SRC Holdings - The 'Open Book' Management Culture


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Case Details:

Case Code : HROB039
Case Length : 13 Pages
Period : 1974 - 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : SRC Holdings
Industry : Manufacturing
Countries : USA

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The Great Game of Business

In February 1983, SRC's debt equity ratio stood at 89:1 and the company was required to pay a monthly interest of $90,000 on the $8.9 million loan. Stack felt that there was only one way to deal with this constraining financial obligation - to seek the help of employees, open the company's books to them, educate them on all facets of running a business, and make them partners in the business. Stack told his employees, "We need to generate enough cash and profits to stay afloat. I do not know how to do it. Here are the financial statements. This is how we keep track of what is going on. I need your help."

This laid the foundation for the practice of OBM at SRC and led to the institutionalization of GGOB, which was built on SRC's earlier system of treating the job as a game. The three main GGOB components were: know and teach the rules; follow the action and keep score; and provide a stake in the outcome (to the winners)...

The Unique Organizational Culture

SRC employees were taught to think and act like the owners of the company. They were given the freedom to be innovative about their job, department, and company. Stack did not believe in the policy of forcing employees to mechanically perform their job. He gave his employees the complete responsibility of their jobs.

According to Stack, this helped employees realize the need to make every effort possible to overcome their weaknesses and eventually led them to be innovative (in overcoming weaknesses). Stack referred to this practice as giving 'psychic ownership' to employees.

SRC's culture was woven around providing opportunities for employees. Commenting on this, Stack said, "We realized that we had a lot of people in their 30s, and we had to figure out how to provide opportunities for them to advance.

They became good businesspeople; we needed a place to put them. So we created new businesses by helping people inside the organization who came to us with ideas. The businesses we created were designed to solve a weakness in the company or capitalize upon an opportunity. We invest the start-up cash, take a percentage of the deal, and give the management team and the employees the rest." ...

Benefits of GGOB

By implementing GGOB, SRC became a company of entrepreneurs where employees considered themselves as profit makers and cash-flow generators. One of the popular stories Stack often recounted (to explain what difference GGOB made at SRC) was of the 'Nozzlettes.' In the mid-1980s, when Stack was holding a weekly meeting and the managers were giving their income statements about an engine that had 750 parts, a lady from the corner of the room called out, "I do not give a damn about the engine. I want to know about the injector nozzles."

Exhibits

Exhibit I: A Brief Note on Open Book Management
Exhibit II: The Four Steps in Implementing GGOB

 

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