Les Schwab wasn't in the tire business; he was in the ownership business. He gave store managers 50% of the profits, requiring them to reinvest their share until they earned their stake. This turned employees into obsessed owners who consistently out-serviced and out-competed rivals.
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To ensure growth and opportunity, tire mogul Les Schwab mandated that store managers appoint an assistant and give them 10% of the profits. To enforce this, he decreased the profit share for any manager who failed to develop and promote their top employees.
A founder who hoped to one day sell his company to employees was advised to start now. Implementing an Employee Stock Ownership Plan (ESOP) early aligns the team with the long-term mission, shares the burdens of entrepreneurship, and builds a sustainable, purpose-driven culture from the beginning.
Instead of crushing competent rivals, Rockefeller transformed them into collaborators. He offered them willing partnerships, significant autonomy to run their divisions, and a voice in overall company policy. This created a "company of founders," aligning interests and ensuring that top talent would join him rather than fight him.
Ally reinforces its "brand is everyone's job" mantra by giving every employee 100 shares of company stock annually. This creates a powerful owner's mindset, directly linking the company's success to the brand experience delivered by every individual, from the call center to the C-suite.
Large corporations can avoid stagnation by intentionally preserving the "scrappy" entrepreneurial spirit of their early days. This means empowering local teams and market leaders to operate with an owner's mindset, which fosters accountability and keeps the entire organization agile and innovative.
While bonuses tied to revenue incentivize employees to perform specific tasks, they are purely transactional. Granting stock options makes team members think holistically about the entire business's long-term health, from strategic opportunities to small cost savings, creating true psychological ownership.
Schwab recognized that newer tire stores were unfairly burdened by higher rent-to-sales ratios. He implemented a system where every store, new or old, paid the same percentage of their sales as rent. This effectively subsidized new locations in their crucial early years, fostering sustainable growth.
Contrary to a shareholder-first dogma, these leaders operate on an employee-first principle. They believe that well-treated, empowered employees provide superior customer service. This creates loyal customers, which drives sustainable profits and ultimately delivers superior long-term returns for shareholders.
A service company's primary asset is its people. To prevent your best talent from leaving and becoming competitors, you must give them significant equity. This transforms their mindset from employee to owner, aligning their interests with the firm's long-term success and growth.
Long-term business sustainability isn't about maximizing extraction. It's about intentionally providing more value (51%) to your entire ecosystem—customers, employees, and partners—than you take (49%). When you genuinely operate as if you work for your employees, you create the leverage for sustainable growth.
