Kochland Page 40

  The schedule began to grind away on Steve and Carla’s relationship. The bars and partying receded, although the drinking continued. The fun drained out of things. Hammond felt like he was being pushed by Carla to achieve the milestones of middle-class life. They bought a bigger house, and their monthly payment jumped to $1,300 a month. Now the bills were hard to meet.

  The tension culminated, and their marriage dissolved during a trip to one of the most stressful places on earth: Disneyland. Carla bought a package trip to the theme park using the family credit card. Steve felt like they didn’t have the money to take a vacation, let alone a trip to California. To help cover these costs, Steve went down to the union hall and cashed out a special emergency account that he kept there—it was common back then for workers to set aside cash to cover costs if they went on strike or suffered an injury that kept them off the job. His account had accrued about $1,200 over the years, and he spent it at Disneyland. It was quite possibly the worst trip of his life, although he and Carla tried to give the girls the full Disney experience.

  “It was a miserable time. Her and I didn’t speak hardly for the whole time down there—just kind of keeping it away from the kids,” Hammond said. “I was so pissed off. We didn’t have any money.”

  Steve and Carla divorced not too long after that. They sold the big house, and he moved in with his mother. They juggled responsibility for the girls. He continued to work odd hours at the warehouse, and the girls figured out how to get themselves to the school bus in the mornings.

  The one thing Steve Hammond didn’t have to worry about during all of this turmoil was losing his job, his health insurance, or his retirement pension. It is unclear, exactly, what Hammond would have had to do to get fired from the warehouse. The culture there would have been familiar to the unionized OCAW workers at Koch’s Pine Bend refinery in the 1970s. Workers weren’t afraid of their bosses. It wasn’t uncommon for a forklift driver to share a slug of whiskey with a manager on the warehouse floor. Everyone laughed when a driver named Kerry Alt accelerated his truck too quickly, and an oversized bottle of beer came careening off the back, where it had been stowed for safekeeping. Alt jumped out and scrambled after the bottle as it rolled across the concrete floor. The bosses looked the other way. If a supervisor had chosen to discipline Alt, he would have had to do so through the union’s grievance procedure. It wasn’t worth the trouble. In this environment, Hammond was a straight arrow, and he was promoted up the ranks through the years.

  One of Hammond’s close friends was promoted even faster and left the union ranks to become a manager. He was Dennis Trimm, an imposing man standing six foot six. Trimm became foreman in the 1990s and was then promoted to supervisor, putting him in the ranks of management and cutting his ties with the Inlandboatmen’s Union. Even then, when Trimm “went company,” as the union members called it, he and Hammond remained friends. They still drank together on their time off, still joked on the warehouse floor, and still visited each other’s families. There might have been a bright line between the union workers and their supervisors, but there wasn’t animosity between them.

  This began to change during the 2000s, however, and it changed dramatically in late 2005 when Koch Industries bought Georgia-Pacific and its warehouses that lined the Willamette River.

  * * *

  As the warehouses and their timber mills were sold over and over again, Dennis Trimm came to know the chain of CEOs who ran the company in succession: from Crown Zellerbach, to James Goldsmith, to Fort James, and then to Georgia-Pacific. Out of all of the leadership teams, he was most impressed with Georgia-Pacific’s. The CEO, Pete Correll, often visited the warehouse to look the place over and talk with the management team. Correll was a lanky, personable man worth at least several million dollars, but also willing to talk with the local supervisors as if they were valued members of his team. Georgia-Pacific installed a special satellite system in all its facilities so they could receive quarterly broadcasts in which Correll talked about the company’s goals and strategy. Trimm and his colleagues gathered in a conference room in the warehouse in 2005 to watch one final broadcast from Correll. Their CEO informed them that they would soon have new owners.

  After Koch Industries bought the warehouse, Charles Koch never visited—at least, not as far as Trimm was aware. Instead, Koch Industries began to flood the supervisors with online training seminars and worksheets. Trimm usually spent his day out on the warehouse floor, driving among the stacks in a small cart to make sure that everything was running smoothly. But now he found himself in his office for long periods of time, watching training videos that were uploaded from Wichita. This is when Trimm began to hear for the first time about Market-Based Management. He learned about the five dimensions and the Ten Guiding Principles. About roles and responsibilities and mental models. And this is how he came to know Charles Koch.

  In one video, produced by Koch Industries, Charles Koch can be seen sitting in front of a black screen. He wasn’t speaking into the camera but was looking past it, sideways, as if at an interviewer. Charles Koch’s thick hair was neatly combed and parted, but it still possessed its unruly waves, once blond, now thoroughly white. Koch wore thin-framed glasses and a blue button-down shirt with no tie or jacket. He looked like a kindly professor, or the dean of an economics school, perhaps. In the video, he didn’t just talk about business goals and strategy. He talked about philosophy, the laws of the market, and the nature of humankind. He also talked about his father.

