← Unemployable with Jeff Dudan
Unemployable with Jeff Dudan
The Great Game of Business: Why This Works When Everything Else Fails #249
01:07:50
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- [00:00]
A
Welcome everybody back to the unemployable podcast. I'm Jeff Duden. If you were a 33 year old manager at an international harvester plant in 1983 when word came down that the plant was to be shuttered, if you let a successful leverage buyout to have management by the Factory secured a $9 million loan to fund operations, leading to the epiphany that nobody at the Springfield remanufacturing company knew the numbers leading to the creation of the open book management system, widely known today as the great game of business. The only sensible way to run a company. Your name can only be Jack Stack. Welcome, Jack.
- [00:41]
B
Hi, Jeff. It's really great to be here.
- [00:49]
A
Yeah, I've been a such a huge fan. It's such an honor to meet you today. I've used the book time and time again and I'm just really excited to have you on here today and, and appreciate you being on. Here's the opener. Why do companies withhold financial information from their employees?
- [01:08]
B
You know, I asked, I get that question asked a lot. This is the, the dark side of it in that there are a lot of secrets inside businesses that they don't really like people to understand. And sad to say that it's so embedded in mostly privately held family companies that have been in existence for a long period of time. So many things get intermingled in terms of trying to have a family business and raise families and provide jobs for communities. That's a very difficult life to live. So they don't want those things to be disclosed. And there may be some assets that are being rented and. But I would tell you, I personally think it's because the top management doesn't know the numbers. Okay. To just get right to the point, I think we rely on bookkeepers, we rely on lawyers. The sad part about it is that they are paid to give you safe answers. So you only get the safe side of every answer that you get. And I don't know, I just think that, I think this thing on illiteracy is just petrifying on a big scale. We do that literacy test every year. 66% of them fail. We were 34% literate and we just got a long way to go to get people to understand it.
- [02:30]
A
When you say literacy test, are you talking about testing people that come to your consulting practice, executives and basic financial acumen?
- [02:39]
B
Now, finra, part of the accounting association, does a six question, possibly a seven question test on economic literacy. Right. And they've done it for 30 years and the score has been flatlined at 66, 34. It just drives me crazy. We even actually have a month of the year dedicated to financial literacy and we still haven't raised the needle a point. Okay. So it's pretty petrifying when you're figuring out that most, maybe one third people are going to really understand what we're talking about anyways. I don't say that from an arrogant position. Not at all. I just think it is a significant possibility of maybe doing a lot better in this world if we focus a little bit more on that.
- [03:29]
A
Yeah. You know, you know, as you look, look through history, if you read Good to Great and you look at the companies that were in the Good to Great book and then you follow them some 20 or 30 years later, many of those companies haven't had the success that they had as when they were, when they were put in that book. If you look at the International Harvester Company that in the early 1900s had 85% of the harvesting market and then they bought the trucks and they had the farmall tractors and they, they really just expanded to be just a global giant in manufacturing and agriculture, vehicles, trucks. And then they found themselves $4.5 billion in debt and by the time the 80s came around they were closing plants and trying to survive. And that's where you were, a 33 year old manager. And, and I, I just, I'm so, I love an underdog story. I watch every football game I watch. I just find myself rooting for the team that's not supposed to win. And this is one of the greatest underdog stories that I've ever heard.
- [04:31]
B
It was pretty bad. When you're 89 to 1 debt to equity, you're comatose and you should be in the hospital and they should have a sign on said don't resuscitate this person. If they even begin to breathe. Right. So yeah, it had to be divine intervention. Okay. Those things have a special little globe to it as well. Right. Because it is. Once you're. There was no capital available at that time. That's why interest rates were at 22%. Right. Unemployment rate was at 14% which a lot of people can't even grasp at what 14% must be looking like. The interest rates are sucking out all the liquidity of the people on the shop floor because the variable mortgage rates were going up. They couldn't buy any out. It was looking pretty grim at that particular point in time. But the only way you can go up against a situation like that is that you have to be Frigging naive, okay? And we were naive and we. There was no place we could go. I mean, there was no jobs, there was no capital, there was no markets, you know, so we just figured out, it was like the Alamo is really what it was like. We just tried to figure out how to keep everybody alive and learn all the things that you needed to learn that you had wished you had Learned in the 14 years you had been with International Harvester. Because if they had asked you to do this, they'd still be around today because they were a tremendous company. They were one of the greatest companies, okay? And we just fell apart internally, all right? We just could not, we could not move emotionally inside of the business. And we fought like crazy and we self destructed. So it was the beginning of the information age because we busted out of the industrial revolution or industrial age by the 80s, you know, and then all of a sudden we went on a whole new way of looking at things. And yeah, the only thing that was ever consistent is that those numbers never go away. And if they don't go away, why wouldn't the hell you just train everybody to understand that they're not going to go away. They're here. They've affected millions and millions of people. So it wasn't that hard once you got it rolling because all of a sudden you began to realize that the people at the capital had its specifications much difference than the people that had to make things okay. I mean, we had to build an engine and we made a specification to build an engine. They didn't ask us to build a company and they asked us to build a company. We probably wouldn't even build a better engine, which is crazy about it. But I think we all learned from it. I could make good products, but I knew nothing about the company. And then when we went, we sought capital. We really began to understand that people ask different questions when you ask for capital and it's more about the business and that the business has a set of specifications. So why don't we just teach everybody what the specifications are? So, so much like your background and your history with sports and coaching and, you know, the things that you do. And the weird thing about it is that it just goes360 is that once you teach your people how to do it, they teach their families how to do it. And then the community begins to pick up on it. And so it's a pretty interesting topic around our neck of the woods.
