Ep. 156 — Jack Stack: The Only Sensible Way to Run a Company

6 min read

Subscribe: Apple Podcasts · Spotify · YouTube · Amazon Music · iHeartRadio · Pandora · RSS

Episode Summary

You’re juggling cash flow, you’re covering payroll on Monday with a check you mailed Friday, and you’re convinced if you tell your people the truth about the numbers, they’ll panic and leave. Jack Stack ran the opposite experiment. In 1983, he and twelve other managers scraped together $100,000 and borrowed nine million on top of it (89-to-1 debt-to-equity) to save 119 jobs at a dying International Harvester plant. Then he did the thing every owner is afraid to do. He opened the books. He taught the shop floor to read an income statement. He turned every line into somebody’s accountability. Today SRC Holdings is a 100% employee-owned company with 1,600 people, 14 business units, and stock that went from ten cents a share to $600. Jack and I got into the origin story, why the bank wouldn’t talk to him in tractor-language, why the gross profit chart your people stare at every week is the only universal language that matters, and the dirty secrets most owners are hiding (debt, lousy retention, customer concentration) that the great game forces into the open. The janitor who diagnosed his customer concentration problem is in here. So is the year SRC missed its bonus by one-tenth of one percent and Jack let them miss it.

Watch on YouTube

## Top 10 Takeaways
  1. If your income disappears the moment you stop working and your people don’t know the numbers, you don’t own a business. You own a juggling act.
  2. Your bank doesn’t care how good your tractor is. They care about your balance sheet, and that’s the language your people need too.
  3. Every line on your income statement should be owned by a person. That’s the accountability system.
  4. The bonus program comes from your weakness, not your strength. Find what can take you out, then pay people to fix it.
  5. Top-line growth without margin discipline is the trap. You can grow into a coffin.
  6. With information comes responsibility. Stop hoarding the numbers and your people will pick up the burden you’ve been carrying alone.
  7. Pre-revenue valuations are a fantasy. No-man’s land is what happens when the oxygen runs out.
  8. Your people are smarter than you think. The janitor will spot the customer concentration risk before your CFO does.
  9. You can’t have values without performance. Lack of performance destroys the values over time.
  10. Repetition changes culture. Weekly huddles on the numbers move people from clueless to fluent in about seven meetings.

Sound Bites

“People love to win. It’s almost the only thing you can unify behind, other than you hate the boss.” (@00:06:32) — Jack Stack

“If you want an MBA real quick, go to 20 financial institutions with a lousy business plan.” (@00:09:00) — Jack Stack

“We sold more shit at lower margins and we beat revenue but lost on margin. We’re not just blindly being excited about this year compared to last year.” (@00:30:10) — Ryan Tansom

“I don’t think you can have values without performance. The lack of performance to the values destroys the whole value over the long period of time.” (@00:50:31) — Jack Stack

“We left ten million on the table last year because of retention. Failure is about education if it’s proposed in the right area.” (@00:57:31) — Jack Stack

“If you’re letting people out there with shades on doing work and keeping them in the blind, you can’t figure out why you can’t move the needle. You might start right there.” (@01:02:58) — Jack Stack

About This Episode

Jack Stack is the President, Founder, and CEO of SRC Holdings, a 100% employee-owned remanufacturing company based in Springfield, Missouri with over 1,600 associates across 14 business units and $600M+ in sales. He’s the pioneer of Open-Book Management and the author of The Great Game of Business and A Stake in the Outcome. Fortune Magazine has called him one of the “top 10 minds in small business.” He’s served as a world judge for the EY Entrepreneur of the Year awards and contributed to The New York Times and Inc. Magazine. This is his second appearance on the show, and the conversation lands on what most owners need most: a system for making the financials of the business visible, teachable, and ownable by everyone in the building.

Resources Mentioned

  • The Great Game of Business by Jack Stack — Jack’s foundational book on Open-Book Management. — greatgame.com
  • A Stake in the Outcome by Jack Stack — The follow-up on building an ownership culture.
  • SRC Holdings Corporation — Jack’s 100% employee-owned company. — srcholdings.com
  • No Man’s Land by Doug Tatum — Referenced for the trap of mid-sized companies stuck between scrappy startup and scaled enterprise.
  • Bo Burlingham — Author and friend of Jack’s, referenced throughout.
  • Ray Dalio — Referenced for his writing on the long-term debt cycle and the 1% vs. 99% conversation.
  • Profit First by Mike Michalowicz — Referenced as part of the same conversation about small-business cash discipline.

Connections

Phase + Module:

Milestones:

Concepts referenced:

Related episodes:

Graph View

Backlinks