THE QUARTERLY NEWSLETTER OF KOCH INDUSTRIES

DiscoveryAUgUST 2013

Spending a summer, starting a career

What a Shocker pg 2 Environmental excellence pg 4 Decade of fertilizer growth pg 7 Perspective: Dave Robertson pg 8

this issue…

“Once you’re on board, you’re likely to see some terrific development opportu-nities, especially given our growth rate, diversity and unique policy of reinvest-ing 90 percent of profits.”

Getting schooledIn addition to internships and college recruitment programs, Koch companies have made significant investments in college educations for worthy students. This year, the Fred and Mary Koch Foundation is providing more than 200 renew-able scholarships for qualifying dependents of Koch employees from 45 com-munities in the U.S. and Canada. Georgia-Pacific sponsors anoth-er 50 four-year scholarships.Over the years, direct scholarship funding has totaled millions of dollars and benefitted thousands of students. Personal donations from Charles and David Koch to educational institutions and programs total millions more.“I think all of our college hires, whether they were scholarship recipients, interns or college graduates, really appreciate the breadth of opportunities at Koch,” Ek said.

www.kochcollegerecruiting.com

Every year, a select group of college stu-dents receives an invitation to spend the summer working for a Koch company.

This year, hundreds of students accept- ed the opportunity to become summer interns. Their roles are as varied as their backgrounds. Some are accountants or analysts. Others are engineers or agrono-mists. A few are artists. (This issue of Discovery was designed by one former and one current intern.)

Primary goal

Andy Ek, Koch Industries’ manager for college relations, says the primary goal of Koch’s college intern program “is to identify those students with the values and capabilities necessary for successful careers at Koch and then convert them into full-time employees.”

For those students who thrive in their temporary roles, internships often lead to full-time jobs with a Koch company after graduation.

“When we end up making a job offer to an intern, our acceptance rate is high. Those who accept really appreciate knowing they’ve got a great place to begin their career.”

Since 2008, at least 220 interns based at Koch Industries’ headquarters have been hired as full-time employees. That’s close to 8 percent of the Wichita workforce.

This summer, 145 students from 26 uni-versities (ranging from MIT to McPherson

College) signed on for roles with 11 differ-ent Koch companies in Wichita.

More than 50 interns are working for Georgia-Pacific this summer, including 30 at GP’s headquarters in Atlanta.

“Our interns tell us what they like most is being assigned real tasks and projects that create value for the company,” said Molly Gregware, GP’s college recruiting manager.

Not all internships are office jobs. At least 130 interns have site-based roles this sum-mer, most of them in engineering.

“All of our interns are challenged to learn more about Market-Based Management®,” Ek said. “We schedule learning opportu-nities with business leaders and MBM® consultants and also assign focused proj-ects. It’s essential that they understand why we do what we do.”

How high is up?The presidents of Flint Hills Resources, Koch Fertilizer, Koch Industries and Koch Minerals all came to Koch straight from college. So did INVISTA’s CEO.

The same is true for several controllers, CFOs and other leaders. The executives overseeing human resources for Geor-gia-Pacific and Koch Industries – Julie Brehm and Dale Gibbens – also both found their first jobs at a Koch company.

“It’s obvious that we like to develop our talent internally,” said Dale Gibbens, vice president of human resources for Koch Industries.

Victoria, Texas – Bianca Garcia became a process engineer for INVISTA after graduating from Texas A&M-Kingsville in 2012.

2

Please extend a heartfelt thanks to those at Koch responsible for the $1 million tornado relief donation. It is very much appreciated by those of us who live and work in Oklahoma.It certainly makes me proud of the com-pany at which I’m employed.

Sharon FrazierJohn Zink Co.

Tulsa, Okla.