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A
Yeah, I know we share youth coaching and you shared with me that you did A lot of coaching, spent a lot of time at the ball field. I had a great game of business approach to when I would coach a football team is I. Most coaches would say, give me your kids. You stand over there. I don't want you to talk to them. I don't want you to compete with my coaching for what I'm telling the kids. I got all of the parents involved, and every parent that wanted a role, I would find a role for them. One just handled the clock, one handled timeouts, one handled special teams. I mean, as many parents that wanted to get involved on that football team, we would have 10 or 11 coaches that were doing things, and then we had other parents involved because I knew that what would happen is that everything that you tried to do, if you didn't include the parents, would get undone in the car ride on the way home. So we had a very great game of business approach. We would have little meetings, we would watch film, and I would show the parents the game plan and all of what we were trying to accomplish. And I had very simple. For each position, I had five to seven things that mattered. And if their child was playing that position, they would have that document, and they would know to talk to the kids about what their responsibilities were. So when the parents were actually watching the kids, they would know that if they were doing it well and getting everybody behind the curtain to understand, like how, you know. And we wanted. There were three things that mattered to us. We wanted. We wanted to win the time of possession, we wanted to win turnovers, and then we wanted to win plays over 20 yards. So those were our simple metrics. And if we won those three metrics, we would win the game.
- [09:44]
B
Hey, for me to tell shout people what I've learned in the search for capital, okay, all the new formulas on ratios and margins and markups and percents of sales and everything of this nature, I had to break it down into the simplicity of the game itself, saying, they got everyone, and the marketplace gives us the rules, okay? And what you did is, in your analogy, you just established a pattern, okay? And there were the rules to winning. You already had a scorecard. Okay? But in my case, the scorecards were like housekeeping and quality and safety. They were never financial. I never had a financial scorecard in my entire life until I sought capital and then began to realize that's the scorecard you really need to be keeping. Jerub. It's like you saw the line where the, you know, it was Billy Crystal was sitting there saying, what's going on here. This is not fair in baseball. Well, I began to see that there are two stories in terms of business. You could be making a product all your life. You could be creating outrageously successful companies. Which one would you prefer? Right. And so we began to teach people how to, how to run the numbers. And we were hoping to get the same kind of action you see in a football field. If everybody's got the pattern, the numbers, the plays, and they write the playbooks and they go through the practice, it works.
- [11:16]
A
Right? And you were aligned with your lenders in as much as they wanted their money back. That's the epiphany, is that they want to give you the money and they want to charge you the interest, but they actually want their money back and you want to pay them back. Because that interest, I mean, carried interest, is a drag on a business, especially if those rates.
- [11:37]
B
And it kills people. I mean, it kills families. It's just one of the worst compound. Compounded interest is one of those questions in that FINRA financial literacy test. And I do think it's a significant question to ask people if they understand the effects of compounding interest, because it basically goes both ways, from an income side as well as an expense side. But.
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A
That's right.
- [11:59]
B
I just spent a lot, a lot of time trying to teach people, you know, that this, this game was invented in the 1400s, okay? It was invented by a bunch of Venetian monks. It's been around here for that period of time, and it's literally affected billions and billions of people and lives. You know, I can see people having an overhead problem saying, off with their heads. Lay them off, get out. Get them out of the business. I mean, you could sit behind a door here and just look at these calculations, or you can figure out that there is a lot of humanity in those numbers. And there's really a lot of stories about people in those numbers and their identity is those kind of numbers. What happens is that you learn all these things in manufacturing on how to combine as many things as you could possibly can, and in terms of only doing one thing, okay? But at the same time have such an impact on so many lives. That's the difference that you want to make. So I can see what you did when you brought all those parents together. That's similar to what we do here. We bring everybody they buy into the plan. It's their plan, it's their standards. We just give them the economic information to be able to understand GDPs and interest impacts, tariff impacts. We try to teach them the Things that are not necessarily in the books. But let me tell you one thing. It's an education that I think when you give people you really felt like you've done something and you've made a difference.
- [13:31]
A
Does every employee take an interest in learning the financial numbers of the business? Or is that something that you look for or you test for when you're hiring?
- [13:42]
B
In the very beginning it was very difficult. Cause all the middle management came up through the ranks as a skill set, not necessarily as a leadership set. So a lot of people didn't really run. They didn't want to know the numbers. Why would the hell, you know, numbers you get, you'll be held accountable for those kind of things, you know. And so we had to break down the barriers. But I would tell you that more so than ever I see the younger people today, it's like this is our third generation of people coming into the business and they're a different bunch. Okay? They are looking to become involved. They don't want to be bored. They want their brains to be stimulated. They want to have kind of complex, difficult problems to be working on. They want to be challenged. So I would say that right now they're more aggressive than I've seen them in a lot of time. They're hungrier now than I've seen. I'm very optimistic about them.
- [14:36]
A
SRC holdings company, last I heard had 60 employee owned businesses. Is there more upward mobility in these companies because you are teaching financial literacy to end employees?
- [14:51]
B
Well, yeah, when you teach them how to be leaders, you gotta have them places to lead. I mean, you can't, you gotta keep. And then what they can do is, okay, look at, since 1983, we have spun off 70 businesses in one shape or form. We're back to 12 businesses because we went through the indigestion of the 90s where we were running 25 at a time and we're drinking out of a fire hose and we died. We were hot stuff. And then we suffered with startups and then we went to ongoing concerns and we, you know, began to realize that we had a culture. And if we bought into a company, started a company, we had to bring that culture up to speed in terms of them understanding what the game was all about. And then you start diluting your assets because you're moving them into all these other organizations. Yeah, we've been, we went through a lot. We now have 12. But what's different is that when we first started this holding company idea, we didn't think that they would even know each other. Okay. Let alone like each other. Now they all began to like each other and then they began to work with each other and now they use each other's strengths and weaknesses and they feel much better knowing that they're all in the holding company than them kind of spin out. Although if they do spin out, they spin out part of the holding company. They don't spin out as if they're going to go out on their own. So it kind of come. They come. They kind of came used to each other. Okay. And they got all these different skill sets because we basically listen to the financial statements every year and then the financial statements tell us where we need to go. It's. That's where our next playbook is at.
- [16:37]
A
What do you look for in a company that you'd like to be part of? The holding company? Are you heavy in manufacturing or is it more diverse?
- [16:48]
B
I got a lot of manufacturing. I have a lot of logistics. A lot of logistics, a lot of packaging, a lot of small contract manufacturing. I love manufacturing. I mean, if we could, if we could, we want to continually do more manufacturing. The numbers weren't perfect for manufacturing. If you think about, you know, what the old days were like is that very few manufacturing people ever got promoted to presidencies or CFOs or.
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A
Right.
