The Great Game of Business – Chapter 5 section 1 (part 7 of 17)

Chapter 5 – Open-Book Management

The more people know about a company, the better that company will perform. This is an iron-clad rule. You will alwaysbe more successful in business by sharing information with the people you work with than by keeping them in the dark. … Don’t 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.

The Language Cure: how open-book management works

When I talk about open-book management, I’m referring to the practice of communicating with people via the numbers. This is a cornerstone of the Great Game of Business as we play it at SRC. I’m not saying … it’s a cure-all … people aren’t going to believethe numbers if you haven’t established some credibility and begun to foster a sense of mutual respect and trust. And people aren’t going to act onthe numbers if they’ve never had the experience of winning, if they think of themselves as losers, if they walk around with sand in their eyes. And people aren’t going to care about the number if you haven’t given them a sense of the Big Picture by educating them about how the company works, where they fit in, and why it all matters.

Start with the basics. Once you’ve laid the right foundation, then it’s essential to teach peope the numbers, because numbers are the language of business, and you can’t understand business, let alone play the Game, if you don’t speak the language.

Take the Emotions Out of the Business

I am second to none in believing that business ought to be people oriented. But no company serves its people well be elevating emotions over numbers. That’s one of the things I like most about open-book management: it takes the emotions out of the business, or at least out of the decision-making process.

Let people evaluate the situation for themselves. Don’t do it for them with rah-rah squads. You can communicate more clearly with numbers. If I tell people one plus one is two, that message gets through without distortion. The challenge is to get people to appreciate what I really mean by one plus one is two.

And when you have bad news to deliver, the numbers are crucial. It’s hard to share bad news. … So the person who is supposed to deliver the news tends to put it in the best possible light, which often undercuts the message. … So somehow you want to send the message clearly without getting people down. You can do that with numbers.

Magic Number: why open-book management works 

There are only two ways to make money in business. One is to be the least-cost producer; the other is to have something nobody else has. … If you have the lowest costs in the market, you can undersell the competition and still earn a profit. By the same token, you don’t have to worry too much about losing business to competitors who charge less. If your costsare lower, a price war is going to hurt them more than you.

On the other hand, it’s always nice to have to come up with an edge that customers can’t get anywhere else. Maybe it’s quality, maybe it’s a particular service, maybe it’s a unique product, maybe it’s a brand name. As long as you’re the only one who has it – and customers want it – you can charge a premium for it.

The best way to control costs is to enlist everyone in the effort. That means providing people with the tools that allow them to make the right decisions. … Those tools are our magic numbers. Every business has them. Specifically, they are the numbers that tell you whether or not your costs are lower than your competitors’. To know what your costs should be, you have to find out what your competitors’ costs are – what their labor rates are, how fast they make their product, what fringe benefits they offer, what other incentives they provide, what they pay for material, what their debt levels are, and so on. Only then can you determine what you must do to be the least-cost producer.

Of course, when you’re striving for lower costs, you can also try to come up with additional services – services that nobody else has. … The idea is to offer something that allows you to charge a little more. In most businesses, however, you’re not going to be able to charge a lot more. So you can never stop trying to be the least-cost producer.

Improvements Come in Fractions; Only Surprises Come in Whole Percentages

The best argument for open-book management is this: the more educated your workforce is about the company, the more capable it is of doing the little things required to get better.

Business is a game of fractions. If you look at the income statements of corporations today, you’ll see that very few of them have pretax margins above 5 percent. So a 1 percent improvement in profitability is very, very significant, but it takes time to achieve it. Surprises, on the other hand, pack a bigger punch. … nobody hates surprises more than the manipulative control freaks who practice old-fashioned, secretive, need-to-know management. That way of operating virtually guarantees a steady stream of surprises, because people don’t have the tools they need to forecast and project, to live up to their commitments.

The Sixth Higher Law Is: You Can Sometimes Fool the Fans, But You Can Never Fool the Players.

 

The Great Game of Business – Chapter 4 (part 6 of 17)

Chapter 4 – The Big Picture

Nowadays we start teaching people the Game as soon as they come to work at SRC. We plunge right into the financial statements. Once people understand the numbers, oncey they see how the Game works, once they get it, business makes all the sense in the world. It puts everything they do in perspective. It makes them understand why they’re here. It shows them what theyir contribution is and why it matters.

But you may want to start a little more gradually, as we did in the early years. It’s a lot easier to teach people about making money and generating cash if they know what the company does and how they affect its performance. Paint the Big Picture for them. Tell them why you’re in business using terms they already understand. Then the numbers will make sense when you get to them. You’ll be able to demonstrate how they can serve as tools to stay connected to the Big Picture on a daily basis, to keep everybody focused on common goals. And that, after all, is the main reason the numbers are important: they constantly lead you back to the Big Picture.

Most of the problems we have in business today are a direct result of our failure to show people how they fit into the Big Picture. KEY POINT: The Big Picture is all about motivation. It’s giving people the reason for doing the job, the purpose of working. If you’re going to play a game, you have to understand what it means to win. When you show people the Big Picture, you define winning.

 So these are the steps so far:

  1. Create a series of small wins
  2. Give people a sense of the Big Picture
  3. Teach the numbers

That’s the rough sequence, at any rate. The truth is that we are always looking for more wins of any size, and we never stop reminding people about the Big Picture. You shouldn’t either. Here are some ways to go about it.

*Give Everyone a Course in Your Business

Sometimes you have to make a dramatic statement to get people to step back, see how everything fits together, and think about the broader purpose of what they’re doing. … So, one day in October 1980, we shut the plant down and had everybody show up instead at the Hilton Inn across town, where they participated in what we called Employee Awareness Day. It began with workshops run by the different department heads. People divided up into small groups that went from room to room. They learned what each department did, and how it fit in with what the other departmetns were doing. The head of engineering explained how his department made it possible for us to take on new products and keep up with technology. The materials department put on a skit dramatizing what would happen if inventory got out of control.

