The Entrepreneur Life

Tag: Employee ownership

Getting your people to take ownership

This last week I made a mistake for a second time and paid for it dearly. A friend had offered to book a hotel for me and feeling lazier than usual I’d agreed. And when she sent me an email with the reservation I actually felt good, because she’d booked me in a fancy downtown hotel at bargain rates. Of course, only when I showed up at the registration desk did I realize that I’d confused my drachmas for dirhams. So the good deal in a downtown hotel, for what I thought was $100 a night, turned out to be nearly $400. But by then it was too late not just with the non-refundable booking but also on a long day after a long flight with the family in tow. I reckoned might as well have a good time. But I was in for yet another shock. The lady behind the desk had a most snarky attitude. “No! Breakfast is not included with your room. It is $30 per person.” “No, there’s no free wi-fi—$7 for an hour or $15 for a day. By the way that’s per device.”

A Stake in the Outcome ; Jack Stack & Bo Burlingham; Double Day, October 2003.

None of this rankled as much as her attitude that she clearly didn’t care how I felt and she absolutely felt no need to be even remotely polite. In contrast, the hotels that I’d stayed at the night before and the two nights afterwards, each cost well below $100 per night and offered free breakfast and free wi-fi (in only the lobby in one case and all over the hotel in the other). More importantly, both had extremely friendly folks at the front desk—who were happy to let us check in early, check out late and went out of their way to help us have a good time. And these were employees, who certainly were paid a whole lot less than my snarky host at the $400 a night hotel. My little one asked in the puzzled tone she uses when she doesn’t understand something, “Why did that lady have such a bad attitude dad?” And, of course, answered herself quickly, “Maybe she had a fight with her boyfriend!” What was evident to my 13-year-old was clearly not evident to the owners of this fancy hotel —not the boyfriend part but the fact that attitude matters. This lady with her snarky attitude did not only prevent us from enjoying our stay at $400 a night but made sure that we’d not go back there.

“I can’t just get them to take ownership.” How many times have we heard this refrain from managers or entrepreneurs? And how often have we voiced this sentiment ourselves? It seems like we all run into folks who can’t look at what they do to be anything more than a job. Something they do to make a living—put food on the table, pay the bills—and they can’t wait for 5 o’clock or the end of their shift, so that they can get back to their real lives. Sure we may use other words or expressions—“Doesn’t he have any pride in what he does?” and “I can’t seem to make them care about the company or customers.”

In his book, A Stake in the Outcome, Jack Stack, CEO of SRC Holdings Corp., talks about building a culture of ownership among the people who run a business and the critical role it plays in the long-term success of a business. The book builds on his own experience of taking the original Springfield ReManufacturing Corp. where he was a manager, from the verge of failure to a major financial success. The original $0.10 stock in 1983 when Jack and his 12 manager colleagues took over the business was worth $81.60 in 2001—for a return of 816,000% in 18 years! But that’s not the story. It is how all 727 employees own shares—not just some shares, the 722 newest shareholders own 64% of the business valued at $23 million in 2002. I’d run out and get this book for everyone on your team to not just learn how Jack and has team achieved this but to repeat it with your business.

Enhanced by ZemantaThis article originally appeared in the Book Beginnings column in Mint.

A Stake in the Outcome – Building a Culture of Ownership

These last six months, I have been doing a good deal of reading; on average maybe two books a week – at least one of which has been a business book! I have gone back to reading books that have been in my library a long while such as Paul Hawken‘s Growing a Business as well as reading new (to me) ones such as A Stake in the Outcome by Jack Stack and Bo Burlingham.

(c) livemint Stake in the OutcomeI ran across A Stake in the Outcome (ASitO) while browsing business books at the Easy Library (a great online library with a brick & mortar presence in Bangalore). Having read and been influenced by Bo Burlingham‘s more recent Small Giants, I began browsing ASitO at the library itself. As the saying goes, “When the student is ready, the Master will appear!” Certainly that’s how I felt as I scanned the book quickly right there and subsequently brought it home to read.

Chapter 3 titled The Design of a Business, begins:

Most people, I know, don’t think about the company they’re designing when they start out in business. They think about the products they’re going to make, or the services they’re going to provide. They worry about how to raise the money they need, how to find customers, how to deal with salespeople and suppliers, how to survive. It never occurs to them that, while they’re putting together the basic elements of the business, they’re also making decisions that are going to determine the type of company they’ll have if they’re successful.

I felt someone had just hit me on the head with a two-by-four. Every week I meet someone who is thinking about starting something. Nearly every last one of them talks about their product or service idea and if at all they talk about their company, its only when they intend to “flip-it” (“Built-to-flip” as Jim Collins speaks of as does Sramana Mitra in a recent blog entry). Jack Stack in contrast, states clearly that

Ownership Rule #1
The company is the product

It is worth pausing here and reflecting on his assertion. All too often I see entrepreneurs, young and not-so-young, pitch their businesses as I have heard Hollywood scriptwriter’s do! “Think Netflix but for Indian movies,” “Waiter.com meets iTunes,” “Google but for contextual search.” I’ll refrain from speculating whether the internet bubble begat this or this begat the bubble and what role VCs had to play in this. This focus on what a company does, rather than what a company will be, Stack asserts misses the opportunity to explicitly design your business from ground up. If you haven’t figured it now by now, I agree whole-heartedly.

In many ways, the practices of visionary companies that Jim Collins and Jerry Porras discuss in their book Built to Last have been explicitly operationalized in Stack’s company Springfield Remanufacturing (SRC). The big difference is that Stack’s direct writing style and first-hand experience makes this a gripping read rather than an dry business book. Also unlike most business books that appear to document management’s clever (often infallible) strategies, Stack walks us through both the good and poor decisions they made, as they set out to remake SRC. In the end (in fact in the epilogue), Stack quotes Herb Kelleher, cofounder and former CEO of Southwest Airlines responding to The Wall Street Journal’s question on what he meant when he said Southwest’s culture was its biggest competitive advantage.

 

“The intangibles are more important than the tangibles,” Kellher replied. “Someone can go out and buy airplanes from Boeing and ticket counters, but they can’t buy our culture our espirit de corps.”

 

ASitO walks us through SRC’s journey of building such a culture of ownership from that day in 1982 when Stack and his managers did a management buy-out of their struggling engine remanufacturing factory to twenty years hence when their 10cent stock was worth $86 (since then has grown to over $136). Most importantly the authors don’t romanticize the journey and are explicit in periodically setting our expectations with insights such as “Stock is not a magic pill” (ownership rule #4) and “Ownership needs to be taught”(OR #7).

ASitO is a must-read for any one contemplating starting a company or looking to effect change in their organizations through employee participation and a culture of ownership.

A much more detailed summary of the book itself can be found here

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