- [17:19]
B
Most of the people were marketing people, finance people, and the manufacturing people are the most measured people in any organization you're ever going to go into. And we time study Nat's asses. Okay. It's how much time study we do. Okay. And yet very seldom do they get a chance to be a CEO. I just got lucky to take all those manufacturing skill sets and to be able to apply them to a company only because of the things that we had learned during that particular period of time. So this journey has been constantly learning. Okay. And then what you can do is get people like yourselves and other people together and they start talking about the same kind of stuff. And if you can start fixing those things that we just don't pay attention to because they're not highlighted, they're not the story of the day. Okay. Right. We got these underlying things and I think if we could figure out how to come closer with the haves and the have nots, we would probably save ourselves over the long term.
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A
Yeah. What future do you see in manufacturing in the United States? Near term?
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B
I'm not as optimistic as most people. They said, I don't know. Our people in the United States like low cost. And I'll tell you, when you're going to try to pull something out of China or pull something out of Mexico. You are at greater than a 68% difference in terms of the cost with the cost of living that we have in today, the wages that we have in manufacturing today. And if you're going to bring the jobs back in, you got a disadvantage in terms of price and a different disadvantage in terms of cost. I also think it's a challenge relative to the skill sets that are out there. Okay. I don't know if we can find the people in order to meet some of the numbers that they're asking us to be able to meet. Okay.
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A
Right.
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B
Unless we're going to be building new products. Okay. I don't think we're going to be that competitive and we're not going to see that much manufacturing actually come to the United States. So I think it's sad. I think some will. It'll be in new markets. It'll be where you can get better margins. Tough to get margins in. Like Missouri was great manufacturing shoes or great manufacturers and clothes. I mean, we were like number two and number five in the world at one time and. But those skill sets are even gone. So it's. It's going to be a real process to be able to take advantage of that opportunity if it comes.
- [19:48]
A
Was it more possible four or five years ago before we had this little run of inflation that we've had here? I know that in construction, some of the businesses that I'm in have construction to it, build outs, things like that. And the revenue of some of these businesses didn't change much, but the cost to stand these businesses up, to do the upfits, to get the facilities open more than doubled. And it just made the math not work.
- [20:13]
B
I'm telling. Have you just dissecting the agricultural division right now. That would probably scare you more than anything. I mean, if you really get down to the farmer that's trying to be able to make a living on soybeans, that the only way they can make a living is to work second and third jobs to be able to cover the cost. They were losing $100 an acre. Okay. Mathematically, it's just impossible for them to. So the government subsidizes them to a point. And then once the subsidies are over, then they got to go to their savings. And their savings then means that they maybe have to mortgage the farm. So then they go into debt and then the bankruptcies hit. Okay. I mean, right. That to me is a security problem. And that's the reality of the situation that's going on right now. So there are some places that really need to have our attention, really need to be able to be explained to people on how important it is that something gets done there. I don't know where you get soybeans when the world is shut down around you. I mean, I don't know.
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A
Yeah. And obviously we offset things with tariffs.
- [21:19]
B
Yeah.
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A
But that's only going to go so far because fundamentally. I know, I've heard you say on another podcast I was listening to that you're a capitalist. And the free market usually is the best way to have competitive products to create lives for people, create impact in people's lives. And if you're having to subsidize things or you're having to create tariff gates makes it very difficult for us to operate in a true free market.
- [21:49]
B
And I think it's going to be the more the 1% becomes 10% of the 1%, because that's how the wealth is shifting inside of the country. That gap has to be addressed somehow, someplace, and it's widening. And I do admire all the people that are out there fighting every single day and just doing their jobs and going to work and doing a great job. That's the legacy of the United States and they don't get recognized enough.
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A
Yeah. I'd like to encourage employers out there by having you speak a little bit about how your style of management helped impact people's personal lives and in terms of their ability to understand their personal finances and make better buying decisions and really accumulate some wealth. I'd love to hear you talk about that. And then on the heels of that, maybe talk a little bit about what do we see for these blue collar or these formula manufacturing people in this country. Where do you see them going? What opportunities do you see for them to retrain themselves?
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B
Well, we have actually classes called Family Friendly Financials where we have our trainers teach all of our people to be able to understand it in terms of home economics and how to be able to handle budgets and how to be able to understand interest. So we have those. But I think what's really kind of cool, because we have open access to the income statement and the balance sheets and the cash flow statements and they're owners of the company that we give them on the day that they receive their stock valuation, we give them a balance sheet and it has their 401k in there and then it has their ESOP equity and we sell them. Go home now and fill this out and try to figure out what your Net worth is. And then about a week later, you hear people on the shop floors talking about what their net worth is. You figure out, I got them, we got them. Because they truly understand what that means, that they're really proud of it. And then they begin to have a life of balance where they can understand, don't overspend, and they understand the mix in terms of being able to. You can't get what you really want if you plan on it and you don't give it away from stupid things. But anyways, they see that in the business acumen because we've been up for 43 years running these same balance sheets and same income statements. So by repetition, they begin to understand them. But more importantly, not for profits started coming in and they started looking at these things and saying, man, we're running our not for profits. Wrong. We ought to be running our profits as if it's a profitable company. And this is a methodology that we can use in the not for profits. So then we went over the not for profit and said, okay, I'll tell you what we'll do is we'll help you out and come up with some revenue producing ideas for you guys and then you can run them through the game and you can understand that. You can teach people how to create revenues and they can create opportunities and businesses and save your cost structures and things of this nature. And then that became really, really successful. And then the government came in and said, look, we're in deep trouble. And they said, we'd really like to figure out how to develop the system for the government. And we went to our Greene county, our county people. We sat down and had an open book with them. And we had 200 people in the room. And I asked them one question. I said, do you guys have any idea where your revenues come from? And I swear to you, there wasn't one of these Green county people that have no idea where it came from, okay? And there were guys from police department, fire departments. I said to him, I said, well, you wonder why people think you just lean on a shovel all day long. I don't want, you know, if you. I said, the guy that just built that business down the street's gonna be able to create four jobs for you guys in terms of the sales tax he's gonna have. And I said, do you ever think about maybe just send him a thank you note, okay, and see if your revenues don't change. And then they began to open up their books to the public. And so now they have their huddles and their staff meetings on a Wednesday. And you come in there and anybody in the community can see where everything is at. They got an improvement in their bonds ratings from standard and poor because of the improvements that they made to their balance sheet.
