Transform Your Business with Open Book Management With Rich Armstrong
Watch/Listen here or on Apple Podcast, Spotify, or wherever you listen to your podcasts“I believe as the leadership team goes, so goes the rest of the company. So if you don't have that consistent and significant sustainable growth, you've got some work to do.” — Mike Goldman
“If the financials are really the ultimate scorecard in terms of showing our collective efforts and results, then. We should teach everybody that language.”
–Rich Armstrong
Rich Armstrong has over 33 years of experience in improving business performance and employee engagement. His focus is on practices of open book management and employee ownership in both small- and large-scale company implementations globally.
The Importance of Trust in Leadership Teams
Key Characteristics: Trust and belief in each other.
Impact: Allows for open and challenging conversations while maintaining mutual support.
Understanding Open Book Management
Misconception: Often mistaken for financial transparency alone.
True Definition: Involves financial transparency, financial education, employee involvement, understanding, and rewards tied to business success.
The History and Impact of SRC and The Great Game of Business
Origin: SRC Holdings Corporation began as a struggling division of International Harvester in Springfield, Missouri. Facing financial collapse in the early 1980s, the company, under Jack Stack's leadership, adopted a radical approach to survive.
Methodology: Engaging all employees in the financial reality of the business to rally collective effort for turnaround and success.
Evolution: From financial transparency to comprehensive financial education and engagement.
Financial Transparency and Employee Engagement
Transparency Level: Providing information necessary for better decision-making.
Educational Focus: Ensuring employees understand financial results through informal and formal education.
Addressing Concerns About Financial Transparency
Common Objections:
Employees demanding more pay.
Competitors gaining access to financial information.
Response: The benefits of transparency outweigh fears by building trust and understanding the true financial picture.
The Role of Financial Education in Open Book Management
Importance: Corrects misconceptions about financial performance and builds informed decision-making.
Process: Start with leadership teams before expanding to the entire organization.
Implementing The Great Game of Business Methodology
Framework: Involves educating employees on financials, empowering them to act, and providing a stake in the outcome.
Coaching and Training: Offered through workshops, conferences, and practitioner coaches to ensure successful implementation.
Principles of Financial Education
Approach: Combination of formal education and informal, practical involvement in financial tracking and forecasting.
Empowering Employees to Act
Method: Using regular financial reviews and forecasts to drive proactive adjustments and improvements.
Creating Mini Games for Variances
Concept: Using focused, short-term games to address specific business challenges and drive performance.
Stake in the Outcome
Definition: Providing rewards and recognition for contributing to business success, from bonuses to career advancement.
Understanding the Critical Number
Purpose: Identifying and focusing on the most critical business goal for a specific period to rally collective effort.
Cultural Differences in Problem Solving
Comparison:
Typical Company: Focuses on individual KPIs without a clear connection to overall business success.
Open Book Management Company: High mutual trust and respect, understanding of the business impact, and collective goal-setting.
Leadership Development through Open Book Management
Benefit: Fosters leadership skills by involving employees in financial literacy and business decision-making processes.
Thanks for listening!
Apply for a free coaching call with me
Get a Free Gift ⬇️
🆓 The limitless organization short video course
Connect with me
www.instagram.com/mikegoldmancoach/
www.facebook.com/mikegoldmancoach/
www.www.linkedin.com/in/mgoldman10/
I invite you to assess your team In all these areas by taking an online 30-question assessment for both you and your team at
-
Mike Goldman: Rich Armstrong has more than 33 years of experience in improving business performance and employee engagement through open book management and employee ownership. He served as a consultant and as an executive at SRC Holdings Corporation, one of America's top 100 largest majority employee owned companies. Rich also served as the president of the great game of business for 17 years, where he coauthored the update of the great game of business 20th anniversary edition, and his new book, get in the game, creating rapid financial results and lasting cultural change with Steve Baker. This practical firsthand experiences enabled him to successfully apply the practices of open book management, employee ownership. And both small and large scale company implementations around the world. Rich, welcome to the show.
Rich Armstrong: Well, thank you. Thank you, Mike. Glad to be here.
Mike Goldman: the first question I always ask after all, this is the better leadership team show, Rich, in all of your experience, what do you believe is the one most important characteristic of a great leadership team?
Rich Armstrong: Well, I think if you had to nail it down to one, it would absolutely be trust and belief in each other. We can count on each other. We trust each other.I think that, I mean, any of the teams that I've worked with the great leadership teams that I've worked with is, They always had that they could have conversations with us that you and I as outsiders could come in and we are like, do these guys like each other today?
