INC.: Why liquidity?
STACK: It's something we don't have under control, and it's the only thing that can really hurt us. We have to control the money, the spending. Otherwise, if we grow too quickly, we're going to run out of cash. If we run out of cash, we're not going to have a company -- or rather, the company is not going to be ours anymore. We'll have to bring in somebody to put in the cash we need to grow, and that will change the Game. OK, so we completely missed our liquidity target in the first quarter. Now it's true that you often don't hit your targets right away if you've picked a really good goal. The whole idea is to choose a weakness that affects your long-term security. If you solve the problem too easily, it may not be a real weakness. But even so, you expect some progress in the first quarter. In this case, the progress was very disappointing.
INC.: Whose fault was that?
STACK: I think it's my responsibility to make sure those goals are met. I mean, we're talking about a major problem that affects the long-term security of the employees. If the problem isn't being solved, I need to do everything I possibly can to get the organization focused on it. So we put together a high-level task force to reduce inventory -- I'm talking about really visible people in important positions around the company. We pulled them off their jobs to focus on this particular problem. At the same time, we straightened up accounting to make certain we're 100% on top of all our receivables. Of course, this sends a message. It creates an atmosphere where everybody is working toward the same goal and doing their part to get the bonus.
INC.: It's interesting that your Game relies so heavily on incentive compensation systems, and yet what really inspires you is getting people to work for rewards other than money.
STACK: I'm not foolish enough to believe that money isn't a major motivator. It just isn't necessarily the only one. I guess what I'm really obsessed with is getting rid of the living dead. I can't stand going into factories and businesses and seeing all these faceless people around. They don't look healthy, and they don't act healthy, and they're a big problem for corporate America.
INC.: Faceless people?
STACK: The people who are there because it's a job, whose attitude is "I have to be here, but I don't have to like it. I'll do it for my family, not for myself." You can't believe how I hate this. What have we done to create those kinds of environments? We should be able to tell this person, "It's your obligation to be happy. Find somewhere to be happy. Don't sit around me and be miserable." Then we wonder why we have a productivity problem. Well, you can't have high productivity with faceless people. They're not happy with themselves, they're not happy with their jobs, they bring you down. So what do we do? I mean, there are lots of jobs in this world that involve putting washers on bolts. You can't walk away from it. The work is boring, but it has to be done. I think the answer is a system where everybody can have fun, even the people who put washers on bolts. They can be playing something else at the same time. Statistics, rewards, and incentives are one way to do that -- to make people aware, to stimulate them, to give them the opportunity to use their intelligence and achieve something.
INC.: Let me play devil's advocate. We often see incentive systems that have the opposite effect, that become a mechanism of control and that make work less fun, not more.
STACK: That happens if you have shortsighted or unquantifiable goals. You need goals with a larger meaning.
INC.: In what sense?
STACK: Our goals are always based on the security of the company, so the larger meaning is to create jobs and keep people working. If we fail to reach a goal, the company is at risk. Each goal is a must, not a want. I mean, we're trying to create a company that will last 30, 40, 50 years. More important, we're creating a system that makes everybody aware of the company's strengths and weaknesses and that forces the weaknesses to be addressed.
INC.: You say the larger meaning is to create jobs. Why isn't it to create top-quality products for customers?
STACK: There's another higher law, which is "If you are going to take care of other people, you have to take care of yourself first." That applies to the company. If our people don't feel good about themselves, they aren't going to be good at remanufacturing engines. The more time they spend in training programs, education, getting involved, the better the end product is going to be. They have to be in the right frame of mind, free of mental stress; they can't be worrying about their job security. Happy people are productive people, and productive people do all the little things required to be great at remanufacturing. That's what the Game is all about.
INC.: But can't you focus too much on making people feel good about themselves? We know of companies that got so involved with corporate culture and self-improvement they forgot about their customers.
STACK: There's a big difference between what we do and what you're talking about. Those companies get caught up in a kind of emotionalism. We do the opposite. Our Game takes emotions out of the business. We go by the statistics, and the statistics don't lie. Emotions can get you all screwed up. We train our people to see that success means making sure one plus one comes out to two. It has nothing to do with standing in a circle and doing a real good job of falling into someone else's arms. We're talking about income statements and balance sheets, not about cafeterias and parking spaces.
INC.: I noticed the top managers at SRC have reserved parking spaces.
STACK: Well, partly, that's a carryover from Harvester, but it is a luxury, no question. I think there have to be certain perks that come with certain jobs, because you want people to want to get ahead. If we treated everyone equally, why would anyone want to take on additional responsibility?
INC.: But you can use that logic to justify enormous disparities of income, equity, fringe benefits, whatever.
STACK: A good manager knows what the guy on the shop floor absolutely can't stand and has disdain for. There is a definite flash point on fringe benefits. Common sense really needs to prevail. If I buy a factory one day and show up in a Lamborghini the next, can I then go and talk about the company being at risk? Would anyone believe me? The point is that you always have to maintain credibility. That requires a sixth sense, one that tells you when your credibility is in question. You know it. You can hear it out on the shop floor. You can feel it. To be a good manager, you have to have that sixth sense.
