Kochland Page 63

  Finally, there is the human element. People are maddeningly unpredictable. They improvise on the job, they break rules, they put themselves in unexpected places and create unforeseen hazards. Koch fought against these factors in two ways: by updating the equipment and updating the thinking and behavior of its workforce. At a large gypsum factory outside Savannah, Georgia, for example, Koch installed new fencing around dangerous machines and changed long-standing practices that put employees in harm’s way. Bright yellow barriers were erected throughout the factory to keep workers away from spinning parts and other barriers.

  Koch’s largest transformational efforts to improve safety were cultural. Across the company, employees learned about Market-Based Management and how it could be used to prevent accidents. They learned about the Ten Guiding Principles and the five dimensions of MBM, and were told that this belief system would help them simultaneously ramp up production while remaining safer. Maybe more importantly, workers were bombarded with the message of 10,000 percent compliance and repeatedly encouraged to shut down machines if they considered conditions to be unsafe.

  During the lull in production after the housing crash, worker injuries declined. An internal Koch report showed that there were 730 reportable injuries at Georgia-Pacific in 2005, before the acquisition. Koch had cut that number by 20 percent. Still, one worker was killed every year at Georgia-Pacific, except for 2007, when four workers were killed on the job.

  By 2010, Koch Industries managers believed that they had put systems and practices in place that would lock in these safety gains. Between 2010 and 2011, the number of recordable injuries fell from 579 to 545.

  In 2011, the housing market and the economy began to recover. The number of new homes being built rose about 21 percent over the year, until there were 697,000 new home starts in December. This upward march in home construction would continue for years, and it increased demand for plywood, gypsum board, insulation, and other building materials. Orders started pouring in to Georgia-Pacific.

  Koch’s newly renovated operations at Georgia-Pacific were put to the test. The system was an unmitigated success in one respect: the factories and mills were more efficient and more productive. Profit margins increased, revenue increased, and Koch Industries began aggressively paying down Georgia-Pacific’s debt. Before Koch bought the company, Georgia-Pacific’s debt was rated as being junk bonds, meaning there was a high risk it would not be repaid. But the debt ratings increased steadily as Georgia-Pacific’s factory hummed with new precision. In 2016, Georgia-Pacific’s debt was rated A+ by Standard & Poor’s, meaning that it was high-investment grade. Profits roughly doubled. The year before Koch bought Georgia-Pacific, the company earned $623 million in net profit. By 2016, Koch had increased that to an average of more than $1 billion.

  This improvement made Georgia-Pacific’s CEO, Jim Hannan, a rising star within the company. Hannan had been on the scouting team that first inspected Georgia-Pacific in the early 2000s. After taking the helm of the company, he behaved as the quintessential Koch man. He was relentless, focused, projected humility, and delivered positive results. He spoke fluent MBM, and attributed the company’s success to its operating philosophy rather than to his personal attributes.

  But one stubborn problem emerged in the shadow of the rising profits. Between 2011 and 2012, workplace injuries jumped from 545 to 584. This would have been displeasing to Charles Koch, who prided himself on running clean operations that were both safe and profitable. But the small gain could have been easily dismissed as a fluke. The number of injuries fell slightly from 2012 to 2013.

  Then, after 2012, housing starts rose more sharply, and working conditions became more unsafe year after year at Georgia-Pacific. Deaths began to rise, and the number of injuries rose in almost perfect tandem with the numbers of orders that came through the door between 2012 and 2014.

  Injuries jumped sharply between 2013 and 2014, from 527 to 644. Nine employees that year lost limbs or body parts. One hundred and fifty-four employees suffered heat burns, up from 134 the year before and 126 the year before that. The number of electrical shocks jumped to nineteen in 2014 from one the year before. In 2013, two workers were killed on the job.

  In many ways, the increasing harm to workers made no sense. Koch was continuing to reinvest in the factories. Managers were told to hammer home the message of 10,000 percent compliance and “safety first.” The rhetoric was unambiguous. But more people were hurt all the time.