Thank you for hosting our tour of the Pine Bend Refinery in Rosemount.Pine Bend is a marvel of modern engi-neering. It speaks to the dedication and expertise of employees that the facility can operate efficiently, effectively and safely for such long periods of time.Flint Hills Resources’ dedication to workplace safety, public safety, the envi-ronment and the community at large is to be commended.I hope these efforts will continue and grow in the future.

Yvonne Prettner SolonMinnesota Lieutenant Governor

St. Paul, Minn.

Thank you for your generous sponsor-ship of the Shocker Pep Rally in Atlanta.Creating a fan experience in conjunc-tion with our men’s basketball team playing in the NCAA Final Four was both exciting and daunting, but it proved to be a tremendous success.Planning a party for approximately 5,000 fans was made a lot easier due to the quick commitment from Koch Industries and Georgia-Pacific.

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 SchroederBurnsville, Minn.Shocker spirit – Employees in Wichita showed their support for WSU at a special event in Café Koch.

These “sway poles” were part of the entertainment at this year’s International Children’s Festival. FHR has been the title sponsor of the event since the festival’s inception in 2001.

Letters and other submissions become the property of Koch Industries, Inc., and may be reproduced in whole or in part, including your name, for any purpose and in any manner. Letters may be edited for length or clarity.

To “like” and follow Koch companies and leaders – including Georgia-Pacific, INVISTA, Flint Hills Resources, Matador Ranch, Koch Pipeline and Charles and David Koch – visit Koch Industries’ Facebook and Twitter pages.

August 2013 | Volume 19 | Number 3

Editorial board

Melissa Cohlmia

Philip Ellender

Rich Fink

Jeff Gentry

Dale Gibbens

Greg Guest

Charles Koch

Jim Mahoney

Dave Robertson

Questions? Comments? Contact: Rod Learned316.828.6136rod.learned@kochps.com

Publication design Caleb Swank Amber VogtsKoch Creative Group

www.kochind.com©2013 Koch Industries, Inc. Koch is an EOE. M/F/D/V

Discovery

I was not surprised to receive the great news of your $1 million donation toward tornado relief but still very blessed at the responsiveness and generosity of Koch Industries.This gift will assist so many affected by the tornadoes in Moore and other areas of Oklahoma. I know that Major Morris and the Arkansas/ Oklahoma Division appreciate this resource to bring hope to these families.

Major Charles H. SmithDivisional Commander

Kansas & Western Missouri DivisionSalvation Army

Kansas City, Mo.

Koch has donated $1 million or more in relief funds following each of several natural disasters, including Hurricanes Katrina (2005) and Ike (2008), the earthquake and tsunami in Japan (2011), and the Moore, Okla., tornado (2013).

I have received many appreciative comments about the event, including several who said it was their most fun Shocker experience since graduation.Having Charles Koch Arena on our cam-pus has always been a source of pride and to be able to take Koch Industries with us to Atlanta was heartwarming.

Debbie KennedyExecutive Director

WSU Alumni AssociationWichita, Kan.

Postal Pipeline

3

“Having someone in Scotland appreci-ate our accomplishments makes this even more special. “We’ve got a picture over at the hunter’s lodge that’s more than 100 years old,” Kilmer said. “It shows two Scots in tweed caps stopping for tea out here on the prairie. “Maybe this award and newspaper article will prompt some other Scots to ‘cross the pond’ for a visit with us.”

Shanghai – On the sixth day of the sixth month, INVISTA celebrated the suc-cessful start-up of its expanded nylon 6,6 air bag fiber plant in the Qingpu District of Shanghai.INVISTA has doubled that plant’s capacity, making the company the first producer in Asia capable of manufactur-ing 20 kilotons of air bag fiber per year at a single plant.Plans for this expansion were an-nounced in 2011, just three years after INVISTA first came to the region. Rapidly growing demand for automo-tive air bag fiber in Asia has fueled the company’s investments there.“This is now the largest facility of its kind in Asia,” said Jeff Brown, executive vice president of INVISTA Performance Surfaces & Materials (second from left in the photo above). “We’re pleased to share this start-up celebration with so many distinguished guests.”As mentioned in January’s issue of Discovery, INVISTA has other signifi-cant investments in China, including plans for the world’s most efficient nylon intermediates plant at the Shanghai Chemical Industry Park.

