Discovery

August 2 013 THE QUARTERLY NEWSLETTER OF KOCH INDUSTRIES Spending a summer, starting a career Every year, a select group of college stu- College) signed on for roles with 11 differ- “Once you’re on board, you’re likely to dents receives an invitation to spend the ent Koch companies in Wichita. see some terrific development opportu- summer working for a Koch company. nities, especially given our growth rate, More than 50 interns are working for diversity and unique policy of reinvest- This year, hundreds of students accept- Georgia-Pacific this summer, including ing 90 percent of profits.” ed the opportunity to become summer 30 at GP’s headquarters in Atlanta. interns. Their roles are as varied as their Getting schooled “Our interns tell us what they like most is backgrounds. Some are accountants or being assigned real tasks and projects that In addition to internships and college analysts. Others are engineers or agrono- create value for the company,” said Molly recruitment programs, Koch companies mists. A few are artists. (This issue of Gregware, GP’s college recruiting manager. have made significant investments in Discovery was designed by one former college educations for worthy students. and one current intern.) Not all internships are office jobs. At least This year, the Fred and Mary Koch Primary goal 130 interns have site-based roles this sum- mer, most of them in engineering. Foundation is providing more Andy Ek, Koch Industries’ manager for “All of our interns are challenged to learn than 200 renew- college relations, says the primary goal of more about Market-Based Management®,” able scholarships Koch’s college intern program “is to Ek said. “We schedule learning opportu- for qualifying identify those students with the values nities with business leaders and MBM® dependents of and capabilities necessary for successful consultants and also assign focused proj- Koch employees careers at Koch and then convert them ects. It’s essential that they understand from 45 com- into full-time employees.” why we do what we do.” munities in the For those students who thrive in their How high is up? U.S. and . temporary roles, internships often lead Georgia-Pacific to full-time jobs with a Koch company The presidents of Flint Hills Resources, sponsors anoth- Victoria, – Bianca Garcia became a after graduation. Koch , Koch Industries and er 50 four-year process engineer for after graduating Koch Minerals all came to Koch straight scholarships. from Texas A&M-Kingsville in 2012. “When we end up making a job offer from college. So did INVISTA’s CEO. to an intern, our acceptance rate is high. Over the years, direct scholarship Those who accept really appreciate The same is true for several controllers, funding has totaled millions of dollars knowing they’ve got a great place to CFOs and other leaders. The executives and benefitted thousands of students. begin their career.” overseeing human resources for Geor- Personal donations from Charles and gia-Pacific and Koch Industries – Julie to educational institutions Since 2008, at least 220 interns based at Brehm and Dale Gibbens – also both and programs total millions more. Koch Industries’ headquarters have been found their first jobs at a Koch company. hired as full-time employees. That’s close “I think all of our college hires, whether to 8 percent of the Wichita workforce. “It’s obvious that we like to develop our they were scholarship recipients, interns talent internally,” said Dale Gibbens, or college graduates, really appreciate This summer, 145 students from 26 uni- vice president of human resources for the breadth of opportunities at Koch,” versities (ranging from MIT to McPherson Koch Industries. Ek said. www.kochcollegerecruiting.com

this issue… What a Shocker pg 2 Environmental excellence pg 4 Decade of fertilizer growth pg 7 Perspective: Dave Robertson pg 8 Postal Pipeline

This past weekend I attended some of the International Children’s Festival in St. Paul. I want to express appreciation for the op- portunities you give through this commu- nity event. It was great and I’ll go again. I guess I’m in a second childhood at age 72! Nancy Schroeder Shocker spirit – Employees in Wichita showed their support for WSU at a special event in Café Koch. Burnsville, Minn. Thank you for your generous sponsor- I have received many appreciative ship of the Shocker Pep Rally in Atlanta. comments about the event, including Creating a fan experience in conjunc- several who said it was their most fun tion with our men’s basketball team Shocker experience since graduation. playing in the NCAA Final Four was Having Arena on our cam- both exciting and daunting, but it pus has always been a source of pride and proved to be a tremendous success. to be able to take Koch Industries with us to Atlanta was heartwarming. Planning a party for approximately 5,000 fans was made a lot easier due Debbie Kennedy to the quick commitment from Koch Executive Director Industries and Georgia-Pacific. WSU Alumni Association Wichita, Kan.

