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Jack Stack

We love him for going naked.

From: Inc. Magazine, April 2004 | By: Bo Burlingham


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Jack Stack SRC Holdings

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.

25_mini_head

  1. Jeff Bezos, Amazon.com
    because "optimism is essential"
  2. Betsey Johnson, Betsey Johnson
    for her stylish life
  3. Russell Simmons, Rush Communications
    for his powerful example
  4. Scott Cook, Intuit
    because he learns, and teaches
  5. Sergey Brin & Larry Page, Google
    for their integrity. And, well, for Google
  6. David Neeleman, JetBlue
    for creating an airline fit for humans
  7. Tom Stemberg, Staples
    for doing it exactly right
  8. Jack Stack, SRC Holdings
    for going naked
  9. Judy Wicks, White Dog Enterprises
    because she's put in place more progressive business practices per square foot than any other entrepreneur
  10. Davin Wedel, Global Protection
    because he's a lifesaver
  11. Pat McGovern, International Data Group
    for knowing the power of respect
  12. Steve Jobs, Apple Computer, Pixar
    because we like to be seduced
  13. Lance Morgan, Ho-Chunk
    because a man must make his own arrows--Winnebago proverb
  14. James Goodnight, SAS
    for saying no to Wall Street (repeatedly) and yes to the people who really matter
  15. Stella Ogiale, Chesterfield Health Services
    for doing good while doing well
  16. Rhonda Kallman, New Century Brewing
    for seizing opportunity-- again and again
  17. Laima Tazmin, LAVT
    because she's a lot like other kids--and then again...
  18. Laura & Pete Wakeman, Great Harvest Bread
    for living a little --no, a lot
  19. Andra Rush, Rush Trucking
    for rolling up her sleeves
  20. Kathleen Wehner, Cirrus Aviation
    for refusing to quit
  21. Frank Venegas, Ideal Group
    because he parlayed a little bit of luck into a lot of good fortune for others
  22. Dan Wieden, Wieden + Kennedy
    because he's a true independent
  23. John Sperling, Apollo Group
    because he stirs the pot, and apparently always will
  24. John Stollenwerk, Allen-Edmonds
    for his commitment to U.S. workers. We also love the shoes
  25. Mel Zuckerman, Canyon Ranch
    for showing the way

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