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 your own analysis by replacing
the application problem data with your own data. We know from history, economics, and
other disciplines that prosperous societies have very different rules and values from failed
societies, and that the rules and values in prosperous societies encourage entrepreneurial
innovation that leads to wealth, health, and happiness. An organization applying the MBM
approach is one that has similar principles, rules, and culture, in order to foster principled,
entrepreneurial behavior among its employees
(http://www.mbminstitute.org/what-is-mbm.cfm (para 1). MBM is organized in and
interpreted through five dimensions: vision, virtue and talents, decision rights, incentives,
and knowledge processes (http://www.mbminstitute.org/what-is-mbm.cfm (para 3).
The concepts to be discussed throughout this paper will be incentives, compensation, and
motivation. Incentives, compensations, and motivation are applied within numerous
organizations to not only help increase employee performance, but to also help the
longevity of the organization. If an employees overall performance increases, so will the
company profitability. For instance if company A gives their employees an incentive to
meet a certain sales quota with a motivation team in place, then top performers of
company A will be rewarded in addition, the company will seek long term revenue
benefits. 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 manytop
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 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,
