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 / Third Quarter 2001 / Issue 24(originally published by Booz & Company)


Jack Stack’s Story Is an Open Book

None of the SRC businesses are required to practice the Great Game, and some have resisted at various times. But they are all held to extremely high standards of performance. And because performance has proved so much better with Great Game practice, all SRC companies do practice open-book management at their core, including The Bank, where a prize is given to the person who guesses each month’s earnings

A Forecast Is a Promise
The highlight of any SRC plant tour, whether blue-collar or white-collar, is the array of measurement-rich wall charts. For example, at Megavolt, the joint venture with CNH Global that produces electrical equipment, a green posterboard shows plant-wide efficiency, and a red posterboard shows how much of the finished product was secondhand (the more used parts instead of new parts, the greater the savings). There’s also a cafeteria with two fair-sized walls covered with charts that show, among other things, all the income and expense breakdowns for the past month. Megavolt General Manager Dianna Devore, who started at SRC 16 years ago as a clerk/typist, and Jack Stack, who casually drops in to visit Megavolt, have both been known to pull visitors over to the charts and explain some significant shift in overhead costs or cash flow.

Since the charts get updated daily, people know very early whether they will hit their monthly targets, and why. “That’s the key,” Ms. Devore says. “If a plan projected $332 in overtime, and we see we’re paying out $351 halfway through, we know that we must react. Something is happening. If we waited for an accounting person to tell us, it would be too late to do anything about it.”

And what of the managers? With supervision and tracking more distributed, they spend more time on setting long-range targets — which, if anything, means more intense work, because the targets must be defended both up and down the hierarchy. “If the actuals come out worse than 5 percent below your projection, you are supposed to be able to give a rational explanation why that happened,” says SRC Heavy Duty Manager Joe Loeber. A forecast, in other words, is seen as a promise from a manager or employee to the rest of the company. A financial number is seen, as Mr. Stack puts it, as “nothing more than the stories people tell.”

Financial literacy is simply a way of taking those promises and stories seriously. It provides the missing direct experience of the business specifics, in a way that people have reason to trust, because they know their bosses are looking at the same numbers. It may seem disingenuous to hear financial data described as a humanizing influence, or even as a source of high-quality production information. After all, we live in the era of stretch goals and performance appraisals, when numbers are generally used to punish people when they don’t measure up. But when times get tough at SRC, the rules stay fair: Bonuses are cut out first, then ESOP payments, then salaries, and only then is cutting jobs considered.

Open-book management is thus an antidote against the brutality of most layoffs. In a typical business downsizing, says Mr. Stack, “the laid-off worker walks out to the parking lot for the last time, wondering, ‘Why didn’t they tell me that the company was in trouble?’” With open-book management, everyone finds out about the troubles ahead of time, because it demystifies arcane accounting statements. In fact, it makes clear what many wage earners would never otherwise understand: the reasons cost-cutting may be the right thing to do under certain circumstances (for instance, in a cash-flow crunch)

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  1. H. Thomas Johnson and Anders Bröms, Profit Beyond Measure: Extraordinary Results Through Attention to Work and People,The Free Press, 2000
  2. Chuck Kremer, Ron Rizzuto, and John Case, Managing by the Numbers: A Commonsense Guide to Understanding and Using Your Company’s Financials, Cambridge, Perseus, 2000
  3. Jack Stack and Bo Burlingham, The Great Game of Business, Doubleday, 1992
  4. Jill Albrinck, Jennifer Hornery, David Kletter, and Gary Neilson, “Adventures in Corporate Venturing,” s+b, First Quarter 2001; Click here.
  5. Lucien Rhodes and Patricia Amend, “The Turnaround: How a Dying Division of International Harvester Became One of America’s Most Competitive Small Companies,” Inc., August 1986; Click here.
  6. The Great Game of Business:
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