When Employees Own The Company, Great Things Happen

The Essence of Ownership

Consider that when SRC held its first shareholder meeting in 1984, a year after SRC spun itself out of International Harvester, the total value of the business was $54,000. Since the business had taken on significant debt to buy the business, their debt-to-equity ratio was an abysmal 89-to-1. That meant that if they missed a single loan payment, they would lose everything. That also meant that if the 100 associates who joined the new company were going to make it, they all needed to play an active role in the business. Every. Single. Day.

Jack Stack, the former general manager of the Harvester plant, and now the new company’s CEO, faced a dilemma. How could he convince a group of hard-edged factory workers the intricacies of income statements and balance sheets? Or that debt was now their mortal enemy? The answer he seized on was by teaching them that business was like playing a game. He wasn’t trying to trivialize business, but to demystify it. To play, you needed to know the rules, you needed to keep score, and you needed to share a stake in the outcome, good or bad.

That’s what ownership is really all about.

When Stack and his colleagues first tried to convince its associates that learning to run a business was not any more complicated than learning the rules to a game, there were skeptics and doubters. Some didn’t trust the numbers management was sharing with them. Others hated the accountability that comes from transparency. And when some of them got their first stock certificate, they wondered if they could trade that for a cup of coffee.

Those folks didn’t appreciate what it meant to be an owner—and they weeded themselves out of the company over time.

But those who stayed and bought into the idea of thinking and acting like owners have built something remarkable over the past 39 years. In this last year, for instance, one associate with a salary of about $50,000 saw their stock portfolio increases six-times that amount.