This system seemed harsh to the old-timers at the warehouse, but they might have understood the ranking system better if they’d read Charles Koch’s book, The Science of Success. Right there, on page 89, Charles Koch explains the ABC process of employee retention at Koch Industries. The A performers are a company’s competitive advantage, he explained, while the B performers are the necessary workers who keep the enterprise running. The C performers, on the other hand, do not meet expectations, and can drag the business enterprise down with them. “Focused strategies should be put in place for C-level employees to improve performance through training, development, mentoring, or role change,” Charles Koch wrote. “Employees who do not quickly respond to these efforts and continue to perform at a C level should not be retained.”
Life at the warehouse, then, became a scramble to stay out of the bottom third of the LMS rankings. The most prominent victim of the ABC process was the forklift driver Kerry Alt, the driver who’d lost his oversized beer bottle many years before when it fell out of his truck. Alt seemed to be incurably slow. It wasn’t that he was lazy. It was that he was pathologically deliberate. Alt looked at the LMS screen, looked up the bay where he had been directed, and then looked back down at the LMS screen to double-check that he was in the right place. Then he picked up the cargo, double-checked where he was supposed to take it, and drove in a deliberate manner to the appointed spot.
Alt lived in the red zone, ranking after ranking. Everybody saw it. Trimm had known Alt for years and felt a friend’s pity toward his situation. Trimm tried to find jobs that would keep Alt out of the center of the action, or keep him off the grid altogether. But there just weren’t that many tasks available. Koch didn’t need someone to sweep the floors. It needed its employees to be on the grid, moving product. Alt was kept in the game and never seemed to break into the yellow or green zones.
This was a hellishly stressful time for Alt. He complained to his bosses that he was just trying be safe and deliberate. He pointed out that Koch valued safety, and he was trying to be safe rather than drive in a hurry. But his coworkers managed to drive faster without having accidents, and the LMS rankings publicly rebuked Alt’s argument.
“They forced him out,” Trimm said. “Everybody knew that Kerry was a hard worker. Or tried to be hard. He just couldn’t do it. I felt sorry for him.”
Kerry Alt and his wife bore hard feelings toward Koch Industries after he left the warehouse. But he could have taken solace from page 90 of The Science of Success, in which Charles Koch explains that C players at one company need not be C players elsewhere.
“Inability to create value at one company does not mean the same will be true elsewhere. Employees may be much more successful in another organization that has needs or a culture better suited to their talents and values,” Koch wrote.
After he was forced out from his warehouse job, Alt had a hard time finding an enterprise where his talents were valued. He had worked at the warehouse for more than twenty years and made the mistake of attaching his identity to his job. When he lost it, he didn’t quite know where to pick up.
“He kind of went into a depression and started drinking more,” recalled Alt’s wife, Shirley. He eventually applied for disability insurance from Social Security and collected his union pension. The couple sold their house and moved to a cheaper neighborhood. Shirley picked up work as a housecleaner to help pay the bills. Years later, Alt had difficulty speaking and could not recall much of the ordeal at Georgia-Pacific. “I was getting sick of it,” Alt recalled. “I felt pretty bad. I programmed it out of my mind.”
* * *
The drivers weren’t the only employees who were ranked. Every month, Trimm and his fellow supervisors received a report card. It quantified the performance of the three warehouses in Portland, and compared their performance against every other Georgia-Pacific warehouse in the country.
Trimm’s operation was ranked according to a few key metrics, including the number of safety accidents (which he said were few) and the proportion of cargo that was damaged during shipment. The most important metric, however, was called “cost-per-case,” meaning the cost that Koch had to pay to move each case of material through the warehouse. The lower the cost, the thicker Koch’s profit margins. Cost-per-case became a constant focus of conversation when supervisors met with the drivers. It was the metric that everything was pushing toward: fewer people moving more product ever more efficiently.
The Portland warehouses did well on their report cards, but their competition was fierce. The managers and drivers were reminded constantly that the three warehouses in Portland were the only three warehouses that Georgia-Pacific owned outright. The other distribution centers were run by third-party contractors, and Georgia-Pacific had enough clout to push these contractors to keep their prices low. Most of the contract warehouses used nonunion labor, Trimm understood, and some of them were located in rural areas where labor was cheaper. Trimm was fighting an uphill battle to keep his operation in the A or B class, and, for many years, he was successful. But he always knew that if he slipped, he would be replaced. If the warehouse as a whole fell behind, it also might be replaced by an outside contractor.
The other pressures on Trimm had to do with safety compliance. It was drilled into his mind, day in and day out, that Koch subscribed to the 10,000 percent compliance rule. In the eyes of Trimm and his fellow supervisors, this didn’t just mean being safe; it meant being safe in exactly the way that Koch prescribed. If a manager or driver didn’t follow each rule to the letter, they could be disciplined. Managers were taught to be ever vigilant about any safety violations and to report them immediately.
It was exhausting, and at times the exhaustion seemed to be created by design. The drivers were pitted against one another in the rankings. The supervisors were pitted against every other facility in the country. And all the while, more product was moved through the warehouses at a cheaper rate. All of these forces pushed toward a place that would do more work, with fewer people, for less money. “I even said to a couple of guys I worked with, I said: ‘Man, this is just an exercise in getting rid of people,’ ” Trimm said.
* * *
The warehouse could not get rid of Travis McKinney. He stuck to the job. He was often forced to work overtime, arriving before dawn on the weekend mornings, logging into the LMS, watching his screen populate with commands, running the circuits as quickly as he could to beat the time expectations. McKinney did this because he knew exactly what waited outside the warehouse doors if he lost his job.
McKinney and his wife both worked long hours to meet their mortgage payment—modest as it was by Portland standards—to pay their health care bills, and to keep the refrigerator stocked. But life never stood still, of course. At one point, McKinney’s wife was demoted at the grocery store, which cut her pay dramatically. The couple also had their first child, a little girl, who was diagnosed with autism. They paid large medical bills. McKinney had to buy gas for his long commutes. Property taxes increased.
Like most middle-class Americans, they often turned to credit cards to cover the gap between their monthly expenses and their income. It was remarkable how quickly small purchases added up on a credit card statement. The McKinneys carried credit card balances of $15,000, even $20,000, whittling away each month at the interest payments. In this regard, they were not unusual. The average credit card debt for indebted American households climbed steadily through the 2000s, rising from $14,185 in 2002 to $16,911 in 2008. The average interest rate on this debt was nearly 19 percent, meaning that households spent about $1,300 just to keep up with interest payments each year.