*Market Your Products to Your Employees

Just because you spend a lot of time, effort, and money telling customers about your products, don’t assume your employees understand those products. The chances are that most of them know about only one small part of the process. They can’t possibly see the Big Picture if they don’t understand what your company does – what products or services it delivers to customers, how it helps customers solve theirproblems and take care of their need. The answer is to spend some of your marketing budget on your own employees.

The company was spending millions of dollars on ads, posters, brochures, and other material designed to get customers to believe in our products, but we weren’t using any of it to generate pride in our own people. So we went to the sales and marketing people and asked them to help us out. … That marketing campaign helped us to turn the entire operation around. It got people thinking like members of a team, which is crucial on an assembly line.

The lesson was: market to the people who are producing the goods. In fact, you should sell your people beforeyou try to sell the customer. It doesn’t do any good to go out there an sell an empty product. You want to sell a product that has life in it – that has people in it.

*Move People Around

People Express Airlines used to have a practice it called “cross-utilization,” whereby employees would get experience in different parts of the business. The flight attendants would spend time handling baggage, for example, and the accountants would work in customer service. It was, in fact, an effective technique for getting people to look beyond their specialties and get a direct, firsthand sense of the Big Picture.

*Draw a Picture

Don’t just tell people about the Big Picture, show it to them. Put it in the form of charts and graphs. Use them to decorate the walls. Anything that can be measured can be turned into a picture – net profits, retail sales, sales per customer, output per week or per day or per minute, energy use, scrap, you name it. And those pictures can be very dramatic. At one point, we had a graph in the cafeteria that went right off the paper, all the way up to the ceiling. It was about overhead costs, and it sure got people’s attention.

But the most effective pictures we have aren’t charts at all. But the most effective pictures we have aren’t charts at all. They are the stock certificates we distribute every year, as a way of giving people physical evidence of their equity in the company and how they have increased their holdings in the past twelve months. The certificates look real enough, although they have no intrinsic value: normally, an Employee Stock Ownership Plan doesn’t issue stock certificates, just an annual statement. We do this strictly because we want people to see the Big Picture. It’s a way of reminding people to see the Big Picture. It’s a way of reminding people how we measure success. We’re saying “In this company, you get equity. When you play the Great Game of Business, that’s the measurement of success.”

*Get Incentives from the Six-Year-Olds

A company is just a means to an end, and the end lies outside the four walls of the business. So the real Big Picture, the one that matters most to people, reaches beyond their paycheck out into the community. We put a lot of emphasis on community programs – Adopt-a-School, the Christmas drive for homeless children the United Way, the Special Olympics, the Red Cross. We have a hard time saying no to anybody. For us, it’s all part of the Big Picture.

Go Beyond Quality

Educating people about the Big Picture runs counter to a lot of ideas that become popular in the 1970s and ‘80s – notably the quality movement. Back then I found that people who were into quality didn’t care about anything else. One of my closest colleagues at SRC thought it was a big waste of time to teach people about the different parts of the business. “Why should a manufacturing guy like me care what the marketing people are doing?” he’d say. “All I care is that they do their job right. If I do my job right, and marking does its job right, and all the other people do their jobs rights, we’ll have a successful business. I don’t have to know how the marketers go about promoting sales. What matters is quality. You get quality by making sure people pay attention to details, not by telling them how the company works.”

The argument sounds logical enough, but it’s wrong. I knew from experience it was wrong. I had seen companies run that way, and they usually had terrible quality, not to mention a host of other problems. When people focus on their narrow specialties, the different departments go to war. They don’t function as the parts of one company. They act more like competing factions. It becomes very hard to make money or do anything else very well. Quality isn’t better. It’s worse.

The Danger of Mixed Messages 

When you don’t teach people the Big Picture, you run a constant risk of sending people mixed messages. I know one Fortune 500 company president who sent out word he wanted to improve customer service, so people began building up inventories at the product distribution centers. What he didn’t tell them was that he was being evaluated according to return on assets – that is, net income as a percentage of total assets. As the inventories grew, so did the company’s total assets, and the further the president was from earning his bonus. In the last quarter of the year, he suddenly ordered his people to stop all deliveries so that he could meet his goal. It was a disaster. Fourteen hundred suppliers were shut off without any warning. Literally hundreds of thousands of jobs were put on the line. The happened because the president sent the wrong message. He said we wanted better customer service when he really wanted a better return on assets. He didn’t tell people the Big Picture and everyone was screwed and demoralized.

Compensation systems are the primary way that companies send mixed messages. But they may also do it with their performance evaluations, particularly if they use Management by Objective. People can get very confused. They develop tunnel vision. They don’t see the effects of their actions. Say you tell a person she’s being evaluated on inventory turnover, and she drives the inventory down to nothing. So what happens? Your inventory carrying costs are very low, but the production people can’t operate their machines efficiently, so manufacturing costs go through the roof. That’s why you need to get everyone to focus on the Big Picture.

The Great Game of Business – Chapter 3 (part 5 of 17)

Chapter 3 – The Feeling of a Winner 

How do you start the Great Game of Business? By creating a series of small wins – by showing people how it feels to be a winner. Believe me, that’s one of the rarest feelings in business today.

You can’t just walk into any company or any factory and start teaching people how to read financial statements. … there are at least two conditions that haveto exist before people are ready to learn about business – about making money and generating cash, about using numbers to follow the action and keep score:

  1. Management has to have credibility
  2. Employees have to have some fire in their eyes

Pride Before Ownership. For people to feel like winners, they must have pride in themselves and what they do. There is no winning without pride, just as there is no ownership without pride. Pride is all about caring. It is the sense of pleasure or satisfaction you take in what you do, or what you have. If you don’t care, you’re not going to do what is necessary to be a winner or an owner. So pride has to come first.

