Jack Stack, Innovation and Open Book Management

“I grew up in a lower-middle-class family that didn’t have a lot of money…My parents worked extra jobs just to be able to fund Christmas. There was a lot of fear in my house…What we’re doing here in Springfield is showing people how to get through life without fear. Once people understand what it takes to be a businessperson, not just a cog in the system but somebody on the brighter side of capitalism, then their lives can change forever.”

-Jack Stack, Founder and CEO, SRC

In 1983, 13 employees of Springfield ReManufacturing Corp ( SRC) brought the company from its owner ( they used their savings and took loan to buy the company). At that time company was in deep financial trouble, its stock was valued at 10 cents per share ( roughly Rs.6) and it had debt to equity ratio of 89:1 ( for every dollar of equity, there was debt of $89)

'Just exactly how bad is our cash flow problem?'

Jack Stack, one of the founders who became CEO, within 5 years brought debt to equity ratio to 1.8:1 and stock was valued at $ 13 per share. SRC today has 1200 employees, with turnover of $400 million.

src-automotive-and-owner-workers

This miracle was brought about by an innovative technique called as Open Book Management System. The system was called “open book management” because the company opened its books to employees (Jack Stack himself calls it “Great Game of Business”). In addition to making all the financial data open to employees, Stack also taught his employees about business. He helped them understand the finances of their business (as company is owned by employees) — he showed them how their department’s finances ran, and how they could help the company, and themselves, make a profit.

At SRC, employees don’t waste products because they know what those products cost, and know that wasting them takes money out of their pockets. Everyone, from secretaries to engine assemblers, can tell you what kind of return their work creates for the company, and the costs of the products they use.

“I like scorecards. I’m a numbers junkie. I’ve got an addiction to numbers. I’ve got a memory that remembers everything. It’s a game, it’s really a game, and it’s fun.”

-Jack Stack

Getting employees involved in decision making can help give them a sense of ownership. Sometimes, a little too much.

In SRC culture of ownership permeates the entire organization from the CEO to the shop floor. A key part of this is business education that is regularly promoted throughout the company to help everyone in the company understand the financials, which are published in lunchrooms and other visible locations throughout the plants.

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