Market-Based Management

Over the past twenty-five years Koch Industries, Inc. has been under careful observation for their innovative management practices. The CEO Charles G. Koch and other executives Richard Fink and Paul Brooks have worked closely with authors Dr. Wayne Gable and Dr. Jerry Ellig to put together a booklet entitled “Introduction to Market-Based Management.” This booklet unfolds the secret to managerial success in a changing economy. As the authors believe organizational success is no longer found in a command-based management but instead with a more liberating market-based structure. Changing from a hierarchal leadership structure takes hard work and an open mind but the end results is fulfilling to employees as well as management. The market system is broken up into six key elements including: division of labor, property rights, rules of just conduct, the price system, free flow of ideas, and market incentives. After thoroughly understanding the key concepts along with the organization objective this new way of organizational leadership allows for maximization of a company’s potential. To begin one must first understand what market-based management is and how it works. In the original total quality management system it is believed that leaders and technical experts know what is best for the company and everyone in it. In order for an employee to change a procedure or show any type of creativity it must first be brought to management and in turn be approved before changes can be made. This traditional type of system depressed the initiative for employees to be innovative and creative. The market-based system instead operates under the “invisible hand” coordination allowing employee interaction to take place independently while being coordinated at the same time. This system is not a mindless copying of external practices in the market but instead is a focus on structure, employee responsibilities, ethics, and, incentive type motivation to achieve the common goal of the