Goole – Why settle for celebrating a single anniversary when you can cel-ebrate three at once?That was Guardian Industries’ approach as its U.K. business unit celebrated three anniversaries in June.That month marked the tenth anniver-sary of Guardian’s first float glass production facility in the U.K., the fifth anniversary of its laminating line there and the first anniversary of its coatings line. Guardian originally entered the U.K. market in the 1970s as a provider of toughened glass for patio construc-tion, a segment that was booming at the time.Since then, Guardian has invested more than £100 million in its U.K. operations, located in Goole, East Yorkshire.The Triple Anniversary Celebration included tours of the plant and its interactive glass room, a new products display and an official ribbon-cutting for the plant’s new, £35 million magne-tron glass coater. Scott Thomsen, president of Guardian’s Global Flat Glass Division, delivered the keynote speech. He noted that the new coater would be used to produce high-performance Guardian ClimaGuard® Low-E glass products.Low-E glass coatings help save energy by absorbing or reflecting heat energy created by infrared sources, such as sunlight. Last December, Koch Industries acquired a 44.4 percent stake in Guardian, which is headquartered in Auburn Hills, Mich.

Dundee – This coastal town on the North Sea averages almost 30 inches of rainfall per year. Matador Ranch, on the other hand, has received less than one-third that amount this year.West Texas and Eastern Scotland may not seem to have much in common, but in May, when Matador won the American Quarter Horse Association’s highest award, it attracted plenty of attention in Dundee. Dundee was home to the Scottish inves-tors who, from 1882 until 1951, owned Matador Land and Cattle Company, one of the largest and most successful cattle-raising operations in the U.S. The farming editor of Dundee’s local newspaper, The Courier, emailed the ranch as soon as he saw the press release announcing the AQHA’s 2013 Best Remuda Award.This award is a singular distinction for ranchers because it recognizes the qual-ity of the horses used by the cowboys rather than quality of the beef they raise.The Matador name “is still well known here,” wrote the editor, whose great-uncle was a shareholder. He asked if the ranch would provide some photographs and data for a story he wanted to write.Four days later, the headline “Dundee’s Links With Texas Ranch,” appeared in The Courier. The article surveyed the long history of the ranch, as well as its most recent award.“We’re very honored by the AQHA award,” said Bob Kilmer, Matador’s manager, “and very proud to maintain the great reputation of this ranch, which Fred Koch loved so much.

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

International News

4

EHS excellence in action“You exemplify the approach all of us need to take regarding EHS,” Koch said, “which is a focus on real, substantive improvement rather than a wasteful, bureaucratic, check-the-box approach. “We believe that by holding you and your innovations up as examples, others will be encouraged to do likewise.”“Safety and environmental excellence is clearly different from compliance,” noted Dave Robertson, “because it is above and beyond compliance.“It means continuously improving our safety and environmental performance to satisfy the expectations of stakehold-ers, which is usually a receding horizon.” Jim Mahoney’s comments included an observation about how those outside of Koch may be evaluating our performance.“Recently there have been a lot of tough process safety issues for others in indus-try, with some very serious incidents, like those in Texas and Quebec. “In part, our risk profile needs to keep evolving, because incidents like those often change the expectations of com-munities and regulators.“But it is even more important that we enable our people to learn how to eliminate all serious safety and environ-mental incidents.”The following examples are just two instances of Koch companies success-fully achieving EHS excellence.

