After all, people would retire eventually. People would even die. All kinds of unexpected things might happen, and we’d be forced to buy back stock that might then be worth a lot of money. What would we do if we didn’t have the cash to pay someone’s estate $1 million or $2 million in one fell swoop? How could we make sure that we’d be able to meet

I can readily understand how owners fall into that trap—especially those who are very successful, who’ve built a certain amount of wealth. Sooner or later, you want to spend some of it. You feel like acquiring some of the nice things that are your reward for working hard and taking risks. As soon as you do, however, you notice that people are

Focusing on the Future The experiments couldn’t help but make SRC a stronger, better company. Then again, I could say the same thing about the other benefits of the new strategy. Together, they had the potential to take SRC to another level. By that, I mean they would turn us from a company that was good at operating in the present into one that

That’s a general rule, by the way. People don’t really start to learn about equity until their stake is worth enough to make a difference in their standard of living. Up to that point, ownership is an abstract concept.

2. Innovation and entrepreneurship. Beyond diversification, every business is under pressure these days to reinvent itself constantly, if only to keep up with changes in the competitive environment. To stay ahead of the curve, you have to institutionalize the process of innovation, so that it happens continuously and automatically,

As Sheppard kept reminding us, you have to design a business understanding that your biggest problems won’t come with failure. They’ll come with success. That’s hard. Nobody starts a business worrying about the dangers of success. You think, “I should only be lucky enough to have those problems.” But, in fact, success is often more difficult to

OWNERSHIP RULE #4 Stock is not a magic pill. It doesn’t change anybody’s behavior, at least not overnight. People don’t suddenly put aside their differences and join together for the common good just because they’ve become owners. When you’ve spent your entire adult life focusing on a job description, it’s difficult to stop thinking like an

The STP-GUTR game was also the catalyst for our high-involvement planning mechanism, whereby we get people throughout the company involved in our budgeting process. I realized that, as long as I and the other senior managers could control the bonus line, we could afford to delegate the planning function. If the budgets we got back were out of

Commissions Encourage Short-Term Thinking As it turned out, however, the commissions were too powerful. People were so focused on competing with one another to make as much money as possible right now that they never took in how much more money they could make down the road if they worked together. In effect, the incentive of commissions