  “My father considered work ethic—attitude toward work—as critically important for developing yourself, and, in fact, being healthy and happy through your life,” Koch said. “The values that were most important to him, I would say, were integrity, humility, work ethic, experimentation, entrepreneurship, thirst for knowledge.” Charles Koch continued: “I would say those are all key elements in Market-Based Management and all parts of our guiding principles.”

  Koch’s voice was rich and deep but also understated, slowed by a midwestern drawl that never seemed to be in a rush to get to the next sentence. It was clear to Trimm that Charles Koch wasn’t just explaining some kind of training manual. This was an all-encompassing philosophy. Managers like Trimm, then, were either all in or all out.

  Trimm learned that watching Koch’s online videos, and completing the related worksheets, was mandatory. If he didn’t keep up with his scheduled viewing, someone from the human resources department e-mailed him with a reminder to stay on track. About a year after Koch took over the warehouses, Trimm was informed that he would attend a three-day seminar to further his education in Market-Based Management. The event was held in a hotel near the Georgia-Pacific mill in Camas, Washington.

  On the day the seminar began, Trimm sat down at a table with a large group of other supervisors, and even one or two unionized workers.II Almost from the beginning, Trimm realized that the three-day session was not going to be a relaxing corporate retreat. The seminar began with an address from an MBM trainer named Benjamin Pratt, who had flown in from Atlanta. Pratt presented himself as someone who carried secret knowledge, directly from inside Koch’s Tower in Kansas. The attendees were expected to pay close attention to his lessons.

  “It was like watching a German war movie,” Trimm recalled. “He was very direct. He told us: ‘You will have homework. You will complete it before the next morning.’ ”

  The crowd was shown more videos of Charles Koch, who talked about the guiding principles and his family’s history. They were given a copy of Charles Koch’s 2007 book, The Science of Success, which was something like an owner’s manual for anyone practicing MBM. They were given worksheets and pamphlets that broke out specific elements of the philosophy. They were told that it would be smart to keep a copy of Charles Koch’s book near their desk to consult periodically.

  During a question-and-answer session, some of the employees expressed their concerns about recent management decisions. Over the previous years and months, Georgia-Pacific l
eft many job positions open as people left the company, slowly trimming the workforce through attrition. This accelerated once Koch took over the company. “They went through like a hot knife through butter and started getting rid of people right and left,” Trimm said. The remaining managers had more work on their plates. Some people found that they were staying at the office ten, twelve, or even eighteen hours a day just to complete their assignments. Many of them had assumed that the workload was temporary. Surely, they thought, there was a hiring binge waiting just around the corner. But the new hiring never seemed to materialize. Some of them started to worry that it never would.

  Toward the end of the three-day seminar, an employee raised his hand and asked Pratt: Would Koch be hiring to beef up the workforce? The employee complained that people were working punishingly long hours just to finish their basic job requirements.

  Pratt replied that if they didn’t like the hours, they could look for employment elsewhere.

  “That silenced the room,” Trimm recalled.

  * * *

  Increasing the bottom line became Trimm’s prime directive. Supervisors were told to maximize efficiency across the warehouses (or the “assets,” as they were called in the parlance of private equity). Several billion dollars in debt were hanging over Georgia-Pacific’s operations, and that debt could only be serviced by squeezing every possible new dollar in profits out of the mills and warehouses. It fell to supervisors like Trimm to figure out how to do it.

  Trimm adapted to the Koch Industries ecosystem. He began to understand the meaning of his new “role and responsibility.” He was a property owner, and he needed to make his piece of land more profitable. He drew up a plan to rearrange parts of the product stacks in a way to speed up forklift routes from the dock to the loading bay. The plan was rejected, but he kept trying to act like an entrepreneur, coming up with money-saving techniques and plans. Trimm quickly discovered that the best way to cut costs was the simplest: he had to find ways to get more work out of each forklift driver while they were on the clock. In 2006, Trimm had a new tool that would let him do that in ways that were previously unthinkable.

  Just when Koch bought Georgia-Pacific, the company was using a newly installed software system in its warehouses that was designed to boost the productivity of its workers. It was called the Labor Management System. The groundwork for the system had been laid before Koch arrived, with a series of odd time trials that Trimm and his associates ran on the workers. The strange tests had been conducted with little fanfare. They seemed like a curious experiment at the time, and there is little indication that anyone in the warehouse paid much attention to what was happening. Dennis Trimm joined a group of supervisors on the warehouse floor and assembled a team of lift drivers. They told the drivers to run a series of routes through the warehouse without picking up or dropping off any cargo. They were simply to drive from point A to point B—say, from the loading bay back to bay B-1. Then, the drivers were asked to go from point A to point B again, dozens of times. Trimm and the other managers recorded the time it took to drive between locations and entered the numbers into a database. The drivers went on circuitous routes all throughout the warehouse, tracing the time it took to go down different lanes and around different corners, creating a rich map of how long it took to drive just about anywhere in the facility.

