I said. “Does it involve opening the books?” she asked. “Yes,” I said. “Well, we have less than $1 million in sales and three employees. So your idea is giving me a panic attack.” (Did I mention that I am married to my bookkeeper?)

Inspired by Stack’s early days, I experimented. I hunted for small ways I could give my employees a taste for the highs and lows of entrepreneurship. Like any company attempting to make a go of open-book management for the first time, we fretted over whether the system would fuel conflicts and jealousies.

It’s all been a bit clumsy at times, but my small team has embraced the game. I’ve seen them get excited about the rules of business and our numbers and feel the business buzz.

The Great Game of Business is a constantly evolving process, though. Did I come to Springfield with questions? You bet. Boy, did I get answers. I realized I was making this more difficult and less fun than Stack would have. First, you have to train people. Second, you have to get them working and interacting as a team. Stack and GGOB team member Steve Baker taught us that to make it work, you have to overcome the enormity of the challenge by making a game of it—literally.

In fact, Stack strongly encourages “mini-games” designed around 90-day goals that attack specific issues or opportunities in the business. Say the busboys in your restaurant chain carelessly throw away spoons to the tune of $10,000 a year. Create a “save-the-spoons” mini-game and reward the players with half of the gains through a progressively better set of gifts. For example, give a nice monogrammed mug to each busboy for hitting a modest goal and a French press for doing much better than that. Or suppose your bicycle manufacturer built two dozen folding bikes three years ago that are now unsold and unloved? Create a “brilliant mistake” mini-game to quietly usher the oddballs out the back door in steeply discounted private sales to cyclists with a sense of humor.

Our group was inspired and moved by the presentation. When we asked Stack what we could do to thank him for his hospitality and gift of his learnings he said, “Just buy me a beer the next time you see me. A Miller Lite would be preferred. And, care for your people and your families.” That’s the kind of guy Jack Stack is.

Stephane Fitch is the Founder of FitchInk.

Source:  Tugboat Institute

 

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