I mean, it's the way they just challenge each other. And but in the end that they have each other's backs.
Mike Goldman: And I have a feeling in talking about great game and talking about open book management, that word trust is probably going to come up again, but before we're done, because that kind of stuff does require a lot of trust, why don't we start off, I want to understand the specifics of the great game of business, but let's talk kind of bigger picture.tell us about open book management. What is that? How should we be thinking about it?
Rich Armstrong: Yeah, Mike, it's a term that, we don't like very much because it's been pigeonholed over the years. Right? when a lot of people think about the term open book management, they. They center on the concept of financial transparency. You know, I ask a lot of CEOs define this. That's where they go financial transparency.
But, we often refer to that as more open book reporting, not open book management side of it. The leadership side of it is so critical to have. As a combination to this, there's one thing of having financial transparency in the workforce, but that can actually be somewhat dangerous if you don't match that with good financial education, right?
Involvement, understanding, about that information, and even sometimes rewards to be able to tie people back to, well, if we can make the business successful, what's in it for me. So it's a lot of other things around it that really make up. Truly what open book management is rather than, you know, just financial transparency.
Mike Goldman: to that end being more than just financial transparency, I want to get into this idea of the great game of business and that specific view and that specific methodology, give us a little bit of history, you know, Jack stack and SRC and your involvement. Give us a little bit of the history of SRRC and Jack and how. The great game of business came into being.
Rich Armstrong: Yeah, it's interesting. You say that because I just saw a LinkedIn post today on this day 38 years ago is when Inc magazine had a front page article on the cover. Of a little company in Springfield, Missouri that,transferred there, you know,that was a filling division of international harvester and was able to turn it around to 1 of the most competitive companies in America.
And that article is just centered about around a concept that at that time was. Still very radical. You can say it's even radical today is that it was built on the idea that, Hey, we're a troubled business. We need to find ways to turn this around. And rather than that falling on the shoulders of maybe the owner or the leadership team is we turn that over to everybody and said, here's the reality.
That we're, we have in this business and we need everybody in the company to be able to rally around that and be able to turn this business around. It just can't, it's not going to fall just on, you know, at that time it was Jack stack, our CEO and founder of the company. And so that was at that time, you know, the, this idea of open book management was, new.
I'm there, you know, I know that there was companies out there. Thinking maybe this is a way we could run the business, but I think great with the SRC story. and what Jack stack did in those early days, it kind of gave us some lift and some popularity after, around it. And. It worked very well for us.
now, as we talked about earlier, there was one thing about opening up the reality, but we had to also rally everybody and make sure they understood what their roles and responsibilities were. But it gave us that, that, that ultimate scorecard of the financials to be able to align ourselves to, right?
And to understand what we needed to do. I mean, we were in a situation that we couldn't make, you know, a 10, 15,000 mistake because we had signed A loan of 8.9 million dollars with 100,000 dollars equity, and we are paying an 18, you know, 18 percent interest rate. So we were in a situation where we had to make some really tough decisions and we had to watch it very closely.
And it really came down to our ability to create cash and drive profitability in the business. So we want to, we rallied everybody around it, educated everybody around how we, you know, how they can play a part. Um, and of course the rewards and, uh, stake in the outcome of that time was, Hey, we get to keep our jobs.
If we can make this successful at that time, but it worked for us. And we, and it,you know, really made it a way that we manage the business today. We've certainly evolved with it, but it's exactly those same principles we manage SRC Holdings today.
Mike Goldman: is that?
Let dive into a little bit more detail on what that means. Is that mean? So the financial transparency piece of it, does that mean everyone in the company understands the P and L from top to bottom? Does that mean everybody understands what everybody else is making. Give me, give us a sense of the level of true transparency we're talking about.
Rich Armstrong: Well, I look at it is, I like to frame it this way is that we're trying to provide everyone in the organization, the information they need to make better decisions and take better actions in the company. And we got to circle that back to kind of the belief of that,if you take the financial transparency, the idea that we're focusing on financials, we look at it as a belief is that's the only scorecard that we have in a business that really shows the collective efforts and results of everyone in the company.
If you think about it, you know, we have our individual KPIs, we have individual departmental teams, goals, and initiatives and priorities. All that is good. And it's needed in this process. But the bottom line, we're trying to show them the end zone, right? We're trying to show them what we need to,you know, what ultimately we're trying to drive for.
