For Jack Stack, the company is the product

Viewed from outside, SRC Holdings Corp. in Springfield appears centered on remanufacturing for agricultural, industrial, construction, truck, marine and automotive markets.

That’s what the company’s website says.

But Jack Stack, the 76-year-old president and CEO, sees things a little differently.

“Most manufacturing companies pay a lot of attention to their product – valuations, quality control, delivery statistics,” he says. “In doing this, they miss the opportunity of teaching their people to look at the company as the product.”

Stack says the operating system he describes connects manufacturing people in real time.

“It isn’t like they get the answers later; they get the answers now because they give the answers,” he says. “They have the responsibility to set their own standards. That’s the payback they get for understanding the game.”

This idea is at the heart of Stack’s philosophy.

“If you want to change behaviors, you have to change the culture,” he says. 

The employees are the owners at SRC Holdings companies, and Stack sees to it that all of them understand the ins and outs of the business. He does this through the open-book management he promotes through one of SRC’s divisions, The Great Game of Business.

Stack wrote the literal book on open-book, publishing with Bo Burlingham in 1992 “The Great Game of Business: The Only Sensible Way to Run a Company.”

While he captains the SRC ship, Stack is first and foremost an educator, empowering everyone with a stake in the corporation to understand their role within it.

The employees of SRC Holdings Corp. have a larger purpose than creating remanufactured items for original equipment manufacturers. Stack maintains that their real product is SRC itself.

“They need to be told that they’re here to create an outrageously successful company,” he says. “If you focus on the company as the product, you’re going to have a better company.”

The genesis of SRC
The story of SRC – which stands for Springfield ReManufacturing Corp. – is well documented in the archives of Springfield Business Journal.

In 1983 – in the midst of a recession – Stack spearheaded an employee buyout of Springfield’s local International Harvester plant. Stack and a group of other managers pulled together $100,000, and with only that much equity, they secured an $8.9 million loan from a bank – after being turned down by about 50 others, according to the company’s official history.

“With an 89:1 debt-to-equity ratio, (Stack) needed every employee to understand that meeting their loan payment was critical to their success, how to reach that goal and that their jobs were at stake if they didn’t,” the history page of the SRC website recounts.

That’s how Stack got into the education business, by teaching all employees how to read financial statements and how what they do impacts the numbers they see there.

“Our people understand margins, cash flow, income statements, balance sheets,” Stack says. “Those are their specs to create a great product, and that great product is the company.”

Today, SRC Holding Corp. boasts an annual revenue exceeding $600 million, Stack says, with 1,800-plus associates and 4.4 million square feet of manufacturing and warehouse space.

‘People want to be happy’
The philosophy of company-as-product is significant to the bottom line, but it’s also significant to the lives of SRC’s workers, Stack says.

“That takes the mystery out of what am I doing here and how do I make a difference,” he says. “You can build a product and be happy, and we need that. People want to be happy in the work they do for 40 hours a week.”

Employees deserve to be inspired, Stack says.

“We want them to be what they want to be, and we want to help people go as far as they want to go,” he says. “That’s the trick. And the only way you can do that is not to teach them like an assembler, but like they have the capacity to be a leader.

“I’m trying to build as many leaders as we possibly can.”

Manufacturing companies have a tendency to leave the intellectual part of the worker on the table, Stack says.

“You can get a set of hands, or you can capture the hands and the brain at the same time,” he says.

Stack acknowledges that some employees are content simply to be assemblers, and there’s a vital place for them, too.

“We need ’em,” he says. “They’re some of the most beautiful people you can ever imagine. But the world has got some people who really want to go places.”

Stack says SRC Holdings Corp. is running 12 different companies right now, one of them being The Great Game of Business, which is described by SRC as a worldwide coaching organization. 

Among its other companies are the original SRC Remanufacturing Corp., an independent remanufacturer and new assembler of diesel engines and components for original equipment manufacturers. There is also SRC Automotive, focusing on gasoline and natural gas/propane engines for automotive and marine OEMs, and SRC Technologies Group, which remanufactures electronics for multiple industries.