  Most alarmingly, it wasn’t just the number of injuries that rose. The rate of injuries also increased. This destroyed the argument that perhaps more people were getting hurt just because more people were working more hours, increasing the odds of an accident. The accident rate, as measured by OSHA, climbed steadily each year from 2013 to 2017, rising 44 percent during that period. It was increasingly dangerous for employees to show up for work.

  Between March 17 and 18, 2014, Hannan joined a group of senior executives for a team meeting in Atlanta to discuss the safety concerns.

  “The last six months is unacceptable,” Hannan said, according to notes of the meeting that were taken by someone who observed it. Hannan referred to accidents and deaths at Georgia-Pacific as “learning events,” the idea being that each accident taught the company better ways to be safe. But the company was failing to learn. Hannan emphasized that the corporate culture would play a critical role in solving the problem. “We need to have a culture of values and not tolerate individual or organizational risk. We must learn from one another. Work on the items with the most risk.”

  “Build on an MBM®-basedI culture,” the notes read. Hannan suggested that the future of the company was on the line. “If we can’t keep safe, why invest?” Hannan asked. Market-Based Management should be solving this problem. But it was not.

  * * *

  During this period, Koch Industries changed the way people worked on factory floors across Georgia-Pacific. The company managed to cut the number of unionized workers in half, from 22,000 in 2005 to roughly 11,800 in 2016. This gave Koch flexibility and allowed it to avoid the type of onerous work rules that Charles Koch opposed since he took over the Pine Bend refinery in 1972. These changes were evident at Georgia-Pacific’s sprawling mill outside Savannah, one of the largest tissue and paper towel mills in the United States.

  The mill was highly mechanized, and its cavernous interior was clean and pleasant to walk through. The space resembled an industrial Santa’s workshop; a complicated maze of automatic machines that rolled, spun, and packed countless rolls of toilet paper. Automated forklifts drove between the machines, guided by lasers beams aimed at the floor in front of them. Employees monitored the machines and fixed them when there was a problem. One of those employees was Dana Blocker, a muscular and intense man who had worked at Georgia-Pacific since the 1990s.

  Until Koch bought the company, employees like Blocker had worked with specific job descriptions and were assigned to oversee specific machines. A person was a winder operator, for example, or a wrap operator, or a case pack operator. After Koch took over, those distinctions were dissolved. Blocker’s job title became “reliability technician,” meaning that he oversaw a wide variety of machines and processes.

  “Now you’re a technician, expected to go out and run all the equipment on the line. So, no one is tied to one piece of equipment. You have to run the entire process,” Blocker said. “When people ask me now, what’s my job, what do I do? I run the entire line. I don’t have one specific job. Whatever needs to be done, that’s what you’re going to do.”

  Blocker’s coworker, Mark Caldwell, said this created a new flexibility in the workforce. “You probably couldn’t tell who the manufacturing engineer is, or the mechanic, or the technician. You wouldn’t be able to distinguish who does what role, because we all flow to the work. We all do what needs to be done.”

  Both men praised the new system. Blocker said that it helped foster teamwork and galvanized him to think like an entrepreneur rather
than a simple factory hand. “That seemed to help everybody out. There’s no blaming or finger-pointing at anyone for running something a certain way. You’re all trying to help each other out to get the best product,” he said. Both men also emphasized that their managers encouraged them to shut machines down in the event of hazards. Safety came first.

  While unions seemed stubborn in clinging to work rules and job designations, the tradition of doing so traced its roots back to unsafe working conditions in the early 1900s. Being confined to a certain job helped workers reinforce their expertise not just on a specific process but also on a specific machine. The equipment inside Georgia-Pacific was of a scale that demanded such intimate expertise. Some machines were the size of a small house and ran giant, spinning roles of paper that weighed two thousand pounds. Knowing the quirks and dangers of such machines was vital. But Georgia-Pacific employees were increasingly put into situations where they were learning on the job.