And for us to do that, we need to make sure that, they understand the financial results of the business, right? So that's the level of transparency is we do definitely want to give them an understanding of the P& L. We want them to understand the balance sheet. Eventually, we definitely want them to understand cash flow in the business.
that takes time to teach that level. A lot of the teaching that we would do in that environment is more informal repetition. Actually owning a line and representing a line on the scorecard scorecards or scoreboards. So, it's a lot of that informal training, but that's the level we want.
Now, in terms of the transparency of, like, compensation and things like that, we don't necessarily at SRC and many of the practitioners that. Or in our community do not share detail compensation what each other's making that kind of thing. They may have salary ranges and bands, but we don't see that's helpful for people to make better decisions and take better actions every day.
Right, but we do want them to know that, hey, our engineering as a percent of total revenue is higher than the industry that salary band is higher. That's that we have to do something about. and it's something we can act on, right? And people can understand. And how do we become more efficient as an engineering department?
That kind of thing. So that's the kind of level of transparency we're looking for.
Mike Goldman: of the pushback I get from my clients when I talk to them about financial transparency is, you know, well, we might share revenue, but if we share, you know, if we share the bottom line, if we share net profit, now everybody's going to see what we're making there, they're going to think they need to make more. if we share all that information now. You know, our competition is going to be able to get ahold of it. What are some of the objections you hear and how do you deal with that?
Rich Armstrong: you know, I think those are valid concerns, right? They are valid concerns, but, you know, we come to this kind of conclusion that the benefits of this outweigh some of those things. Types of concerns or fears, right? if I take the one that you're talking about, Hey, if they see our bottom line, see what we're making, they're going to want more. Well.
They already want more, you know, they're already asking for a raise. What we're trying to do there is to give them the full picture. Of what the business looks like and needs to see the success at to be able to have all of us benefit from that. Right? And in terms of wages increases and that sort of thing.
So I know that's kind of an easy answer to say, but it really comes down to that simplicity. I mean, they're already thinking that. So why don't we provide them the truth and the reality? And then educate them around that. And I know that takes effort, but that effort pays off,in a whole lot of ways, and as we started the whole podcast, where it really helps is just building a deep trust, mutual trust and respect that they have trust in the company and the company has trusted them and they respect each other in their roles in the business.
and that's hard to, that's hard to match
Mike Goldman: you mentioned education being a part of it. We're going to come back to that because I do want to talk about, I know there are kind of three key principles and I want to dive into that with you, but the education is so important and Rich, you tell me if you've seen this as well, but. part of what I've seen in order to say, well, people are just going to want to make more.
Not only to your point, do they already want to make more, but there are folks and my God, I've seen this on a leadership team and they won't admit they're financially ignorant,but they are, I've seen folks that really don't know the true difference between revenue and profitability. And if they hear the company is making. It has revenue of a hundred million dollars. They think the owner is probably putting 70, 80 million in their pocket and they have no true understanding of what. Net profit really is. And the difference between that and cashflow and reinvesting back in the business.
Rich Armstrong: Have you seen that? That is why exactly.
Mike Goldman: think once people understand that they, some of them might say, wow, I guess I am making a lot because I didn't realize that's all the company was making.
Rich Armstrong: Yes, that I mean, that's the, that's where it becomes pretty powerful because you know, we talk often, we use this as an example that if you take 212 industries, you know, the median profitability for those industries are around six and a half percent profit margin. But the public opinion is that they're at 30 or 40 percent.
Okay. That's a big gap. So I always ask CEOs that are like a little reluctant about this. I said, if they, if that's their belief, I said, just think about the decisions they're making right now and the actions they're taking right now with that belief or that assumption that you're making 40 percent at the bottom line.
They're, it's, they're horrible. I mean, they're saying this guy has all the money in the world. Oh, you know, who cares about this? Who cares about that? Those kinds of things. And probably are saying, Hey, I need more money and all of that. So you're just driving those misperceptions down through the organization.
And. You can eliminate that by just saying, Hey, here's how hard it really is to make money. Right. And it may, we may make a lot of money, but A lot of that money is reinvested and that's that next level of understanding, right? Because they understand that every profit that you're making at the bottom line doesn't necessarily go into the owner's pocket that it's reinvested in the business and that's a harder concept for people to understand but when you get them to that.
Concept. It's pretty, pretty powerful. And I'd also like to just address you. You mentioned also just leaders not understanding this, you know, even people in the leadership team. I think you're exactly right. And I think that is 1 of the biggest fears that we run into and we had to, it took us a while to acknowledge this ourselves is that there's leadership teams and CEOs that Are concerned about opening up and taking this step of being more financially transparent and educating people in the business because they don't really understand it and it puts them in an awkward position.
