Market-Based Management Institute
Encyclopedia
The Market-Based Management Institute (MBM) is a non-profit organization that researches management
strategies, and utilizes their expertise to educate students, educators, community leaders, non-profit organizations, and government leaders in the concepts and methods of management that their research has developed.
, Chairman and CEO of Koch Industries
, and author of The Science of Success, in which he introduces his concept of "Market-Based Management." Koch developed his idea of MBM after some study into the nature of free market economies, likely influenced, in part, by his father's experiences.
His father (and co-founder of Koch Industries), Fred C. Koch
, had spent time developing petroleum cracking units
in the Soviet Union
under Joseph Stalin
's regime between 1929 and 1932, and came back with a deep disdain for the communist regime's totalitarianism. He described the nation as "a land of hunger, misery, and terror," and later, lamented the fact that many of the engineers he had worked with there had been purged by Stalin's regime
, along with a great many other "intellectuals".
The Kochs saw the necessity of freedom to the success of societies, and translated that into their business practices—this is the basis of Market-Based Management; the implementation of which was a major factor in allowing Koch Industries to grow to become the largest privately-held company in the United States.
Woodlief goes on to note, however, that this is not always the best system for organizations to implement immediately, as it puts a lot of responsibility on individual employees to make decisions on their own, and consequently be held accountable for them, and it can also be difficult for managers to adjust to their role to "coach and lead" employees rather than the broad decision-making roles they are more accustomed to.
They have also supported through teaching and mentoring the Charles G. Koch Charitable Foundation's Associate Program, a year-long program for college graduates to learn how to apply market-based management.
(WSU), in 2007, the MBM Institute opened an experimental economics laboratory based in the university's W. Frank Barton School of Business, the first of its kind in the nation. The laboratory uses human participants who respond to sets of experimental situations in ways to maximize their efficiency. Their success is rewarded with cash awards that vary based on their success, creating a more realistic experimental environment in which to test new ideas. The efficient concepts learned can then be applied in real-world situations to measure their efficacy.
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
strategies, and utilizes their expertise to educate students, educators, community leaders, non-profit organizations, and government leaders in the concepts and methods of management that their research has developed.
History
The MBM Institute was founded in 2005 under the impetus of Charles G. KochCharles G. Koch
Charles de Ganahl Koch is co-owner, chairman of the board and chief executive officer of Koch Industries Inc., the second-largest privately held company by revenue in the United States according to a 2010 Forbes survey...
, Chairman and CEO of Koch Industries
Koch Industries
Koch Industries, Inc. , is an American private energy conglomerate based in Wichita, Kansas, with subsidiaries involved in manufacturing, trading and investments. Koch also owns Invista, Georgia-Pacific, Flint Hills Resources, Koch Pipeline, Koch Fertilizer, Koch Minerals and Matador Cattle Company...
, and author of The Science of Success, in which he introduces his concept of "Market-Based Management." Koch developed his idea of MBM after some study into the nature of free market economies, likely influenced, in part, by his father's experiences.
His father (and co-founder of Koch Industries), Fred C. Koch
Fred C. Koch
Fred Chase Koch was an American chemical engineer and entrepreneur who founded the oil refinery firm that later became Koch Industries, the second-largest privately-held company in the United States....
, had spent time developing petroleum cracking units
Fluid catalytic cracking
Fluid catalytic cracking is the most important conversion process used in petroleum refineries. It is widely used to convert the high-boiling, high-molecular weight hydrocarbon fractions of petroleum crude oils to more valuable gasoline, olefinic gases, and other products...
in the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
under Joseph Stalin
Joseph Stalin
Joseph Vissarionovich Stalin was the Premier of the Soviet Union from 6 May 1941 to 5 March 1953. He was among the Bolshevik revolutionaries who brought about the October Revolution and had held the position of first General Secretary of the Communist Party of the Soviet Union's Central Committee...
's regime between 1929 and 1932, and came back with a deep disdain for the communist regime's totalitarianism. He described the nation as "a land of hunger, misery, and terror," and later, lamented the fact that many of the engineers he had worked with there had been purged by Stalin's regime
Great Purge
The Great Purge was a series of campaigns of political repression and persecution in the Soviet Union orchestrated by Joseph Stalin from 1936 to 1938...
, along with a great many other "intellectuals".
The Kochs saw the necessity of freedom to the success of societies, and translated that into their business practices—this is the basis of Market-Based Management; the implementation of which was a major factor in allowing Koch Industries to grow to become the largest privately-held company in the United States.
Market-Based Management approach
MBM challenges traditional American business practices, and encourages a relatively flat hierarchical structure, with the free flow of ideas between all levels of an organization. Employees are encouraged to approach their work from an entrepreneurial perspective, and be rewarded based on the value that they bring to the company, rather than only the amount of time that they spend at work. This encourages workers to use their own deductive powers to overcome obstacles and be creative in their decision-making, rather than waiting for orders from higher-ups. Problem solving, the theory contends, is best carried out by those closet to the problem - the workers. This, they say, is the best way to utilize the "collective brainpower" of the entire organization, rather than just that of the few top decision-makers. Research fellow Tony Woodlief explains:
At the biggest level, essentially what we’re talking about is helping the owner or the manager transition from being somebody who makes all the decisions and has to deal with all the problems, into being a coach and a leader on a team of people who can use their own brains. And that, I think, not only leads to a more successful company because you’ve got more brains involved, but it also allows the manager to be the person that he probably envisioned being when he first got into management, instead of a prison warden or a babysitter or somebody who has to solve problems that common sense ought to be able to solve.
Woodlief goes on to note, however, that this is not always the best system for organizations to implement immediately, as it puts a lot of responsibility on individual employees to make decisions on their own, and consequently be held accountable for them, and it can also be difficult for managers to adjust to their role to "coach and lead" employees rather than the broad decision-making roles they are more accustomed to.
Training
The MBM Institute has conducted training and consultation for businesses and other organizations in the implementation of Marked-Based Management. Among them are several other non-profit organizations such as the Youth Entrepreneurs of Kansas, the Bill of Rights Institute, and the Wichita Non-profit Chamber.They have also supported through teaching and mentoring the Charles G. Koch Charitable Foundation's Associate Program, a year-long program for college graduates to learn how to apply market-based management.
Research
Through a partnership with Wichita State UniversityWichita State University
Wichita State University is a NCAA Division I public university in Wichita, Kansas with selective admissions. WSU is one of six state universities governed by the Kansas Board of Regents. The current president is Dr. Donald Beggs....
(WSU), in 2007, the MBM Institute opened an experimental economics laboratory based in the university's W. Frank Barton School of Business, the first of its kind in the nation. The laboratory uses human participants who respond to sets of experimental situations in ways to maximize their efficiency. Their success is rewarded with cash awards that vary based on their success, creating a more realistic experimental environment in which to test new ideas. The efficient concepts learned can then be applied in real-world situations to measure their efficacy.