I was not surprised to receive the great Thank you for hosting our tour of the news of your $1 million donation toward in Rosemount. tornado relief but still very blessed at Pine Bend is a marvel of modern engi- the responsiveness and generosity of neering. It speaks to the dedication and These “sway poles” were part of the entertainment Koch Industries. expertise of employees that the facility at this year’s International Children’s Festival. FHR has This gift will assist so many affected can operate efficiently, effectively and been the title sponsor of the event since the festival’s by the tornadoes in Moore and other safely for such long periods of time. inception in 2001. areas of Oklahoma. Flint Hills Resources’ dedication to Please extend a heartfelt thanks to those I know that Major Morris and the Arkansas/ workplace safety, public safety, the envi- at Koch responsible for the $1 million Oklahoma Division appreciate this ronment and the community at large is tornado relief donation. It is very much resource to bring hope to these families. to be commended. appreciated by those of us who live and work in Oklahoma. Major Charles H. Smith I hope these efforts will continue and Divisional Commander It certainly makes me proud of the com- & Western Missouri Division grow in the future. Salvation Army pany at which I’m employed. Kansas City, Mo. Yvonne Prettner Solon Minnesota Lieutenant Governor Sharon Frazier St. Paul, Minn. John Zink Co. Tulsa, Okla.

To “like” and follow Koch companies and leaders – Discovery August 2013 | Volume 19 | Number 3 including Georgia-Pacific, INVISTA, Flint Hills Resources, Editorial board Questions? Comments? Matador Ranch, Koch Pipeline and Charles and David Melissa Cohlmia Contact: Rod Learned Koch – visit Koch Industries’ Facebook and Twitter pages. Philip Ellender 316.828.6136 Rich Fink [email protected] Koch has donated $1 million or more in relief funds Jeff Gentry Letters and other submissions become the property of Koch Publication design following each of several natural disasters, including Dale Gibbens Caleb Swank Industries, Inc., and may be reproduced in whole or in part, Hurricanes Katrina (2005) and Ike (2008), the Greg Guest Amber Vogts including your name, for any purpose and in any manner. Charles Koch Koch Creative Group earthquake and tsunami in Japan (2011), and the Jim Mahoney Letters may be edited for length or clarity. www.kochind.com Moore, Okla., tornado (2013). Dave Robertson ©2013 Koch Industries, Inc. Koch is an EOE. M/F/D/V 2 International News

England – Getting a clear look at production. Scotland – Tea and tweed in Texas a century ago. China – The 6/6 celebration for INVISTA’s expanded nylon 6,6 plant.

