Book Summary of The Great Game of Business by by Jack Stack and Bo Burlingham

The Great Game of Business by Jack Stack and Bo Burlingham proposes that creating a successful business is best achieved by encouraging employees to take ownership and see the company as theirs. The authors argue that when employees feel a sense of ownership, they are more motivated to work hard for the success of the company.

Stack, a CEO and author, promotes open-book management and believes his principles for leadership can increase productivity and success at any level of a company. Burlingham is an editor and author who co-authored a second book on employee ownership with Stack. The guide synthesizes the authors’ principles into two keys to increasing employee ownership: accessibility and engagement. The commentary compares their advice to other business experts and examines how it intersects with psychological principles.

Defining the Two Keys to Employee Ownership

Encouraging ownership is essential for a successful business, and Stack and Burlingham believe accessibility and engagement are the keys to achieving it. Accessibility means providing employees with enough information to fully understand how the company operates, while engagement means having active and interested employees.

The authors argue that engaged employees who understand the company’s operations are more likely to help the company succeed. Technology can help with accessibility, but companies must make an effort to use it effectively. We’ll explore the benefits of these keys and ways to encourage them further in this guide.

Barriers to Encouraging Ownership

Stack and Burlingham identify several reasons why companies may not prioritize encouraging ownership, despite its significance in achieving a thriving business.

Barrier #1: Misplaced Focus

Some companies prioritize fun over ownership, which can detract from creating a successful business, according to Stack and Burlingham. However, Tony Hsieh disagrees with this view and argues that prioritizing employee happiness can lead to more focused, productive, and innovative employees who are committed to the company’s success.

Barrier #2: Lack of Trust

Stack and Burlingham found that many companies discourage ownership among employees due to a lack of trust. Managers often assume that employees are not invested in the company’s success and withhold important information.

This results in a lack of accessibility and prevents employees from feeling a sense of ownership. This lack of ownership leads to decreased motivation and productivity, which reinforces the manager’s low expectations. For example, a manager may lie about production targets to motivate employees, but this ultimately leads to a lack of trust and decreased productivity.

The Dangers of Managing With Misinformation

Stack and Burlingham point out that spreading misinformation is problematic as it decreases motivation and prevents employees from taking ownership. According to Ken Blanchard and Spencer Johnson in The One-Minute Manager, the consequences of manipulation can be even more severe. Employees may become resentful and jaded towards the company, leading to a lack of desire to help it succeed and even sabotaging it.

In contrast, Tony Hsieh believes that honesty is a powerful motivator. Being honest builds trust and relationships, which increases the likelihood of people wanting to help. Zappos’ policy of radical transparency, where employees and outside vendors were trusted with access to inventory and systems, led to the company’s meteoric success.

Barrier #3: The Myth of Omniscience

Some managers don’t encourage ownership because they fear that sharing information and being accessible will damage their reputation. They worry that knowledgeable employees will recognize gaps in their knowledge and lose respect for them. This fear is based on the myth that managers should have all the answers.

However, Stack and Burlingham argue that this attempt to appear omniscient is harmful as managers who refuse to reveal gaps in their knowledge are more likely to make mistakes. Furthermore, employees struggle to take ownership due to a lack of information from their reticent managers. Instead, the authors recommend creating an environment where everyone, including managers, can ask for help and learn from each other without fear.

The Role of Social Comparison Bias in Management

Rolf Dobelli explains in The Art of Thinking Clearly that social comparison bias can cause people to refuse to help others if they feel threatened by their position in a group. This is an evolutionary defense mechanism, but it can be problematic for modern companies.

Hiring managers may avoid hiring more skilled or knowledgeable employees for fear of being replaced. This limits a company’s growth and improvement. To combat social comparison bias, companies can foster a culture of innovation that values risk-taking and learning from mistakes. Innovative companies see mistakes and knowledge gaps as positive attributes that fit the company’s culture, making employees more willing to overcome their shortcomings.

