Chapter 1
Unleashing the Power of Business as a Game
What if the secret to business success wasn't found in an MBA program but in the natural competitive spirit that drives us to win? In 1983, Jack Stack and twelve colleagues faced a desperate situation after purchasing a failing factory from International Harvester with a crippling 89:1 debt-to-equity ratio. Rather than implementing traditional management techniques, they pioneered something revolutionary-treating business as a game where everyone participates, understands the rules, and shares in the rewards. The Great Game of Business was born, transforming their company from near-bankruptcy to extraordinary success. Over thirty years later, Stack's approach has influenced thousands of companies worldwide, earning praise from business leaders like Warren Buffett and Jack Welch. This isn't just another management theory-it's a proven system that has created countless millionaires from the shop floor to the boardroom while maintaining one of the highest employee retention rates in manufacturing. The system has weathered multiple recessions and continues to thrive because it taps into something fundamental: people's natural desire to win, contribute meaningfully, and share in the rewards of their collective success.
Chapter 2
Business as a Competitive Game, Not a Complex Mystery
The Great Game of Business (GGOB) makes business approachable by framing it as a game rather than an intimidating academic discipline. Business isn't art or science-it's a competitive undertaking with rules, winners, losers, scorekeeping, and elements of both luck and talent. By appealing to everyone's competitive spirit, the system transforms workplace culture and engagement.
At its core, the Game recognizes that business success depends on just two critical factors: making money and generating cash. While safety, quality, and customer service are important processes, they're means to these essential ends. The Game breaks down departmental walls by teaching everyone these fundamental rules and showing how individual actions affect the entire company.
Traditional management approaches keep employees in the dark about financial realities, creating what Stack calls "workplace ignorance." When people don't understand how their work affects profitability, they make poor decisions and blame management when companies fail. The Game eliminates this ignorance through education rather than threats, creating a unified team working toward shared goals.
This approach contradicts common management myths, particularly the belief that you shouldn't tell people the truth because they'll take advantage. Stack discovered the opposite at International Harvester-honesty builds credibility and trust. When he told suppliers the exact truth about inventory and needs, they protected him in return. When he insisted on following production schedules exactly and shut down an assembly line when parts weren't available, people quickly synchronized their efforts, and production tripled from 100 to 300 engines daily.
The Game rejects the notion that managers must have all the answers. Instead, good managers build confidence in others by showing they're human and sharing problems to develop solutions collaboratively. This creates an environment where people attack problems rather than each other.
Chapter 3
Creating Winners Through Small Victories
Before teaching people about business financials, two conditions must exist: management must have credibility, and employees need "fire in their eyes." Without trust, people won't believe your numbers, seeing them as tricks to make them work harder for less. And demoralized people who feel like losers won't engage with any game.
The journey begins by creating small wins that show people how it feels to be a winner-one of the rarest feelings in business today. Even successful companies are often filled with depressed, scared, and dissatisfied people. In healthy organizations, you feel enthusiasm-people smile, make eye contact, and celebrate achievements.
Pride comes before ownership-people must take satisfaction in their work before they'll want responsibility for the company. At SRC, they built pride through simple techniques: open houses where employees decorated work areas, fishing tournaments, baseball games, and community competitions. They created monthly events, awarded attendance plaques, and gave out branded merchandise.
To light the fire in people's eyes, you must create and celebrate wins, turning small victories into bigger ones while making the workplace fun. Stack discovered six key lessons about effective games: choose team-building activities that promote cooperation; be positive and build confidence; celebrate every win, no matter how small; keep it a game without inspiring fear; give everyone the same goals; and limit objectives to two or three that encompass multiple targets.
These activities build pride and self-esteem while providing outlets for frustration in non-threatening environments. They break down barriers between management and workers, create bonds, and give others chances to laugh at management mistakes. Company-sponsored competitions are incredibly cost-effective benefits-SRC's softball team costs about 42 cents per person per hour, while their golf league costs just 8 cents. In return, they get people discussing business after hours, advertising, camaraderie, broken barriers between departments, better relationships, and most importantly-pride, self-esteem, and a winning attitude.
