Every company should have a vision for itself. Jack Stack, CEO of SRC Holdings and the founder of The Great Game of Business, says, "Having a 10-year plan can help overcome unexpected surprises."
Recently, Rich Armstrong, President of The Great Game of Business, and Steve Baker, Vice President, "sat down" (via zoom) with Jack to learn about the 10-year vision for SRC Holdings in a post-covid world.
Here is a cross-section of that interview:
A bumpy plane ride. Yeah, that's the theme, isn't it? Kind of wrapping up the 10-year plan and getting ready to roll it out on the tarmac?
Yeah, today's January 20. And our fiscal year starts February 1. So, we were targeting our organizations this morning, saying we are landing this plane. It has been an extraordinarily bumpy ride. Nobody has gotten hysterical on the plane, and everybody has remained relatively calm during this stormy, rough ride. I think it's been the discipline of the culture that's made us able to stabilize, adapt, change, bring the plane in, and then get ready for another takeoff. So, we've been working on the takeoff for the last quarter. We're launching the next 10-year plan, and we're really excited about it.
Prefer to listen to the interview? Here it is in it's entirity.
You want to talk about the 10-year plan that's coming up. People, what's your vision for the company, the economy ... let's start with the company?
Well, I don't see any changes that have occurred over the last 40 years. I think we'll go on a 10-year run. We'll have some bumps in that 10-year run, and I think we'll have a crisis after a 10-year period of time. We'll have to figure out what that crisis is to the best of our abilities, but there will always be a bump in the road. I mean, it's not always going to be an easy ride. The whole idea is to make absolutely certain that when that bump hits, you know, you don't get hurt. And if anything, you can get stronger as a result of it.
So when you have the kind of value proposition that we believe in — jobs — then once we hire somebody, it should be their decision to leave, not necessarily the leadership team's decisions. So we have to have answers to very tough, unexpected surprises. I think the only way we can overcome the unexpected surprises (I've thought about it for a long time) is that you have a 10-year plan. Okay, let's say five of them are probable. I guess people understand that in the evolution of a plan, you learn a lot. The plan you made and then applied gets added to the next evolution of the plan.
So, if you're not really planning and you're just living it day to day, you're not learning anything from what you did. But, understanding deviations and variances to plans make you stronger as a community. That provides the diversification that you need to eliminate the paranoia in terms of what will happen if something goes wrong or somebody drops off the table.
So, we have been advocates for a long, long time to sit down and say, okay, "What's the consensus of the people inside the organization?" And what are their feelings in terms of where they think the markets will be, what will be the new innovation, the worst capital, and the flow with new administrations? So, we go through a lot of analysis regarding where we fit in terms of the organic products and services we have. Will it continue to grow? Which ones will be obsolete? And, how will we put them together? So, we spent a lot of time putting this 10-year plan together with a hairy audacious goal.
At the end of our 2009 plan, we began building a war chest, estimating that we were coming out of recession and probably going on a run for about ten years before hitting a wall in 2020. We knew we had to figure out how to make hay when the sun shines or the clouds come in. We had met plan, which is an extraordinary event, right? And now everybody's looking at what's the next wild ass big hairy goal for the next ten years?
We had rolled out the first element of what that plan was. Our 10-year plan going forward was based on what we'd learned from the last four 10-year plans since each of those helped us to get stronger. For example, our biggest problem in the previous ten years was constantly outgrowing our capacity. Okay, we were scaling, we were growing, we knew the stock price was going to the ceiling, and we were straining to meet the expectations of the marketplaces we play in. So we would run into building problems and knowing where we're going to put the business. And then that comes in long lead times on regulations and permits.
We stopped once in our development over those ten years because they initiated an Endangered Species Act of Indiana bats. We had bats on our property, and we couldn't build on the property until the bats left in October. I mean, you think that is funny, but it's true.