Other divisions focus on logistics, supply chain and diesel emissions filter solutions, according to the company website.

“This is a crazy company,” Stack says. “In 42 years, we’ve actually had our hands in over 70 companies. Once we began teaching leaders how to lead, we had to find places for them to lead, so we created new companies. That’s how we got where we are today.”

Stack notes the company has a different strategy today, having sold off or combined multiple divisions.

“Really, in the ’90s we went crazy and just put out too many companies – maybe 25-30 at the time,” he says. “We had indigestion because we were so big. We would draw talent from our older companies into the newer companies and dilute companies that were strong.”

The decision was made to consolidate, he says, and now SRC’s component groups are growing.

“The coolest thing about it is they are creating little mini businesses on the inside,” he says of his teams. “We’re not spinning them off anymore. They’re creating these departments that can feel like individual small businesses.”

The system of empowering employees works most of the time, according to Stack – in fact, he estimates it goes off without a hitch 95% of the time.

“Five percent of the time, you’re going to get burned,” he says. “We spend too much time on the 5% – they just piss you off – but that’s the worst reaction. When you defensively make a change that affects the other 95%, that’s what kills you.”

A different language
Stack says people who work in manufacturing have lots of data, but most don’t understand the data they have. At SRC, he says, they are taught what they need to process and activate the information they have.

“It ironically ends up being a financial conversation,” he says. “It brings us all together. We talk a different language.”

When people come to SRC and talk to employees, they leave amazed, Stack says.

“They walk away saying, ‘How do I take this home? How do I bottle it up?’” he says. “If you appeal to a higher level of thinking, you’re going to get higher levels of performance.”

The company puts its money where its mouth is, by paying for as much education as its employees want.

“You can get a PhD here, all paid for by the company,” Stack says. “It’s crazy, but what’s crazier is that people don’t take advantage of it.”

Stack says that the more a company can teach its workers about the business, the better off society is.

“They take the pattern home and apply it to their own income statements, balance sheets, cash flow,” he says. “They make their own budgets; they understand debt and compounded interest. We spend a lot of time on family-friendly financials to keep them out of trouble.”

Employees are stockholders, Stack says, and he encourages them to look at their 401(k) accounts on a balance sheet and consider their net worth.

“I’ll hear on the shop floor, ‘Do you know how much my net worth increased last year?’” he says. “At that point, you know you’ve got them.”

Manufacturing leaders
Stack believes more leaders should come from the manufacturing floor.

“It’s a shame more manufacturing people don’t get into business,” he says. “Society in the ’70s, ’80s, ’90s did not promote manufacturing people to the CEO’s office – it was always people in finance or sales and marketing. But manufacturing has more skills. We could study a gnat’s ass – we’re that obsessive.”

The field of finance doesn’t require much innovation or creativity, by Stack’s thinking.

“What if you took a manufacturing person and taught them finance?” he says. “Whoa. That’s where you start seeing productivity.”

Finance people are taught to give safe answers, he says, and that’s what you’ll get from them 80% of the time.

“It’s tough to find the 20-percenters, but that’s who you need,” he says.

Innovation will help companies to make it through challenges to come, according to Stack – including challenges from lack of workforce, exacerbated by limiting immigration amid a dwindling native-born workforce.

“We’re planning on a recession in 2030,” he says. “Most people fear things, and they do nothing about it. We like to look at something that’s pretty scary and think, ‘There’s an opportunity there.’”

Since SRC began, he says, the company has weathered four recessions, as well as 9/11 and a pandemic. Its people are the reason it survived.

“Our forecast here is companies will be evaluated in the future based on the talent they have inside their organization,” he says.

It’s an idea that deserves to be studied, according to Stack.

“We’ve got to figure out what creates teamwork, leadership and inspiration,” he says. “What you learn is that people like to win; they like to have fun. Then they can rise above the idea that it’s just a job and approach it from a totally different perspective.”

He adds that he has a lot of confidence in an approach focused on doing the right thing.

“We’ll fail at times – no question about it – but I do think we can take a punch,” he says. “That’s a significant attribute of a good company.”