The Market-Based Management philosophy enables an organization to succeed long term by applying the principles that allow a free society to prosper. 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.

The MBM philosophy was developed by Charles Koch and is employed by Koch Industries, the largest privately-held company in the world, according to Forbes magazine. The company is engaged in refining and chemicals (through its ownership of Flint Hills Resources); process equipment and technologies; fibers and polymers (through its ownership of INVISTA®); commodity and financial trading; and forest and consumer products (through its ownership ofGeorgia-Pacific®). Koch Industries' chairman and CEO Charles Koch credits the success of Koch Industries to the development and application of this management philosophy.

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. It is organized in and interpreted through five dimensions: vision, virtue and talents, decision rights, incentives, and knowledge processes.


Vision: Determining where and how the organization can create the greatest long-term value.
-Is your vision based on your competitive advantages? Will it generate significant value for customers and society?

Virtue and Talents: Helping ensure that people with the right values, skills, and capabilities are hired, retained and developed.
-Do your people possess the virtue and talents necessary to advance your vision?

Knowledge Processes: Creating, acquiring, sharing, and applying relevant knowledge, and measuring and tracking profitability.
-What systems do you have to discover how your employees and practices can become more profitable?

Decision Rights: Ensuring the right people are in the right roles with the right authority to make decisions and holding them accountable.
-Do you base authorities on a job title or on an employee's comparative advantage and proven ability to create long-term value?

Incentives: Rewarding people according to the value that they create for the organization.
-Is employee compensation based on time in the organization and job title, or is it based on evidence of long as well as short-term value creation?


One of the purposes of the MBM Institute is to conduct research that will enhance the ability of leaders and employees to apply the concepts underlying the MBM philosophy, and to provide case studies and other materials that make the concepts easier to understand and put into practice.

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