In 1983, Stack and some employees bought the company from IH, turning SRC into what Inc. magazine calls “one of America’s most competitive small companies.”
WS: You are a big believer in open-book management, in which employees gain access to the company’s financial numbers. Why is this so important?
Stack: Senior executives take all this financial knowledge and lock it into this vault. As a result, employees become totally disconnected with what’s in that vault. I’ve found it’s much better to tell people how the business works.
WS: Doesn’t that require a lot of teaching about financial concepts?
Stack: You need to explain the cash-flow process, the difference between revenue and profit, and how to read an income statement and balance sheet. Then you need to show employees how their jobs affect the bottom line. I’ll allot a few minutes of an informal staff meeting to going over the latest numbers.
WS: How do employees respond when given all this information?
Stack: They make it their business to work smarter to produce better results. The ones who see outside the box get ahead because they think of new ways to do their jobs to make a greater impact on the numbers. I’ve got people who are always streamlining procedures, coming up with great ideas and proposing cost-saving steps.
WS: How about work ethic? Do go-getters really work harder and burn the midnight oil?
Stack: The people who become top executives figure out the shortest way to get something done. I admire that. You can give these employees all the work in the world, and they will take care of it and ask for more. And they’re still home at a reasonable hour. When I see a lazy person doing double or triple the amount of good as someone who’s in the office 14 hours a day, I say, “Give me more lazy people!”
WS: What other traits do you look for in star workers?
Stack: I like to see people who think in new ways and perceive problems differently. My dad once coached me in baseball. He told me to hit the ball where the players aren’t. So I began looking at the holes in the infield, not at the third baseman. That was a whole new way of thinking for me, because I wasn’t thinking about obstacles so much as opportunities. That’s how you need to think to become a CEO. It’s not talent, it’s understanding the rules.
WS: But if you propose a great idea to your boss, don’t you still need to discuss how you can overcome real obstacles?
Stack: You need to know how to measure your idea. You have to run your idea through your company’s income statement and balance sheet. I like it when an employee comes to me with an idea and says, “Look what I can do with the margins and look at the excess cash I can generate.”
WS: You must make a great mentor. Do you have a mentoring philosophy?
Stack: I ask a lot of “why” questions. I want to know others’ motivation. I like to help them develop their gut instincts for business.
Some people start out excited and then seek advice from lawyers or accountants, where they get a lot of safe answers. Then they give up. I want to mentor people who keep searching for answers.
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