Jack Stack A case study

E-MBA Leadership

Introduction
Jack Stack is the founder of SRC, Springfield Re-Manufacturing Corporation and inventor for open-book management approach, a well-proven way to run a company. In 1983 along with 12 other managers, Jack Stack scraped together $100,000 in cash, borrowed $8.9 million and transformed a failing division of International Harvester into one of the most successful and competitive companies in America under Mr. Stacks leadership and Open-Book Management approach (The Great Game of Business). The great game of business gets every employee focused on one common goal for the company to be successful. All employees are taught to read critical numbers (balance sheets) and understand the situation which the company is in. Employees can see the cost and earnings of their own departments, they are self-motivated to cut the cost and increase the earnings, they know how they can make a difference and how important they are for company. Employees can buy company stocks so that they earn when company earns, this is called as employee stock ownership program, ESOP. People got sense of ownership and started to act like owners that they can see how they can individually contribute.

The Great Game of Business

During IH period, there was bureaucratic meddling in Springfield facility. Everybody was asking for open- accountable system for performance and financial management. Jack mentioned that he believes it is possible to teach people anything if there is desire. Jack decided to teach employees how to read numbers and understand financial management for running a business. Employees will see the whole truth and nothing but the truth and this will liberate employees to do their best because they will respect the honesty and trust. Employees will be able to evaluate their company and get reliable feedback about marketplace performance and see the risks and challenges for the company, for employees job security, this information is very important. Company would prepare, income statement, balance sheet and cash flow statements bi-weekly. Costs such as labor ratios, material costs, overhead and rates are hourly measured were measured hourly. Jacks philosophy was Do not use information to intimidate, control or manipulate people. Use it to teach people how to work together to achieve common goals and thereby gain control over their lives What they found was that, everybody wants to see how they fit in and how their own individual contributions were affecting the companys performance. People were hungry for information. There were weekly meeting meetings, Great Huddle, where numbers were reviewed by top managers and then discussed in small groups of employees, after these meeting employees became more familiar with numbers. Because employees were now playing at higher level, the great games of business so they were focusing on bigger things rather than small issues. It was a straight forward easy process and all employees were educated. This was even fun for them, so they called the process Great Game of Business.

Open-Book Management
All employees were generating daily numbers reflecting their daily performance. These numbers fed up to financial department, weekly financial reports were generated for each department based on these numbers. These numbers are very important for company because it is a unique source of information for workplace performance; offering clues about possible problems, opportunities and victories. But Jack and team in SRC achieved is not to create manic-obsessive accountant by educating employees and keeping process straight forward and easy. Employees kept their eyes on numbers because numbers tell them if they will get bonus or did they have job security. Employees were proud of how they met performance goals or even exceed them so numbers were welcomed. Cost control is done on individual level, numbers made employees made the right decisions. Open book management not also helps to communicate big picture about company finances to employees but also the common set of critical business goals. Employees shared the wealth they helped to create, through bonuses and employees stock ownership program. This is an important motivator for employees to work in harmony around common business goals. Bonus plan is based on company-wide productivity and to keep employees interested in productivity, bonuses were distributed quarterly. This type bonus plan was not based on arbitrary rules and not seen as gifts from management, bonuses were earned rewards. No one can earn bonus unless all employees work in harmony for a common goal. Everyone depends on each other in such a bonus mechanism, this is goal that management targeted to achieve. Under ESOP, equity value of the company was shared among employees and even some employees were also encountered to buy extra company stocks.

Results
This new management philosophy did a great job and financial results were great. But improvements were not limited only by finance but also quality and productivity were improved in short period of time. SRC reputation was widely spread through the industry, GM choose SRC as a subcontractor for engine remanufacturing for their Oldsmobile diesel engines. This contract helped SRC to create a huge revenue stream. The philosophy behind all is the more you give the more you get back. Employees were more motivated, dedicated, zealous and creative; this made SRC to be more competitive. Sharing information with employees was right because all employees felt responsibility for their behaviors by doing so. Another important result is, me boss, you worker mentality is transcended, Jack believes management and employees should work together. Employees are encouraged for being entrepreneurs and even more they are educated to be so. Such investments were enhancing the value of the company. One of the reasons for the success and result of open-book management is dedication of employees for the common collective good. Ten higher laws of business, Jack mentioned in his book, the Great Game of Business 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. You get what you give It is easy to stop one guy, but it id pretty hard to stop100 What goes around comes around You do what you gotta do You gotta wanna You can sometimes fool the fans, but you can never the players When you rise the bottom, the top rises When people set their own targets, they usually hit them If nobody pay attention, people stop caring Shit rolls down hill.

