The best, most successful companies feature highly participatory cultures in which employees routinely identify problems and share and implement ideas. High engagement cultures take a lot of work—the right information, the right team structure, management commitment, training time, and more. But a key factor that is often overlooked is the need to create a safe environment in which people feel comfortable dealing with conflict, taking risks, and trying new ideas. This blog talks about why this matters and how to get there. 

Liquidity options are plentiful for business owners: strategic sale, private equity, management buyout, family transfer, and leveraged recapitalization. Which path should you take? We know that 42% of the 2021 Great Game™ All-Star companies and many others walked a different path—implementing an Employee Stock Ownership Plan (ESOP). Apart from the fact that ESOPs can be a great exit strategy for open-book companies, here are the top five reasons why open-book management companies should consider an ESOP.

Using an ESOP for Business Transition Can Be Complicated, But Selling to an Outside Buyer Is Often Uncertain and Even More Complicated with Less Flexibility and Fewer Tax Benefits When people describe the pros and cons of ESOPs, often they note that the plans are complex. ESOPs are somewhat more complex than 401(k) and similar retirement plans and do cost substantially more to install and somewhat more to operate, mostly because an annual appraisal is required for closely held companies. But ESOPs are not more complex than selling to a third party. The table below compares what issues come up in the sale of a company to an ESOP compared to a sale to a third party. It was prepared with the advice of professionals who have done both kinds of transactions. The table indicates that the overall level of complexity is similar, but ESOPs are much less risky in terms of the likelihood of finding a buyer. They are also considerably less costly, mostly because in the case of a sale to a third party, in addition to substantial legal, accounting, and sometimes other fees, the price paid to the seller is usually reduced by brokerage commissions paid by the buyer.  Sales to third parties also do not qualify for special tax benefits, as is the case with ESOPs.

    In October 2019, Rick Hedden retired from SRC after 36 years. He was 59 years old. At the time, his shares in the company’s ESOP plan were worth seven figures. But the lessons he learned from playing the Great Game of Business over his career at SRC might be even more valuable. It helped him live his version of the American Dream. Here is his story.

The War for Talent is now in full swing. As the economy continues to reopen, companies have begun hiring again in earnest—driving the unemployment rate closer to pre-pandemic levels. At the same time, the number of open jobs in the U.S.—an estimated 9.2 million—is now breaking records. It’s one of those rare times in recent history where the number of job openings exceeds the number of unemployed people actually looking for a job.

  The Company's Largest Shareholder Think about how most people you encounter daily don’t really enjoy waking up and going to work every day if they go at all. When many (or most) people reach a certain age, they find it more comforting to think ahead to retirement than focus on what they might need to do that day at work. And yet there is an associate at our company, SRC, who still chooses to come to work even though he’s seventy-one. His job on the factory floor pays him about $31,000 a year. He doesn’t continue working for the pay; he shows up every day because he sincerely loves his job.

We run SRC with a lot of participation, but it is not a democracy in the political sense of the word. A political democracy derives its authority from the consent of the governed. A company derives its authority from the consent of the marketplace. The people who work for a company may think it’s just terrific, but they’ll have to work somewhere else if the company doesn’t make money or runs out of cash. So the market tells us what a lot of our decisions have to be. Often the trick is to recognize what it’s saying.

  During March 2020, when the COVID-19 pandemic reached the U.S., it not only impacted the health of many Americans but also quickly resulted in economic instability: thousands of businesses were shuttered, the unemployment rate spiked, there was a significant drop in personal consumption expenditures and GDP plummeted. However, the U.S. government intervened, helping to stem further declines by offering unemployment and stimulus payments to eligible individuals as well as programs such as the Paycheck Protection Program to assist businesses in continuing their operations. As a result, the U.S. economy began to recover; still, it has lost ground since early 2020.

When it comes to deciding upon an exit strategy, owners of closely-held businesses have a lot to think about. Faced with the frightening prospect of turning over the business they have worked so hard to build to new ownership, they might worry about what will happen to the company – and their employees – once they’re gone. Selling the business to a third party isn’t always a welcome or viable option. But if there isn’t a qualified management team or successor in mind, what’s a business owner to do?

      A company is only as good as its people. Everyone knows that. So why is that in so many companies the vast majority of the information-hoarding and decision-making happens only at the top? Why have we been holding onto a managerial system invented decades ago to fit an industrial society that tells us that only the CEO and the rest of the C-Suite are smart and capable enough to drive the company forward?

How Healthy Competition Drives Continuous Creativity And Productivity At SRC By Jack Stack   I’m a big believer in the positive power of competition. I believe it’s a universal truth that all people like to win—and hate to lose. But as I’ve written about before, losing is also an opportunity to learn and to improve. So, why wouldn’t we try to build in some of that healthy competition into the workplace? To take some of the drudgery out of our day-to-day routines and spice things up with some competition? At a fundamental level, that’s what The Great Game of Business® is all about.

Back in mid-March 2020, Chris Hurley, the co-owner and CEO of Russell & Abbott Heating and Cooling in Maryville, TN, was in a dark place. The COVID-19 pandemic had begun its rampage and the country was beginning to shut down in response.