Good businessFive years after acquiring a nitrogen fertilizer plant in Enid, Okla., Koch Fer-tilizer invested more than $70 million to expand the plant’s capacity. (The Enid plant was already one of the largest nitro-gen fertilizer facilities in North America.)Unfortunately, despite everyone’s best efforts, once the expansion was com-plete, the plant failed to meet its produc-tion and environmental goals. The urea plant test team recognized that this was because, in part, the operations group did not have the working knowl-edge needed to bridge the gap between expectations and actual performance.The team decided to begin its problem-solving process by applying an MBM® framework. This entrepreneurial approach led to the establishment of a multi-skilled team with the right knowledge for develop-ing and implementing an innovative strategic plan.The team’s goals were to achieve opera-tional targets, decrease environmental emissions and releases, and realize energy savings.Was it successful? Remarkably so.After gaining a better understanding of operational issues, the team succeeded in several ways.It was able to recapture more than 2,000 tons of ammonia from the plant’s scrubber, reducing the plant’s emissions (which are tracked on a closely watched public database) by more than half.As a result of that accomplishment, the plant is saving at least $1 million per year and no longer needs to spend $4 million on a scrubber upgrade.Together, the team proved that EHS excellence not only helps the environ-ment, but makes great business sense.

Our place in the communityBecause of changing political, commu-nity and regulatory requirements (not to mention new business and operating strategies), GP’s Savannah River Mill team realized the need for change.

In May, more than 150 people representing dozens of Koch companies attended the 2013 EHS Excellence Awards ceremony, held on Koch Industries’ Wichita campus.This annual event honors exceptional performance in the areas of environmen-tal, health and safety performance. There were six award-winners this year, includ-ing two from Georgia-Pacific and one each from Flint Hills Resources, INVISTA, Koch Fertilizer and Koch Pipeline.

Attracting attentionCharles Koch, KII’s chairman and CEO, Dave Robertson, KII’s president and COO, and Jim Mahoney, KII’s executive vice president for operations excellence and compliance, all participated in the award presentations.In his keynote address to attendees, Charles Koch complimented the innova-tion and efficiency of the award-winners.

Jim Mahoney introduced each winner at the May 14 awards ceremony.

2013 EHS Excellence Award-winners■ GP – Building Products: PPE

Standardization Process

■ INVISTA – China: HMD EIA Project

■ FHR – Pine Bend: Experimental Analyzer Team

■ Koch Fertilizer – Enid: Urea Plant Test Team

■ GP – Consumer Products: Savannah River Mill

■ Koch Pipeline – Reputation Enhancement

5

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 adviceIn 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.“We need to collaborate and employ the best knowledge, wherever it resides,” said Robertson. “I think getting this right is a critical part of Operations Excellence.“So I hope you’ll take the time to learn more about the programs and see how they can be applied to what you do.”Charles Koch concluded his comments by noting that this year’s award-winners have demonstrated that they “are in the forefront of compliance and EHS excel-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/

That point of view, combined with the five dimensions of our MBM® frame-work, provided the foundation for a strategic planning process.The process involved changing the organizational structure, expanding ownership of environmental perfor-mance throughout the organization and improving the way the mill identi-fied opportunities.

That process began by re-evaluating the facility’s environmental focus in hopes of better understanding (and defining) the mill’s performance. The team established a new “mental model” for what the mill’s environmen-tal performance should look like. They also took the view that environmental performance is a function of compli-ance, environmental footprint and resource stewardship.

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

Koch Fertilizer award – (L-R) Dave Robertson, Ev Shishkin, Charles Koch, Bruce Ainsworth, Steve Packebush.

2014 EHS Excellence Conference

April 28 – May 1

Atlanta, Ga.

For more information visit:http://khcwss.khc.local/

kiioe/ehs/default.aspx

6

Koch Equity Development and Koch Asset Management are also responsible for a portion of Koch’s liquidity. Koch Equity Development is the group that originated last year’s structured investments in Guardian Industries and American Greetings. Koch Asset Management is a pension management group led by Randy Bushman. “One of the first things treasury had to tackle was how to earn a real rate of return in this artificially low interest rate environment,” Bushman said.“We had some good in-house models and resources to offer as treasury began building its capability for better manag-ing excess liquidity.” “Treasury’s success in meeting this challenge is tremendously important to Koch,” May added, “because, long term, it is our liquidity that gets invested back into the company through acquisitions, expansions or capital projects.”

