‘Good Profit” Excerpt by Charles Koch

Updated

CHAPTER 1 EXCERPT (Pgs. 16-17)

What has remained constant since the dawn of Koch, is our commitment to MBM. The goal is unchanged: to enable a business  to create more value and drive creative destruc- tion faster and better than any existing or potential competitors. After much  trial  and  error,  we organized  MBM into  five dimensions:  Vision, Virtue  and  Talents,  Knowledge  Processes, Decision Rights, and Incentives. Each of these will be explained in its own chapter,  but here’s a snapshot of all five:

■      Vision: Our  vision  is based  on  what  we believe is the role of business  in society: providing  products and  services that customers  value more than  their alternatives while more efficiently using  resources.  Consequently, we strive  to  profit only  from  benefiting  both  our  customers  and  society  as a whole. (Again, this is what we call good profit.)

■      Virtue and Talents: Having  skills and intelligence is important,  but  we can hire all the brightest  MBAs in the world, and  if they don’t have the right  values, we will fail. There- fore, we hire based on values first—then talent.

■      Knowledge Processes: One of our top priorities  is impressing on new employees that not only is it permissible to challenge their  bosses  respectfully  if they  think  they  have  a  better answer,  but  that  they have an obligation to do so. And supervisors  have the obligation to create a culture  that  invites challenges.

■      Decision Rights: Just like owners  usually take better  care of their  property than  renters  do,  when  an employee  “owns” well-defined areas at work, she takes greater pride and re- sponsibility for outcomes. This greatly improves results— especially  when  the  role  is  a  good  fit  for  her  skills  and abilities.

■      Incentives: At Koch, anyone  can earn more than  his boss if he creates more value. Our goal is to motivate  all employees to maximize their contribution, regardless of the role.

Another  improvement in this book is the inclusion of case studies demonstrating these five dimensions.  Through these examples it will become clear that  MBM utilizes these concepts  differently than  most  management literature  does.  For  example,  “vision” for Koch is not  a static,  one-time  statement of goals and  aspirations. It is a dynamic concept, always evolving based on continual examination of how we can use our capabilities  in response to changing opportunities to create the most value for our customers and society.

Adapted) from GOOD PROFIT: HOW CREATING VALUE FOR OTHERS BUILT ONE OF THE WORLD’S MOST SUCCESSFUL COMPANIES Copyright © 2015 by Charles G. Koch. Published by Crown Business, an imprint of Penguin Random House LLC.

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'Good Profit'' Excerpt by Charles Koch

Updated