  Koch Industries tried to mitigate these safety risks by imposing a complex set of rules and regulations on the daily life of workers. The regulations and standards were codified in a series of papers accessible through the company’s internal computer network. Employees were told to learn the rules, but this was not easy. One “work standard” paper dictated how employees should conduct themselves when taking on “nonroutine” work outside their typical operating procedure, and the document was more than twenty pages long. Another work standard, dictating how employees should shut down machines to repair them, was about twenty-five pages long. One employee estimated that the total number of work standards reports were a thousand pages combined. Workers were expected to follow these standards, and could be cited for violations if they did not.

  In 2014, this was the system in place when a wave of deaths swept across Georgia-Pacific.

  * * *

  On August 11, 2014, a forty-one-year-old man named Robert Wesson was working at Georgia-Pacific’s paper mill in Crossett, Arkansas. He lived in the nearby town of Hamburg with his wife, Lisa. Wesson had a thin and angular face, short-cropped black hair, and a finely trimmed beard that traced his sharp jawline. He was working with a large paper winder that day: a machine that spun industrial-sized rolls of paper weighing thousands of pounds.

  As the big rolls went down the conveyor line, Wesson applied tape to the “tails” so that the rolls would remain tightly coiled when they were shipped.II For reasons that remained unclear, Wesson left the area where he was supposed to stand and walked farther down the line to apply more tape to the rolls, perhaps because the first application wasn’t working. His movements could be described as “nonroutine” by Georgia-Pacific’s standards. If Wesson was trying to compensate for a problem with the taping process, then Koch’s voluminous work standards might have recommended that he follow a procedure that employees called LOTO or “Lock-out, Tag-out.” The LOTO would have required Wesson to lock the machine down by stopping it, and then record the reasons for doing so before verifying again that the machine was in fact turned off. Georgia-Pacific’s LOTO work standard paper was roughly twenty-five pages long. Wesson did not follow the LOTO procedure, and he approached the rolls instead to apply the tape. Production ran smoothly.

  As Wesson approached a paper roll, he failed to take into account the movements of a large piece of machinery called a “kicker,” a giant metal arm that shoved the heavy rolls down the assembly line. As Wesson stood near the roll, the kicker engaged and smashed his skull, killing him. His coworkers later discovered his body.

  Wesson’s death was the fifth fatality at Georgia-Pacific in 2014.

  A few months earlier, in March, when Hannan attended the safety meeting in Atlanta, no workers had yet died that year. Hannan had reported this piece of good news to the team, but it turned out to be an anomaly. Accidents and the injury rate were sharply higher by the end of the year.

  Roughly a month after Hannan’s presentation, a contractor named Sam Southerland was working at Georgia-Pacific’s plant in Pennington, Alabama. He was not intimately familiar with the facility. Southerland, who went by the name Sambo, was twenty-nine years old and married to his childhood sweetheart, Michele. He had a son named Carson, and a newborn daughter named Caylin. Southerland was something of a country boy, with a broad smile, who loved to hunt and play baseball with his son. On April 15, Southerland was inside the Georgia-Pacific factory, holding the bottom of a twenty-eight-foot extension ladder. He stepped backward, perhaps trying to find a better place for the ladder, when he fell into a hole in the floor. He plunged thirty feet into a cauldron of noxious chemicals that is called a “digester,” an apparatus that processes raw materials for the paper-making process. Southerland sustained multiple bone fractures from the fall, along with chemical and thermal burns on his body from the digester, and was killed.

  Less than two weeks later, at Georgia-Pacific’s plant in Corrigan, Texas, a fire broke out in a tall silo that captured wood dust. Employees rushed to the location to put the fire out, many of them apparently floor workers who were not trained firefighters. Some bags inside the silo were blocking a group of vents designed to release flames and pressure inside the silo in case of emergency. Pressure built up, and then the silo vents released, engulfing the employees in flames. Different news accounts said between seven and nine employees were burned and transported to local hospitals. Some of them languished in burn wards for weeks. On May 30, a fifty-six-year-old Georgia-Pacific employee named Charles Kovar died from his wounds. About one week later, fifty-eight-year-old Kenny Morris died in the hospital. Both men left behind wives and children. Kovar’s obituary suggested that he had lived a full life that was enriched by his Christian faith: “He had just experienced his best Easter ever where he cleaned out the bowl of Aunt Diane’s famous banana pudding,” the obituary said.