In this year's plan, we've taken stock of all the properties and communications from our people and created a visual footprint regarding how we're going to fill in all of these real estate developments. That will be the elasticity that the organizations need to grow their business. It is the satisfaction that we've already established the groundwork for growth and shortened the lead times to get up and running. So, we have a visual aid to tell people what we see as the real estate rental income over the next ten years.
So, it's like, you have this massive blueprint with empty spaces in it. If you look at it from 40,000 feet, it is just an opportunity waiting to go into effect, okay? We listened to the people through the High Involvement Planning process, and they told me what they're going to do over the next five years to have the form, fit, and size to adapt to their opportunities.
So, we have the 10-year vision, the five-year plan, and how it fits into the squares. Any squares that can't fit, we're looking at building other elements of the real estate industry. We're looking at rental income as diversification in our business because we have learned that rental income is really good in a downturn. Rental income doesn't change. While you know, there's a tremendous irony of that going on right now. Property values are really high right now, and rental income is really high right now. It's steady right now, even though we're in the midst of a pandemic. So, it'll only be a wise decision. So far as our strategic thinking, that's one more element we can sustain the earnings during a rough period. It's a strategic initiative as much as an operational opportunity for all of our subsidiaries. So, I don't really think it's crazy.
Well, it's great because that's exactly where we're headed. How do you even begin to envision this? And I hear you saying; we're building the box before we need it. And historically, we've outpaced the boxes that we built. I mean, we've done it faster than we planned it.
We're wall-to-wall. I'm just waiting for the next general manager to come in and say I need another 150,000 square feet. To get 150,000 square feet, you know that you could lose the deal with the lead time. It's not that easy anymore to acquire 150,000 square feet. So, what we have to do is be ahead of the five-year plan. But we can also be looking at this thing from a standpoint that will be a healthy return on investment and will last a long time. And if we're ever wrong with the investment, we can then sell the investment. So, this is a low-risk, high-return type of analysis that we do when we put this strategic plan together. You know, it's constantly looking at your plans and what could go wrong? Okay, I say let's figure out how to build a floor. Then when we do hit the floor, we're not going to get knocked out.
Yeah, exactly. So the idea about outpacing or outgrowing capacity is something we've learned over the previous 10-year plans. Another one you touched on was diversification. Talk about in what ways did diversification become even more apparent in 2020?
I tell you; I think that's a great question. But I think it needs to be established to everybody that we had the highest concentration of retirees that we've had in the company's history. It is incredible to have a 38-year-old company and see how many people have stayed with us for a long time. Okay, we have everybody. Thank God we got a system that we can bring people in and bring them up to speed really quickly because of the processes we have in building business leaders. What it really comes down to is how much stretch can you really give them, especially when they're brand new and inexperienced? And so, one of our biggest challenges is obvious. We got to accelerate the training; we got to accelerate the base, accelerate the opportunities that people have in front of them. So our investment in diversification will have a lot to do with the training programs that we're going to be putting in place. To fill all these buildings and take advantage of these opportunities, we have to spawn entrepreneurs to fill this blank vision.
Alright, so we've got two elements of diversification. One was that we wanted to buy a business. As of this morning, we made an offer on another company. Alright, so we will have another business opportunity, a high-volume opportunity in our wheelhouse. It'll be delivered to the board on Friday along with the real estate plan.
As a diversification method, we go out to the floor and ask our associates to give us their plans and contingencies. We then take those to the board.
So, our form of diversification in the future is, our people will have a new opportunity for new business. Plus, they will have the rental income with a vision of turning our properties over to retail or warehousing or logistics or manufacturing or something of this nature. So, we have that. We have a normal, organic plan with innovation. On top of that, we have a plan if that doesn't work; we know what we will do and have another business opportunity in front of us. As a matter of fact, the new business we are looking to acquire was a Great Game company that was very successful. We wrote about them in the book, The Great Game of Business. It's kind of funny that we stayed with these guys for such a long time. They've done really, really well and scaled really fast. And so, you know, we can come in there, provide some equity if the deal goes through, and then help them. And then they'll help us relative to our investments and our diversification.