Goole – Why settle for celebrating a Dundee – This coastal town on the North “Having someone in Scotland appreci- single anniversary when you can cel- Sea averages almost 30 inches of rainfall ate our accomplishments makes this ebrate three at once? per year. Matador Ranch, on the other even more special. That was ’ approach hand, has received less than one-third “We’ve got a picture over at the hunter’s as its U.K. business unit celebrated three that amount this year. lodge that’s more than 100 years old,” anniversaries in June. West Texas and Eastern Scotland may Kilmer said. “It shows two Scots in tweed caps stopping for tea out here That month marked the tenth anniver- not seem to have much in common, but on the prairie. sary of Guardian’s first float glass in May, when Matador won the American production facility in the U.K., the Quarter Horse Association’s highest award, “Maybe this award and newspaper fifth anniversary of its laminating it attracted plenty of attention in Dundee. article will prompt some other Scots line there and the first anniversary Dundee was home to the Scottish inves- to ‘cross the pond’ for a visit with us.” of its coatings line. tors who, from 1882 until 1951, owned Shanghai – On the sixth day of the sixth Guardian originally entered the U.K. Matador Land and Cattle Company, one month, INVISTA celebrated the suc- market in the 1970s as a provider of the largest and most successful cattle- cessful start-up of its expanded nylon of toughened glass for patio construc- raising operations in the U.S. 6,6 air bag fiber plant in the Qingpu tion, a segment that was booming The farming editor of Dundee’s local District of Shanghai. at the time. newspaper, The Courier, emailed the INVISTA has doubled that plant’s Since then, Guardian has invested more ranch as soon as he saw the press release capacity, making the company the first than £100 million in its U.K. operations, announcing the AQHA’s 2013 Best producer in Asia capable of manufactur- located in Goole, East Yorkshire. Remuda Award. ing 20 kilotons of air bag fiber per year at a single plant. The Triple Anniversary Celebration This award is a singular distinction for included tours of the plant and its ranchers because it recognizes the qual- Plans for this expansion were an- interactive glass room, a new products ity of the horses used by the cowboys nounced in 2011, just three years after display and an official ribbon-cutting rather than quality of the beef they raise. INVISTA first came to the region. for the plant’s new, £35 million magne- The Matador name “is still well known Rapidly growing demand for automo- tive air bag fiber in Asia has fueled the tron glass coater. here,” wrote the editor, whose great- company’s investments there. Scott Thomsen, president of Guardian’s uncle was a shareholder. He asked if the Global Flat Glass Division, delivered the ranch would provide some photographs “This is now the largest facility of its keynote speech. He noted that the new and data for a story he wanted to write. kind in Asia,” said Jeff Brown, executive coater would be used to produce high- vice president of INVISTA Performance Four days later, the headline “Dundee’s Surfaces & Materials (second from left performance Guardian ClimaGuard® Links With Texas Ranch,” appeared in in the photo above). “We’re pleased to Low-E glass products. The Courier. The article surveyed the share this start-up celebration with so Low-E glass coatings help save long history of the ranch, as well as its many distinguished guests.” by absorbing or reflecting heat energy most recent award. As mentioned in January’s issue of created by infrared sources, such “We’re very honored by the AQHA Discovery, INVISTA has other signifi- as sunlight. award,” said Bob Kilmer, Matador’s cant investments in China, including Last December, Koch Industries acquired manager, “and very proud to maintain plans for the world’s most efficient a 44.4 percent stake in Guardian, which is the great reputation of this ranch, which nylon intermediates plant at the headquartered in Auburn Hills, Mich. Fred Koch loved so much. Shanghai Park. 3 EHS excellence in action In May, more than 150 people representing “You exemplify the approach all of us Good business dozens of Koch companies attended the need to take regarding EHS,” Koch said, Five years after acquiring a nitrogen “which is a focus on real, substantive 2013 EHS Excellence Awards ceremony, fertilizer plant in Enid, Okla., Koch Fer- improvement rather than a wasteful, held on Koch Industries’ Wichita campus. tilizer invested more than $70 million to This annual event honors exceptional bureaucratic, check-the-box approach. expand the plant’s capacity. (The Enid performance in the areas of environmen- “We believe that by holding you and plant was already one of the largest nitro- tal, health and safety performance. There your innovations up as examples, others gen fertilizer facilities in North America.) were six award-winners this year, includ- will be encouraged to do likewise.” Unfortunately, despite everyone’s best ing two from Georgia-Pacific and one each “Safety and environmental excellence efforts, once the expansion