STACK: I guess. Anyway, it absolutely convinced me that secrecy is bullshit. From then on, I was going to give my people everything I've got, and eventually that grew into the whole idea of teaching people how to make money.
INC.: Wait a minute. You're getting ahead of us here. What do you mean, "teaching people how to make money"?
STACK: Well, think about it. Most people who work in companies don't understand business. They have all kinds of misconceptions. They think profit is a dirty word. They think the owners just slip it into their bank accounts at night. They have no idea that 46% of business profits goes to taxes. They've never heard of retained earnings. And there's a good reason for all this ignorance. No one teaches them how business works. I worked at the Harvester plant in Melrose Park, Ill., for 10 years. Every Friday I went to a staff meeting where the plant manager said, "We gotta make more money, we gotta be more profitable." But he never taught me how to make more money. We got plenty of orders -- deliver a crank-case to such-and-such line, make sure that workers are safe, get so-and-so's productivity up. I never knew anything about making money, and here I'd supervised hundreds and hundreds of people. Finally, it dawned on me that there was a better way.
INC.: Which is . . .
STACK: It's the way businesses have been run for a long, long time -- with financial statements. If people know how to use them, that's really the simplest way to run a business.
INC.: Hold on. Say I'm 23 years old with a high-school education and an entry-level job at SRC. You're going to teach me to read financial statements?
STACK: That's right. When people come to work at SRC, we tell them that 70% of the job is disassembly or whatever and 30% of the job is learning. What they learn is how to make money, how to make a profit. They don't have to play the game, but they do have to learn it. We teach them about after-tax profits, retained earnings, equity, cash flow, everything. We teach them how to read an income statement and a balance sheet. We say, "You make the decision whether you want to work here, but these are the ground rules we play by."
Then every week the supervisors come back with the updated income statement, showing how we're doing in relation to our annual goals. And of course, the quarterly bonuses are tied to those goals. So the numbers are just flying around. The more people understand, the more they want to see the results. They want to know how well they are doing and if they are contributing. There's internal competition and peer pressure, and they get caught up in it. It's a game -- the Great Game of Business, as we call it. It's a mechanism for getting people to come into work every morning and enjoy it.
INC.: Did you start out with this idea of teaching people how to make money?
STACK: No, I started out with the idea that I really didn't want to be in the position of having to lay people off.
INC.: What do you mean?
STACK: I just think you take on a big obligation when you hire somebody. That person is bringing home money, putting food on the table, taking care of children. You can't take that lightly. Of course, it's a two-way street, but -- as much as possible -- you should make it their choice whether they leave or not.
INC.: OK, but what does that have to do with your Game?
STACK: That's how the Game got started. After the buyout, we had an 89-to-1 debt-to-equity ratio. As a corporate entity, we were nearly comatose. We began with $1 million in working capital, but we owed $8 million, and all the assets were pledged. So I looked at this situation, and I realized there were two things we couldn't do. Number one, we couldn't run out of cash. Number two, we couldn't destroy ourselves from within. If either one of those happened, we'd lose the company, and 165 people would lose their jobs.
INC.: How might the company have destroyed itself from within?
STACK: Bad morale. The danger was we'd get into a situation where people would turn on each other. So how do you avoid that? It became obvious to me that we had to communicate with people through the financial statements. They had to know the company's situation at every point. We had to tell them where the cash was and then make sure they were involved in deciding what to do with that cash. That's how the Game evolved.
INC.: In a sense, you're saying this system provides people with a kind of job security.
STACK: It provides them with the only kind of job security that means anything. Look at Harvester -- a company that went back 100 years, one of the 30 largest in the country, more than 100,000 employees. My dad retired from it. I worked there for 14 years altogether. I just assumed my job was secure, and I had no way of knowing it wasn't. Then Harvester went down the tubes. So that's one thing the Game does: it gives people a scorecard and a way to influence the score. It tells them how secure their jobs really are. It doesn't provide guarantees, but there aren't guarantees anymore.
INC.: At the same time, it reduces your responsibility for their job security, doesn't it?
STACK: It delegates the responsibility, yes. Just like it delegates every action in the company. It doesn't put all the emphasis on one guy.
INC.: How does it delegate every action in the company?
STACK: By identifying each person's role. Our people know exactly where they show up on the income statement and how they contribute. So responsibilities are completely delegated. The Game provides a structure whereby the individuals support the body. It teaches people the fundamentals -- what they each have to do to make the company successful. If your fundamentals get out of whack, you find out right away, and you don't move until they're back in line.
INC.: Who makes sure that you don't move?
STACK: Usually, it's your peers.
INC.: If all these responsibilities are delegated, what does that mean for you as the boss?
STACK: My role is to make sure the Game is working. For example, we have two company wide goals every year. One is profitability, and the other changes from year to year, depending on the particular weakness we see in the company. This year we've targeted liquidity, measured as current assets divided by current liabilities.