  These tests were part of a broader effort to digitize operations at the warehouse. Back when Steve Hammond had started, the lift drivers gathered their orders on paper sheets and found the different locations in the warehouse in a directory that looked something like a phone book. Some of the inventory was simply recorded in the memory of a supervisor who happened to remember which brand of grocery bags was stowed in which stack. Then, during the 1980s, the company built its own digital catalog of the inventory, which could be recorded and managed from a computer. It took a lot of trial and error, but eventually the system, called the OIS, helped cut down on the paperwork necessary to track shipments through the warehouse.

  Georgia-Pacific wanted to improve upon the OIS, and it did so by hiring an outside data firm called RedPrairie. RedPrairie specialized in supply chain management systems, which had been revolutionized during the software boom of the 1990s. Georgia-Pacific’s use of the system was common. Companies across corporate America, from Amazon to Walmart, perfected the art of digital management programs to make their distribution systems as efficient as possible. By 2004, the technology was remarkable. A label with a bar code on it could be affixed to any pallet of products made in a Georgia-Pacific mill, such as the Wauna, Washington paper mill, for example. When the pallet arrived at the warehouse in Portland, that bar code was scanned and its information recorded in a database. The computer in Portland recorded that the pallet was from Wauna, and also which machine inside the Wauna mill made the product and at what time. If there was a defect in the product, Georgia-Pacific could track the mistake back to the machine and the minute at which it occurred.

  This was the inventory management aspect of RedPrairie’s system, which was called the Warehouse Management System, or WMS. It was a big improvement over the OIS. RedPrairie also created a different suite of software tools that went alongside the inventory management system. This suite didn’t help control the inventory; it helped control the workers. This was the Labor Management System, or LMS.

  The LMS tracked workers with the same level of detail used to track the pallets. Each worker was assigned what was essentially their own bar code. The LMS system tracked them throughout their workday, their workweek, and eventually their entire career. Every minute was recorded. Every minute was analyzed. Nothing was lost on the LMS.

  Koch Industries inherited the LMS when it bought Georgia-Pacific. But Trimm and others said that Koch used the system in new ways that reflected Koch’s particular philosophy. “When G-P had [the LMS], we didn’t use it that much. We were a little bit more lax,” Trimm recalled. “Once Koch had it, the policies got a lot stiffer.”

  * * *

  When the LMS went operational, the forklift drivers arrived for work at the warehouse to find that their day-to-day operations were no longer just dictated by foremen and supervisors. They were run, instead, with the help of an algorithm inside a set of black boxes that no one could see. The algorithms never slept, churning around the clock as they subsumed and analyzed enormous volumes of data from every point along Georgia-Pacific’s vast supply chain. Everywhere that a bar code was scanned, the information was fed into the LMS. The computers simultaneously analyzed incoming orders from customers that were hundreds of miles away. They tracked the location of every parcel and crate of toilet paper as it rolled off the factory line at the plant in Wauna and as it was loaded onto a barge, shipped downriver, and then hoisted dockside at the warehouse. They tracked every parcel as it was brought into the warehouse and was stacked and then as it was loaded into the back of semitrucks and sent to Target or Costco. The LMS paid attention to all of this activity, everywhere, at once, in a way that no human ever could. And then it synthesized the information near instantaneously and generated the list of tasks that employees would perform once they arrived for work.

  The LMS redefined what it meant to be on the clock. An employee was either on the grid or off the grid. If they were on the grid, they were working. If they were off the grid, they were not. When they were off the grid, they essentially ceased to exist in the eyes of the LMS and Georgia-Pacific, and they were off the clock. Over time, the drivers yearned for the minutes when they were off the grid.

  The older guys, in particular, had trouble adapting to the new system for understandable reasons—they had spent twenty years or more working with paper order sheets and verbal commands from humans. The LMS disposed of all of that.

  But even younger employees, who didn’t know a workplace without the LMS, found themselves ground down under the daily pressure. One of these young employees was named Travis McKinney, and his career working under the LMS illuminated just how much things had
changed since Steve Hammond started working at the warehouse.

  McKinney was hired in 2004, shortly before the LMS went live. He seemed like someone who might quickly adapt to life under the LMS—he was a computer nerd with a blog and an affinity for technology. McKinney earned the nickname Magneto when the other guys realized that he was a comic book fanatic who often traveled to sci-fi conventions. Someone found a picture of him online, dressed in full costume as the X-Men villain Magneto. His nickname was assigned to him instantly and permanently. McKinney didn’t seem quite at home with some of his tattooed, hard-drinking coworkers. But his affable nature and outgoing manner helped him fit in. Magneto was a hard guy not to like.

  McKinney had every reason to be grateful that he had a job at the warehouse. Some of the older guys, like Steve Hammond, fell into the job. McKinney had to fight very hard just to get in the door. Full-time jobs with good benefits were hard to find in 2004. When Georgia-Pacific posted the warehouse job, McKinney visited an office to submit his application. When he arrived, there were dozens of other people already lined up for the job. He heard that more than two hundred people applied for the position.