Creating a Team. Winning is not just a matter of pride, of course. It is also a habit. Unfortunately, losing can get to be a habit as well. When people are in the habit of losing, you won’t see fire in their eyes, only sand. If you want to light the fire, you have to begin by creating wins and celebrating wins – by making a big deal out of the little victories and then building on the little victories to achieve bigger victories. It’s a way of putting fun in the workplace – literally. We throw parties and hold celebrations at the drop of a hat. What we’re really doing is creating a team.

That is, of course, one of the major purposes behind the Great Game of Business. In the early days, however, we couldn’t set up games around the financial statements, because people didn’t understand them and would have been intimidated by them. So we came up with other games, simple games, games we knew people could win. That way, we could begin to create the habit of winning. Every win would give us something to celebrate and allow us to start fires. Along the way, we learned some lessons about the kind of games and goals that worked best:

  1. Business is a team sport – choose games that build a team. You can set up all kinds of games in a company. Avoid the ones that are divisive. The best games are those that promote teamwork and togetherness, that create a spirit of cooperation.

At the same time as you’re fostering team spirit, you can also be using the games to build credibility. One of the first issues I went after, for example, was safety. … Safety is basic. It’s the first thing that can turn people against you. It can undermine everything else you try to do. … So I took on each issue, and I made it very personal. … That really got through to people.

We organized a safety committee and set a goal of 100,000 hours without an accident. We put up four-foot-high scorekeeping thermometers all over the place, and we filled them in every two thousand hours we advanced closer to the goal. As the weeks went by, the drama began to build. On the afternoon when we hit the goal, we closed the plant down for a beer bust. We played the theme song from Rockyover the public address system while members of the safety committee marched around, handing out fire extinguishers. There was a parade of forklift trucks decorated in crepe paper. People stood around and cheered.

  1. Be positive, build confidence. Manager have a bad habit of focusing on the negative. I’ve seen statistics showing how managers tend to react quickly to anything that goes wrong and overlook everything that goes right. … This is a serious weakness. One of a manager’s main responsibilities is to build confidence in an organization. To do that, you have to accentuate the positive. If you accentuate the negative, it eats away at the organization. It becomes a demotivator, and management is all about getting people motivated. A manager who doesn’t motivate isn’t doing his or her job. You can’t motivate if you’re continually focusing on the negative.
  2. Celebrate every win. Records are important, no matter how insignificant they may seem, because you can celebrate whenever you break one. Every record represents an opportunity for management to compliment people, to make them feel good, and to build confidence and self-esteem. People may be feeling depressed, bored or whatever. If you don’t celebrate, you’ve missed the chance to cheer them up. … You can also use records to change the mind-set of an organization, to get people to take responsibility for themselves.

Once the games get going, people stop pushing their problems up to management. If you’re caught up in a game, there’s no time to push problems up. You want to go out and solve the problems by yourself. Otherwise, you’ll get behind, and you won’t win. So the game get people to focus on solving the present problems, which leaves the mangers free to think about the future problems – and that’s how a manager stays in control. If you focus on future problems, you eliminate surprises. You deliver consistency. You have a very happy work environment.

  1. It’s got to be a game. You can go too far in trying to light the fire in people’s eyes. If you do, you’ll find that people stop having fun and start getting scared. Then you have to pull back fast. … The mistake I’d made was to think people would look at these accountabilities as guidelines, as opportunities to help the company and help themselves at the same time. That was naïve. In fact, individual evaluations inspire fear in a lot of people.

The point is that it’s got to be a game. I hadn’t realized the fear I was building into the system. When you think about it, the fear came out of being alone. Security comes from being with other people. There’s a lot to be said for knowing that everybody’s in the same boat with you, that you aren’t on an island, that you don’t have to do it all on your own.

  1. Give everyone the same set of goals. Don’t send people mixed messages. Let them all have the same objectives, and make sure they have to work together to achieve them. Turn success into a group effort. That way, they can win together.
  2. Don’t use goals to tell people everything you want them to do. Too many goals are useless. You should only have two, or at most, three goals over the course of the year. What’s important is to make sure each goal encompasses five or six things. In other words, choose a goal that people can only meet if they do five or six things right. It goes back to the lesson I learned at Melrose Park when we had the deadline on the Russian tractors: you don’t have to tell people to get the parts in on time if you get them to concentrate on getting the tractors out.

Feeding the Desire to Play the Game and Win. Much of what we did back in the early years we still do today. We haven’t had an open house in a while, but we have picnics all the time. We also set aside special days when people bring their kids into the factory. We do it for the same reason we had an open house back then: to build pride and self-esteem. We have more games going outside the company than ever. There are the bass fishing tournaments, the Corporate Cup relays, the golf league, the softball team, the bowling competitions. It amazes me to see all the events our people participate in under the SRC banner.

We definitely encourage the managers to take part in these competitions. It’s another way of knocking down walls. No matter how hard you try to be open, people are intimidated by the title, the door, the desk – all the symbols of power. Those are barriers you have to break down, and these outside competitions offer a way to do it.

The Great Game of Business – Chapter 2 section 2 (part 4 of 17)

Chapter 2 (cont’d)

Myth #5: Don’t Worry About the Big Issues – Just Do Your Job. Like most American companies, International Harvester operated on the principle that everybody should focus on doing the specific job he or she was assigned. The corollary was that you should only give people the information required to do their specific jobs; everything else should be treated as some kind of corporate secret. Somehow it had become common wisdom that this was a good way to run a business – in fact, the only right way to run a business. That is the biggest myth of all.

If you want to make things happen, you have to get people toraise their sights, not lower them. The broader the picture you give people, the fewer obstacles they see in their path. People need big goals. If they have big goals, they blow right by the little obstacles.

I learned that all in one of my first management experiences. I’d been put in charge of getting parts into the factory, and I began going to weekly management meetings, where I started hearing some of the company’s secrets. At the time, we had a big contract to make tractors for the Russians. The secret was that we were in trouble on it. The Russians had negotiated a penalty clause whereby they could harge us for every day we went beyond the deadline of October 31. By October 1, we were still 800 tractors short of the goal, and nobody knew where we could get the parts needed to fill the order in time. The other managers said, “Keep it to yourself. This is real serious. Heads are going to roll. You just focus on getting us the parts. We’ll take care of the tractors.”