Chapter 4
Painting the Big Picture: Context Creates Meaning
Most business problems stem from failing to show people how they fit into the Big Picture. When workers focus only on specific tasks without understanding the broader context, they can't comprehend how the company could be failing despite their perfect performance. The Big Picture is fundamentally about motivation-giving people the purpose behind their work and defining what winning means.
To help people see the Big Picture, SRC uses four approaches:
First, they give everyone a course in the business. At Springfield, they held an Employee Awareness Day where department heads explained their roles and how they fit together, concluding with an NBC documentary about America's productivity decline that sparked an emotional response.
Second, they market products to employees. At Melrose Park, Stack used company marketing materials to help assembly line workers understand the importance of the trucks they were building. One worker proudly told his child, "Your daddy built the engine in that truck." This internal marketing transformed operations by helping workers think like a team.
Third, they move people around. Cross-utilization gives employees firsthand experience of different parts of the business. People who've worked multiple jobs develop better cooperation skills and understand interdependencies. Even sending hourly workers to deal directly with customers helps them see their responsibilities beyond company walls.
Finally, they draw pictures. Visual representations like charts and graphs help people understand complex business relationships. Their most effective "pictures" are the stock certificates distributed annually, giving people physical evidence of their equity in the company.
This approach contradicts the quality movement's narrow specialization focus. When departments only concentrate on their specific functions, they become competing factions rather than parts of one company. The Big Picture serves as a motivator, helping people enjoy their work more and making the company more flexible. While Japanese methods emphasize doing specific jobs right, Stack wants players to be versatile-like a tight end capable of playing quarterback.
Without teaching the Big Picture, companies risk sending mixed messages. One Fortune 500 president emphasized customer service while being evaluated on return on assets. When inventories grew, he suddenly halted all deliveries to meet bonus targets-devastating suppliers and demoralizing everyone. The disaster happened because he didn't share the real priorities.
Chapter 5
Open-Book Management: Numbers as Tools, Not Weapons
The more people know about a company, the better that company will perform-this is an iron-clad rule. Information should be a means of education, not a power tool. When you share numbers and bring them alive, you turn them into tools people can use daily. A business should operate like an aquarium where everyone can see what's happening.
Open-book management means communicating with people via the numbers. Numbers are the language of business, essential for understanding how you're doing and seeing how daily actions affect everything around you. They link individuals to the Big Picture and keep people focused on important issues by breaking down departmental walls. When everyone examines the whole business, departments can't blame each other-problems must be solved collaboratively.
For individuals, numbers give meaning to jobs. Billy Clinton, a warehouse manager, initially saw himself as an insignificant cog. Once he understood the numbers, he realized how warehouse accuracy directly impacted assembly line operations and company growth. This revelation transformed his perspective-his work became not just a job but a meaningful responsibility that put food on his family's table.
Stack believes business should be people-oriented, but elevating emotions over numbers serves no one. Open-book management strips emotions from decision-making because numbers don't lie. Success depends on making sure one plus one equals two-not on motivational gimmicks that manipulate people's ignorance. When you hide the real condition of the business while telling everyone how great things are, you're taking advantage of them.
The biggest obstacle to open-book management isn't pride but fear. CEOs worry about three things: competitors seeing their numbers, employees misunderstanding financials, and revealing bad performance. But these fears are overblown. Knowing a competitor's numbers provides only short-term tactical advantage compared to the benefits of an educated workforce. When numbers are hidden, employees make wild assumptions-usually thinking the company has more money than it does. And sharing both good and bad numbers is the only way to build trust. At SRC, credibility came through adversity-telling people the truth even in the darkest moments.
Chapter 6
Setting Standards: The Power of Benchmarks
Numbers have been misused by most companies as tools to supervise, intimidate, or control. But the real payoff comes when the people creating the numbers actually understand them, creating phenomenal communication between all levels of the organization. Standards-targets to shoot for in any category you're measuring-make numbers meaningful. They are benchmarks that challenge people to perform at their best and can be revised as circumstances change.
Every company has one Critical Number that will have the greatest impact on success at any given time. This number might relate to sales, cash flow, quality, recruitment, or operating costs, depending on business type, economic conditions, and financial situation. It's the metric you absolutely must excel at to survive and succeed. Finding your Critical Number is relatively simple-it's often what keeps you and your team awake at night. During recessions, it's typically sales; for growing service companies, it might be employee retention; for highly leveraged businesses like SRC after its buyout, it's usually cost of goods sold.
