INC.: Even the deadwood?
STACK: Deadwood is such a small percentage. It's the ones with talent who are really tough. But even losing deadwood is tough because you spend a lot of time and money training, teaching, and motivating them.
INC.: How do you deal with the talented ones?
STACK: That's probably the most stressful part of my job. I mean, when you know a guy has incredible talent but you just can't harness it, you can't focus it, you can't get it into the system -- it kills you. And then, of course, you start questioning whether the problem is him or you. You start saying to yourself, "Maybe we just have a style conflict here. Maybe I'm being too possessive. Maybe I don't want to let go." Fortunately, the system serves as a reality check.
INC.: In what way?
STACK: A style conflict won't necessarily show up in the numbers. A performance problem becomes very clear very fast, and everybody knows about it. Then the pressure gets intense. You have to do something. I can't explain to 450 people why we didn't deal with a situation -- not if it costs them their bonuses.
INC.: Is there anybody you can talk to about those kinds of issues?
STACK: I think I talk to everybody. We're all very, very close.
INC.: Are you saying that it really isn't so lonely at the top after all? I mean, what's the difference between being the number-one person and being number two, three, or four?
STACK: First, let me say there isn't always a distinct number two, three, and four. In the past decade especially, people have become very coy about designating a chain of command. It gets in the way of building a team. You can say who does what when you're gone, but you can't go much beyond that without undermining team spirit. Now in that context, the number-one person has to be prepared to work exclusively on deviations and problems. If something is going right, you have to let it go right, no matter how good you may be at that aspect of the business. Otherwise, you can't function as number one, because your role as number one is to focus on what's going wrong. When the numbers show there's a problem, you've got to go in and make sure it gets fixed, and that could be anything -- quality, volume, sales, inventories, bad debt, extension of receivables, whatever.
INC.: So you're taking care of other people's problems. Who's taking care of your problems? The board?
STACK: There are definitely situations where I rely on the board. For example, the managers may not be able to reach a consensus, and I'll have to take sides, knowing that my decision is going to be detrimental to somebody. In those instances, it's good to have a board to help you work through the problem. Having a board also helps me explain a decision to people in the company, especially with regard to wages and compensation. It's easier to say, "The board looked at the numbers and decided this wasn't a good time to give a raise." It depersonalizes some tough decisions.
INC.: Does the board set your salary?
STACK: No, not really. They review it. But I don't have to go along.
INC.: It sounds as though you disagree.
STACK: Yeah, they think it should be higher. They're afraid that, if anything happened to me, they couldn't hire a new president for what I'm making.
INC.: What do you think?
STACK: I guess I'm superstitious. I think that if I took more out of the company, something bad would happen. It's an instinct, a gut feeling, voodoo. I don't know. I'd argue that I'm making enough right now. I'm certainly not hurting. Look, we've got guys working at our automotive engine plant who make $5 an hour, which is what you pay if you're going to be competitive in that market. There's a limit to what I can justify for myself. I'm not a socialist by any means. I realize that in a competitive society we have to do certain things to compete. But my heart still goes out to that guy who's making $5 an hour and supporting two or three kids.
INC.: Do people know how much money you make?
STACK: No, it's part of an aggregate in the financial statement. I suppose someone could figure it out, plus or minus 20%. But we may take the company public someday, and then it would be printed in the prospectus.
INC.: So you think there's a limit to what people can accept.
STACK: Yes, and I admit there's a contradiction. I've been offered five times what I make to go to another company, and I do think people would feel better if I took it. But I also think they'd resent it if I stayed here and made that kind of money. Anyway, I'm not being totally altruistic. Remember, I have stock. If we sell this company or take it public, we'll get a multiple of earnings, say 15 times. In a sense, the salary I'm passing up is going into earnings. Every dollar I don't take out now could mean $15 down the line. So I'm not crazy.
INC.: Doesn't your salary put a ceiling on what you can offer other top people?
STACK: Yeah, but it hasn't hurt our ability to recruit. I mean, our compensation program is competitive, we have a good benefits package, and we offer a lot more than most companies. For one thing, there's the pot at the end of the rainbow if we take SRC public or sell it. For another, we give people a tremendous lesson in entrepreneurship. After you've spent a year or two here, you walk away with a lifetime of lessons in running a business -- your own business.
INC.: Do you actually make that pitch when you recruit people?
STACK: Pretty much, and we deliver on it, too. We just lost an executive who says he's learned more here in the last year than in his entire career up to that point. He went off to take the top spot at another company.
INC.: But let's say somebody comes in because he wants this pot at the end of the rainbow. Doesn't that put tremendous pressure on you?
STACK: Not really. That's how the whole system is set up. When the guy walks in here, he finds 500 people trying to do the exact same thing. His reaction is "Holy cow! I've never seen anything like this."
INC.: Another case of delegating responsibilities.
STACK: That's right.
INC.: I suppose, if you delegate enough responsibilities, you could make yourself obsolete.
STACK: My job is to make myself obsolete, and I'm getting there. In many ways, I'm not the boss of SRC anymore. Our system is the boss. n
