for going naked
The first time I met Jack Stack, in May 1988, he was doing a presentation at an Inc. 500 conference in Cleveland. His topic was "The Great Game of Business," which was the name he'd given to the management system he'd developed with his colleagues at the Springfield Remanufacturing Corp. (SRC) in Springfield, Mo. The system involved teaching employees the basics of finance and then providing them with all the information they needed to monitor the company's--and their own--performance. The term "open-book management" had not yet been coined to describe such practices, but that didn't keep the conference attendees from recognizing the radical implications of Stack's approach. Judging by the comments, a lot of them thought he was out of his mind.
Stack did not, in fact, look the part of a business revolutionary, or even an experienced entrepreneur. He was 39 years old at the time and appeared 10 years younger, with a mop of reddish-brown hair and the map of Ireland on his face. The son of a former baseball player turned industrial engineer, he'd gotten his business education while working his way up from mail boy at International Harvester's Melrose Park plant, outside Chicago. In person, he didn't have any of the larger-than-life qualities you might expect in a visionary CEO. Not that he seemed smaller than life. Rather, he was just about life-size, the sort of guy you'd meet in a bar or at your kid's Little League game--a regular Joe or, in this case, a regular Jack.
And yet he was clearly on to something with his new management system. In five years, SRC's "game" had turned the company from a nearly brain-dead start-up with an 89-to-1 debt-to-equity ratio into a steadily profitable $43 million enterprise with a debt-to-equity ratio of 1.8 to 1. Meanwhile, the appraised value of SRC stock had soared to $13.06 per share from 10 cents per share at the company's founding--an increase of almost 13,000%.
Following the conference, I decided I had to see for myself how the Great Game of Business worked. That fall, I paid my first visit to SRC and took my first tour of its main facility. There I found the most highly motivated and business-savvy work force I had ever encountered. I met fuel-injection-pump rebuilders who knew the gross margins of every nozzle and pump they produced. I met crankshaft grinders and engine assemblers who could discuss the ROI of their machine tools. I met a guy who worked on turbochargers and ran his area as if it were his own small business. Then again, why shouldn't he? Like the other employees, he was an owner of SRC.
I returned home convinced that I had seen the future of business. Somehow Stack had figured out how to tap into the most underutilized resource available to a company--namely, the intelligence of the people who work for it--and the results were breathtaking. When Inc. staff members were asked to write about their favorite companies for the magazine's 10th anniversary issue, I didn't hesitate to devote my segment to SRC. Its management system was so effective, I believed, that the company virtually ran itself. Consequently, no one was indispensable, not even Jack Stack.
That assessment turned out to be wildly premature. SRC was only at the beginning of its journey, and Stack was as indispensable as ever. Indeed, his greatest challenge lay ahead. He and his colleagues had built a fine company that provided meaningful work for employees, truly valued them as human beings, and promised them a share of the rewards that capitalism offers to the creators of wealth. But it's one thing to promise and quite another to deliver. Where would the money come from to cash out those employees as they left? How could Stack live up to his fiduciary responsibilities without either selling the company or smothering it in debt?
Over the next 15 years, I had an opportunity to watch up close as Stack wrestled with those questions and others. In the course of writing two books, we wound up spending a lot of time together in Springfield and elsewhere. He had become something of a celebrity, as hundreds of companies began practicing open-book management. Many came seeking his advice, and he seldom turned anybody down. But he never let his attention stray too far from SRC and the people who worked there. "What we're doing here," he said, "is helping a lot of people get through life." It was a responsibility he never stopped working on.
Today SRC is a far different business from the one I visited in 1988. In fact, it isn't one business anymore, but rather more than a dozen separate businesses operating under the umbrella of SRC Holdings Corp. The company as a whole does about $178 million in sales, and that 10 cent share of stock is worth $87.36. Yet some things haven't changed. People still play the Great Game of Business, which has continued to evolve. And while 10 of the 13 founders have cashed out, Stack remains.
For the moment, he's still indispensable, although it's possible to foresee a time when he won't be. Succession plans are in place. Various options have been developed that should allow the next generation to retain ownership--and control--of the business if they want to. So there's a decent chance that when Stack leaves, SRC will go on without him, keeping the qualities that made it such an extraordinary company in the first place. But even if that doesn't happen, Stack will have left an indelible mark on the business world, having proved that you can run a company by the numbers and still make it a great place to work.--Bo Burlingham
Bo Burlingham is an editor-at-large.