Reflection“In retrospect, our transformation all seems pretty simple and rational,” May said. “As the company’s balance sheet changed, we had to change with it, even though we thought we were pretty good at what we were doing.”“That’s the way it usually is,” Davies noted. “A company or capability that’s successful often lacks the sense of ur-gency needed to drive change.”“Today,” May said, “we look more like an investment management firm. We’ve really built up our investment capabili-ties beyond typical treasury functions.“Everyone’s roles, responsibilities and expectations are now tied back to our new vision and the priorities we put in place. We had to add talent and redo everyone’s RR&Es – including mine.“Because of all this, the treasury func-tion is a little larger now. But what’s most important is that we have the right vision and skill sets to accomplish what needs to be done – even if the world keeps changing, which it will.”

“Steve asked us to think about what a good competitive advantage for trea-sury should look like. In other words, he challenged our vision, which, at the time, was all about preserving principal and being efficient.”

Getting startedAs the company’s asset base has ex-panded and revenues and profits have grown, so has its liquidity (what most of us might call cash on hand).“In the old days, we invested a lot of our liquidity in short-term, high-quality bank deposits and commercial paper.”But as interest rates dropped to near zero and inflation held steady at about two percent, the treasury group realized it was not really protecting Koch’s capital.“We were actually losing purchasing power,” May said. “So that forced us to look at different ways of investing money.” David May credits Tim Davies, a former MBM® team member who now works on transaction excellence, with helping treasury establish a new vision.“Getting the work done and getting better are always important,” Davies said, “but what if we’re not prioritizing the right things? It’s especially important to re-examine your vision when circumstances change, as they certainly had for treasury.”“Tim really helped us get over those initial humps and hurdles,” May said. “Then we approached the rest of the team and began asking lots of challenging questions: What capabilities were needed to achieve the new vision? What knowledge systems, decision rights and authorities needed to be put in place? What incentives were needed to create value in a new way?”

Shared knowledge“Instead of trying to build an invest-ment management capability from scratch, we reached out to others in Koch with a proven track record in that area,” May said.May knew that treasury was not the only function managing money for Koch.

Although most employees don’t know it, Koch Industries’ treasury capability spent much of the past four years under-going a significant transformation.According to David May, KII’s trea-surer since 2005, that transformation involved a significant change of vision for the group, which is responsible for managing the billions of dollars of cash generated across Koch Industries.

Not bad at all? “Five years ago,” May said, “we were very good at basic treasury services and pro-cessing transactions. We were efficient and effective at moving money globally, which is important because Koch has a presence in nearly 60 countries.“Even so, treasury is a bit like payroll,” May said. “No one thinks about us unless something goes wrong.”The seeds for change were sown, not when something went wrong, but when treasury’s leadership began to consider more than just efficiency or accuracy.“When we took a step back and asked ourselves if treasury was a competitive advantage for Koch, the honest answer was no. Being efficient and effective kept us on par, but it wasn’t creating a long-term competitive advantage.”When May discussed the situation with Steve Feilmeier, CFO for KII, Feilmeier presented a challenge.

Visioneering

Wichita – (L–R) Ross Goering, assistant treasurer; Yolonda Adams, senior treasury analyst; Cassidy Cook, treasury intern; Tim Davies, managing director – transaction excellence; Matt Orr, treasury director; and Bryan Long, assistant treasurer.

