Market Based Management®
Philosophy and Principles
Market Based Management® is a value system and framework for action that encourages employees to think and act like principled entrepreneurs. (The Principled Entrepreneur, 2007) The MBM philosophy was (and continues to be) developed by Charles Koch, chairman and CEO of Koch Industries. It is used by all Koch companies such as STAINMASTER® carpet, LYCRA® spandex, Quilted Northern® tissue, and Dixie® cups. Charles Koch credits the success of Koch Industries, one of the world’s largest privately held companies, to the application of this unique way of doing business. (Koch C. , 2007) MBM is a large set of ever-evolving “mental models” ...view middle of the document...
Any organization – corporation, small business, nonprofit, government agency – can apply these proven principles.The MBM Guiding Principles center on a company driving change internally to survive and prosper. In order to achieve such prosperity, it requires the business entity and its employees to live by a set of Guiding Principles that includes: integrity, compliance, value creation, principled entrepreneurship, customer focus, knowledge, change, humility, respect and fulfillment. (Geiszler-Jones, 2006) (Koch Industries, Inc., 1999-2008) It is imperative that each principle is defined and understood to be used in life as well as the workplace. | | |
Integrity requires each of us to conduct all affairs lawfully and with integrity. Real integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not. This is part and parcel to keeping your obligations and promises. You must try if possible to do business with honorable people; and, build a positive reputation based on reality, or others will create one based on speculation or animus.
Compliance means that each employee must strive for 10,000% compliance, with 100% of employees fully complying 100% of the time. This includes ensuring excellence in environmental, safety, and all other areas of compliance. Stop, think and ask! Striving to comply with every law does not mean agreeing with every law. But, even when faced with laws we think are counter-productive, you must first comply. Only then, from a credible position, can you enter into a dialogue with regulatory agencies, for example, to demonstrate alternatives that are more beneficial to your businesses.
The third principle is value creation – in simple terms, creating real long term value by economic means. This is done by understanding, developing, and applying Market Based Management® to achieve superior results and eliminating waste. An effective business vision begins and ends with value creation, which is the only reason any business should exist. In a true market economy, for a business to survive and prosper long term, it must develop and use its capabilities to create real, sustainable superior value for its customers and for society. Value creation involves making people’s lives better. It is contributing to prosperity in society. We create value by providing products and services our customers value more highly than available alternatives. We do this while consuming fewer resources, leaving more resources available to satisfy other needs in society.
Principled entrepreneurship is demonstrated by the sense of urgency, discipline, accountability, judgment, initiative, economic and critical thinking skills, and the risk-taking mentality necessary to generate the greatest contribution to the company. As Thomas Edison once stated, “Opportunity is missed by most people, because it is dressed in overalls and looks like work.” (Edison, 1994-2007) Principle entrepreneurs maximize...