The Benefits of Accessibility

To foster ownership, Stack and Burlingham advocate for accessible and engaging business practices. In this guide, we’ll explore the advantages of accessibility and engagement and the authors’ recommendations for promoting them. Accessibility, defined as sharing sufficient information for employees to comprehend the company’s operations, has three key benefits:

Benefit #1: Enforced Accountability

Employees are more likely to take responsibility for their choices and their impact on the company when they have access to information about how the company operates. This is because it’s easier to trace problems to their root causes when details are openly available, according to Stack and Burlingham.

Openness prevents employees from shifting blame or hiding mistakes, which encourages accountability. To minimize fear of punishment for mistakes, companies should prioritize a culture of respect and empathy over blaming and punishing individuals.

Benefit #2: Increased Productivity

According to Stack and Burlingham, accessibility also boosts productivity. When employees have a clear understanding of how the company operates, they can adjust their processes accordingly and make decisions without constantly seeking guidance from management. For example, if employees are aware of the time it takes for the computer system to process order forms, they can adjust their submission times to ensure timely shipping.

Encouraging Productivity: More Complex Than Just Offering Accessibility?

According to Stack and Burlingham, accessibility boosts productivity because it enables employees to improve processes and make decisions independently. However, Paul Marciano argues that productivity also requires resources and autonomy. For example, Bill needs access to computers to implement his knowledge of how to improve his work processes.

Autonomy is also necessary, as Bill’s manager needs to give him the freedom to submit the forms in the evening. In addition to improving productivity, accessibility also encourages teamwork by demonstrating how each department and individual contributes to the company’s success. This understanding fosters cooperation, as employees realize that they must work together to ensure the entire company thrives.

Signs of Interconnectivity

To encourage employees to focus on the success of the whole company, Stack and Burlingham suggest that understanding how a company is interconnected is key. This shift in focus is crucial for adaptation and success, as noted by The Practice of Adaptive Leadership.

To help employees adapt and thrive together, your company should have traits like shared resources, compensation structures that prioritize company-wide performance, leadership with experience across departments, and shadowing opportunities for employees to learn from each other.

Creating Accessibility

Stack and Burlingham suggest three key actions for making a business accessible: clarifying the business, clarifying financial information, and regularly informing employees.

Step #1: Explain the Business

To make a company accessible, it is important to ensure that employees understand the company’s products or services, goals, and purpose. According to Stack and Burlingham, employees may have a narrow view of the company, which can hinder their support for its larger goals. In contrast, knowledgeable employees are more likely to take ownership and work hard to support the company’s goals.

Sharing the company’s goals, purpose, and operations directly with employees is the most effective method of education, which can be done during onboarding and meetings with established employees. For example, a car saleswoman named Shelly becomes more passionate about selling upgraded cars to customers when she learns that the company’s purpose is to decrease crashes and protect its customers.

The Psychology of Memory in Business

According to Stack and Burlingham, employees often lack a broad understanding of their company, which can discourage ownership. This is because the brain prioritizes remembering relevant information and forgets what it deems irrelevant.

Employees focus on remembering their personal tasks, as forgetting them could result in losing their jobs. The company’s overall goals and operations are seen as less important and thus forgotten. To counter this, Stack and Burlingham suggest discussing the company’s organization, goals, and purpose during onboarding and meetings. This makes these concepts more relevant to employees’ day-to-day tasks, which encourages them to work harder to fulfill them.

Step #2: Explain the Numbers

To effectively take ownership and help the business succeed, employees must understand the numerical details of how the company works towards its goals – especially financial numbers, according to Stack and Burlingham. Financial statements are the language of business, and comprehension of them reduces misunderstandings between employees, which can lead to over-ordering and inventory issues.

Explain Balance Sheets and Income Statements

According to Stack and Burlingham, understanding balance sheets and income statements is crucial for employees to take ownership and help their company succeed. Balance sheets reveal financial problems, while income statements help diagnose their cause.

This knowledge allows employees to diagnose and solve problems as they arise, rather than waiting for upper management to address them. The authors recommend offering classes and tutoring in reading these financial documents to both new and established employees. However, before educating employees, it’s crucial to ensure that financial statements are accurately constructed, clearly organized, and regularly updated to make them easier to understand.