Eventually, your Critical Number will involve costs, making a standard cost system essential. This system establishes what costs should be for every aspect of operations, enabling effective cost control and competitiveness. Without it, employees won't believe costs are too high or know how to address them. Unlike average cost systems that perpetuate past inefficiencies, standard costs provide targets for what you should be spending.
Developing good standards requires creativity and imagination to effectively quantify business activities. You must understand what numbers truly represent-the behaviors producing them and what changes will improve them. Numbers serve as clues to underlying realities, not magical entities. The best standards make intuitive sense to employees, becoming part of everyday conversation-like batting averages in baseball that instantly communicate performance levels.
At SRC, the overhead absorption rate serves as their version of a batting average. This metric shows how much overhead is covered when employees work "on prime" (directly on products). Despite skepticism from other executives, everyone on their shop floor understands this concept because it directly connects to their bonuses and stock value. By multiplying the absorption rate by actual hours worked on prime, employees can quickly determine if production levels are sufficient to cover overhead expenses.
Numbers become powerful tools when transformed into stories that educate without intimidating. Every financial figure represents opportunities, problems, and mysteries that SRC shares in weekly staff meetings. These narratives animate the numbers, showing people their impact. For example, when a new plant manager missed his overhead absorption target by $45,000 two months straight, investigation revealed he was using the wrong formula and had unwisely promoted cylinder-head workers, creating a chain reaction of inexperienced staff across four departments. This story demonstrated why understanding the Game matters.
Chapter 7
Skip the Praise-Give Us the Raise: Effective Bonus Systems
A well-designed bonus program is the most powerful tool a manager can have. It communicates goals by putting a bounty on them, focusing people's attention and giving them reason to work harder and smarter. SRC's "Skip the Praise-Give Us the Raise" program delivers multiple benefits: it educates people about business concepts, targets company vulnerabilities as a form of insurance, builds teamwork, quickly identifies problems, increases stock value, and provides the structure for the Game.
Stack believes in operating any company as if its survival is constantly at risk. This "bootstrapping" mentality keeps businesses lean and competitive. A good bonus system builds this mentality by emphasizing job security while showing people how they can earn more. It offers a solution to the dilemma faced by least-cost companies: either pay people less or make them work faster. SRC's system maintains base salaries at levels that ensure job security while sharing additional money generated through improved performance.
Their first bonus program in 1983 was a disaster because people didn't understand it, weren't motivated by it, didn't know how to achieve the goals, and they'd chosen targets they couldn't afford to pay for. Since then, they've learned key lessons about creating effective bonus plans:
First, put everybody in the same boat. Every employee should participate in the same program with identical goals, though the percentage may vary. At SRC, managers and professionals can earn bonuses up to 18% of annual pay, while others can earn up to 13%. This difference rewards those taking more risks and responsibilities, but everyone pursues the same goals under the same rules.
Second, stick to two or three goals from the financials. SRC typically bases one goal on pretax profit margins to ensure focus on making money, and takes another from the Balance Sheet to emphasize cash generation. When you select goals from financial statements, you get multiple benefits simultaneously.
Third, give people the chance to win early and often. SRC structures payouts with multiple achievement levels for each goal and uses quarterly payouts rather than annual ones to maintain engagement. The bonus pool grows through the year: 10% of the annual total available in Q1, 20% in Q2, 30% in Q3, and 40% in Q4. Unearned bonuses roll over to the next quarter, keeping everyone motivated until year-end.
Fourth, communicate constantly. The bonus program should become the center of attention, providing context and structure for everything else. This requires a continuous two-way flow of information between frontline employees and managers.
Finally, don't pay bonuses unless earned, but do everything possible to help people win. The program must connect people with marketplace realities. Bonuses aren't gifts from management but rewards earned by outperforming competitors. Paying bonuses when targets aren't met undermines this fundamental message.
Chapter 8
The Game Plan: Collaborative Annual Planning
The annual game plan forms the heart of the Great Game of Business. Without it, people have no way to measure performance, recognize problems, or set targets. But the planning process itself is just as important as the final document. You need a plan rooted in reality that people actively want to achieve, not one imposed from above.
