Jack Stack is the founder and CEO of SRC Holdings Corporation, an award-winning, employee-owned organization based in Springfield, MO. He is also the author, with Bo Burlingham, of The Great Game of Business and A Stake in the Outcome. In this interview, Stack discusses how employees can be empowered to innovate through the use of open book management, as well as the commonalities among the Top Small Workplaces finalists that he found as a one of this year’s judges.

Your regularly speak about how open book management can positively impact people’s lives and workplaces. Could you elaborate on some of the benefits for employers?
I think most companies are “command and control,” and they’re optimizers. They’re trying to squeeze everything they can out of the organization – overhead and efficiencies, for example. In fact, I remember hearing about one factory not too long ago that ultimately got rid of their human relations and accounting departments.

Well, if I do a really good job optimizing, I could probably only add one or two points to the net income [of SRC]. But if I create an organization of innovators – of creators, entrepreneurs – and they come up with a new idea or a new business, the margins on being ahead of the curve, rather than trying to optimize, are much more profitable.

In business there are always going to be winners and losers, and globalization is changing the landscape constantly. If you’re not going to be an innovator, you’re probably going to be caught sometime, somewhere, some place. So the idea is that if you can get [employees] to act and think like owners, they’re constantly developing, innovating and creating. That’s a measure of the success of the business – it’s not in the optimization.

When you’re talking about sharing the information, is that for employees at all levels?
It starts the minute you’re hired. It doesn’t matter whether you’re an intern, whether you’re hired permanently or whether you’re flex-time. We’ve got one company that has 90 flex-time students that work whenever they can. We teach them [about] income statements, balance sheets and cash flow statements for a minimum of one hour every week. We go through it with everybody, line by line, [looking at] how efficiently they’re using the money that we’re giving them, where the money is at and how quickly they can get the money to reemploy and reinvest in their ideas and opportunities.

Think about a freshman in college who goes to school and doesn’t have any idea how the curriculum fits into the lifestyle of business. He comes [to work for one of my companies] for two or three weeks, and all of a sudden begins to realize, “I get why engineering should support sales, and why sales and marketing are an expense to promote the growth of the company. And I now begin to see, as a result of the income statement, business from a different perspective.” You might not see how everything fits together in your major, but if you can come here and fill out our scorecard, you can really begin to see how everybody comes together and how they can truly make a difference – and that if they all make a difference, the company is outrageously successful.

You met with the Top Small Workplaces judges in June to select the winners from the pool of 2007 finalists. What did you learn about the companies that had to overcome critical hurdles? What commonalities do they share?
I think what happens is that they begin to establish patterns. I think [author Jim] Collins was right: In order to sustain over a long period of time, it isn’t about prismatic leadership; it’s about patterns.

The companies that really do survive are those that have good patterns – just as good coaches and good teachers have their patterns. And once business starts working a pattern, it takes managing out of the process. No longer are you managing people, you’re beginning to manage a system.

The other thing is that, every day one opportunity overcomes another opportunity, and one opportunity gets left behind. So the whole idea is that you’ve got to have innovation in your organization to create opportunity. And you have to realize also that taking a punch and falling on the canvas is part of the game. That defines the character of the company.

You’ll be giving the Keynote Address at our Top Small Workplaces Awards Dinner on October 3. Could you give a preview of what you’ll be speaking about?
I’m working with a title of “The Significance of Honoring Excellence.” I think we need to be talking about entrepreneurship and about these people that are creating jobs and a better way of life. I think it’s something to be proud of. You don’t hear about it from the Democrats, you don’t hear about it from the Republicans; you don’t hear about it from the journalists. We’re too focused on devastation and destruction. I mean, what’s the point?

So I think we need to make [the finalists] feel special, like heroes. And I think we need to talk to them with the understanding that we all have blemishes, we all have failures. But enjoy what you have and pass it along. The concept would be to pay it forward, and the people in the audience need to realize that they need to pass along their successes and their stories and best practices.