And that's real. I mean, that's just the reality.but why don't we just start with them? You know, I mean, our process to get this started with all organizations is start with the leadership team. We start with a small leadership team. If the leadership team isn't confident. About these numbers that they're going to share with everybody else.
we've failed. So we may take six months to a year sometimes with leadership teams and their CEOs, just getting them playing. The game or practicing open book management before we ever throw it out to the rest of the organization.
Mike Goldman: what about an organization that, as you're saying it, this flew into my head too, of a, an objection I've gotten what about an organization that's not doing well? That is losing money. And their fear is, wow. if we let everybody, if we let everybody on a team know how we're doing, they're all going to start getting their resumes ready. Is that now, is that a situation where maybe. Maybe that's not a time to be financially transparent. I mean, I would think if you're going to be transparent, you got it. You can't say, well, this year we're not going to share information with you because we're losing money, but next year we'll share it with you again. But how do you deal with that objection? Cause that could be pretty scary for folks.
Rich Armstrong: Well, I hope this doesn't sound like another flippant response, but the bottom line is that if we don't share that information, they're going to make it up themselves. And if you're in a company that's not doing well, financially, the employees are feeling it. They're seeing it in other areas and that is coming to them and then they're taking that information and probably blowing it up 10 times more than the reality of the financial issues are going on in the business.
So,I've seen that. You know, a lot. but it goes back to the origin of S.R.C. Is that sometimes the best time to really get people's attention is that time because and you need them working to help you resolve that those issues and we need to be all rallied around that. And where I seen this, you know, we used to say that a lot, you know, and, it definitely worked for us at S.R.C. And we had, you know, Organizations that showed us that works where you need to turn around a company, open up the books, get everybody rallying around. It works, but we never see it in broad, you know, broad sense, right. Of other companies until the pandemic. And, you know, I speak with the Vistage groups a lot.
And during that time, I did a lot of remote type, calls with Vistage groups, in the, in 2020. And of course I'm doing my same pitch about open book management, great game of business, but I started it out in asking them, what are the things that have you done differently or more of, because of the pandemic?
And they would list a lot of things from, you know, more focus on safety and how people are doing at home. And the one that always come up is we're more transparent around the financials. And I was like, really? And they said, yeah. And I said, well, how'd that go? It went great. I mean, I didn't have anybody say I opened up the financials and then it was a disaster.
Everybody was, it was more of that. I gave them more visibility of how we were doing financially because They need to understand this is tough times for us. And they rallied around that. So it kind of gave a full circle that, you know, it does work. That's the time where you really do need the team rallying around your efforts.
Mike Goldman: That's a great point. It's when times are tough that you, and that's when SRC started doing it many years ago. So, so it's a great example.
Rich Armstrong: Yeah.
Mike Goldman: so let's, so we've talked about, we're talking about open book management and kind of a general way and SRC and how that started. Let's dive into the specifics of game of business, which is it's a book. It's a methodology. It's a coaching organization. Give me Rich's sense of, you know, what is it? Maybe it's those three things I just listed out. Maybe it's more. And then I'm going to want to drive into some of the key principles.
Yeah the practice of the game or the great game of business is a business, it's a coaching and training organization. And, a quick little story though. I mean, it's part of SRC Holdings, which is the original company that I talked about earlier that was a division of International Harvester and started by Jack Stack writing a book in 19, uh, was published in 1990.
Mike Goldman: the Great Game of Business was published in 1990, but we actually started the Great Game of Business years earlier than that. And, The reason was people wanted to come and visit us right at SRC. So we started an organization just to tour people around. Then we started charging money for coming in, because we had too much people coming in and disrupting our operations.
Rich Armstrong: And guess what? When we started charging people money, the volume went up.
So, we started that organization, just a touring organization through our SRC's operations, then started doing some workshops and built it out to a coaching and training organization. But it's really. Spun off on the idea of the great game of business, which was published in the early nineties that talked about that story of S.R.C. And then we've just built that out into helping companies. What the way I like to look at is we try to help companies to implement this and apply this. We certainly do some training, but we feel like. The coaching organization that we have helps them actually apply these principles and put the disciplines in place to make it work.
the great game methodology is really built around a lot of things we've talked about is it is centered around this idea that if the financials are really the ultimate scorecard in terms of showing our collective efforts and results, then. We should teach everybody that language and get everybody on the same page, communicating and collaborating around that same language.
but to do that, we know that we have to educate people on the financials. Then we have to empower them, to act on that information and use that information. And then if we're successful with all of that is that we need to provide. them a stake in the outcome, what's in it for me.
and that could be as simple as, you know, incentive plans, bonus plans, profit sharing, that sort of thing. But it is certainly when all the way to the scale that we're at this point in time in our evolution of a business is we're an employee owned company, a hundred percent employee owned company.