None of this made sense to me. For one thing, I didn’t understand why we should focus on getting parts in the door when the real goal was to get tractors outthe door. And I certainly couldn’t see the point of keeping it all a secret. So I put up a big sign outside my office saying, OUR GOAL: 800 TRACTORS, and I told people the whole story. Everybody thought I was crazy. We were shipping 5 or 6 tractors a day, and there were only twenty working days until the deadline. At that rate, we were going to be short by about 700 tractors. To reach the goal, we had to average 40 tractors a day. We got out 7 tractors on the first day, 3 on the second, and people shook their heads. But when we looked closer at the problem, we began to see ways to improve the daily score. We discovered, for example, that some of the parts weren’t making it to assembly – they came in and sat on the dock. The showed us it wasn’t enough to get parts to the factory. We had to push them through the door and out onto the shop floor. We also figured out that a lot of tractors were just missing a few key parts. If we targeted those parts, we could dramatically increase shipments.

It was a case of taking a big problem and dividing it into a series of little problems, which is the best way to solve any problem. But at the same time we kept the Big Picture in front of everyone’s eyes. And it worked.

Suddenly, our daily total jumped to 55 tractors, and people got turned on. They were amazing. This was a factory where you never went outside your department, where you needed a pass to go to someone else’s area, but we had guys doing scheduling, production control, assembly, testing, shipping, the whole nine yards. They’d come into the factory after hours and crawl over the tractors, figuring out exactly what parts were needed and how many tractors were short those particular parts. Then we’d go out on the shop floor and talk to the supervisors and the hourly people. We’d get them to schedule their time as efficiently as possible and made sure we covered them.

The numbers kept going up. When we hit 300 tractors, everybody took notice. We put up bar charts – showing exactly what parts we needed, where they were coming from, and how that was going to affect shipments. People could see the whole picture. They could see all the different pieces and how – if this fell in and that fell in – we just might pull it off. They began to believe, and let me tell you, there’s nothing like it when people believe, when they think they really can do something everyone said was impossible. Individualism goes out the window. The team takes over. Nobody lets anybody down.

By the last week in October the pressure was intense. The executives would come down and watch what we were doing. With five days left, I put up a sign saying we’d shipped 662 tractors, and the place went wild. Would we make it? Would we just miss? By this point, everybody was involved. Assembly was going crazy. People couldn’t wait to get the latest score. We worked right up to the deadline of October 31. On Halloween , the last sign went up outside my office window: 808 TRACTORS SHIPPED.

What a celebration we had! We put balloons all around the sign. We had a party. There were pizzas all around. Nobody could believe that we’d beaten the Russians out of their penalty clause. It was great, just great.

That experience taught me a big lesson. I saw these guys get hungry. I saw them push and accomplish things they never thought were possible. I saw satisfaction on a daily basis. I mean, they didn’t know they were working! I thought, My God, if I can get people pumped up, want to come to work every day, what an edge that is! That’s what nobody else is doing. Suppose I could run the right numbers, so that a guy wakes up in the morning and says, “Man, I feel terrible, but I really want to go in there and see what happened.” That’s the whole secret to increasing productivity.

And I learned something else as well. The experience absolutely convinced me that secrecy is baloney. I decided that, from then on, I was going to give my people everything I got. Eventually that grew into the whole idea of teaching people how to make money.

The Fifth Higher Law Is:You Gotta Wanna

When you think about it, all these myths have one thing in common, what you might call the Big Lie. That is the notion that you can manage effectively by forcing people to do things they really don’t want to do.

It is just not true. People only get beyond work when their motivation is coming from inside. That higher law – you gotta wanna – says it all. If people don’t want to do something, its’ not going to get done. Whatever goal you’re talking about – owning your own company, being the best, building 800 tractors in a month. If you don’t want it inside of you, it ain’t gonna happen.

Management is all about instilling that desire to win. It’s about instilling self-esteem and pride, that special glow you get when you know you’re a winner. Nobody has to tell you. You just feel it. You know it.

The Great Game of Business – Chapter 2 section 1 (part 3 of 17)

Chapter 2 – Myths of Management

You may wonder if it’s possible to play the Great Game of Business anywhere – in a division of a giant conglomerate, say, or in a factory with a dominant union, or in a company that doesn’t share equity with employees or have an intelligent bonus system. In fact, the Game started in a place exactly like that, in a very small department at the huge International Harvester plant in Melrose Park, Illinois. It was there that I learned most of what I know about managing and everything I’ve tried to forget about leadership. … The practice of management, I discovered, is filled with myths that are guaranteed to screw up any factory or company as badly as Melrose Park was in those days.

Myth #1: Don’t Tell People the Truth – They’ll Screw You. Being honest with people was unheard of at Melrose Park and at most other companies in the 1970s. The whole mentality was, Cover your ass. … We established credibility, and you only build credibility by telling the truth. You simply can’t operate unless people believe you and believe one another. That taught me an important lesson: lying and dishonesty are bad business.

Myth #2: Nice Guys Finish Last. When you flaunt what you’ve got, when you intimidate, when you treat people badly, you lose power.

The Third Higher Law Is:What Goes Around Comes Around

Whenever I see someone take advantage of other people, whenever I see a boss acting like an S.O.B., I know his days are numbered.

Myth #3: A Manager’s Job Is to Come Up with Answers. It’s very common for managers, especially new managers, to think they’re supposed to have solutions for any problems that arise on their watch. That kind of thinking can get you into deep trouble. For one thing, it sets you up to fail because no one has all the answers. For another, it undermines your credibility because everyone knowsthat on one has all the answers. It also isolates you from people. … At the same time, they’re failing managers, because they aren’t doing what every good manager has to do: build confidence in other people.