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A
Right.
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B
And it's so simple. And these commissioners have not run without anybody running against them for the last three or four elections. Okay? So it's like this is common sense. It just really, really common sense.
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A
Yeah, it's amazing when companies get into times of massive growth or massive expansion and you've got different managers making different purchasing decisions and making different commitments and you lose a little bit of control. And then when things slow down a little bit, you go back and you look in your financials and you see what happened. And it's like there's some obvious wins, right? We're overspending here or two different departments have bought the same software, or, you know, we're, you know, we're losing money in this product. And the best thing to do would be to just kill this product and reallocate over here or these. Fire these 20% of customers. But it's amazing, these simple disciplines that entrepreneurs, I see it all the time, they, they just get so excited about the product or, you know, are we. And just focusing on what they're doing without paying any attention to basically what are the vital signs. It's like your heart rate, it's like your blood pressure. I mean, it's reading the charts and making sure that you're businesses is healthy, right? And an unhealthy business is going to die.
- [27:57]
B
It's stealing a base. There's going from second. You know, it's one little thing like it. But you don't. They don't understand the power of one thing, okay? And that is that if you want to go to the county and when the, when they, the ratings, the bond ratings, people call them up, they said, look, we don't do audits unless there's a significant variance in your balance sheet. She said, you guys have become so favorable over the last two years. He said, we want to know why you have had such a favorable turnaround. And they said, well, we began to teach people the business. We taught them everything there was to know about the county and where all the cash in the county went. And this guy was kind of negative. He goes, oh, lady, why don't you give me a better example of that? She said, well, she had with two maintenance guys and they got together and they said, what could we do to help the company out? Or the county out. You know, they're asking us to do all these things, come up these mini games and ways of being able to save money. And they happen to be sitting in the room and they were looking at a 55 gallon drum of the cleaning fluids they were using and they noticed that you were supposed to dilute it seven to one. And they've been using one to one. So the two got together and said, my, if we diluted what it was and they ended up having a $62,000 annual savings on just the, the fluid they were using. And the standard. Poor guy said, okay, I heard enough. We're going to take X amount of points off your interest expense. And so they got just one little guy with one little idea. It can just lead to these most incredible events, you know, and we don't give credit, guys.
- [29:36]
A
Now there was another example in a pizza place. The number one expense in a pizza place is cheese. And somebody, one of the pizza makers realized that all the pizza that was, all the cheese that was falling off the pizza was getting put down into the trough and then thrown into the trash. And it, it literally, they, they picked up five or seven points on the bottom line of that business just by creating a system to not, not waste that cheese. But it was just, it was easier just to throw it down the drain.
- [30:06]
B
Yeah, that's where it all happens. You know, I call it it, I call it it. All right. And that I will tell you, when we get a person to get to it, it changes their lives forever. It does. It's a more positive way of being able to go forward and look at things. And I do think it has a lot to do with what your discernment was all about. And that is that to analyze it, to process it. Okay. To pattern it. Okay. To be able to realize that it isn't only about charismatic leadership. It's about the fact that if you have a disciplined system and you are all working for the system, when you have a variation or deviation to the system, you fix it as a group. You don't fix it as the leader of the company. You fix out, you know, if the tariffs are going to hit you with a purchase price variance, everybody in the company's seeing the variants that are coming in and then everybody's defensively saying, oh no, this is exempt from this and that's exempt from that. And now all of a sudden they come, they take a defensive position in terms of saying, I'm not going to let it affect me, I'm going to fix it. And I'M going to take the punch, right?
- [31:19]
A
Let's say I've got a dysfunctional company, we're a little bit fat, we're underperforming, we've got some embedded management, we've got sacred cows, we have all the things that happen a lot of times in family businesses or legacy companies and we come to you and we say we need help, Jack. We need to come into the great gain of business consultancy. We need to implement the system, we need to improve our performance. What are some of the implementation challenges that get in the way and then what are some of the casualties that you just know you're going to find right off the bat?
- [31:54]
B
Oh, you're going to sometimes have families that are dysfunctional working together in the same kind of environment. You're going to have accounting people, sec screaming that they are not allowed to be able to give people that data, even though we publicize the data. You're going to have, you know, CEOs that don't want that, you know, have got a bad thing coming and they don't want their people to see it. Instead of going out there and just being honest with them right from the very beginning and knowing that it was much better to get at it earlier than it is to come as an unpleasant surprise. I don't see any negatives. I guess what my problem is, I mean I just see that this thing isn't a perfect game. I mean, how many people can go 10 and 0 or how many people go 100? How many people go 43 and 0? Right. And the only way that I think it's, it's logical from people, it gives you a true, I hate the word pointing north, okay? But it gives you at least some kind of a plan to be able to go forward in a system, to be able to base the plan on what it is that people say, not necessarily what the leadership says.
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A
What are some of the non obvious impacts of implementing the system in terms of. I thought maybe employee attrition like you teach people so well that they go out and start that now that you have the ability to start their own businesses, which me as a leader, I think that's a measure of my success. Where are the people that I had in my company 15 years ago? Are they thriving? Are they business owners? Are they key executives having success in the industry? I want people to learn here, I want them to leave here and I want them to go and be successful.
- [33:49]
B
Because.
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A
Because I think that's a testament. But are there some non obvious things in attrition or entrepreneurship that people should be aware of when they implement the system.
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B
Well, yeah, I, I, I find out that someone that's got something of a strategic nature this isn't really ready for because most strategic people are born to be. Right. And it become a lot of people that are born to be right out there. All right. They're not necessarily going to accept the cause that most of you are working on. They're going to try to accept their own cause. Okay. So you're going to have a lot of people. I mean, we've learned so much since the pandemic, and We've been through four recessions, a 9, 11 and a pandemic. Okay. We responded. And every time we've had a big problem, we've been able to double the value of the business five years after we've had the problem. I mean, it's just like this is the kind of system that makes you get better. It doesn't, you don't really, kind of, because it's always going to be there. You're always going to be improving upon it. Right. And then this doesn't go away. It's always going to be at your face one way or another. Okay. So why isn't it, it's simple enough to try to explain to people that if they really kind of understand that they'll make their. There's no lose. There's not a losing moment that you can get out of understanding something like this. Okay. So.