I think rules given above is true for all types business but still it is easy to adapt all different businesses due differences in their natures; in system integration business, it is hard to share financial information because it is hard calculate to actual (daily) costs and (daily) productivity. Projects usually exceed estimated costs and time period at the beginning.

Conclusion
Jack Stack is local hero for people of Springfield, Missouri. What he achieved in business helped to the people Springfield which is not that common among companies. He changed the rules of the great game of business, he shared the information, wealth with employees and offered life time employment which is almost anti-American. This is called open-book management. His experiences in IH Melrose plant shaped the idea of open-book management. In IH Company, no information was shared with people and there was bureaucracy. People were begging for open and accountable employee performance and financial management. Jack noticed that people are hungry for information and if they are given the truth, they will respect that honesty and trust, this will build credibility (for management) among employees. As a result credibility will motivate employees to give their best. Truth here means the truth about the company; sales numbers, market positions, costs and revenue. To share these information, information is collected from all departments in daily period and finance published daily and weekly reports to share all these information; balance sheets, cash flows and sales numbers. Cost for each department is also shared with employees All management and employees are trained to read these reports and understand the position of company. So that, employees can see their costs and contribution to company. Increasing costs can be easily noticed and mitigating actions can be set accordingly. Jack said if people can learn the rules of baseball or basketball than they can learn rules of the great game of business. We had 119 employees when we opened in 1983, and now, worldwide, we have 1400. We look for attitude in our workers, that gotta wanna. Ive been in business going on 40 years, and I believe you can teach people anything. But, if they dont have the desire the gotta wanna theres nothing you can do. We really look for the person who has that desire, that attitude. Thats the key ingredient it takes to work here. Another important benefit of these reports is that employees can see if they have job security risk by their own eyes and act for the benefit of their company to have job security. Everybody in company can read these numbers in reports and in weekly meeting these numbers are discussed by management and explained to employees, this is called huddle. People are proud of their performance numbers and worked hard to keep the best performance and motivated to cut the costs as much as possible. In SRC example, product quality increased so high that their reputation took other companies attention such as GM. This is one the practices of open-book management, another practice is (performance oriented) fair bonus management, skip the praise -- give us the rise or stop-gooter and employee ownership program. Performance is calculated based on numbers but Jack and his management team successfully managed to avoid manic accounting and keep the whole process straight forward and easy.

Employees are given bonuses in quarterly period based on their performance which they can see in shared reports, information. ESOP allow employee to share the wealth of their company. This sense of ownership motivated employee to think differently and make clearly understand that they get what they give. ESOP removed the difference between employee and owner and make them a team working for the common goal. Both bonus and ESOP programs are successful practices, so that employees are self-motivated to earn bonus and get their part from wealthy of company based on their equity share. They dont just work for wages they work for equity I think, the practices makes open-book management so successful can be listed as below; Employees can see the truth, real numbers and learn to interpret these numbers so they can understand what is going on and evaluate their own performance and company performance. They respect to this trust and this created credibility for management. Trust between management and employees is very important for a business to be successful Everyone can see who is giving his best who cant and so worked hard to give their best and to keep it. They were proud of their high performance. Bonus management was fair based on performance. ESOP help to generate a team working the common goal, benefit of the company. Benefit of the company is also the benefit of its employees; I think that is a huge success . They even encourage people to be entrepreneur and formed many joint ventures with people and main-stream companies.

I think leadership of style is combination of different styles because he successfully used different leadership styles together; one of them is thought leadership because he was an authority on related topics that he can answer the questions of target customers and another is participative leadership (democratic) because he encouraged employees to participate, and as a result employees were more motivated and creative. (*) Many sources (not listed here) are used to prepare this article.