7

Koch Fertilizer is celebrating a pair of 10-year anniversaries this summer: the acquisition of Farmland’s fertilizer plants and terminals in the U.S., and investments in Caribbean fertilizer facilities in Trinidad and Tobago.The 2003 Farmland acquisition marked the beginning of a dynamic growth period for Koch’s fertilizer business.Subsequent acquisitions included Simplot Canada Limited (2006), Francefert Sas (2007), Usborne Fer-tiliser Limited (2008), AGROTAIN International, LLC (2011), J&H Bunn Limited (2011) and Farmers Plant Food, Inc. (2012).Koch Fertilizer also acquired NITAMIN® slow-release fertilizer products produced by Georgia-Pacific Chemicals LLC.Along the way, the company changed its name from Koch Nitrogen to Koch Fertilizer and became one of Koch’s largest companies.“In the ten years since Farmland,” said Steve Packebush, who became presi-dent of Koch Fertilizer in 2003, “we’ve not only grown, we’ve really globalized this business.“We’ve gone from a fairly small foot-print here in the U.S. to having physical assets in Canada, France, Mexico, the United Kingdom, Australia and Brazil.”

Ups and downs As with every Koch company, there have been plenty of developments in the fertilizer business that weren’t necessar-ily positive or growth-oriented. The 2010 decision by the Venezuelan government to nationalize FertiNitro

Too

True

Noteworthy

“Capitalism has lifted more people out of poverty than any other force in history, and it has done so through voluntary exchange.”

– Marc Gafni, co-founderCenter for World Spirituality

was a serious cause for concern. At the time, 25 percent of FertiNitro – one of the world’s largest fertilizer plants – was owned by a Koch subsidiary.In late 2002, the fertilizer business downsized considerably by selling a major asset: the 2,000-mile-long Gulf States Pipeline. (That ammonia pipeline sale is mentioned in Charles Koch’s book, The Science of Success, in Appendix C, “Businesses exited,” on page 169.)

Around the corner“For the past five years, we’ve had a four-fold vision,” Packebush said. “It includes optimizing our existing base, creating value-added products and services for customers, expanding our activities in global markets and applying our capabilities to new industries.”Koch Fertilizer has just announced plans for its largest initiative ever: expanding its existing ammonia produc-tion and constructing a new urea plant at its Enid, Okla., facility.“If you add those two projects together,” Packebush said, “we’ll be increasing production by at least 1 million tons per year and spending about $1 billion in Enid between now and 2016.”Oklahoma Governor Mary Fallin and Enid City Manager Eric Benson had high praise for these projects. “We are pleased Koch Industries is once again expanding its presence with a new in-vestment in Oklahoma,” Fallin said.“We are thrilled with Koch Nitrogen’s investment plans,” Benson said. “They are an excellent corporate citizen and outstanding community partner.”

www.kochfertilizer.com

Conscious Capitalism by John Mackey and Raj Sisodia What does a vegan, counterculture, yoga-loving, college drop-out from a co-op/commune in Austin, Texas, think of capitalism? For John Mackey, who is all of those things as well as the CEO of Whole Foods Mar-ket, the answer is emphatic approval.

Mackey believes capital-ism holds the key to making every life much, much better – especially for those who are poor.“The poor can become wealthier without requir-ing the well-off to become poorer,” Mackey writes. “The pie grows, and there is more for everyone.

This idea is at the core of capitalism.”Mackey and his co-author, business professor Raj Sisodia, are quick to con-demn crony capitalists and all those who pervert a true capitalistic approach.At the same time, they are unabashed advocates for the overwhelmingly good things that result from capitalism. They believe capitalism creates value for all of society.The key, they suggest, is to focus on four tenets: higher purpose, stakeholder integration, conscious leadership and conscious culture.

Going Global - Koch Fertilizer is marketing its products worldwide.

Enid -This fertilizer facility is one of the largest in North America, and is about to become even bigger.