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A
Right.
- [35:17]
B
But I think it's not going to happen in the school systems, and I think it's got to happen in the businesses. I think we're going to be the, we need to be the teachers if this is going to exist. I mean, if it continues, you know, it's going to go one way or another. But I think the people that are going to have the talent in the next five years are going to set new evaluations. Evaluations will be based on talent, the talent inside the company and those that are going to be investing in the talent. I'm betting on it. That's what we're, that's what the game is bet on. Okay. It's making certain that, you know, you've got that, that major league team that you really want to have when you take the field. I feel pretty good about the people that I work with because the trust is there, the transparency is there. We think like each other, we act like each other, we behave like each other, and we pretty well are happy with the way things are going.
- [36:12]
A
So how much of your talent is recruited and then how much is developed after they get there.
- [36:20]
B
I don't know. We are now down to our third level of succession planning. Okay. And the third level is we decided that we got potential out there and all this, you gotta be this or you gotta be that. I go, give me 20 people with potential and I don't care. When I started, one day, I don't care. They've been there 50 years. Okay, just give me a group, 20 of the most highly talented people. Yeah.
- [36:53]
A
Best athletes on the field, right? You want the best athletes? Give me the best athletes.
- [36:58]
B
Okay? And we have them going through a nine week program now. And it's, they're, they're, they're, they create more stuff than I've ever seen in my entire life. I mean, it's crazy. And we're, we're, we're, we need, we know that if we can have that best talent, we're moving in the right direction. So I'll tell you how that goes later on. But it's really pretty exciting because they're, they're eating up projects, they're coming up with their, these, they, they have to have things that they accomplish and they get done. That's. And also there's four things I learned about the potential. One is that there are curious as could be. Okay. And I began to start trying to understand curiosity probably like you're trying to learn discernment and then insight. I know that you talk a lot about too, and I do think insight is one of the things you look for in terms of their potential and relationship building. That's obvious. Okay. In terms of. And then the last one, the big one for me is engagement because the engagement's getting rougher with the younger people. I mean, we're having some kind of I'll come to Jesus discussion saying, hey, ask, talk, speak up. So we just started Toastmaster Club. So I'm going to go to Toastmasters next Thursday. Again.
- [38:24]
A
What's your role in the business today?
- [38:27]
B
Keep the system going. Making certain that the system is handed off and everybody understands the idiosyncrasies of the systems and the timing of it and the reasons that you certainly do things on a repetitive basis that you might think are boring, but we try to make them exciting. So you're very interested in the tricks of getting people through life, really? That's probably what I'm doing is passing those on.
- [38:56]
A
Do you love the engagement and the relationship aspect?
- [38:58]
B
I love the game. Yeah. I love the game.
- [39:00]
A
Yeah.
- [39:02]
B
So. And I think most people around here Love it, too. You know.
- [39:07]
A
What'S been your experience with using AI? Have you incorporated that into how you work?
- [39:13]
B
I have engaged it. I have admitted to it. I have been profoundly aggressive at this organization to really embrace it. And we also are obviously trying to do something about the security of it. But I think it's. I've never been able to write as clearly. I've never been able to get research done so quickly. I've never felt more confident. Now, the problem is that most of my people around here think that I only do anything out of AI. They're always asking me, is that AI or is that you? Combination of both.
- [39:53]
A
Yeah. Yes and yes. Yeah. Do you get to spend some of your time now giving back? Do you work in education? Do you get to go guest lecture anywhere? I know that you participated as a judge in Eye for Some Things.
- [40:15]
B
Yeah, I learned all those things. I did a lot of hard time. I was a judge for a long period of time. Went to Europe and went to Monte Carlo to pick the international judge, which is a real honor. Yeah. I went to Kaufman Foundations when they first started and hung out with Ben and Jerry's in the days of Inc Magazine and Michael Dells. And I was part of that whole network of spinning out the. The good news on small businesses when, you know, the only documents you could get were Fortune 500 companies. So I got heavily involved. Yeah, I'm learning. I'm learning all the time. I mean, and it's fascinating.
- [40:57]
A
Who was the guy? Was it Norm Brodsky that wrote in the back of that magazine? Did you know Norm?
- [41:03]
B
I know him really, really well. I debated him all the time.
- [41:06]
A
Really?
- [41:07]
B
We were really close. We're still very close. He's still very close.
- [41:13]
A
I'll tell you. He probably had one of the biggest influences in my life. For whatever reason, I was one of these non traditional students, but I was a voracious reader. And I just got a subscription to Ink magazine early, maybe in high school and was just reading it, and I would always flip to the back first to read Norm's take on things. And I think he had a. Wasn't he in the storage business? Like a. Like Iron Mountain type storage business?
- [41:38]
B
He did a million boxes. He got to a million boxes. Did he? To a million? Yeah. Norm was a character.
- [41:45]
A
Is he still out and about making the circuit? I'd love to talk to him.
- [41:49]
B
He would talk to you in a heartbeat. He would talk to you.
- [41:51]
A
Oh, man, I would. I'm writing that down right now.
- [41:54]
B
Yeah. And. And just tell him That I told. I told you.
- [41:59]
A
Okay. I definitely will.
- [42:01]
B
And if you need his information, I'll get you his information. Okay.
- [42:06]
A
That would. That would be fantastic. You. You grew up in Chicago?
- [42:12]
B
Yep.
- [42:13]
A
Whereabouts?
- [42:15]
B
Illinois. My dad was west side. He was west side Chicago. And then we moved to the suburbs, but I was all around. I did Catholic schools all my life. All throughout Chicago.
- [42:31]
A
Yeah, my folks lived in Westchester.
- [42:34]
B
Oh, I know. That's a classy neighborhood. I was in Elmer's right down the street.
- [42:41]
A
That's right. And then we moved. They did Catholic. My mom and my dad both went to the neighboring Catholic schools and they met. And then they moved us out to Schaumburg in 72.
- [42:55]
B
Yeah, that was when it was all farm.
- [42:59]
A
Yeah, that's exactly right. It was.
- [43:03]
B
Yeah.
- [43:03]
A
Yeah. We would sled down the hills because all there was.
- [43:07]
B
It was.
- [43:07]
A
Schaumburg was one of the fastest growing townships in the country for a while.
