Empaths at the Gate: KKR and a Stanford Psychologist Measure People Skills

In 2011, KKR & Co. bought an industrial company in Minnesota and did something unusual for a private equity firm—it invited factory workers to share ownership. A key plant with a major morale problem was losing employees and had a sky-high accident rate. Giving workers an equity stake, the thinking went, would increase loyalty, engagement and performance.

The results were promising enough that KKR began issuing equity stakes to workers at other companies it owned, at first mainly in the manufacturing sector, where annual turnover rates are routinely above 40%. KKR, which manages $600 billion in assets firmwide, is most famous for leveraged buyouts, such as in the bare-knuckle battle for control of RJR Nabisco chronicled in Bryan Burrough and John Helyar’s 1989 bestseller, Barbarians at the Gate. But it has an interest in the management of a vast private equity portfolio of 250 companies with a combined total of more than 850,000 employees. Today its employee ownership model is in place at more than 65 of those companies, including publishing giant Simon & Schuster LLC, and the firm’s private equity business in the Americas is now pledging to bring the setup to every deal in which it buys a controlling stake.