So we've taken it all the way to the equity side. What's unusual or something that a lot of people don't realize with the kind of the community of open book management and great game practitioners is that a very small percentage of those practitioners are employee owned because employee owned companies are relatively small, you know, in terms of the number.
I mean, there's less than 8, 9000 ESOPs, you know, employee owned companies in the country. But they all provide some level of a stake in the outcome in terms of some way of rewarding them for the financial performance of the business. with most of it being common around some kind of profit. I don't like using profit share.
We talk about it as being gain share. You know, we're not just going to share profits because those profits may need to be reinvested in the business. But if we're able to generate more than what's needed for the business, Let's see if we can start to, reward everybody for those types of performance or that level of performance.
So those are the three kind of principles to it.
Mike Goldman: those three, you know, at some level. So starting with the financial education. What does that look like? Does that look like, Hey, you know, go read this book. Is it a bunch of training sessions? what does that actually look like to get people enough knowledge to truly understand and be able to act on those numbers?
Rich Armstrong: It's a good question because I think the perception a lot is that we're going to take all of our employees and put them in a room and teach them the income statement balance sheet cash flow. There's certainly, a place for that formal education, giving them a broad sense about what's an income statement balance sheet cash flow, but we're more informal.
We're more of. The track of let's give them a number that they got to track and forecast and own. That's how we learn it. I mean, you and I probably had some kind of financial literacy or some education, but when we really understood the numbers, it's because we had to own a number, right? And we had to work with that number in, and that's what we try to position that.
So it's a combination of that, where we lean more to the informal side of it. Many games is a process that we talk a lot about, which is like a microcosm of the game. That's where we educate people on the financials because we're connecting dots where we're giving them that line of sight. Here's what you did in the organization and here's how it affects cost of goods sold, gross margins, revenue, expenses.
So we bring them to that line of sight. That's how we teach it. But there's certainly a, an element of, baseline foundation, financial training, but a lot of it's informal.
Mike Goldman: an example of a mini game?
Rich Armstrong: Well, I tell you a really good one that I'm kind of proud on both sides is because it came from my son. You know, when you're always talking with your kids and you're talking about what you do for a living and that kind of thing, and you think they're not listening to you at all, but he was just promoted.
He's 28 years old. He just promoted to a branch manager position for Commerce Bank, which is a local. bank up through Kansas City and they just were awarded branch of the year. And I, you know, I was asking, I said, well, what did you do to get branch of the year? And he says, well,they were really excited about all those games that you guys play at the great game of business and stuff.
I said, you guys were doing mini games. He said, yeah, we were doing some mini games. They were real successful. So all the other branches are coming over. and what he had done was, Commerce Bank is very metric driven. I mean, this is an organization that leans on one on ones and you have certain metrics and, you know, and they talk about the lead and lag measure.
they're really good at that. And he had been doing his one on ones, and he has all these different metrics all of his team has, and so he attached a minigame to driving those metrics over a 90 day period, driving performance in those. But what he was really measuring in a minigame was not the outcome, but really focused on the driver.
So if we do the disciplines and the behavior changes, we'll get the outcome. So the minigame was We need to do all the, the activity measures. Think of it that way. So he placed, he listed all those metrics like, and it was mainly built around branch sales stuff. So there's a lot of, you know, you know, upsells and,you know, setting up appointments and reaching out and making calls to customers and all these kinds of activity measures.
And for each one that they did, they had a puzzle piece that they would get. And he took a big puzzle. 3,000 piece puzzle, stuck it in a break room and said, if we can build this puzzle over the next 90 days, and we're going to go have a great time at the steakhouse, at the end of the 90 days, but they had to drive all those activities.
So the whole puzzle piece was built on activities. And,the short thing about that is that was the game, right? 90 days, build this puddle based on the activities. If we do the activities, we'll get the outcome. Well, the corporate was having some challenges with, wealth management. They weren't really hitting their goals around wealth management.
So they were asking the branches to set up appointments. So he put, you could get five puzzle pieces if you make an appointment for the wealth manager and they blew it away,they outstripped his capacity to take all the. All the meetings, right? And that's what got, you know, got the attention from the other branches because they couldn't get any appointments for this guy.