was com- from Flint Hills Resources, INVISTA, is clearly different from compliance,” plete, the plant failed to meet its produc- Koch Fertilizer and Koch Pipeline. noted Dave Robertson, “because it is tion and environmental goals. above and beyond compliance. The urea plant test team recognized that “It means continuously improving our this was because, in part, the operations safety and environmental performance group did not have the working knowl- to satisfy the expectations of stakehold- edge needed to bridge the gap between ers, which is usually a receding horizon.” expectations and actual performance. Jim Mahoney’s comments included an The team decided to begin its observation about how those outside of problem-solving process by applying Koch may be evaluating our performance. an MBM® framework. “Recently there have been a lot of tough This entrepreneurial approach led to the establishment of a multi-skilled team process safety issues for others in indus- with the right knowledge for develop- try, with some very serious incidents, Jim Mahoney introduced each winner at the May 14 ing and implementing an innovative like those in Texas and Quebec. awards ceremony. strategic plan. “In part, our risk profile needs to keep Attracting attention The team’s goals were to achieve opera- evolving, because incidents like those tional targets, decrease environmental Charles Koch, KII’s chairman and CEO, often change the expectations of com- emissions and releases, and realize Dave Robertson, KII’s president and munities and regulators. energy savings. COO, and Jim Mahoney, KII’s executive “But it is even more important that Was it successful? Remarkably so. vice president for operations excellence we enable our people to learn how to and compliance, all participated in the eliminate all serious safety and environ- After gaining a better understanding of operational issues, the team succeeded award presentations. mental incidents.” in several ways. In his keynote address to attendees, The following examples are just two It was able to recapture more than Charles Koch complimented the innova- instances of Koch companies success- 2,000 tons of from the plant’s fully achieving EHS excellence. tion and efficiency of the award-winners. scrubber, reducing the plant’s emissions (which are tracked on a closely watched public database) by more than half. 2013 EHS Excellence Award-winners As a result of that accomplishment, the ■ GP – Building Products: PPE plant is saving at least $1 million per Standardization Process year and no longer needs to spend ■ INVISTA – China: HMD EIA Project $4 million on a scrubber upgrade. ■ FHR – Pine Bend: Experimental Together, the team proved that EHS Analyzer Team excellence not only helps the environ- ment, but makes great business sense. ■ Koch Fertilizer – Enid: Urea Plant Test Team Our place in the community ■ GP – Consumer Products: Savannah Because of changing political, commu- River Mill nity and regulatory requirements (not to mention new business and operating ■ Koch Pipeline – Reputation Enhancement strategies), GP’s Savannah River Mill team realized the need for change. 4 As a result of these changes, the mill’s overall environmental footprint was reduced and a savings of $3.9 million in annual operating costs were realized. The team’s efforts also demonstrated an ongoing commitment to continued environmental excellence. This is essen- tial, not only for the long-term viability of the facility, but for maintaining a reputation as a place of value in the local community. Words of advice In addition to the awards event, there was a two-day EHS Excellence Summit which allowed professionals from across the company to share knowledge and best practices. Koch Fertilizer award – (L-R) Dave Robertson, Ev Shishkin, Charles Koch, Bruce Ainsworth, Steve Packebush. “We need to collaborate and employ the best knowledge, wherever it resides,” said That process began by re-evaluating the That point of view, combined with the Robertson. “I think getting this right is a facility’s environmental focus in hopes five dimensions of our MBM® frame- critical part of Operations Excellence. of better understanding (and defining) work, provided the foundation for a “So I hope you’ll take the time to learn the mill’s performance. strategic planning process. more about the programs and see how The team established a new “mental The process involved changing the they can be applied to what you do.” model” for what the mill’s environmen- organizational structure, expanding Charles Koch concluded his comments tal performance should look like. They ownership of environmental perfor- by noting that this year’s award-winners also took the view that environmental mance throughout the organization have demonstrated that they “are in the performance is a function of compli- and improving the way the mill identi- forefront of compliance and EHS excel- ance, environmental footprint and fied opportunities. resource stewardship. lence in general, and the prevention of catastrophic events in particular. “That is why we are celebrating you and your accomplishments here tonight.” http://www.kochind.com/Operations_Excellence/

