Market Based Management Essay

1069 Words May 4th, 2008 5 Pages
Introduction
The Market-Based Management philosophy was developed by Charles Koch and is employed by Koch Industries, the largest privately-held company in the world, according to Forbes magazine. MBM is based on rules of just conduct, economic thinking, and sound mental models which harnesses the dispersed knowledge of employees, just as markets harness knowledge in society. Market-Based Management enables an organization to succeed long term by applying the principles that cause a free society to prosper. Market-Based Management applies concepts and tools posed in the application problems, it allows you to learn experientially by changing input values to see how different situations impact performance, and also teaches to perform
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Keeping employees motivated in addition to creating incentives and/or additional ways for employees to receive more compensation will create better performance overall within an organization. Contrary if company B gives their employees incentives to perform, without any motivational tactics they probably will not have as many top performances as company A, in addition the company may only seek short term rewards verses have long term success. Lack of motivation for employees within an organization, can cause long term damage for the company’s success. Different things motivate everyone; therefore there should be a system in place to keep employees motivated for the long term success of the company. In the MBM textbook under the concept of incentives, compensation, and motivation, there are a couple of different views of how it should be applied within an organization. We will discuss The Social Role of Profit, Personal Profit and Losses, and the way Market-Based Management view how incentives, compensation, and motivation should be applied and the things that effectively drive employees’ actions while at work.
The Social Role of Profit The market system is critical if people are to receive rewards for helping others accomplish their goals (Gable, W., and Ellig, J ). It is believed that leaders who focus strictly on profitability don’t think about the longevity of the organization. For instance if an incentive is set
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