The bottom line is they focused entirely on the activities and the big outcome was that they scored a 2,000,000 wealth management account for this guy because he had the offer from their bank, right? There was the big outcome, but they focused on the activities. But it was very short, 90 day type of mini game that everybody could get focused on, have a little bit of fun.
It was created by the team, so they came up with the whole idea. It wasn't Ryan, my son, just saying, Hey, here's what we're going to do. He got the team together to do that, and it was very successful.
Mike Goldman: Love that. And most importantly, you found out he was actually listening all these years. That's the coolest part
Rich Armstrong: Yeah, that's right.
Mike Goldman: so we've got, so the first kind of principle of this is the financial education piece. Part of that is true education, but not all of it. Some of it's mini games and actually having people work with these numbers.
then the second one you said was empowering people to act. Dig a little deeper on that one
Rich Armstrong: That's right.
Mike Goldman: what does that mean?
Rich Armstrong: You don't want to use the game when I should probably back up and say when we're using the analogy of the game. We talked about that 1st one is more around knowing the rules of the business, right? Financials are the rules of the business that also includes understanding the business of the business, right?
The marketplace, the competition that we're in. So we're teaching them that as well. So it's not just about financials. The next principle is really take all that education and follow the action and keep score. But it's really about making sure that we've set these goals, right? These are where we want to go and what we're doing and follow the action is.
Huddling around that on a very frequent basis, weekly basis, going through the financials, understanding not what has happened, but more importantly, what are we playing? What are we forecasting to happen? And that's a very subtle change because you probably have had this with your clients, Mike, is that.
You know, I get this whole financial stuff, but those are outcomes. I can't really drive the outcomes. I just said that in the mini games, right? I can't really drive the outcomes. I got to do something, to drive those but with the way we communicate the financials are not looking, you know, after the books are closed and trying to figure out what the variances were, we're looking at the financials in a very forward focused way.
So we're saying, okay, here's our goals. Here's what we said we were going to do in revenue cost and margin. But based on what we know now, what's the end of the month going to be? How are we going to do? Let's forecast that. Tell me what we're shooting for. Right? And it's not as much about predicting the future as it about as much as, us trying to figure out what we need to do to influence the future, right?
Are we going to be better than planned? Are we going to be short of plan? What's that gap? And then all of us know what we have to do to bridge that gap.
Mike Goldman: I imagine that's
Rich Armstrong: And that's how we do
Mike Goldman: where more mini games could come up. It's like, here's what we need to do. Hey, could we create a game around that?
Rich Armstrong: Exactly. Every variance is a potential game. You know, every variance we see from where we wanted to be and where we're forecasting to be is a game opportunity. The other key to this is it circles back to education because Think about it. If you get really good at forecasting a financial number, revenue, cost, gross margin, you know that number pretty well because you know everything that could potentially influence it.
So it's an education on really understanding that. as well as understanding all the other levers in the business that can influence your number, right? So it's all, they start to connect the dots just in that, that one simple process of saying, forecast a number for me.
Mike Goldman: Love it and I imagine, are there kind of department level games and also kind of overall company level games, or is it mostly happening at a department level?
Rich Armstrong: When we look at the whole, you know, the, that year's plan as the big game, right? We're trying to hit the profitability of the business. That's the big game. What we try to really encourage companies to do is to keep The other, the mini games, and that's why we call them mini games, mini, small, very targeted, because you can get too big and you're trying to stretch yourself too much and too limited time is just try to, incrementally, chip away at the goals, right?
That's where the mini games come from. So some of them are departmental. Some of them are cross departmental. Some of them are pop up mini games that, Hey, you know, we're You know, we're a couple points from our next level of our bonus. What could we do to in the next 60 days to make a difference in there?
And those pop up, they can be strategically tied to some quarterly priorities that you've set for the business where you've said, Hey, this is a priority. So we've got to get done this night. This next 90 days. Well, where we put a fun mini game around it and make it. Fun as we go and attack this particular priority.
So sometimes they're more strategically built that way. So there's a lot of ways to use it, but the center things should be a continuous improvement effort. It's a problem we're trying to solve. If we can teach people that this is a great way to solve problems and do it in a fun way and educate your people and do it as a team, many games are a good fit for that.
Mike Goldman: third principle I think was a stake in the outcome. So tell us more about what that means.
Rich Armstrong: And it's a broader term. Typically people think of it as, you know, maybe a bonus plan but it is really trying to understand what do employees, how would they define a stake in the outcome? So it could be bonus, you know, instant gratification, like bonus plans or mini game wins, things like that.
