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Jack Stack is the founder and CEO of SRC Holdings Corporation

Open Book Management

&The Great Game ofBusiness

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i. Discuss the initial Problems faced by SRC?

ii. What led to its buyout by the employees?

iii. What were the circumstances that prompted

the new management to adopt OBMphilosophy?

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SRC Holdings was originally known as SpringfieldRemanufacturing Corp

Internation Harvester established SRC for buildingtransmissions, engines, tractor for construction, or a

highway truck, or a farm tractor, or industrial equipment.

In late 1970s this division was losing $2 million a year andwas host of employ related problems.

Jack Stack was a superintendent at one of the InternationHarvester machining division plants

He was sent to SRC to either close the facility or to get it upand running in six months. IH banked on it being closed.

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Jack Stack observed that division was facing a severe dearthof tools due to which there production was hampered.

He convinced IH to supply these tools so that productionline could be back on track.

To motivate the employees he changed their work pattern ingame format and encouraged them for Winning.

Stack set three modest goals for his employees and calledthem Accountabilities. Product Quality Safety

Housekeeping

These changes at SRC made it a profitable division withinfour months. And reported a profit of $250,00 by end of1970.

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US economy underwent recession in early 1980s and its conditions further

deteriorated by 1982.

By this time IH was neck-deep in dept of $4 billion and was struggling hard to

wardoff bankruptcy.

It decided to sell SRC for $9 million.

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It had debt ratio of

89:1 and had to pay$90,000 interestagainst the loantaken by thecompany

Stack finally succeeded in obtaining a loan of

$8.9 million from an investment bank.

Stack bought SRC in February 1983.

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Stack felt that there was only one way to deal

with this constraining financial obligation - toseek the help of employees - open thecompany's books to them, educate them on allfacets of running a business, and make them

partners in the business.

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i. Explain the concept of GGOB

ii. Why SRC employees were prepared to play itover the years..

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OBM

Know and

teach the rules

Follow theAction & Keep

Score

Provide a Stake

in the Outcome

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Employees were required to work in teams and asignificant part of their compensation package was tiedup with winning the game.

The employees were showed what wages thecompanys competitors are paying so that they couldunderstand that if they want to pay themselves moreor they need to make savings in other areas.

Employees at SRC also received additional rewardsif their ideas contributed to improve the company'soperations reportedly this practice made manyemployees come up with innovative ideas

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i. Unique culture at SRC

ii. How far do you think OBM and GGOBcontributed to this culture?

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SRC employs were taught to think and act like the owners ofthe company.

With the invention of OBM at SRC it had Standard andeffective cost system to measure and monitor costs therebyenhancing profits

They created "Huddle and Scoreboard system to manageIncome statements which helped in identifying weak areasof the company

Introducing the Bonus Programs which served as highly

powerful tools for keeping Job secured thereby makingcompany strong

Motivation by promoting Managers internally therebyshowing opportunity of growth

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Young People in their 30s helped SRC grow/explore with unique& innovative ideas which got converted in to new Businesses.

SRC has grown from Single firm to about 22 companies by end of20th century which eventually is run by its own bright Managers.

By implementing GGOB, SRC became a company of

entrepreneurs where employees considered themselves as profitmakers and cash-flow generators.

GGOM as a Concept even brought them business with the newventure i.e. Education and Consulting firm to spread OBMphilosophy through which they taught 3000 companies about how

to run effective and successful business.

2/3rd of SRCs original three hundred member workforce (from1983) is still working with the company, a success which analystsattribute to SRC Culture.

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Do you thinkcompanies irrespective

of the industry andgeographical area theyoperate in, wouldbenefit from the

implementation ofOBM and GGOB

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The great game of business book was

published in 1992

In just 10 years SRC has spun off 20 newbusiness