2014 EHS Excellence Conference

April 28 – May 1 Atlanta, Ga.

For more information visit: http://khcwss.khc.local/ kiioe/ehs/default.aspx

Savannah River Mill award - (L-R) Dave Robertson, Brent Howell, Charles Koch, Chip Hilarides. 5 Visioneering

Although most employees don’t know “Steve asked us to think about what a Koch Equity Development and Koch it, Koch Industries’ treasury capability good competitive advantage for trea- Asset Management are also responsible spent much of the past four years under- sury should look like. In other words, for a portion of Koch’s liquidity. going a significant transformation. he challenged our vision, which, at the Koch Equity Development is the group According to David May, KII’s trea- time, was all about preserving principal that originated last year’s structured surer since 2005, that transformation and being efficient.” investments in Guardian Industries involved a significant change of vision Getting started and American Greetings. Koch Asset for the group, which is responsible for Management is a pension management managing the billions of dollars of cash As the company’s asset base has ex- group led by Randy Bushman. panded and revenues and profits have generated across Koch Industries. “One of the first things treasury had grown, so has its liquidity (what most of to tackle was how to earn a real rate of us might call cash on hand). return in this artificially low interest rate “In the old days, we invested a lot of environment,” Bushman said. our liquidity in short-term, high-quality “We had some good in-house models bank deposits and commercial paper.” and resources to offer as treasury began But as interest rates dropped to near zero building its capability for better manag- and inflation held steady at about two ing excess liquidity.” percent, the treasury group realized it was “Treasury’s success in meeting this not really protecting Koch’s capital. challenge is tremendously important to “We were actually losing purchasing Koch,” May added, “because, long term, power,” May said. “So that forced us to it is our liquidity that gets invested back Wichita – (L–R) Ross Goering, assistant treasurer; look at different ways of investing money.” into the company through acquisitions, Yolonda Adams, senior treasury analyst; Cassidy Cook, David May credits Tim Davies, a former expansions or capital projects.” treasury intern; Tim Davies, managing director – MBM® team member who now works transaction excellence; Matt Orr, treasury director; Reflection on transaction excellence, with helping and Bryan Long, assistant treasurer. “In retrospect, our transformation all treasury establish a new vision. seems pretty simple and rational,” May Not bad at all? “Getting the work done and getting better said. “As the company’s balance sheet “Five years ago,” May said, “we were very are always important,” Davies said, “but changed, we had to change with it, even good at basic treasury services and pro- what if we’re not prioritizing the right though we thought we were pretty good cessing transactions. We were efficient things? It’s especially important to re- at what we were doing.” and effective at moving money globally, examine your vision when circumstances “That’s the way it usually is,” Davies which is important because Koch has a change, as they certainly had for treasury.” noted. “A company or capability that’s presence in nearly 60 countries. “Tim really helped us get over those initial successful often lacks the sense of ur- “Even so, treasury is a bit like payroll,” humps and hurdles,” May said. “Then we gency needed to drive change.” May said. “No one thinks about us unless approached the rest of the team and began “Today,” May said, “we look more like something goes wrong.” asking lots of challenging questions: What an investment management firm. We’ve The seeds for change were sown, not capabilities were needed to achieve the really built up our investment capabili- when something went wrong, but when new vision? What knowledge systems, ties beyond typical treasury functions. decision rights and authorities needed to treasury’s leadership began to consider “Everyone’s roles, responsibilities and be put in place? What incentives were more than just efficiency or accuracy. expectations are now tied back to our needed to create value in a new way?” “When we took a step back and asked new vision and the priorities we put in ourselves if treasury was a competitive Shared knowledge place. We had to add talent and redo advantage for Koch, the honest answer “Instead of trying to build an invest- everyone’s RR&Es – including mine. was no. Being efficient and effective ment management capability from “Because of all this, the treasury func- kept us on par, but it wasn’t creating a scratch, we reached out to others in tion is a little larger now. But what’s long-term competitive advantage.” Koch with a proven track record in most important is that we have the right When May discussed the situation with that area,” May said. vision and skill sets to accomplish what Steve Feilmeier, CFO for KII, Feilmeier May knew that treasury was not the only needs to be done – even if the world presented a challenge. function managing money for Koch. keeps changing, which it will.” 6 Looking Back