  On July 24, a sixty-three-year-old Georgia-Pacific employee named Lydia Faircloth was leaving her shift at the company’s mill in Cedar Springs, Georgia. Just two years earlier, Faircloth had been featured in an internal Georgia-Pacific safety bulletin. She had coined a phrase to promote safety awareness: “LET OTHERS SEE SAFETY IN YOU,” according to the bulletin. It was close to midnight when Faircloth was leaving. She cut through an area where industrial loader trucks were transporting big loads of product. She crossed the floor in a crosswalk marked for pedestrians, but was hit by a truck driven by her coworker and died from severe internal injuries.

  It was less than a month after this that Wesson was killed at the mill in Crossett. Roughly ninety days after that, a contractor named Bobby Creech at the Crossett mill was performing lawn maintenance at the mill while riding an off-road four-wheel vehicle. When Creech traveled over a hill, the vehicle rolled over and killed him. This contractor’s name was spelled variously in internal Koch documents as Bobby Creech and Bobby Creach, but there is scant documentary evidence of his death.

  By Christmas 2014, six workers had been killed in Georgia-Pacific. And the injury rate and total number of injuries continued to climb. The accident rate jumped 18 percent from the year before. The total number of reportable injuries jumped by 22 percent.

  * * *

  Between 2015 and 2017, accidents and injuries continued to climb each year, along with the rate of injuries. The increasing danger at work seemed tightly linked to increasing production: the upward trend of injuries still mirrored the upward trend in new home construction and economic growth.

  The chart below documents recordable injuries, drawn from Koch’s own internal tracking system, TRAX. The total number of accidents increased by 30 percent between 2010 and 2017:

  The injury rates rose even more sharply during this period. Koch’s TRAX system recorded two injury rates: the “OSHA Rate,” which tracked injuries, and the “DART Rate,” which basically tracks lost work time due to injuries. The OSHA rate increased by 45 percent, and the DART rate increased by 57 percent:

  Koch Industries needed to change the way it did business at Georgia-Pacific. But it wasn’t cle
ar how it would do so. In the past, Koch changed dangerous procedures after strict government enforcement, coupled with publicity of the company’s wrongdoing. In the 1990s, the raft of criminal charges and civil fines for environmental violations prompted Charles Koch to develop the 10,000 percent compliance doctrine. The crisis of workplace injuries appeared to follow a different path. Federal regulators ruled that Koch Industries had violated dozens of federal worker-safety regulations at its Georgia-Pacific facilities, but the fines for doing so were relatively paltry.

  Georgia-Pacific was fined $5,000 for violations related to the death of Robert Wesson, according to OSHA records. The company was fined $14,000 for violations related to the burn-related deaths of Charles Kovar and Kenny Morris. It was fined $35,050 for a series of violations dubbed “serious” by OSHA related to Lydia Faircloth’s death. These deaths were scattered around the country and garnered little mention outside of local media accounts, which often characterized the deaths as accidents and provided little information beyond that. By contrast, the EPA and the Department of Justice fined Koch $30 million for a series of pipeline leaks and other violations in 2000, grabbing national media attention because it was the largest such fine in history.

  In the absence of headlines and fines, Koch Industries responded to the Georgia-Pacific safety crisis by reemphasizing the need of employees to follow the guidelines of Market-Based Management. An internal Koch Industries presentation prepared in 2017 referred to the crisis in terms that military commanders might use to describe a large-scale insurgency. The “Headline Discussion” of the presentation said that Koch needed to “Engage Hearts & Minds” of employees to reverse the increasingly dangerous conditions. “Are we putting too much emphasis on ‘we are improving’ versus we are not satisfied with where we are and our rate of improvement?” the presentation asked. The presentation noticed that serious injuries were “flat to increasing” between 2016 and 2017, in spite of the company’s efforts.