Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies

The Revolutionary Management System Behind One of the Most Successful Companies of Our Time

Legendary CEO Charles Koch shows managers, entrepreneurs, leaders, students, innovators, and employees of all kinds—and in any field—how to apply the principles of his revolutionary Market-Based Management system to generate good profit in their organizations, companies, and lives.

In 1961, Charles Koch joined his father's Wichita-based company, then valued at $21 million. Six years later, following his father's death, he was named chairman of the board and CEO of the company. Today, Koch Industries' estimated worth is $100 billion—making it one of the largest private companies in the world. Koch exceeds the S&P 500's five-decade growth by 27-fold, and plans to double its value on average every six years.

What exactly does this company do and why is it so remarkably profitable? Koch's name may not be on your stain-resistant carpet, stretch denim jeans, the connectors in your smart phone, or your baby's ultra-absorbent diapers, but it makes all of them. And Charles Koch's Market-Based Management system is what drives innovations like these—and many more.

Based on five decades of interdisciplinary studies, experimental discovery, and practical implementation across Koch businesses worldwide, the core objective of MBM is as simple as it is effective: to generate good profit. Good profit results from products and services that customers vote for freely with their dollars; products that help improve people's lives. It results from a culture where employees are empowered to act entrepreneurially to discover customers' preferences and the best ways to satisfy them. Good profit is the earnings that follow when long-term value is created for everyone—customers, employees, shareholders, and society.

Here, drawing on revealing, honest, and previously untold stories from his nearly six decades in business, Koch walks the reader step-by-step through the five dimensions of MBM to show how any reader can apply its framework to generate more good profit in any business, industry, or organization of any size. Readers will learn how to:

• Craft a vision for how a business can thrive in spite of increasingly rapid disruption and ever-changing consumer values.
• Select and retain a workforce possessing both virtue and talent (the first of which is more important for long-term success).
• Create an environment of knowledge sharing similar to a community of scientists—rejecting bureaucracy and hierarchy in favor of a culture that prizes (and even demands) respectful challenges from everyone in the company, at every level.
• Award employees with ownership and decision rights based on their comparative advantages and proven contributions, not job title.
• Motivate all employees to maximize their contributions by effectively structuring incentives so employees' compensation is limited only by the value they create—not budgets or company-wide policy.

Good Profit is a must-read for any leader, entrepreneur, or student, as well as those who want a more civil, fair and prosperous society.

ABOUT THE AUTHOR

Charles G. Koch is chairman of the board and CEO of Koch Industries, Inc., a position he has held since 1967. He is renowned for growing Koch Industries from just $21 million in the early 1960s to its current revenues of about $115 billion according to Forbes. He is ranked fourth on Forbes' list of America's richest people. He has continuously supported academic and public policy research (including many Nobel Prize winners) for more than 50 years, and has helped build a number of organizations focused on research, policy and education to advance the understanding of the free society. He holds a bachelor's degree in general engineering as well as two master's degrees in nuclear and chemical engineering from MIT. He has been married to his wife, Liz, for 43 years. They have two children and two grandchildren.

Based in Wichita, Kansas, Koch Industries, Inc. is one of the largest private companies in America with annual revenues of about $115 billion, according to Forbes. With a presence in about 60 countries, Koch companies employ more than 100,000 people worldwide, with about 60,000 of those in the United States. From January 2009 to present, Koch companies have earned more than 930 awards for safety, environmental excellence, community stewardship, innovation, and customer service.