SRC's planning process follows four logical phases: 1) Determine likely sales for the coming year; 2) Calculate production costs and expected cash generation; 3) Decide what to do with the cash; and 4) Choose bonus goals for the year. What makes this process exciting is that everyone participates, and no one-not even top management-knows the outcome in advance.
Planning requires a schedule-SRC gives themselves more than six months to create their annual game plan. Working backward from the new year, they develop eight key documents: Income Statement, Balance Sheet, Cash-Flow Analysis, sales plan, capital plan, inventory plan, organization charts, and compensation plan.
The process begins in July with sales forecasting and intensifies in October when they present the sales plan to the entire company. After dissecting the preliminary forecast, they allow 2-3 months for sales to develop a stronger, smarter version. Meanwhile, they pin down standard costs-their cost expert spends the year reviewing every expense and talking with employees to develop accurate standards.
In October, the process accelerates as sales presents its revised forecast-a detailed document showing exactly what products will ship to which customers each month. Middle managers take this plan to frontline supervisors, who analyze implications for their areas. They convert dollar figures into actual production numbers so shop floor workers can evaluate feasibility. This company-wide debate isn't just PR-they listen carefully and make changes when needed, as they did in 1990 when employees' recession concerns led them to reduce forecasts by 15%.
November is when they settle on standards for the coming year. Supervisors and managers must sign off on these standards-Stack personally reviews any change over 10%. This creates internal motivation and commitment, as people choose their own targets and can't blame others if they miss. This is also when they begin discussing goals, asking people about their worries and wants to determine how to allocate limited cash in the coming year.
In December, once they have all numbers for sales, production costs, and expenses, they create monthly income statements for the coming year, along with preliminary Balance Sheet and Cash-Flow Plans. They present these at staff meetings, saying "If we execute this plan and meet standards, we'll generate this much cash. What should we do with it?"
By January, they're ready to choose bonus goals that address their greatest job security threats. The key is selecting measurable targets that can't be manipulated, ensuring fairness in the bonus game. The completed plan sections go into a three-ring binder called "The Bible," which they present at the next staff meeting for final feedback.
Chapter 9
The Great Huddle: Making Numbers Come Alive
SRC's weekly Wednesday staff meetings are the heart of the Great Game of Business-where they calculate their score in real time. About fifty managers and supervisors gather with visitors to share their department numbers, comparing them against projections as everyone tracks them on scorekeeping forms. These meetings serve as their organizational switchboard, setting the pace and tone for the entire company. Within 36 hours, the information flows to everyone through follow-up sessions, connecting all employees to the Big Picture and showing them how their work affects bonus targets.
The Wednesday meeting is their focal point-the Great Huddle where all numbers come together, providing everyone with information needed to play their position effectively. But the real value comes from what happens before and after. Within 36 hours, virtually everyone has the latest data about where they stand and what's needed to improve. This creates unified direction as people make fractional improvements that determine business success.
While every business needs a communication system to draw people into the Game, yours will inevitably differ from SRC's. Companies are as diverse as people, with distinctive communication styles that must fit your business personality. What matters is developing a system that lets you control your numbers effectively. The key is creating an environment where "chatter" emerges naturally-people using financial language in everyday conversation because they understand its importance.
SRC's most crucial feature is consistency-same day, same time, same place. This reliability lets people develop routines around it and focus entirely on the Game rather than logistics. When they experimented with biweekly meetings, it was a disaster. People lost track of progress, estimates deviated by 30-40% from actuals, departmental walls went up, and the vital "chatter" stopped.
The Huddle humanizes business by eliminating the "invisible enemy"-the nebulous "they" that breeds suspicion and division. By assigning each financial line to a real person who reports on it, they transform abstract numbers into human connections. When someone has bad news, they offer help rather than anger.
As a leader, Stack avoids being the person with all the answers. Instead of telling people what to do, he keeps putting responsibility back in their hands. He refrains from backward criticism and focuses forward, encouraging people to drive ahead. He's active by leading and teaching-planting seeds in people's minds, highlighting important points, and pushing to uncover the stories behind the numbers.
What happens after the Huddle matters more than what happens during it. Information must spread beyond the meeting room through Chalk Talks-departmental meetings where leaders share numbers and news while teams figure out how to improve scores. Having people physically write down the numbers during these sessions is crucial for education. By distributing blank scorecards and having employees record the numbers themselves, they reinforced learning through repetition.