You all learn faster when you teach each other. … Aside from sharing problems, they taught me about the importance of managing with the downside in mind, of having contingencies and trap doors. Because failure is part of the process. You can’t succeed if you don’t fail sometimes. But if you’re not prepared for failure, it’s going to take you by surprise and knock you for a loop. … The secret is to make contingency planning a habit of mind. It was a habit I developed as I moved up the ladder and found the problems kept getting harder. I would teach people everything I knew, and it wouldn’t be enough, so together we’d have to come up with one more trick.

That was critical because the people in the factory were depending on us. When you have the responsibility to take care of other people, you do whatever it takes to get the job done.

The Fourth Higher Law Is: You Do What You Gotta Do

You drop everything else. You stay night and day on that one thing. You figure out how to motivate, push, sneak, threaten, do whatever is necessary because people’s livlihoods are at stake. Take the hill. You gotta take the hill. … You do that, not by coming up with the answers yourself, but by generating a level of creativity that allows the answers to come out.

Myth #4: It’s a Big Mistake to Promote People Too Quickly. The common wisdom is that people should prove themselves before they get promoted. I always promoted people as fast as I could. … Tunnel vision is a big problem in business. When people spend all their time in one function, they see every issue from a single perspective. … that makes it harder to accomplish anything. I got around this obstacle by getting my people jobs in other departments. In effect, I instituted a program of cross-training for the people I worked with. … As a result, my department could function better. We had our own support system consisting of erstwhile colleagues who understood our point of view and could give us help when we needed it.

 

The Great Game of Business – Chapter 1 (part 2 of 17)

Chapter 1 – Why We Teach People How To Make Money

It’s amazing what you can come up with when you have no money, zero outside resources, and 119 people all depending on youfor their jobs, their homes, even their prospects of dinner for the foreseeable future.

That’s pretty much the situation my twelve fellow managers and I faced in February 1983, our first month in business as an independent company. We were supervisors and managers at a little factory in Springfield, Missouri, that up until then had been owned by International Harvester. At the time, Harvester was in big trouble, sinking faster than the Titanic, cutting loose operations like ours in a desperate attempt to stay afloat. When the company offered to sell us the factory, we jumped at the chance to save our jobs. It was like jumping into a leaky life raft in the middle of a hurricane. Our new company was loaded down with so much debt that the smallest wave could capsize us.

We were scared. We couldn’t rely on traditional ways of managing because they wouldn’t produce the kind of results we needed in time to save us. So we grabbed for something new, based on what we thought of as the higher laws of business.

The First Higher Law Is: You Get What You Give.

The Second Higher Law Is:It’s Easy to Stop One Guy, But It’s Pretty Hard to Stop 100

I don’t know where I learned these laws. You don’t hear about them in school. You pick them up on the street. But I know they are real laws of business, and they are the reason why we survived and have been successful ever since. It was out of these laws that we created the Great Game of Business. These two higher laws sum up our success; they emphasize how thoroughly dependent we are on one another – and how strong we are because of it.

I am often asked to say exactly what the Great Game of Business is. I have to admit I find this hard to do. It is not a system. It is not a methodology. It is not a philosophy, or an attitude, or a set of techniques. It is all those things and more. It is a whole different way of running a company and of thinking about how a company should be run. What lies at the heart of the Game is a very simple proposition:

The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run anda stake in the financial outcome, good or bad.

Guided by this proposition, we turn business into a game that everybody in the company can play. … As a result, hourly workers who had been with the Springfield Remanufacturing Corp. (SRC) from the beginning had holdings in the Employee Stock Ownership Plan (ESOP) worth as much as $35,000 per person. That was almost the price of a home in Springfield in 1991.

 

The Basic Rules of the Game 

People who run companies know that there are really only two critical factors in business. One is to make money and the other is to generate cash. As long as you do those two things, your company is going to be okay, even if you make mistakes along the way, as you inevitably will.

The only way to be secure is to make money and generate cash. Everything else is a means to that end.

Those simple rules apply to every business. And yet, at most companies, people are never told that the survival of the company depends on doing those two things. People are told what told in in an eight-hour workday, but no one ever shows them how they fit into the bigger picture. … Most important, no one tells people how to make money and generate cash. Nine times out of ten, employees don’t even know the difference between the two.

 

The Basic Tools of the Game

When people come to work at SRC, we tell them that 70 percent of the job is disassembly or whatever, and 30 percent of the job is learning. What they learn is how to make money, how to make a profit. We offer them sessions with the accounting staff, tutoring with supervisors and foremen, instructional sheets, and so on. We teach them about after-tax profits, retained earnings, equity, cash flow, everything. … Then we provide a lot of reinforcement. Once a week, for example, supervisors hold meetings throughout the company to go over the updated financial statements.

 

Why We Play the Game

 Reason #1 for Playing the Game: We Want to Live Up to Our End of the Employment Bargain. Everything we do is based on a common understanding that job security is paramount – that we are creating a place for people to work not just this year or five years from now, but of the next fifty years and beyond. We owe it to one another to keep the company alive.

Reason #2 for Playing the Game: We Want to Do Away with Jobs. How often have you heard this: “All we ask you is to do the job, nothing more.” Well, I don’t want people just to do a job. I want them to have a purpose in what the hell they’re doing. I want them to be going somewhere. I want them to be excited about getting up in the morning, to look forward to what they’re going to do that day.

Reason #3 for Playing the Game: We Want to Ged Rid of the Employee Mentality.The big payoff to us for playing the Game is that we become a more educated, more flexible organization. We can respond instantaneously to changes in the market. We can turn on a dime for a customer if we have to. We can respond to a problem in the length of time it takes to place a phone call. … We can do all that because we have a company filled with people who not only areowners, but who also thinkand actlike owners, not employees. That’s an important distinction. … Ownership is not a set of legal rights. It’s a state of mind. You can’t give people that state of mind in one fell swoop. You can only nurture it through a process of education.