- [43:10]
B
Yeah.
- [43:11]
A
And. But while they were building, we had those big topsoil hills. So we'd get, you know, climb up and sled down them. And I did.
- [43:18]
B
I did. I remember them. I didn't. Well, that 78 was the worst snowstorm that Chicago, I think, ever had.
- [43:26]
A
You know, I talked to my kids about that last night. I said there was a snowstorm in 78. And I opened the garage door to our house, which was an eight foot garage door, and the snow was all the way up to the top. And I was. We had to. We had to bury our way out.
- [43:40]
B
Yeah, it was. And then the roof, it would melt and then it would freeze. And then the roof, the icicles move under the thing. So I was being transferred down here then at that time, and all the side of my walls cracked because of that storm. I couldn't get the snow off the roof. And then it just kept melting and it just came down there. So Harvester ended up buying my house, and the appraiser came out and I hired all these painters. Okay. And I said, these plasters. And like three days before the guy came out there, I had it all plastered and painted. And right when he walked in, it started to crack in the ceiling. And I thought, oh, my God, if it cracks before he leaves here. That was not. Yeah, it was a bad one.
- [44:30]
A
Are you still a Bears fan?
- [44:32]
B
I gave up on the Bears. I'm a sinner. Okay. I felt like I was in a rut where I would be saying that we're going to have a better year next year. That was just a. I don't know. I got off the wagon. I'm thrilled that they're doing well right now though. I'm thrilled for all my friends. I'm sorry for giving up.
- [44:57]
A
I heard a rumor that they're moving to Gary, Indiana or something like that.
- [45:01]
B
That would be horrific. And they got that Arlington Heights property from the racetrack? Yeah, they bought that. And I thought that they got all the trains running in out of there. I thought that'd be great place for him.
- [45:13]
A
Yeah, it been plenty big. That have been a good spot. We used to go there. I used to go there all the time. My dad lived right up the street from there ultimately.
- [45:20]
B
Was your dad an athlete?
- [45:22]
A
My dad was an engineer.
- [45:25]
B
For who?
- [45:26]
A
So there was a company called RKR then he worked for which was just out in Hoffman Estate somewhere. And he was a mechanical engineer. Did mostly moving dry solids and then he had his own business for a few years. Then he ended up at ucc. United Conveyor.
- [45:45]
B
Oh yeah. Oh yeah. My dad was international harvester for 43 years.
- [45:50]
A
Is that right?
- [45:51]
B
Yeah. Yeah.
- [45:53]
A
What kind of engineering did you study?
- [45:55]
B
I didn't study anything. I barely got out of college. I mean I went 10 years in high school and did all my time working and partying, but I didn't. I got out with a 2.00.000. So it was like I have. Like I said, half a lot of my life has been divine intervention for darn sure, you know.
- [46:19]
A
Yeah. I went to University of Northern Iowa out of Schaumburg High. I didn't. I didn't touch the 2.0. So they asked me to leave and I dropped back to. I dropped back to Harper College in Chicago and Juco. And then I got a scholarship out to Appalachian State. So that's how I got out here to North Carolina back in 1989. But isn't it. It's not a mis. It's. It is not a. It's. It's not a coincidence that sometimes non traditional or disinterested students end up being the best entrepreneurs.
- [46:52]
B
I'm convinced of it. I've seen it all my life. I. I do think that. I don't know where you were in high school, but I was staring out the window thinking about wanting to find the lost Dutchman's gold mine, let alone try to do an algebra equation. All right, so.
- [47:09]
A
Right.
- [47:10]
B
Mine was elsewhere. Okay. I was not. I don't know, I was a dreamer or maybe it was. Maybe I didn't load it up with a lot of smart stuff and things became simple, you know?
- [47:21]
A
Yeah. My kids take My. I have an engineer son now. He's like, I'm taking Diffie Q, like differential equations and all the calculus and all that. You know, I never touched algebra 2. And so I can't even. When he says the name of a math class, I don't even recognize it's math.
- [47:39]
B
Yeah, totally. I have 15 grandkids, and so I get to see almost everything from preschool to senior. And a lot of it hasn't changed. All the silliness and stupidity and the shyness. But I don't know, I think that these kids have got a really rough road to haul in front of them, and hopefully they're going to be prepared to be able to handle it. Yeah, yeah.
- [48:04]
A
What types of. What types of things. What types of things would you point our young kids to in this country to pay attention to? I know manufacturing. Manufacturing's, you know, gonna be. Gonna be tough. So we've got now AI which is really taking a bite out of technology and coding and things like that. What, you have 15 grandkids. What kind.
- [48:29]
B
What.
- [48:30]
A
What kind of advice do you give them or what experience do you share with them?
- [48:35]
B
You know, I think they. I think about what we're doing here in terms of our community, just trying to figure out how to be able to hire people. One of the things you learn in manufacturing is that you have to absorb overhead. And one of the ways you absorb overhead is through direct labor hours. Right. And so I've always been the type of person that keeps thinking about the more people that are leaving the workplace, the less direct hours we're going to be having here. And our overhead in our country is going up and up and up. So all of a sudden we're not absorbing it, and then sooner or later, we're going to have more people that are in overhead than they're in direct labor. And then you're going to break the back of the direct labor. And if you don't understand that and you don't have an answer for it, you can expect a downturn around 20, 30. Okay. Because that's when the direct labor hours decline, overhead reaches a point, and you can't absorb your overhead anymore. So I'm a big advocate. I said we got to find ways to keep people working. Okay. Yes. I couldn't tell my kid what to get into right now. I couldn't tell myself what to get into right now. Okay. I mean, I am trying to figure out. I've got 12 companies here, and I'm trying to figure out what they're going to be into going forward. And there are 43 year old companies out here. And yeah, I'm looking at the whole thing from right, right now. I would say energy for sure immediately. And I do think that there's going to be some significant opportunities in that market and always go where the shortages are because that's where the margins are going to be. So I see shortages in terms of, you know, electricity and any kind of alternative combustibles or anything of that nature. I think solar is going to become popular again. It's out of favor right now, but when you don't have the capacity to be able to handle what's in front of you, they'll take anything. Okay. They'll take gasoline, petroleum, they'll take whatever it is. Okay. I do think that if you can find new things like the, some of the technology that came out of agriculture has been absolutely incredible. I mean the idea that they could actually go in there and separate weeds, you know, and then categorize 1100 different weeds and then come in there with a chemical, they'll just go right to the weed. That is necessary. Okay. I, I do though, I do think those applications are still going to be available. I think going to be creating smaller businesses, you know, where you're just going to be able to generate your own way of life and how hard it is you really want to put into it. I do think that they say that there's going to be, for every robot, there's going to be one and a half persons that are going to submit. They're going to support the robot. I have that number. I've heard it frequently. I don't know what all that means. Okay. But no, I do think that we need to have an open discussion in terms of saying we got to have more labor. I mean, let's. I'm for bringing immigrants in and figuring out that every one of them is worth 2000 direct labor hours a year. Okay. I thought we all, I thought we would need a goal where we said to ourselves, look, let's take where we're at right now. Participation rate, number of people working, let's take the number of hours they're generating. Let's take the overhead, let's come up with the overhead rate and say to ourselves, it will not go up. Let's just compromise and say it will not go up. Now let's figure out what we're going to do and say you can have what you want only when you get to the rate by which we can sustain ourselves by. Right. So it'd be really easy for us to be able to have a goal. We could come together or could all see it, rather than all this subterfugion that they have that makes everything complicated. When the simplicity is that we need more people working to absorb the overhead that we have.