Step #3: Keep Employees Updated

To succeed, employees must have access to constantly updated information about a company’s goals and numbers. Outdated information can lead to harm for the company, causing it to fail to meet its goals or even collapse. The authors recommend frequent staff meetings, posters, scoreboards, and charts to keep everyone informed.

This is important because modern markets are constantly shifting and companies need to be viewed as constantly evolving. Visual management systems are valuable tools because humans process information visually faster and more accurately than with words.

The Benefit of Engagement

To foster employee ownership, engagement is the second key, defined as active and interested employees. Engaged employees use their intelligence, creativity, and dedication, leading to better business decisions, innovative solutions, and harder work.

Unengaged employees focus on tasks and paycheck, leaving potential untapped. Efficient and positive relationships between management and employees are crucial to avoid disengagement. Understanding employees’ weaknesses, talents, and personalities can make them happier and more engaged, leading to autonomy and company success.

Creating Engagement

To foster employee ownership, engagement is crucial. Stack and Burlingham define engagement as employees being active and interested in their work, which leads to better business decisions, innovative problem-solving, and stronger dedication to the company.

Unengaged employees, on the other hand, are at risk of becoming lethargic and using only the minimum required to complete their tasks. To promote engagement, businesses should prioritize accessibility, as learning new information releases dopamine and generates pleasure and motivation. However, setting goals and offering rewards are also essential factors in generating engagement, according to Stack and Burlingham.

Step #1: Set Company-Wide Goals

According to Stack and Burlingham, active and interested employees are key to creating engagement in the workplace. One way to achieve this is by setting specific company-wide goals, as this gives employees something tangible to work towards. Specific goals, like “make 100 sales this week,” are more motivating than vague ones like “increase sales.”

By achieving these goals, employees can see how their actions can impact the company’s success, making their work more meaningful and interesting.

Set Baseline and Ambitious Goals

Stack and Burlingham advise that setting a minimum level of success for the company is the first step in goal-setting, as it ensures survival. However, it’s important to go beyond this baseline and set more ambitious goals for company growth and success.

Using sales and profit projections as starting points for goal-setting can help create a middle-ground or comfort zone, but it’s also important to set stretch goals that encourage employees to get out of their comfort zones and increase their effort. Achieving smaller goals can provide important motivation for employees and help them feel more invested in the company’s success.

Consult Other Departments When Setting Goals

Consulting with other departments is crucial when setting goals, according to Stack and Burlingham. While sales and marketing may provide estimates, other departments provide concrete information to determine if the projections are feasible and accurate.

For instance, the manufacturing department can determine if making 500 cars, as projected by sales and marketing, is possible in terms of cost and labor and if it will actually result in $3 million in profit. This advice aligns with the OKR goal-setting system’s approach of having larger objectives and smaller key results, where employees set most of their own key results for efficiency and better understanding of their goals.

Step #2: Offer Rewards

To promote engagement, Stack and Burlingham suggest offering rewards, which incentivize people to be active and earn them. Rewards create positive feelings, activating the pleasure centers of the brain and releasing dopamine, which leads to increased engagement. The authors recommend two methods for offering rewards:

Method #1: Institute a Bonus Program

Stack and Burlingham recommend using a bonus program to encourage engagement by offering rewards to employees who reach certain goals. The program should operate on a company-wide level, with everyone working together to meet the same goals and receive the same bonus. Individual bonuses can create conflict and a lack of cooperation.

The bonus program should have tiers, with increasing bonuses for more ambitious goals, and payouts every few months to keep employees engaged. This structure concretely shows employees their progress and encourages positive feelings associated with making progress.

Preventing Inter-Employee Competition

Stack and Burlingham warn that competing for bonuses can lead to conflict, as it requires one person to fail for another to succeed. To avoid this problem, the authors suggest offering company-wide goals instead of individual bonuses.

Alternatively, individual bonuses can be offered that make employees compete against themselves rather than their coworkers. In this scenario, employees push themselves out of their comfort zones to reach certain goals and earn bonuses, without relying on their coworkers’ failures. This approach helps to prevent conflict and promotes mutual appreciation and support.