Noteworthy

Conscious Capitalism by John Mackey and Raj Sisodia Going Global - Koch Fertilizer is marketing Enid -This fertilizer facility is one of the largest in North America, its products worldwide. and is about to become even bigger. What does a vegan, counterculture, yoga-loving, college drop-out from a co-op/commune in Austin, Texas, Koch Fertilizer is celebrating a pair was a serious cause for concern. At the think of capitalism? of 10-year anniversaries this summer: time, 25 percent of FertiNitro – one of the acquisition of Farmland’s fertilizer the world’s largest fertilizer plants – was For John Mackey, who is all of those things plants and terminals in the U.S., and owned by a Koch subsidiary. as well as the CEO of Whole Foods Mar- investments in Caribbean fertilizer ket, the answer is emphatic approval. In late 2002, the fertilizer business facilities in Trinidad and Tobago. downsized considerably by selling a Mackey believes capital- The 2003 Farmland acquisition marked major asset: the 2,000-mile-long Gulf ism holds the key to the beginning of a dynamic growth States Pipeline. (That ammonia pipeline making every life much, period for Koch’s fertilizer business. sale is mentioned in Charles Koch’s book, much better – especially , in Appendix C, Subsequent acquisitions included for those who are poor. “Businesses exited,” on page 169.) Simplot Canada Limited (2006), “The poor can become Francefert Sas (2007), Usborne Fer- Around the corner wealthier without requir- ing the well-off to become tiliser Limited (2008), Agrotain “For the past five years, we’ve had a poorer,” Mackey writes. International, LLC (2011), J&H Bunn four-fold vision,” Packebush said. “It “The pie grows, and there Limited (2011) and Farmers Plant includes optimizing our existing base, is more for everyone. Food, Inc. (2012). creating value-added products and This idea is at the core of capitalism.” Koch Fertilizer also acquired Nitamin® services for customers, expanding our activities in global markets and applying Mackey and his co-author, business slow-release fertilizer products produced our capabilities to new industries.” professor Raj Sisodia, are quick to con- by Georgia-Pacific Chemicals LLC. demn crony capitalists and all those who Along the way, the company changed Koch Fertilizer has just announced pervert a true capitalistic approach. its name from Koch Nitrogen to Koch plans for its largest initiative ever: expanding its existing ammonia produc- At the same time, they are unabashed Fertilizer and became one of Koch’s tion and constructing a new urea plant advocates for the overwhelmingly good largest companies. at its Enid, Okla., facility. things that result from capitalism. “In the ten years since Farmland,” said They believe capitalism creates value Steve Packebush, who became presi- “If you add those two projects together,” for all of society. dent of Koch Fertilizer in 2003, “we’ve Packebush said, “we’ll be increasing production by at least 1 million tons per The key, they suggest, is to focus on not only grown, we’ve really globalized year and spending about $1 billion in four tenets: higher purpose, stakeholder this business. Enid between now and 2016.” integration, conscious leadership and “We’ve gone from a fairly small foot- conscious culture. print here in the U.S. to having physical Oklahoma Governor Mary Fallin and assets in Canada, , Mexico, the Enid City Manager Eric Benson had high praise for these projects. “We are United Kingdom, Australia and Brazil.” pleased Koch Industries is once again “Capitalism has lifted more people Ups and downs expanding its presence with a new in- out of poverty than any other force in As with every Koch company, there vestment in Oklahoma,” Fallin said. history, and it has done so through have been plenty of developments in the “We are thrilled with Koch Nitrogen’s voluntary exchange.” fertilizer business that weren’t necessar- investment plans,” Benson said. “They Too True Too ily positive or growth-oriented. are an excellent corporate citizen and – Marc Gafni, co-founder outstanding community partner.” Center for World Spirituality The 2010 decision by the Venezuelan government to nationalize FertiNitro www.kochfertilizer.com 7 Dave Robertson Perspective President and COO - Koch Industries, Inc. From time to time I’m asked what is We also want our leaders focused on while integrating them into a productive expected of leaders at Koch companies. long-term results. They have to be will- team that understands the company’s If you were in charge of hiring your lead- ing to build and be rewarded over time – vision and is committed to achieving it. er, what qualities would be at the top of not just