Reason #4 for Playing the Game: We Want to Create and Distribute Wealth. What’s really going on is that companies are getting rid of people and replacing them with machines. … What machines can’t do is figure out how to make money. Only people can do that. If you have people who know how to make money, you’ll win every time. … But to get people to that point, you have to educate them. You have to teach them why it’s important to make money and generate cash, and then you have to figure out a way to keep them focused on doing those two simple things.

The Great Game of Business (part 1 of 17)

The Great Game of Business: The Only Sensible Way to Run a Company

by: Jack Stack with Bo Burlingham (1992, 2013)

[pigeonhole] Practical Principles Book

[premise] The story of ‘SRC’ a manufacturing company in Missouri that saved itself by teaching financials to the entire company, including front line employees, and empowering them to influence their end results. Their example of success can serve as a model for your business or work group.

Chapters:

INTRODUCTION AND UPDATED ADDITION – 1
DOES IT REALLY WORK OR IS IT JUST A BUNCH OF HYPE? – 25
THE HIGHER LAWS OF BUSINESS – 27
THE ULTIMATE HIGHER LAW – 29

  1. Why we Teach People How To Make Money – 31
  2. Myths of Management – 52
  3. The Feeling of a Winner – 67
  4. The Big Picture – 86
  5. Open-Book Management – 101
  6. Setting Standards – 126
  7. Skip the Praise – Give Us the Raise – 157
  8. Coming Up with the Game Plan – 184
  9. The Great Huddle – 213
  10. A Company of Owners – 245
  11. The Highest Level of Thinking – 269
  12. The Ultimate Higher Law: A Message to Middle Managers – 287
  13. Get In The Game: The “Interactive” Guide – 293

ACKNOWLEDGEMENTS – 367

Crucial Conversations – Chapter 11 (part 18 of 18)

I can win an argument on any topic, against any opponent. People know this, and steer clear of me at parties. Often, as a sign of their great respect, they don’t even invite me. – Dave Barry

 

Chapter 11 – Putting It All Together – Tools for Preparing and Learning

TWO LEVERS

Learn to Look. The first lever for positive change is Learn to Look. That is, people who improve their dialogue skills continually ask themselves whether they’re in or out of dialogue. This alone makes a huge difference. Even people who can’t remember or never learned the skills of STATE or AMPP, etc., are able to benefit from this material by simply asking if they’re falling into silence or violence. They may not know exactly how to fix the specific problem they’re facing, but they do know that if they’re not in dialogue, it can’t be good. And then they try something to get back to dialogue. As it turns out, trying something is better than doing nothing.

So remember to ask the following important question: “Are we playing games or are we in dialogue?” It’s a wonderful start.

Make It Safe. The second lever is Make It Safe. We’ve suggested that dialogue consists of the free flow of meaning and that the number one flow stopper is a lack of safety. When you notice that you and others have moved away from dialogue, do something to make it safer. Anything.

These too levers form the basis for recognizing, building, and maintaining dialogue. When the concept of dialogue is introduced, these are the ideas most people can readily take in and apply to crucial conversations. Now let’s move on to a discussion of the rest of the principles we’ve covered.

 

HOW TO PREPARE FOR A CRUCIAL CONVERSATION 

Here’s one last tool to help you turn these ideas into action. It’s a powerful way of coaching yourself – or another person – through a crucial conversation. It can literally help you identify the precise place you are getting stuck and the specific skill that can help you get unstuck. [Table on Page 214]

 

CONCLUSION – IT’S NOT ABOUT COMMUNICATION, IT’S ABOUT RESULTS

Let’s end where we started. We begin this book by suggesting we got dragged somewhat unwillingly into the topic of communication. What we were most interested in was notwriting a book on communication. Rather, we wanted to identify crucial moments– moments when people’s actions disproportionately affect their organizations, their relationships, and their lives. Our research led us time and again to focus on moments when people need to step up emotionally and politically risky conversations. That’s why we came to call these moments crucial conversations. The current quality of your leadership and your life is fundamentally a function of how you are presently handling these moments.

Our sole motivation in writing this book has been to help you profoundly improve the results you care about most. And your dearest hope as we conclude it is that you will do so. Take action. Identify a crucial conversation you could improve now. Use the tools in this last chapter to identify the principle or skill that will help you approach it in a more effective way than you ever have. Then give it a try.

One thing our research shows clearly is that you need not be perfect to make progress. We promise you that if you persist and work at these ideas, you will see dramatic improvement in your relationships and results. These moments are truly crucial, and a little bit of change can lead to an enormous amount of progress.

Crucial Conversations – Chapter 9 (part 17 of 18)

To do nothing is in every man’s power – Samual Johnson

 

Chapter 9 – Move to Action – How to Turn Crucial Conversations into Action and Results 

Up until this point we’ve suggested that getting more meaning into the pool helps with dialogue. It’s the one thingthat helps people make savvy decisions that, in turn, lead to smart, unified, and committed actions. … It’s time we add two final skills. Having more in the pool, even jointly owning it, doesn’t guarantee that we all agree on what we’re going to do with the meaning. For example, when teams or families meet and generate a host of ideas, they often fail to convert the ideas into action for two reasons:

  • They have unclear expectations about how decisions will be made.
  • They do a poor job of acting on the decisions they do make.

This can be dangerous. In fact, when people move from adding meaning to the pool to moving to action, it’s a prime time for new challenges to arise. … Let’s take a look at what it takes to solve each of these problems. First, making decisions.

 

DIALOGUE IS NOT DECISION MAKING 

The two riskiest times in crucial conversations tend to be at the beginning and at the end. The beginning is risky because you have to find a way to create safety or else things go awry. The end is dicey because if you aren’t careful about how you clarify the conclusion and decisions flowing from your Pool of Shared Meaning, you can run into violated expectations later on. This can happen in two ways.

How are decisions going to be made?First, people may not understand how decisions are going to be made.

Are we ever going to decide?The second problem with decision making occurs when no decision gets made. Either ideas slip away and dissipate, or people can’t figure out what to do with them.

