Putting Some Vested Skin in the Game

In a Vested partnership it’s important for the company and the service provider to have what I often call “skin in the game,” or basically a commitment to making the deal work by putting their money and resources where their mouth is.

A real-world example of this idea was on display in the case of a janitor by the name of Tony Lee who rescued a failing factory in Ohio. His inspiring story is one of grit and commitment.

After leaving the Army in 1997 Lee took the only decent job he could find, accepting a janitorial job at an Eaton Corp. factory in Massillon, Ohio. Like a lot of U.S. manufacturing centers, Massillon has suffered from closed factories and thousands of lost jobs. Tony made the most of his opportunity, rising from janitor to foreman in four years.

But things got worse at Eaton. In 2002, the company started shutting down divisions of the factory. More than 900 workers in were laid off in Lee’s division, which was slated for closure at the end of 2002.

Lee refused to give up. After lots of study in the Public Library, he wrote a business plan detailing how his factory could survive and prosper.

Against all odds, he convinced a group of investors to buy the factory and keep it running. But there was a catch: The investors wanted Lee to have some “skin in the game,” so he had to raise $25,000 to purchase a stake in the factory.

Lee had to scramble to raise the funds needed for him to stay in the game—for him it was more than just some skin in the game—to use a poker term, the investors forced him to go “all-in” or lose the pot.

You can probably guess the end of this story. Today he’s co-owner of Ring Masters, a company that makes engine rings for industrial use, and he’s recouped that $25,000 investment several times over.

Vested Outsourcing is first and foremost a mind-set change in which the participants approach outsourcing differently, crafting relationships that move beyond simply placing butts in seats or employing transaction-based approaches to an environment where the service provider has skin in the game and has the freedom and responsibility to drive results and real value for the company.

Sometimes putting skin in the game means going all-in. Vested deals have skin in the game: both parties invest because they have a vested interest in making their enterprise work. It’s NOT a buy-sell relationship; it’s a win-win partnership.

[Image credit: 83 dollars by Seditious Canary via Flickr CC]

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