Method #2: Offer Equity

Stack and Burlingham suggest offering equity as a reward to increase employee engagement. By giving employees a stake in the company’s ownership, they become more invested in the company’s success. As the company’s value increases, so does the value of their shares.

However, the authors warn that offering equity is only effective if employees have access to information about what affects share value, as uninformed employees may become upset by temporary dips in share price.

Equity and Participative Management

Equity is a powerful reward that encourages engagement and improves company performance. Studies show that companies with employee stock ownership plans (ESOPs) grow faster, perform better, and retain more employees than those without.

ESOP companies are also more resilient in the face of economic hardship. Offering equity gives employees ownership and the ability to influence the company’s direction, motivating them to work hard to improve its performance.

Pairing equity with participative management further increases motivation, as it extends employees’ sense of influence over day-to-day operations. Participative management can be implemented by including employees in important meetings, seeking their feedback regularly, and educating both managers and employees on effective participation.

Book Summary of Built to Sell by John Warrillow

According to John Warrillow, the secret to creating a successful company is to make one that can run without the owner. By doing this, you may create a company that can function without the owner. This strategy not only raises the company’s worth but also makes it simpler to market the company to prospective purchasers. In his book Designed to Sell, Warrillow utilizes an imaginary narrative to explain how to operate and sell a small firm.

The necessity of focusing in a good or service, producing a healthy cash flow, selecting the best salespeople and management group, and handling the business sale are all emphasized in the book. Warrillow contrasts his recommendations to those of other business gurus throughout the book to provide readers a thorough overview of how to create and market a successful, scalable firm.

Reasons for constructing a business that can be sold

According to John Warrillow, constructing a business that can be sold is advantageous, even if you do not have any intentions of selling it.A sellable business is one that has high profit margins, low risk, and room for growth, which are qualities that benefit any business or owner.

Building a sellable business also provides options in case of unexpected changes in the business or personal life, such as needing to sell the business for money or no longer enjoying running it. However, Warrillow advises against starting a business solely with the intention of selling it, as this may lead to neglecting important aspects of the business that make it sellable and reduce the chances of a successful sale.

What Makes a Business Sellable

According to John Warrillow, the most important attribute that makes a business sellable is its ability to operate successfully without the owner. A business that does not rely on a single employee, including the owner, is more attractive to potential buyers.

Regrettably, a lot of small business owners become so intertwined with their enterprises that they are indispensable to it. Warrillow presents a step-by-step procedure for creating and selling a business that can operate without the owner, which includes selecting the ideal product or service, producing positive cash flow, and selecting and educating the ideal staff members and management. The ultimate objective is to build a company that can run well without the owner’s ongoing involvement, increasing the likelihood of a successful sale.

The Personal Toll of Running a Business

Warrillow stresses the need of creating a company that can run without the owner. This is because single ownership of the company’s success might result in fatigue and ultimate collapse. The E-Myth Revisited by Michael Gerber illustrates how many business owners try to handle everything themselves in the beginning, which causes overwork and disillusionment. It is advisable to adopt a strategic perspective on the company and engage assistance when needed to prevent this.

The goal is to grow the business, and the best way to achieve that is to delegate tasks to others instead of trying to do everything alone.

Step 1: Find Your Scalable Specialty

John Warrillow, in his book “Built to Sell,” suggests that to build a sellable and scalable company, you should focus on specializing in one product or service that is unique and valuable, and that can be learned by employees.

Warrillow also stresses the significance of providing a repurchasable product, which refers to discovering a good or service that clients may use frequently. Warrillow advises putting new hires through rigorous training programs to create a balance between distinctiveness and learnability. The product should also offer a clear advantage and be simple for buyers to grasp.

Step 2: Generate Positive Cash Flow

After deciding on your area of expertise, it’s crucial to concentrate on producing positive cash flow in order to achieve long-term success in your company. If your company has positive cash flow, it is earning more than it is spending. For the money to be released to carry out the remainder of the growth process, this is crucial.

