Category Archives: 2015

Learning about “The Great Game of Business”

wpid-20150209_195200.jpgPost written by Larry Baumgart

We had a great conversation on The Great Game of Business, by Jack Stack. This book follows along the business events in a company that was involved in a management buy-out. The Company is a manufacturing firm in Missouri. They were one of the first “open-book” management style management teams to have great success. Here are some high-lights of our conversation:

Competitive spirit – The Company asked these questions — “how do we get everyone in the competitive spirit? How do we get everyone pulling in the same direction?” They changed people’s perception from that of an employee to that of an owner. This allowed everyone to have a chance to win and have fun at the same time.

Sharing information was critical in their journey. They felt that in the absence of information people will fill in the blanks with their own ideas and bogus facts. They wanted to avoid misinformation and filled the gaps before it really began.

It takes a global perspective to fully understand how a business runs. Understanding of the production function or the sales function is not running a business. It took a breaking down of the silos that allowed everyone to see the entire field. The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the financial outcome, good or bad.

The firm started out refurbishing large industry engines. But in some ways they felt that engines were incidental to what they did. They defined themselves as an education business. They taught people about business. Everyone was instructed on how to read an income statement, balance sheet and cash flow report. They taught their staff the difference between income and cash flow. Their primary objective was to focus on and increase cash flow. The only way to be secure is to make money and generate cash. Everything else is a means to that end. You can have great customer service and fail.

In most companies, people are taught how to do their 9-5 tasks and not given information on the larger picture. They are not taught how they fit in with the larger picture. So a gap grows between managers and workers. Sharing information and giving them a stake in the game can reduce that gap.

They firmly believe that every department should make forecasts of the business activity. Business got off track when they stopped asking people to make forecasts.

These are some of the highlights of our conversation. If you did not get a chance to finish the book, you might want to keep it on your reading list. It is worth the read.

Thanks!

 

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A “Capital” Discussion

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The choice of “Capital” by Thomas Piketty may have been slightly crazy to choose, at close to 700 pages.  Larry, LuMarie and I read between 100 and 300 pages each. Hikaru read the entire book last year for a class at Kalamazoo College and filled in some of the points. Thanks to LuMarie, we also had the following articles to browse while waiting at the Michigan News Agency: “The short guide to Capital in the 21st Century,” “Piketty’s “Capital,” in a Lot Less than 696 Pages,” and Tom the Dancing Bug (cartoon). You can find these articles and more at the publisher’s website.

Our particular discussion included the point that Piketty used literature to study wealth since not many metrics existed otherwise. In fact, it was noted that there was a high amount of Jane Austen moments. Piketty also referenced Balzac quite a bit. What the literature angle suggests is that the general population was aware of the differences, and expected certain incomes for certain positions. It was also noted in our discussion that not much changed in the 19th century, yet going back 50 or 60 years now would not work without converting the difference to be able to compare.

Capital

Big changes came because of World War I, World War II, and a population growth (that has since slowed down). One addition mentioned at our discussion was the effect of labor unions. We also returned to the point of education. Could education be the answer? Piketty’s suggestion is to have a world tax.

The articles mentioned above do a great job of clearly summarizing the book. Knowing that, is the book worth reading? What I liked was how the book was organized, and that you don’t need to be an expert in economics for it to make sense. While LuMarie still plans on finishing “Capital” because it is being considered such a keystone book, I may pass, at least for now, and move on to the next one. However, I definitely recommend reading what Piketty wrote if you have the time to do it.

A few other points to note:

  • Some inequality is desirable cause it provides incentive to improve.
  • People with capital have power to make better investments.
  • A question that came up: Is there a huge inequality in non-capitalistic countries? One conclusion is that it is human nature and does not specifically exist in a capitalistic society, which many are interpreting from the study.

Is there an answer to the question of evening out the difference between the wealthy and the poor? Will the wealthy continue to inherit and be the most powerful? What are your thoughts?

Thanks for reading!

Stacy (a.k.a. “The Book Lady”)

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