I want to back up just a bit because we kind of glossed over that we just put a 10-year plan out there. There's a lot of people that may be listening going ten years. Are you kidding me? I cannot put in next month. Can you talk a little bit about that? Why SRC? What is the importance behind goal setting, and how that all ties in? Because I think people are trying to wrap their heads around a 10-year plan.
I think people miss the opportunity. People in your organizations absolutely love to be going somewhere. I mean, they get tremendously excited about having this ladder, okay, and participating in it. I mean, I don't know why people cannot get it. I think they're missing an element of productivity, motivation, and engagement.
We're a competitive country. Alright, we thrive on competition. How can you have competition without having any kind of a goal? And what are the benefits that you get by just the attempt? I mean, the slips and the mishaps teach you so much in terms of how you can improve and how you can get better? I mean, life is going to be boring without a plan. Okay. I mean, to me, it would be.
Yep. What I hear you say, and we see with the clients we're working with, is that it's a whole other level of engagement, right? And getting people to really see what the future holds for them and where they can fit into that. And you can't do that without setting big goals. And so that's really interesting. The only other thing I want to talk about, you talked about learning from the past, right? We just went through a crazy ride, you know, landing the plane. But we always learn from the past, but this past year, there have been many lessons, I'm sure. And I'm just curious about what has been your biggest takeaways; what are the biggest lessons learned that's maybe guiding your decisions going forward. Based on what we went through the last 12?
I think it's an affirmation again; I don't think it's a lesson learned. It's an affirmation that you will get through the worst crisis if you believe you can get through the crisis. And the fact is that there is always going to be a crisis. Now, some people are older, okay. And I've been through these crises before or one kind of like like it. So this is another thing we got to get over, okay. But it is really such an important thing to be able to tell people, you know, how life is short, and all the changes that it makes. And, you know, this pandemic is horrific. But it's a bump in the road. It is. And you have to be able to tell people, and they will believe if you tell them, that they will be out of this thing and how to get out of this thing. There will be better times. I mean, it's an affirmation of this whole idea of planning. You know, we planned for a bump in the road, with never having the specifications that are today. But the whole idea of the plan is knowing what you are going to do when you get out of it? Alright, so this is nothing more than just an affirmation in terms of what we've always believed in what our culture is here. "Okay, we'll handle it ... we'll handle it. Okay, calm down. It's bad. We'll fix it. And we'll get better." And what else is there to do? Right?
Wallow in victimhood; that's the other thing you can do.
Yeah, that's true. That's true.
You have a choice. And I will tell you that, you know, especially for our listeners, who were in the beginning part of their journey, or in a really challenging part is that working here at SRC, you know, the one thing that I love about it, maybe more than anything else is we win here. We figure it out; we win. And just knowing that and that 2000 other people are pulling the wagon, the same direction helps. So, when you say it's an affirmation that we will get through whatever the world throws at us, if we believe we will, that belief is a huge takeaway, and that as leaders, we need to do that in all of our organizations. So that's, that's a good thing.
I also think fundamentally; it's financial literacy. I think open-book management is about teaching leadership. That's why we do it because we want more leaders, alright. And we want leaders who have the tools to be able to succeed. And so, I don't think there's anything more misused than the financials of a company because so few people know how it works. So, I mean, the reason that we do this is to be able to create leaders. Some leaders stay in line, and some of the leaders go to other companies to become leaders at those companies. And some of it blends over into not-for-profits and communities. And, you know, that's what it's really kind of all about. Teaching people how to be successful, right?
Now courage is a different thing, okay, to take risks and to take the jumps. And, you know, maybe courage comes with age and experience, but it also comes from failure, right? It comes with getting knocked down and having the desire to win, get back up, and take the next punch, you know. So, like Tyson said, "you don't have it without a plan," right?
You have a plan to get your first punch.
That's why you have a contingency plan.
Hear Jack Speak Live at the Annual Great Game of Business Conference this September. Tickets on sale now.