Note that cash flow and profit are different, and a profitable business can have negative cash flow. To generate positive cash flow, Warrillow recommends charging upfront for your product or service or adopting a subscription model. To facilitate upfront payment, you can offer discounts for early payment or send out invoices as soon as they’re generated. Doing credit checks for customers can also help improve cash flow.

Step 3: Hire the Right Salespeople

According to Warrillow, it’s appropriate to recruit a sales staff after you have a good cash flow and a service that can be given without human participation. He contends that salespeople with product-selling experience are more suited than those who sell services since they are knowledgeable about how to market a particular good.

They can also sell your specialized service effectively. Warrillow suggests hiring at least two salespeople to create a competitive environment and demonstrate the company’s success as a whole. If you only have one salesperson, potential buyers might assume that the company’s success is due to the salesperson’s talent.

More Tips On Building a Sales Team

The book Sales Management by Mike Weinberg. Simplified advises employing a number of salespeople to fill several positions in the sales department, such as generating leads, keeping clients, and providing customer service.

This enables each position to make use of particular abilities. In accordance with Warrillow’s counsel, Weinberg highlights the value of an effective sales pitch that can sell a good or service without altering it for every new client. A sales pitch should be a succinct and uncomplicated story that conveys to the buyer the value of the item or service.

Step 4: Build a Team of Managers and Incentivize Them to Stay

Warrillow contends that in order to successfully sell your firm, you must have a strong management team in place. Warrillow suggests setting up a bonus account that managers may only take from after a specified amount of time in order to encourage this team to remain with the business after the sale.

As long-term rewards, he cautions against giving management stock in the firm or a cut of the earnings because these arrangements can lead to conflicts of interest and make a sale more challenging. He proposes, instead, encouraging managers to build connections with their workers and allowing them the time and space they require to assist and learn from one another. Giving managers shares as compensation is a common practice, but it has drawbacks as well.

Step 5: Find the Right Company to Help Sell Your Business

To sell your company, you should find a professional adviser who is the right size for your business and has knowledge of your industry. A business broker is suitable for companies with less than $2 million in annual sales, while a merger and acquisition (M&A) firm is suitable for larger companies.

In order to make sure that they understand the importance of your firm, it is crucial to pick an advisor that is knowledgeable about your sector. While M&A companies are more likely to broker complicated agreements on a national or international level, business brokers often work on a smaller scale. Industry-savvy advisors are more likely to push for your business’s best possible pricing.

Step 6: Inform Your Managers

According to Warrillow, notifying your management that you want to sell your business might be difficult, especially if you have a close connection with them. To prevent catching them off guard at a meeting with a possible customer, it is essential to let them know ahead of time.

Warrillow recommends informing them once you find a potential buyer. You can also offer them a one-time bonus and highlight the benefits they might experience as part of a larger company. However, it’s essential to be aware of potential drawbacks, such as job cuts and changes in corporate culture. The National Federation of Independent Business (NFIB) recommends involving key managers early in the process to support the transition and maintain trust. 

Step 7: Accept an Offer

In the final step of selling a business, it is important to know what you want from the deal to make the decision easier, according to Warrillow. This means having a clear minimum amount of money you will accept up front, and any future performance fees or add-ons as a bonus.

You might need to stay on staff with the firm if the majority of your income is contingent on its future performance in order to ensure that you are paid. Understanding your bottom line can help you resist pressure from your broker to accept a less desirable bargain in order to move on.

More Advice on Selling Your Business

According to Ben Horowitz’s book “The Hard Thing About Hard Things,” it’s crucial to take both your intellectual and emotional sides into account when selling a business. Both of these elements are covered in Warrillow’s advise on knowing what you want out of a bargain.

Horowitz advises examining whether the industry your firm specializes in is larger than it seems and whether it has the potential to be one of the top businesses in that market in order to determine your company’s actual value. The buyer may lower their offer during due diligence or even withdraw from the purchase completely, so it’s important to be aware that the process can be drawn-out and time-consuming. As a result, it’s crucial to stay to your guns, don’t give up if this occurs, and understand the true value of your business.