But sometimes it's just career advancement. just plain old fashioned recognition, you know, and, that kind of thing. But it's that the concept there is that if we're winning, And we're making the business better. How can we reward and recognize our people for that effort? And there's a lot of ways to do that.
but the, but if you're sharing financial information, you know, eventually somebody is going to say, you know, well, we're making this profit. Can we have a share of that? Yes, we can do that, but the company needs to be successful first. We need to maintain our ability to have jobs and careers and growth with this company.
So we have to reinvest first, but if we cover everything plus a reinvestment and their lead, their leaves a pool of money after that, then we want to try to share that in some way back to the employees as, as broad as we possibly can.
Mike Goldman: know what the, another part of the, this methodology is the idea of a critical number. Talk about that. What is a critical number and how do you, how does a company use it?
Rich Armstrong: So think about those three principles. And right in the center is the critical number it's, but if we can identify the most critical thing, this organization needs to achieve over a given period, let's say it's six months, 12 months, and rally people around that. And then we entice some kind of reward around that, just like we did the mini games that can be pretty powerful in organization.
And the best way I like to position the critical number idea is that, we're trying to teach the whole organization how to make the business successful. And we're showing them all the financials and we're getting them involved with all of that. That's a lot to take in. But can we give them one number every six months or every year that we could teach them their line of sight to that particular number or goal?
So think of it is, you know, right out of the gate. Most companies are going to say my critical numbers profitability. Their profitability is not where it should be. Right? So there it is profitability. And then we use the year to teach people. How do they find their line of sight to that? What are things you can personally do or as a team do to drive profitability in the business?
But as the company evolves, profitability may not be the critical issue, right? Maybe you're making really good money in the business. You're making a profit that's higher than the industry, but you're doing all that with A very limited customer base that's tied in a specific industry and diversification and your protection of that profit is really the critical issue.
Maybe we put a critical number around diversification that year. Maybe there's still something around profitability, but now we're really teaching everybody the importance of diversifying the business and finding other revenue streams and, customers to, to support us. So we see that over year, over the years, our critical numbers changed often, and it's based on the current situation of the business.
But every year we get to teach some,our employees something new about the business, a new challenge that they help us, solve, and tackle. but the outcome of that is that typically if we really focus on that. Then it doesn't become a problem in the future. So we've solved it, got it out of our way.
Now we're moving on to the next challenge. A great example that I use is in the early days of SRC, we were growing, you know, 25, 30 percent a year for a manufacturer, and we had some inventory accuracy issues, and that's, You know, a slow death to a manufacturer. You have inventory issues growing 30 percent a year.
So we had to focus on that. And I remember being, you know, I was in the business development sales area right out of college. And I remember that coming up as a critical number. My first instinct was what the heck can I do about inventory accuracy? My bonus is going to be tied to inventory accuracy, you know, all this kind of stuff.
But over the year I learned there was a lot I could do, you know, in my role to either help indirectly or help directly in inventory accuracy issues in the business. And it taught me that, but I also understood at the end of, you know, at the end of the period was, I know why that we picked that. If we wouldn't have picked that, we would have been really in some rough spots for the business.
So that, that's the, what we're trying to do with critical numbers just to get that. Find as Patrick Lencioni saying, what's most important now that's. Our critical number.
Mike Goldman: How would you describe, you know, and this could relate to SRC, it could relate to the dozens of companies that have gotten coached and, you know, on great folks that you've helped or coaches have helped.
How would you describe the difference between the typical company and their culture and how they go about solving problems and setting goals and a company that is. Really taken of the great game of business set of principles and processes. How would you describe the difference between the two?
Rich Armstrong: you know, I would really take it back to the first thing we discussed. I would see that there's just a high level, a higher level of mutual trust and respect. So, whatever, I mean, because of the transparency, but also because they can see how the company is. They can see how the, if the company is successful, they're going to be successful.
And if I'm successful, the company is going to be successful. They can see that give and take. And what I see with some organizations, no matter what you try to do, if you're not creating that, your culture isn't very strong. The other subtle difference is, I think a lot of companies that, that don't focus.
Or try to give their employees the financial story or the financial picture, and we're driving results through one priority at a time, one KPI at a time.it can feel to the employee, like, what am I doing all this for? You know, maybe I'm doing it for a paycheck, or maybe there's a profit share at the end, but I don't see the connection and I don't recognize how my.
KPI performance actually drives bottom line results because I don't see those results. And I think there's a big opportunity there. An analogy I like to use as I go back, I'm a big football fan, is that if we had a team on a football team that, and we, you know, the ultimate KPI would be three and a half yards, right?