- [52:45]
A
It's such a simple, truthful statement. And, you know, I've gone through this in companies where I. At some point I just said, anybody that has the word manager in their title, I don't need them. I just need the people that are making the sausage. Just, you know, and let them give them the tools to manage their production, connect them directly with the next phase of production and get out of the way and let these people produce the widget and get the overhead out of the building because it's just not contributing anything to the bottom line of the company. Yeah, it's so simple. And. And if you look at, if you look at today, I mean, what we look at is people creating vast wealth online, doing things that maybe don't contribute or don't build anything. There's less people that are actually building things. And, you know, that's why I love, that's why I love Mike Rose so much. He's just, he's all about, you know, creating. He's a huge advocate for it. And. But everybody wants to be overhead, everybody, because it's. It's perceived to be easier and, or, you know, everybody wants to be, you know, managing other people doing things. And I think to an extent, there's a. There's a need for that. But like you said, once the scale tips and you've got more overhead than you have direct labor, then you're not going to be able to make any money.
- [54:11]
B
Well, the country's in trouble. I mean, that's where the real problem is going to lie, is that you'll break the back of the worker. Those that are continually working because they realize the contributions that they make or the causes that they have, or they frigging like it. They like working, you know, they have. But there's definitely got to be a focus on it. I mean, it's, you know, you're the game player. It's mathematical. Right. Everything is everything. The math is probably one of the only things you can count on. One and one is always going to be two, and two and two is always going to be four. Yeah.
- [54:47]
A
Awesome. Jack, is there anything else that I should have asked you that we haven't asked you yet?
- [54:54]
B
You know, I get that question a lot. And then I, I've said this before, if this thing is so great, how come more people don't do it? That would be the question that I would ask you to ask me. And my answer would be, I don't know. Just don't know. You know, what do you got to lose? You know, you've heard the story of the guy walking in Rome and walked by two guys that were bricklayers and went to the first bricklayer and so what are you doing? He said, I'm laying bricks. Went to the second one and said, I'm building a cathedral. And we want to build a cathedral. Okay. So what we're trying to do is figure out how to be able to get everybody to see what it takes to be able to pull it together, to be able to make it together, and then be able to take the rewards and make certain that there's a fair compensation program for everybody. So I don't know how long we can keep the flag going.
- [55:48]
A
With the flag still up, is the consulting practice still relatively active? Are people coming to you and saying, help us?
- [55:58]
B
We put in about 5.5 million into the great game, and we probably spend about 5.6 million in the. In the game. Yeah. But there's, you know, for something that came out in 1991, this has remained resilient. Okay. I mean, I. I hope you're not thinking that I'm. I'm feeling like this isn't making a difference. There are so many cool people out there you don't even know about. Okay. That have your type of thinking. Okay. Have finally said to themselves, oh, I get it. This is what I always felt was in my heart from the very beginning. Now I got it, because other people are doing it. And what we're trying to do is get with the people that are doing it to learn more about how to do it better. That's all. We're just trying. And that's where the group is coming. The conference comes together. You're just trying to tweak a system, and then everybody gives everybody the advice to be able to make certain that you're moving it forward. So. And you're paying it forward.
- [56:56]
A
So where can people learn about the game? Are there events, conferences, websites, tools that they can take advantage of?
- [57:04]
B
Business? GGOB is definitely the place to go, and then it will open you up to learning techniques that we have. We have all kinds of modules for all kinds of different businesses, and we have conferences. When we have online experiences, then we have experiences here where you can come in and just talk to the people and walk around and see whether it's real or not. You can walk around the community. It's really kind of a community event because all the companies that have been affected by it, like you go over to our little theater, our little theater was virtually saved by it when they Start teaching the 200 volunteers that they weren't there just to design sets, they were there to put butts and seats. And so you get a little tour of it. So there's an experience here too. So it's all under the ggob.
- [57:56]
A
Ggob so gg ggob.com stands for the great gameofbusiness.com. you can go there and see when and where the events are and get involved in it. And really it's just. It is, it is. Again, I think I opened with the only sensible way to run a company which is numbers up and numbers out and everybody understanding what role they play in the playbook.
- [58:23]
B
As best they can. And they all do play a role. Nobody's insignificant at all.
- [58:30]
A
I'm always amazed at pockets that build in my companies. And then I go and I, I engage an employee or I, I ask just for people to put time on my calendar at every level of the business just to get, you know, you've got the top line, the bottom line, you got the front lines. And leaders need to spend time in the front lines. There's not a war that's been won without a leader that didn't spend time at the front line understanding what's going on. And that's where you get these people, they see things that didn't bubble up, it just didn't make it through. And it's the most common sense thing. And it becomes, like you said, a $62,000 savings because now you're diluting the cleaning solution.
