OWNERSHIP RULE #1:
The company is the product.
To build a culture of ownership, people have to understand that they have a
direct role to play in creating the kind of company they want, as well as that
creating such a company is their responsibility and the ultimate goal of the
enterprise, the end result of all their efforts.
OWNERSHIP RULE #2:
A company isn't worth anything if nobody else wants to own it.
If your aim is to build value in a company, you have to learn how to look at it
from the outside in. You can't view it the way most people in business do, from
the inside out. You have to see it as investors see it-coldly, objectively,
without any sentimental attachments to people, products, buildings, history, and
culture. Why? Because people don't put money into a business unless they feel
it's a good investment for them. They won't invest in your dream if they don't
believe they can earn a good return. If you can't promise them one, they'll look
elsewhere.
OWNERSHIP RULE #3:
The bigger the pie, the bigger the individual slices.
This is one of the great challenges in equity sharing-namely, the difficulty of
getting people to think about what's possible, rather than focusing on what they
have. You give them stock hoping it will motivate them to grow the business. You
want them to be thinking, "Gee, how much could this stock be worth in ten years?
What can we do to maximize its value?" Instead, they see only what's on their
plate right now and ask, "How much did so-and-so get?" It's a disease that leads
people to miss some great opportunities. Unfortunately, there's only one cure
for it that I know if: the benefit of hindsight.
OWNERSHIP RULE #4:
Stock is not a magic pill.
Granting employees stock 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 employee and start thinking about what's best for the company as a whole.
Old habits die hard.
OWNERSHIP RULE #5:
It takes a team to build equity value.
An ownership culture is built on mutual trust and respect, and it's almost
impossible to have either one unless people throughout the company are engaged
in frank, open, and honest communication about the state of the business.
OWNERSHIP RULE #6:
Failures are fine as long as they strengthen the company.
Everything depends on making the company successful. Yes, you want all the
players to have a chance at the rewards. But the rewards come only after success,
not before. As long as people understand that rule, you can handle the failures.
You can learn from your mistakes. The company gets in trouble only when people
lose sight of the common goal.
OWNERSHIP RULE #7:
Ownership needs to be taught.
As wonderful as a business design might be, it won't produce a company of owners,
or a culture of ownership, all by itself. If people don't recognize the
opportunity they have to create some financial security for themselves and one
another, they won't be motivated by it.
OWNERSHIP RULE #8:
You build an ownership culture by breaking down the walls.
You have to show people that ownership means opportunity, not exclusion. You
have to convince them that, with ownership, they can go as far as their talent,
their will, and their energy can carry them. They won't be blocked by class
distinctions, by bogus barriers, by somebody else's decision to keep them out of
the club.
OWNERSHIP RULE #9:
Getting out is harder than getting in.
The issue that almost all entrepreneurs, chief executives, and company owners
eventually face: How do you leave with a clean conscience? After 15 years, I
still haven't finished working on this one.
OWNERSHIP RULE #10:
To maximize equity value, you have to think strategically.
The value of business depends much more on than having efficient production,
great customer service, on-time delivery, and all the other things you think
about from an operational standpoint. You have to start looking at the business
strategically if you're going to increase its equity value. You have to think
about improving its position in the marketplace.
OWNERSHIP RULE #11:
You create wealth by building companies, not by selling products and services.
If I sell you a pen, I can make a penny. If I sell you the pen company, I can
make $10 million. When you play the game of business at the highest level, you
understand that the company is your product, not the pen.
OWNERSHIP RULE #12:
A company is only as good as its people.
To build an ownership culture, you need to get the cycle of leadership
development going-with people coming in, learning skills, moving up and making
room for others, learning more skills, moving up again, and so on. Setting up
such a process is a long-term, arduous, often frustrating undertaking, and it
will absorb a huge amount of time and energy, but it's where all the big rewards
come from.
OWNERSHIP RULE #13:
Ownership is all about the future.
The value of a business depends not on how much money you made yesterday or are
making today but on what you're going to be making down the road. That's why
buyers are willing to pay a multiple for your stock. They believe the returns
they'll get in the future will pay back their investment many times over. It's
all about future earnings, future growth, future ideas, future cash flow.
Now that's a big concept, and getting people to understand it is the key to developing an ownership mentality in a company. They need to realize that they can directly affect the value of their stock-and their own economic situation-by learning how to operate in the present with an eye toward the future.
OWNERSHIP RULE #14:
You gotta wanna.
It's one of the higher laws of business I wrote about in my previous book, and
it's a fundamental rule of ownership as well. If I've learned anything on this
journey, it's that you make your own destiny in this world. You determine your
own outcomes. If you have the will, there's almost always a way. It may not be
the most direct route. You'll have to overcome a lot of obstacles. But you'll
get there eventually.