As the economy shows signs of an upturn, it may be OK to breathe a slight sigh of relief. But only a slight one. This story from the past will illustrate why.
In 1983, with prime interest rates above 20 percent and unemployment rates approaching 11 percent, Jack Stack and a dozen colleagues saved their jobs by purchasing a small engine-remanufacturing factory from International Harvester. Thus was born Springfield ReManufacturing Corporation. It was a difficult birth.
"Our debt-to-equity ratio was 89:1," Stack—the company's CEO—told Inc.com. "Let me tell you, you're brain-dead in that situation. You're on life support. We had bank auditors ... camped outside our doors. If we'd had one little slip-up—if we'd been an hour late with a payment—they would have rushed in and closed us down, and 120 people would have been out on the street."
The nerve-wracking experience had a profound impact on the way Stack runs the business today, and he attributes the company's current success to an unusual philosophy grounded in paranoia.
"A lot of businesses put up a plan to satisfy their bankers or because they think it's what you're supposed to do," he noted. "But our culture is, 'Let's find out where our weaknesses and vulnerabilities are and then build something to offset them.'"
Because of its hyper-cautious approach—defined by well-measured diversification—Springfield ReManufacturing Corporation has managed to avoid the massive layoffs endured by less-paranoid firms in the current economy.
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