- [59:13]
B
I had the blessings of starting at the bottom and then working most of the jobs and just the experience of being in a position for a year you looked around you and you got to see so many people in so many different situations and you know, eventually you, you, you, when you, you get to be able to think like every person inside the company thinks. And what you want to do is not be what they think, okay? Because typically they don't look too forward in terms of leadership or man. We came to the conclusion that people do not like to be managed or led. Okay? So the only way we can figure out how to have any rule of order is to create the system. So the system, system is there. They were all working to fix the friggin system. And we're not trying to fix each other. We're just trying to figure out where the shoe falls, how many people can catch it before it hits the ground. I mean, it's a. I know it's a kind of a. Like a storyteller or a cultish type of thing, but it's just an easy way of living. I can't tell people more about. It's an easy way of leading. It's really easy to lead this way.
- [60:28]
A
In a traditional management style. You're sitting on the other side of the table and you're the manager and you've got the employees over there and you're trying to tell them what to do and maybe you're trying to tell them why to do it. In open book management, you're sitting on the same side of the table and you're looking objectively just like I have on my table here. I've got all of the notes for our conversation and somebody would be sitting next to me. We'd be looking at the same numbers, maybe having a different set of opinions about why they are that way. But we'd be having an objective, collaborative conversation, not a. Not again. Like I did with those little kids and their parents in coaching football. We all got together. They all knew what we were trying to accomplish. So it wasn't them trying to figure out how their kid wasn't getting the ball or wasn't why he wasn't the quarterback. It's like they saw that this was a very objective. It was numbers based, it was goals based. And it's just a great way to run a business. And more people should.
- [61:31]
B
Yeah. But you know, I still keep wanting to hear you say one thing, and that is that idea of the perception too, that you are teaching them how to win. Okay. You are teaching them the ingredients to make the right brownie. Or, you know, you were teaching. You taught him. Someone once told me, if you're in a business book, read the last chapter first. You know, and I do think a lot of times it's not a bad thing to do. When you went out and took those kids, you taught them where it was going to be to feel like a winner. And then you moved them backwards. That's the brilliance of the deal. Okay? They felt like they could win and they had the hope and they had the confidence. And I know a lot of people are sitting out there saying that if you ever give anybody hope or confidence, well, what would you expect? Well, that's right. Hope and confidence really pays off. But winning too, is. We Try to break down winning where every small win is. You're called, you're flagged. If you don't create at least some kind of a constant win. Because winning isn't one big thing. Winning is just so many little things, okay? And it's the idea to create the winner by making, Recognizing the small things that everybody does so well. We, everybody loves it.
- [62:50]
A
I appreciate the prompt and I'll take advantage of talking about it. We had three sets of little. You ever see the history of the world movies where they had the three tablets with the commandments? He drops one, he said these 15 commandments. And he says these 10 commandments. Because he dropped. No, Brooks dropped one. But he said. But we had three sets of commands, really. We had player rules, coaching commitments and parental expectations. And each one had five to seven little things. And. But our overwhelming goal, our end point was we would all be all three parents, players and coaches, the best that we could be on the last day of the season, whenever that was. And we knew that if we did it and we followed the plan, working from the future backwards, that that last day would always be the championship. Because after the championship, there is no other game. The only people that, the only teams that play on the last day of the season are the two teams that are in the championship. And so that was our goal. And then what we would do is we would say for us to be there, we've got to have all 11 players doing these five to seven things on every play with discipline and everybody playing their role. And one of the goals that we would say is we're going to teach you, not like 11 and 12 and 13 year old children. We're going to teach you like college players, meaning that if none of the coaches showed up on the last game for the championship, that you could do it yourself. So we gave them the tools. So when you watched our kids warm up, it wasn't the team that was in the sharp lines and the coaches blowing the whistle and they're doing push ups and they're doing sit ups and they're, they're doing all that. They were warming up individually. You know, the, the defensive backs were taking their drops and the quarterbacks were throwing with the receivers and the linebackers were, you know, getting their pads loosened up and, and we, we, we continued the last third of our game plan, the last third of the season. The goal was autonomy. And we would, where we would turn slowly turn the team over to the leaders. Now to turn the team over to the leaders, you got to know who the leaders are so one. In the first phase, in the first trimester of the season, we had to break out the clicks because they would always click up, right? So we had it broken into. We had three distinct phases of our program. And every year, no matter what kids they gave us, we would always almost end up in the championship because of our system. We had a system that I developed over 30 seasons of coaching, and it was the exact same thing as the great game of business. And it worked every single time. And every year we would have more and more notes from parents that say they would want to be on our team because they wanted to be part of, not. Not necessarily the winning. They wanted to be part of the experience where the kids were really good, given the tools. And I, I hear things from kids now that, you know, they. They remembered that they. They use the things that we taught them in their Life today, some 10 or 15 years later.
- [65:50]
B
But it doesn't. It doesn't end when you're an adult. And what we see here is it affects the workers. It affects everybody in the company here. The same way you have your. You affected those kids. They. They went with a pattern. They went with a winning pattern. Okay. And that I way you. I think the way you get to create any kind of changes is through repetition, repetition, repetition. But the idea is not to make the repetition boring. You made the repetition exciting. I mean, you did all the right stuff. Yeah, it was good.
- [66:31]
A
Well, Jack, you are an amazing man, and you've had an impact in so many people's lives. Just, it's an honor to get to spend this time with you today. I can't thank you enough for coming on.
- [66:40]
B
I really. When I read all your. I love your stuff. I'll read more about your stuff. I love what you're thinking about. You're like me. You get hung up on a word and you're not going to be satisfied until you can figure out the impact it's going to have on others. So congratulations on everything you're doing, too. We appreciate you.
- [66:57]
A
Thank you. Jack, last question for you, which you just gave me the perfect intro. If you had one sentence to make an impact in somebody's life, what would that be?
- [67:10]
B
God, teach a kid how to make a buck, okay? Just teach him how to make a buck, okay? I mean, put a buck in a savings account and then go try to take it away from him. And you're going to find out they understand ownership. And that's probably the greatest thing that you can teach somebody is ownership.
- [67:35]
A
Perfectly said. We'll end it on that. Thank you so much, Jeff.
- [67:38]
B
It's always good to see you. Thanks again for everything. Nice to see you. Been a real pleasure.
- [67:43]
A
It's always a pleasure, sir. I'm Jeff Duden. We've been here with the incredible Jack Stack on the unemployable podcast. Thanks for listening.