Executive Word -- Open Books To Elevate Performance

Dec. 21, 2004
Sharing company financial data with all employees helps engage them in making the enterprise more successful.
Jack Stack CEO SRC Holdings Corp., Springfield, Mo. Age: 54 Education: Elmhurst College, bachelor's degree in business. Career Highlights: 1979: Became plant manager for International Harvester. 1983: With 12 fellow managers bought operation and renamed it Springfield Remanufacturing Corp. 1992: Co-authored The Great Game of Business. Family: Wife Betsy; children, Ryan, Katie, Meghan, Timmy and Kylie. Interests: Judge for Ernst & Young's National Entrepreneur of the Year Awards, board member of Citibank Corp., current chairman of Springfield 2002 United Way fundraising campaign.
Since 1983 the employees of SRC Holdings have grown the company from $16 million to $160 million in sales, and from 119 to more than 850 employees. The organization is composed of 22 companies, including The Great Game of Business Inc., an education and consulting firm that spreads the open-book management philosophy, which advocates sharing detailed company financial data with all employees. IndustryWeek spoke to Stack about SRC, his most recent book, A Stake in the Outcome (2002, Doubleday) and the relevance of open-book management today.IW: In your book you refer to a culture of ownership. What does that mean?Stack: What it means to me is that if I bring in a customer, and they walked anywhere in any one of our facilities, they could see it in people's eyes. They can see healthy companies. They can see pride, they can see self-esteem, and they can see teamwork. It's obvious. You can sense it. Education is how you create that culture. IW: Is that why financial training is a critical part of your approach to open-book management?Stack: Look at our society. We hire somebody, we teach them safety, we tell them what the benefits are, we get them out on the job and try to get them up to an adequate skill level in 90 days. We not once tell them how the business makes money. Not once. It doesn't happen. You would think that, very simply, when you hired somebody you would sit down and say, 'I manufacture widgets. Here is the labor content. Here is the material content. Here is the overhead content. Here's the marketplace I'm in. Here are the margins I've got. Here's how much we're spending in terms of sales and engineering. Here's what the market spends in these areas. And here's how it all comes together.' But we don't. IW: Tell us about the transition you went through from being a manufacturer to becoming a corporate executive.Stack: I love making things. I used to build trucks and crawler tractors. At the end of the day when you saw 50-ton trucks roll off of an assembly line, you really felt like you had built something. Then I had to become this businessperson, this bureaucrat, and I had to figure out how you transform yourself from a person who really enjoys making things, to a businessperson in a corporate office. In the beginning of my business career, everything was documented, coordinated, and valuations were set up on how to create a 50-ton truck. I drove everything through the organization to create a great product, or a great service. When I bridged the gap between being a manager and a sales person, I began to realize that nowhere in my process did I ask people to create a great company. When I began to teach [people] how to evaluate the business, they began to change their behavior much quicker because now we were appealing to a higher level of thinking, and they gave us higher levels of performance. This stuff is common sense. You just raise the bar. [We expect employees can] measure the productivity rate of how many direct labor hours we're putting inside of an engine and the utilization and effectiveness based on that, why don't we think that these guys can understand things like debt-to-equity, margins and liquidity ratios? It's just a matter of teaching them those things. IW: Going forward, what do you think U.S. manufacturers should focus their attention on?Stack: I really think [the key] to the manufacturing sector in the United States today is this whole element of open-book management, where everybody gets involved in trying to figure out what it's going to take for us to get competitive on a global basis. I don't think that CEOs, presidents, vice presidents are smart enough to have those answers. In order for us to be able to compete over a long period of time, we have to give everyone in our organization all of the information so they can start making decisions that will drive innovation through our company. E-mail nominations for Executive Word to Editor-in-Chief Patricia Panchak at [email protected].

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