 

DECIDE HOW TO DECIDE 

Both of these problems are solved if, before making a decision, the people involved decide how to decide. … Make it clear how decisions will be made – who will be involved and why.

When the line of authority is clear. When you’re in a position of authority, you decide which method of decision making you’ll use. … Deciding what decisions to turn over and when to do it is part of their stewardship.

When the line of authority isn’t clear. When there is no clear line of authority, deciding how to decide can be quite difficult. … Use your best dialogue skills to get meaning into the pool. Jointly decide how to decide.

 

The Four Methods of Decision Making

There are four common ways of making decisions: command, consult, vote, and consensus. These four options represent increasing degrees of involvement. Increased involvement, of course, brings the benefit of increased commitment along with the curse of decreased decision-making efficiency.

Command. Let’s start with decisions that are made with no involvement whatsoever. This happens in one of two ways. Either outside forces place demands on us (demands that leave us no wiggle room), or we turn decisions over to others and then follow their lead.

Consult. Consulting is as process whereby decision makers invite others to influence them before they make their choice. … They gather ideas, evaluate options, make a choice, and then inform the broader population.

Vote. Voting is best suited to situations where efficiency is the highest value – and you’re selecting from a number of good options. … When facing several decent options, voting is a great time saver but should never be used when team members don’t agree to support whatever decision is made. In these cases, consensus is required.

Consensus. This method can be both a great blessing and a frustrating curse. Consensus means you talk until everyone honestly agrees to one decision. This method can produce tremendous unity and high-quality decisions. If misapplied, it can also be a horrible waste of time. It should only be used with (1) high-stakes and complex issues or (2) issues where everyone absolutely must support the final choice.

 

HOW TO CHOOSE 

Now that we know the four methods, let’s explore which method to use at which time – along with some hints about how to avoid common blunders.

 

Four Important Questions 

When choosing among the four methods of decision making, consider the following questions:

  1. Who cares?Determine who genuinely wants to be involved in the decision along with those who will be affected.
  2. Who knows?Identify who has the expertise you need to make the best decision.
  3. Who must agree?Think of those whose cooperation you might need in the form of authority or influence in any decisions you might make.
  4. How many people is it work involving?Your goal should be to involve the fewest number of people while still considering the quality of the decision along with the support that people will give it.

 

MAKE ASSIGNMENTS – PUT DECISIONS INTO ACTION

To avoid common traps, make sure you consider the following four elements:

  • Who?
  • Does what?
  • By when?
  • How will you follow up?

Who?When it’s time to pass out assignments, remember, there is no “we.” “We,” when it comes to assignments, actually means, “no me.” It’s code. … Assign a name to every responsibility.

Does What? Be sure to spell out the exact deliverables you have in mind. The fuzzier the expectations, the higher the likelihood of disappointment.

By When?With vague or unspoken deadlines, other urgencies come up, and the assignment finds its way to the bottom of the pile, where it is soon forgotten.

How Will You Follow Up? Always agree on how often and by what method you’ll follow up on the assignment. It could be a simple e-mail confirming the completion of a project. It might be a full report in a team or family meeting. More often than not, it comes down to progress checks along the way.

 

DOCUMENT YOUR WORK 

Once again, a proverb comes to mind. “One dull pencil is worth six sharp minds.” Don’t leave your hard work to memory. If you’ve gone to the effort to complete a crucial conversation, don’t fritter away all the meaning you created by trusting your memories. Write down the details of conclusions, decisions, and assignments. Remember to record who does what by when. Revisit your notes at key times (usually the next meeting) and review assignments.

 

SUMMARY – MOVE TO ACTION 

Turn your successful crucial conversations into great decisions and united action by avoiding the two traps of violated expectations and inaction.

Decide How to Decide

  • Command. Decisions are made without involving others.
  • Consult. Input is gathered from the group and then a subset decides.
  • Vote. An agreed-upon percentage swings the decision
  • Consensus. Everyone comes to an agreement and then supports the final decision.

Finish Clearly

Determine whodoeswhatby when. Make the deliverables crystal clear. Set a follow-uptime. Record the commitments and then follow up. Finally, hold people accountable to their promises.

Crucial Conversations – Chapter 8 section 2 (part 16 of 18)

Inquiry Skills

When?So far we’ve suggested that when other people appear to have a story to tell and facts to share, it’s our job to invite them to do so. Our cues are simple: Others are going to silence or violence. We can see that they’re feeling upset, fearful, or angry. We can see that if we don’t get at the sourceof their feelings, we’ll end up suffering the effectsof the feelings. These external reactions are our cues to do whatever it takes to help others retrace their Paths to Action.

How?We’ve also suggested that whatever we do to invite the other person to open up and share his or her path, or invitation must be sincere. As hard as it sounds, we must be genuine in the face of hostility, fear, or even abuse – which leads us to the next question.

What? What are we supposed to actually do? What does it take to get others to share their path – stories and facts alike? In a word, it requires listening. IN order for people to move form acting on their feelings to talking about their conclusions and observations, we must listen in a way that makes it safe for others to share their intimate thoughts. They must believe that when they share their thoughts, they won’t offend others or be punished for speaking frankly.

 

Ask, Mirror, Paraphrase, or Prime (AMPP)

To encourage others to share their paths we’ll use four power listening tools that can help make it safe for other people to speak frankly. We call the four skills power listening tools because they are best remembered with the acronym AMPP – Ask, Mirror, Paraphrase, and Prime. Luckily, the tools work for both silence and violence games.

Act to Get Things Rolling

The easiest and most straightforward way to encourage others to share their Path to Action is simply to invite them to express themselves.

Mirror to Confirm Feelings

If asking others to share their path doesn’t open things up, mirroring can help build more safety. In mirroring, we take the portion of the other person’s Path to Action we have access to and make it safe for him or her to discuss it. All we have so far are actions and some hints about the other person’s emotions, so we start there.