Chapter 10
A Company of Owners: The Power of Equity
At SRC, equity sharing is fundamental to their business philosophy. Unlike most companies that simply pay hourly wages, SRC gives people ownership stakes because they believe everyone achieves their dreams more effectively when they're stockholders. The counterintuitive insight is that sharing equity actually creates more wealth than hoarding it. The company's stock value reflects the collective accomplishments of everyone involved-achievements that would have been impossible if the original buyout group had kept all the stock for themselves.
A company of owners will always outperform a company of employees. When people think like owners, they make the extra call to satisfy customers, find ways to cut costs, spend money wisely, and take care of product quality. This ownership mindset only emerges when people have a larger purpose beyond a paycheck. Equity is the fifth tool in SRC's Great Game toolkit, delivering on the promise of the other four tools.
Sam Walton mastered the art of using equity to motivate Walmart employees. By giving workers opportunities to earn stock, he created one of the most motivated workforces in business. The genius was that public investors effectively paid these bonuses as they bid up share prices. Walton kept employees focused on the stock's value through in-store notices and electronic tickers, sending a clear message: "Here is your pot at the end of the rainbow. Now it's up to you to make it bigger."
Critics argue that employees don't appreciate stock. This is true-but only when companies fail to educate their workforce about business fundamentals. Simply handing out stock certificates without teaching people how they can affect its value won't motivate anyone. Others suggest companies should give employees cash instead of stock, allowing them to diversify investments. While this sounds logical, it misses the point entirely. An ESOP isn't merely an investment vehicle-it's a commitment that fundamentally changes employees' relationship to their work.
When SRC began exploring equity sharing, they discovered regulatory limitations prevented them from simply giving shares to all employees without going public. Instead, they developed three alternative approaches: an Employee Stock Ownership Plan (ESOP) that now owns 31% of SRC stock; special offerings that sell shares directly to employees through state exemptions; and internal trading that allows direct ownership while maintaining company control.
SRC isn't a political democracy-they derive authority from the marketplace, not employee consent. Yet they make major decisions by acclamation after extensive consultation. Stack has chosen a democratic process because it works-it gets people contributing, participating, learning and growing. Without education, there's no democracy, just manipulation. The better educated people are, the more democratic you can be.
Chapter 11
The Highest Level of Thinking: Creating Opportunity
The ultimate higher law is simple but profound: When you appeal to the highest level of thinking, you get the highest level of performance. This is the essence of the Great Game of Business-creating an environment where people use their full intelligence and resourcefulness toward common goals.
In the early 1990s, SRC began creating new businesses rapidly while decentralizing existing ones. They transformed into a business incubator, with companies run by people who had learned the Great Game of Business at SRC. They found opportunities everywhere-turning problems into profitable ventures and spinning off businesses to solve customer issues.
Starting new companies requires two components: overhead absorbers (products or services that people can produce for customers) and cash-flow generators (committed customers or markets). When these elements combine, a business emerges. Unlike traditional downsizing, SRC creates opportunities by helping their best people start their own businesses. They finance them, provide support, and let them build equity-creating jobs rather than eliminating them.
When they announced their plan to help employees start businesses, the response was overwhelming-people proposed everything from liquor stores to beauty salons. Though many ideas weren't feasible, it revealed the universal hunger for ownership evident worldwide. This desire drives transformation across continents as people seek to own businesses, land, and equipment.
Even middle managers in traditional companies can implement Great Game principles in their departments without formal tools or executive approval. The key is personal commitment and honest self-assessment: Are you sharing problems and information with your team? Do they know your critical numbers? Have you asked about their frustrations and fears? When you share knowledge and victories with your team, everyone can celebrate together, making management enjoyable.
The Game's fundamental purpose is to eliminate organizational pain by ensuring alignment across all parts. While you may not save the entire company by implementing these principles in just your department, you'll create "an island of sanity in a sea of confusion" and maintain control through performance excellence.
The drive for ownership will shape the coming century, and we must harness it by educating and motivating our people to become self-reliant and accountable-or be crushed by growing social overhead. We have ourselves as the only resource needed to create a better future.
