BOS: Great Game of Business

The Great Game of Business by Jack Stack

This briefing document summarizes the main themes and important ideas presented in the excerpts from Jack Stack's "The Great Game of Business." The book advocates for a transparent and participative approach to business management, where employees are treated as businesspeople, understand the financials, and are actively involved in improving performance.

Core Philosophy: Open-Book Management and Employee Ownership

The central tenet of the Great Game of Business (GGOB) is to run a company by openly sharing financial information with all employees and empowering them to act on that knowledge. Stack believes that by teaching employees the "rules" of business and holding them accountable for the "score," companies can unlock the collective intelligence and drive of their workforce.

• Treating Employees as Businesspeople: Stack emphasizes the potential in every employee to understand and contribute to the success of the business. He states, "almost anyone could be taught to be a businessperson and a leader." The GGOB system is designed to build "confidence in becoming businesspeople."
• Transparency and Knowing the Numbers: A fundamental principle is that "Every employee should be given the measures of business success and taught to understand them: Know and Teach the Rules." This involves openly sharing financial statements and educating employees on key metrics like profit margins, cash flow, and costs. Stack argues against keeping financial information secret, stating, "I certainly couldn’t see the point of keeping it all a secret."
• Accountability and Empowerment: The second core principle is that "Every employee should be expected and enabled to act on his or her knowledge to improve performance: Follow the Action and Keep Score." By understanding the numbers, employees can see the impact of their actions and are empowered to make decisions that positively affect the bottom line.

Key Elements of the Great Game of Business:

1. Knowing and Teaching the Rules:

• Financial Literacy: Employees need to understand basic financial statements (income statement, balance sheet) and key performance indicators (KPIs). Stack emphasizes the importance of developing financial statements that "works for your particular business" and breaking down complex figures into understandable components.
• The Big Picture: It's crucial for employees to understand the overall goals and financial health of the company. Failing to do so can lead to "mixed messages" and counterproductive actions. Stack highlights an example where a president's focus on return on assets, without communicating it clearly, led to a "disaster."

1. Following the Action and Keeping Score:

• Setting Standards and Targets: Establishing clear, measurable standards allows employees to track their progress and understand what constitutes success. Stack notes, "You need a number against which you can compare your results and thereby determine how you’re doing. That number is the standard—the level you can reach if you apply yourself and do a good job." He prefers the word "target" to emphasize that these are not fixed goals but part of an ongoing contest.
• The Critical Number: Every company has a "Critical Number" – the one metric that will have the biggest impact on its success at any given time. Identifying and focusing on this number is vital.
• Scoreboards and Tracking: Visual scoreboards and regular updates on performance against targets keep employees engaged and informed. This makes the "Game faster and more fun" and allows them to see their contribution to making money.
• Huddles: Regular "Huddles" (meetings) are essential for reviewing the score, forecasting performance, and making commitments. This fosters communication and collective problem-solving.

1. Providing a Stake in the Outcome:

• Bonus Plans: Tying bonuses to the achievement of financial goals directly links employee performance to rewards. Stack emphasizes "bootstrapping: the best reason for paying people with bonuses," arguing that it fosters a mentality of resourcefulness and cost-consciousness. Bonus plans should be designed to "shore up your weaknesses as a business."
• Employee Ownership: Giving employees the opportunity to own shares in the company further aligns their interests with the company's success and fosters a sense of ownership. Stack shares examples of successful employee stock ownership programs at SRC.

The "Higher Laws of Business":

Stack outlines a set of "Higher Laws of Business" that reflect the principles underlying the GGOB, such as:

• "You Get What You Give."
• "It’s Easy to Stop One Guy, But It’s Pretty Hard to Stop 100."
• "What Goes Around Comes Around."
• "When You Raise the Bottom, the Top Rises."
• "When People Set Their Own Targets, They Usually Hit Them."
• The "Ultimate Higher Law": "When you appeal to the highest level of thinking, you get the highest level of performance."

Overcoming Myths and Challenges:

The book addresses common business myths and challenges to implementing open-book management:

• Myth: Nice Guys Finish Last: Stack argues against intimidation and bad treatment, stating, "When you aunt what you’ve got, when you intimidate, when you treat people badly, you lose power."
• Fear of Sharing Financials: Stack counters the concern that employees will demand raises by arguing that they already have assumptions about the company's profitability, and transparency builds trust. As Tom from another company says, "Guess what, Randy—they already want one! Here’s the reality. Your people already think you make a ton of money... Transparency is great. It builds trust when..."
• Dealing with Cynicism: The example of Gerald highlights the importance of patiently educating and involving skeptical employees. Randy emphasizes, "We are all in this together. We win or lose as a team, remember?"

Innovation and Growth through Empowerment:

By engaging employees in understanding the business, the GGOB fosters innovation and creates opportunities for growth. Stack recounts instances where employee involvement led to creative problem-solving and the identification of new business ventures. He describes "overhead absorbers and cash-ow generators" as key components for starting new companies within the existing framework.

The Importance of Involvement and Ownership:

Throughout the excerpts, the theme of genuine involvement and ownership is paramount. Stack emphasizes that "To get real ownership in the plan, we have to focus on how people are involved in the process. If people don’t participate, they don’t buy in. If they don’t buy in, they don’t commit. If they don’t commit, they don’t deliver.’" He sees the ultimate success of the GGOB in transforming employees into individuals who "understand how to run a business" and potentially become entrepreneurs themselves.

Conclusion:

"The Great Game of Business" presents a compelling case for open-book management as a powerful tool for improving business performance, fostering a culture of ownership and accountability, and ultimately creating a more engaged and empowered workforce. By sharing financial information, teaching employees the rules of business, and providing them with a stake in the outcome, companies can tap into the collective intelligence and drive of their people to achieve remarkable results.

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