When we mirror, as the name suggests, we play the role of mirror by describing how they look or act. Although we may not understand the others’ stories or facts, we can see their actions and reflect them back.

Mirroring is most useful when another person’s tone of voice or gestures (hints about the emotions behind them) are inconsistent with his or her words. … We explain that while the person may be saying one thing, his or her tone of voice or body posture suggests something else. In doing so, by staying with the observed actions, we show both respect and concern for him or her.

When reflecting back your observations, take care to manage your tone of voice and delivery. It is not the fact that we are acknowledging others’ emotions that creates safety. We create safety when our tone of voice says we’re okay with them feeling the way they’re feeling.

Paraphrase to Acknowledge the Story

Asking and mirroring may help you get part of the other person’s story out into the open. When you get a clue about whythe person is feeling as he or she does, you can build additional safety by paraphrasing what you’ve heard. Be careful not to simply parrot back what was said. Instead, put the message in your own words – usually in an abbreviated form.

The key to paraphrasing, as with mirroring, is to remain calm and collected. Our goal is to make it safe, not to act horrified and suggest that the conversation is about to turn ugly. … Simply rephrase what the person has said, and do it in a way that suggest that it’s okay, you’re trying to understand, and it’s safe for him or her to talk candidly.

Don’t push too hard. Let’s see where we are. … To encourage the person to share, we’ve tried three listening tools. We’ve asked, mirrored, and paraphrased. The person is still upset, but isn’t explaining his or her stories or facts. … Now what? At this point, we may want to back off.

Prime When You’re Getting Nowhere

ON the other hand, there are times when you may conclude that others would like to open up, but still don’t feel safe. Or maybe they’re still in violence, haven’t come down from the adrenaline, and aren’t explaining why they’re angry. When this is the case, you might want to try priming. Prime when you believe that the other person still has something to share and might do so with a little more effort on your part.

When it comes to power listening, sometimes you have to offer your best guess at what the other person is thinking or feeling before you can expect him or her to do the same. You have to pour some meaning into the pool before the other person will respond in kind.

Now, this is not the kind of thing you would do unless nothing else has worked. You really want to hear from others, and you have a very strong idea of what they’re probably thinking. Priming is an act of good faith, taking risks, becoming vulnerable, and building safety in hopes that others will share their meaning.

 

But What If They’re Wrong? 

Sometimes it feels dangerous to sincerely explore the views of someone whose path is wildly different from your own. He or she could be completely wrong, and we’re acting calm and collected. This makes us nervous.

To keep ourselves from feeling nervous while exploring others’ paths – no matter how different or wrong they seem – remember we’re trying to understand their point of view, not necessarily agree with it or support it. Understanding doesn’t equate with agreement. Sensitivity does equate to acquiescence. By taking steps to understand another person’s Path to Action, we are promising that we’ll accept their point of view. There will be plenty of time later for us to share our path as well. For now, we’re merely trying to get at what others think in order to understand why they’re feeling the way they’re feeling and doing what they’re doing.

 

REMEMBER YOUR ABCs 

Let’s say you did you level best to make it safe for the other person to talk. After asking, mirroring, paraphrasing and eventually priming, the other person opened up and shared his or her path. It’s now your turn to talk. But what if you disagree? Some of the other person’s facts are wrong, and his or her stories are completely fouled up. Well, at least they’re a lot different from the story you’ve been telling. Now what?

Agree

As you watch families and work groups take part in heated debates, it’s common to notice a rather intriguing phenomenon. Although the various parties you’re observing are violently arguing, in truth, they’re in violent agreement. They actually agree on every important point, but they’re still fighting. They’ve found a way to turn subtle differences into a raging debate.

So here’s the take-away. If you completely agree with the other person’s path, say so and move on. Agree when you agree. Don’t turn an agreement into an argument.

Build

Of course, the reason most of us turn agreements into debates is because we disagree with a certain portion of what the other person has said. Never mind that it’s a minorportion. If it’s a point of disagreement, we’ll jump all over it like a fleeing criminal.

Now when the other person has merely left out an elementof the argument, skilled people will agree and then build. Rather than saying: “Wrong. You forgot to mention …” they say: “Absolutely. In addition, I noticed that …”

If you agree with what has been said but the information is incomplete, build. Point out areas of agreement, and then add elements that were left out of the discussion.

Compare

Finally, if you do disagree, compare your path with the other person’s. That is, rather than suggest that heor sheis wrong, suggest that you differ. He or she may, in fact, be wrong, but you don’t know for sure until you hear both sides of the story. For now, you just know that the two of you differ. So instead of pronouncing “Wrong!” start with a tentative but candid opening, such as “I think I see things differently. Let me describe how.”

Then share your path using the STATE skills from Chapter 7. That is, begin by sharing your observations. Share them tentatively, and invite others to test your ideas. After you’ve shared your path, invite the other person to help you compare it with his or her experience. Work together to explore and explain the differences.

In summary, to help remember these skills, think of your ABCs. Agreewhen you agree. Buildwhen others leave out key pieces. Comparewhen you differ. Don’t turn differences into debates that lead to unhealthy relationships and bad results.

 

SUMMARY – EXPLORE OTHERS’ PATHS

To encourage the free flow of meaning and help others leave silence or violence behind, explore their Paths to Action. Start with an attitude of curiosity and patience. This helps restore safety.

Then, use four powerful listening skills to retrace the other person’s Path to Action to its origins.

  • Ask. Start by simply expressing interest in the other person’s views.
  • Mirror. Increase safety by respectfully acknowledging the emotions people appear to be feeling.
  • Paraphrase. As others begin to share part of their story, restate what you’ve heard to show not just that you understand, but also that it’s safe for them to share what they’re thinking.
  • Prime. If others continue to hold back, prime. Take your best guess at what they might be thinking and feeling.

As you begin to share your views, remember:

  • Agree. Agree when you share views.
  • Build. If others leave something out, agree where you share views, then build.
  • Compare. When you differ significantly, don’t suggest others are wrong. Compare your two views.