Every play we watch that we get three and a half yards every play. We're definitely going to get to the end zone. Right. But if we focus on that KPI that much, everybody's heads are down on that KPI and they don't realize there's a wide receiver that is wide open in the end zone. And I think it just opens up people's minds of what the possibilities are and the innovation comes out.
They figure different ways to get to the same goal. quicker, I think, than getting people so focused on what's my KPI, you know, I think KPIs are important because that drives line of sight. It's what I do, but if you can get to that point that you just don't see the wide receiver and then worst, the worst thing that can happen is that wide receiver that's been running the end zone wide open 1 day just goes.
I'm just going to run out there three and a half yards and turn around because no one's paying attention to me. The only way that I'm going to get attention is if I get three and a half yards. So you get into that kind of thinking. So I think that's the big difference.
Mike Goldman: I was talking to a client of mine earlier today, who we were talking about some leadership development she wanted to do. And I asked her what her, what was her primary goal? Like, why did she want to go do this leadership development? She said she wanted this group of high potential leaders. to become stewards of the company, to feel more quote unquote ownership and to feel like, you know, the company is me and I am the company kind of thing.
And it strikes me as we're having this conversation and I hadn't put this together until just now is that doing all these things we're talking about from an open book management, great game of business standpoint. I've got to imagine this, not training somebody on how to motivate better or communication skills, or, you know, this has got to be the best leadership development that I can imagine.
Like if people are understanding the numbers and understanding how the business work to make those numbers happening and developing many games based on that, know, to me, I can't imagine any better, you know, I don't want to use the word training because to me that word training is like fingernails on a blackboard, but there's
Rich Armstrong: It's development.
Mike Goldman: for people to truly be leaders in the organization.
Cause even at the lowest levels, you've got them acting that way.
Rich Armstrong: It's very foundational, totally agree. And I say this and I know it's, but. I think that great game, And this practice and framework definitely does a good thing of building companies, but it really builds people who end up building companies because I mean, and you know, the story at S.R.C. as well is that we've done it through spinning off a lot of businesses. We're a true holding company, and I think the only way that we were able to do that is we had people. That we're ready to go run a business, not run a, you know, a product line or, you know, some initiative or project. We had people that are ready to go run a business because they could read a P& L on a balance sheet and cash flow.
it started there and that's the way we were able to scale the company in the way we did.
Mike Goldman: Love that. So we alluded to this earlier, but as we start to wrap up, tell us, if someone is interested in attacking this.
How does great game of business help? What are some of the products and services? You know, how do you help clients make this happen?
Rich Armstrong: Well, we certainly tried to make it accessible for anybody that wants to, you know, like self implement verse get support to help. So, There's a lot of, training that we have that is through the community online training where people say, I just want to learn about it. And then I'm going to go back and do it.
so where that starts is that we have, a workshop here in Springfield that we do over a 2 day period where you can come in and learn the practice, experience it, talk with other practitioners, that sort of thing. We have an annual conference that you could come to as well. That's coming up in September, second week in September in Dallas.
That is a place where all the practitioners come together and we. Teach each other how to go about doing this. All those things are available and very valuable. if you're doing it today or you want to start, where we feel like, we're the best dad is that we have coaches and I call them practitioner coaches.
These are coaches that have ran their companies on open book and great game of business for years and now are doing our coaching for us, including myself. That we go in and help companies do that. Not unlike a lot of companies, but we do, have an implementation process of doing that, a way to get people started very quickly.
and I just see it as a way to hold people accountable to that process for one, but it also just being able to avoid all the. You know, the roadblocks and the setbacks and things like that. You can avoid a lot of that with just somebody riding shotgun with you along the way. And I think that helps a lot too.
So, and that's done in just a coaching relationship. that we come in and help companies do this.
Mike Goldman: beautiful. So, so if someone does want to find out more and this'll all be in the show notes, but if someone wants to find out more, where should they go?
Rich Armstrong: Yeah, I would go straight to, greatgame.com is our website. certainly on LinkedIn, there's plenty of information about great game as well. so yeah, I would go there. they can learn a lot in terms of, what the options are to learn more for one, just to understand it more. but then there's,a lot of ways that we can help.
You, take these practices and make them a reality.
Mike Goldman: Well, I always say, if you want a great company, you need a great leadership team. I think what we're talking about expands that leadership team to kind of feel like everybody. So, Rich, Thanks for helping us getting closer today to it, to a great leadership team and a great company.
Really appreciate it.
Rich Armstrong: Well, you're welcome. And thanks for the invite.