Looking Back

8

President and COO - Koch Industries, Inc.

while integrating them into a productive team that understands the company’s vision and is committed to achieving it. Good leaders help you succeed by giv-ing appropriate decision rights, provid-ing timely help and feedback, and hold-ing you accountable for your decisions and actions. They also set a positive tone for the organization and lead by example, creat-ing an environment that attracts and retains top talent. Your leader should be a role model for our Guiding Principles and for imple-menting MBM® – not necessarily perfect, but at the very least a good example and one worth following. Leaders are also expected to solicit challenges. We encourage a challenge culture at Koch because it leads to bet-ter decisions. It also helps all of us learn and develop. If you feel uncomfortable challenging your leader in good faith, something is wrong. If we have leaders who are not promoting a challenge culture, I would prefer they leave and go to work for our competitors.

Time for reflectionBusiness growth and employee develop-ment go hand-in-hand. The more we build our capabilities and grow and diver-sify our businesses, the more opportuni-ties we create for our employees. And the more we create opportunities and

develop the skills of our employees, the more suc-cessful they – and their companies – can become. This is a virtuous circle that requires committed,

effective leadership at every level. The process for growing a business and developing employees is not always smooth and easy. But when we set the right expectations and manage things the right way, the results are often outstanding.Which is just one more reason why I believe Koch is the best place in the world for realizing MBM Guiding Principle 10: Fulfillment.

www.kochind.com/mbm

From time to time I’m asked what is expected of leaders at Koch companies.If you were in charge of hiring your lead-er, what qualities would be at the top of your wish list? What expectations would you have for the person in that role?Chances are you’d want somebody who helps you – and your business – improve, grow and be successful.

It’s no coinci-dence that those are some of the key expectations for all of our Koch company business and ca-pability leaders. Just as you have roles, respon-sibilities and expectations that help define what you do, so do all of those in

leadership positions. In addition to op-timizing their current business, we want leaders focused on employee develop-ment, innovation and business growth.

Growing the businessTo most people, it probably doesn’t look like we have much trouble growing. Ten years ago, Koch Industries had 15,000 employees and just over $35 billion in annual revenues. Today, it has about 60,000 employees helping generate $115 billion in revenues. Since 2003, we have fueled our growth by investing more than $50 billion in capital expenditures and acquisitions.The book value of the company has grown, too – up almost 3,500-fold since 1960. We are fortunate to be a private com-pany with shareholders who consis-tently reinvest 90 percent of the profits back into the company. But, at times, it’s harder than you might think to find a good home for our capital. That’s why we push our leaders to find opportunities for investment and foster the kind of innovation that will help us grow.

We also want our leaders focused on long-term results. They have to be will-ing to build and be rewarded over time – not just focused on this year’s results. It’s important to note we’re not interest-ed in growth just for growth’s sake, such as growing sales revenue or employee head count. As Sterling Varner, a past president and COO of KII once asked: “Are we grow-ing or are we swelling?” We always need to keep Sterling’s challenge in mind as we endeavor to grow profitably.

The innovation challengeInnovation is what moves us into the future. If we succeed in innovating faster or better than our competitors, we grow and prosper. As Charles wrote in his book, we want a culture that “engages everyone in a passionate pursuit of innovation to- ward an unknown future of ever-greater value creation.” Leaders are responsible for creating that culture. They cannot be satisfied – or let you be satisfied – with where we are today. They have to drive innovation consistently and relentlessly. Sometimes leaders have to push us out of our comfort zone in order to get us to accept risk, truly innovate or seize new opportunities. (And some-times the leaders need to be pushed.) Innovation requires experi- mentation, and often the best experiments will fail. That’s not a problem if the experiments are well-designed and we learn from these failures. Leaders who promote innovation are doing more than just growing their company. They are helping create ad-ditional opportunities for employees.

Developing talentIn order to develop employees, leaders have to be good judges of people. They must know their employees well enough to ensure that their responsibilities match their comparative advantages,

Dave Robertson

“We want leaders focused on employee

development, innovation and business growth.”

Perspective