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MENDOZA IN THE NEWS

Employee ownership key to success, executive says

by ANDREW SOUKUP, South Bend Tribune
Publication: South Bend Tribune

September 22, 2004

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SRC Holdings CEO speaks at Notre Dame.

SOUTH BEND -- If business executives want their companies to succeed in the game of business, then their employees have to know what it takes to win.

That was the message Jack Stack, the president and chief executive officer of Springfield, Mo.-based SRC Holdings Corp., passed along to roughly 200 people Tuesday at the University of Notre Dame.

Speaking to a crowd of mostly students as part of the school's Cardinal O'Hara Lecture Series in Business Ethics, Stack told his audience that employees need to feel a sense of ownership in order to create a more successful business.

Throughout his talk, Stack drew on lessons learned from decades spent in the manufacturing industries.

As a manager at a remanufactured engine plant, Stack began to realize in the late 1970s and early 1980s that employees need to be kept informed of key business developments and had to understand where they fit into the corporate structure.

"Everything was centered around making something," Stack said, "not about making a great company."

When the company hit a low point in the early 1980s, Stack said he endured questions from employees wondering about their financial future. That's when he realized something needed to change.

"I wanted people to feel like they were winners," he said, "and that they didn't have to feel downtrodden."

Stack secured an $8.9 million loan to purchase the factory -- despite having only $100,000 in equity -- and set about showing workers what they needed to do in order to bring the company out of debt.

That included showing workers financial statements and balance sheets and giving them shares of stock in the company. If workers at all levels of the company understood that their quality of living would improve with the company's success, Stack theorized they would work more efficiently to meet the bottom line.

"Unless you understand that winning is a process, it does not occur," said Stack, who co-wrote the books "A Stake in the Outcome" and "The Great Game of Business."

It's safe to say Stack's approach has been successful. Stock that Stack gave to employees at 10 cents a share in 1983 ballooned to $98 by 2004.

In all, 43 separate businesses in 22 years were created as part of SRC Holdings. The largest of those companies has 350 workers, the smallest has five employees, and all use Stacks' business model of heavily involving employees in planning and in business training.

"We spend a lifetime trying to have someone work for someone else," Stack said, later adding, "What happens if we teach the people how" successful people got successful?