focused on this year’s results. Good leaders help you succeed by giv- your wish list? What expectations would It’s important to note we’re not interest- ing appropriate decision rights, provid- you have for the person in that role? ed in growth just for growth’s sake, such ing timely help and feedback, and hold- Chances are you’d want somebody who as growing sales revenue or employee ing you accountable for your decisions helps you – and your business – improve, head count. and actions. grow and be successful. As Sterling Varner, a past president and They also set a positive tone for the It’s no coinci- COO of KII once asked: “Are we grow- organization and lead by example, creat- dence that those ing or are we swelling?” We always need ing an environment that attracts and are some of the to keep Sterling’s challenge in mind as retains top talent. key expectations we endeavor to grow profitably. Your leader should be a role model for for all of our The innovation challenge our Guiding Principles and for imple- Koch company menting MBM® – not necessarily perfect, business and ca- Innovation is what moves us into the but at the very least a good example and pability leaders. future. If we succeed in innovating faster one worth following. or better than our competitors, we grow Just as you have Leaders are also expected to solicit and prosper. roles, respon- challenges. We encourage a challenge sibilities and As Charles wrote in his book, we want culture at Koch because it leads to bet- expectations a culture that “engages everyone in a ter decisions. It also helps all of us learn that help define passionate pursuit of innovation to- and develop. what you do, so ward an unknown future of ever-greater If you feel uncomfortable challenging your do all of those in value creation.” leader in good faith, something is wrong. leadership positions. In addition to op- Leaders are responsible for creating that If we have leaders who are not promoting timizing their current business, we want culture. They cannot be satisfied – or a challenge culture, I would prefer they leaders focused on employee develop- let you be satisfied – with where we are leave and go to work for our competitors. ment, innovation and business growth. today. They have to drive innovation Time for reflection Growing the business consistently and relentlessly. Sometimes leaders have to push us Business growth and employee develop- To most people, it probably doesn’t look ment go hand-in-hand. The more we like we have much trouble growing. out of our comfort zone in order to get us to accept risk, truly innovate or build our capabilities and grow and diver- Ten years ago, Koch Industries had seize new opportunities. (And some- sify our businesses, the more opportuni- 15,000 employees and just over times the leaders need to be pushed.) ties we create for our employees. $35 billion in annual revenues. Today, And the more we create opportunities and it has about 60,000 employees helping Innovation requires experi- mentation, and often develop the skills of our generate $115 billion in revenues. “We want leaders employees, the more suc- the best experiments will Since 2003, we have fueled our growth focused on employee cessful they – and their fail. That’s not a problem by investing more than $50 billion in companies – can become. if the experiments are development, innovation capital expenditures and acquisitions. well-designed and we and business growth.” This is a virtuous circle The book value of the company has grown, learn from these failures. that requires committed, too – up almost 3,500-fold since 1960. effective leadership at every level. Leaders who promote innovation are We are fortunate to be a private com- doing more than just growing their The process for growing a business and pany with shareholders who consis- company. They are helping create ad- developing employees is not always tently reinvest 90 percent of the profits ditional opportunities for employees. smooth and easy. back into the company. But, at times, But when we set the right expectations it’s harder than you might think to find a Developing talent and manage things the right way, the good home for our capital. In order to develop employees, leaders results are often outstanding. That’s why we push our leaders to have to be good judges of people. They Which is just one more reason why I find opportunities for investment and must know their employees well enough believe Koch is the best place in the foster the kind of innovation that will to ensure that their responsibilities world for realizing MBM Guiding help us grow. match their comparative advantages, Principle 10: Fulfillment. 8 www.kochind.com/mbm