Can a Small Company Benefit from Market Based Management (MBM)?

Can a small company benefit from Market Based Management (MBM)?  If your response is “what is market based management?” I’ll try to explain below.  If you already know what MBM is the question is not rhetorical because unless it becomes a part of your corporate (and personal) DNA you will probably fall short.  For new companies it’s about starting out right.  For existing companies it is about being willing to hit the “Reset” button and rebuild your corporate model (through “creative destruction”) around fundamentals that helped make Koch Industries one of the world’s largest privately held organizations.  Can your company grow to $115 billion (USD) in annual revenue if you adopt MBM?  I don’t know but I do know that your company will be better, stronger and more prepared to face an ever-changing marketplace with confidence.  It starts with Culture.

If you’ve ever had the fortunate opportunity to attend a meeting in a conference room at the CSX Transportation world headquarters in Jacksonville, Florida you’ve experienced a part of their culture that is immovable, immutable and never ever taken for granted… the safety briefing.  Should you be lucky enough to have four meetings in four separate conference rooms in a single day you will be a witness to this process repeated every time.  I’ve sat in rooms where we had a conference bridge setup and many people participating from different locations and each one starts with “Folks on the conference call, we’re going to do a quick safety briefing and we’ll be back online shortly”, says Larry Biess, Director of Business Intelligence at CSX as he puts the call on hold and begins the process of conducting the safety briefing.  Everyone has a role and a responsibility even if you are a guest.  Where the stairs are, where we’ll meet outside, responsible person for CPR (primary and backup), AED, Call 911, headcounts.  I’ve come to appreciate not only the thoroughness and professionalism that is displayed but also the model that never waivers or deviates from the plan.  You see, this is a part of the culture that everyone who works at CSX takes very seriously and one which takes precedence above the importance of the meeting.  If you visit one of their repair facilities the same briefing will happen.  Safety is just one of their guiding principles and I have a confidence that should anything happen the plan will execute and we will be safe.  I have been there when a tornado came through downtown Jacksonville (really weird and reasonably rare).  We received notice via the public address system and everyone followed the plan.  Excellence and preparation in action.

What happens when you make excellence a part of your culture?  What happens when you adopt guiding principles and operational processes that are non-negotiable?

I have become a student of Market Based Management (MBM) that Charles Koch helped define and refine for Koch Industries.  There are two excellent books he has written, “The Science of Sucess” (2007) and “Good Profit” (2015).  The fundamentals are solid and, when adopted into a corporation’s culture, it becomes easy to make sound business decisions for today and  the future.  I encourage everyone to read both books but if you can only find time to read one I recommend “Good Profit”.

As a small company the question is how do you adopt and implement the business model of a $115b a year company?  Will it work? Yes. Is it too complex or overkill?  No.  The biggest requirements are to be committed and to have courage.

Whether you have two, ten, fifty, two hundred or ten thousand employees MBM works because it starts with the “man in the mirror”… you.

I’m not going to go into a deep philosophical discussion about the details of MBM but I do want to highlight the Guiding Principles and Five Dimensions.  Hopefully, you’ll want to learn more and make this model a part of your organization’s culture (quick quiz, what is 10,000%?).

Guiding Principles:

  1. Integrity
  2. Compliance
  3. Value Creation
  4. Principled Entrepreneurship
  5. Customer Focus
  6. Knowledge
  7. Change
  8. Humility
  9. Respect
  10. Fulfillment

The  Five Dimensions of MBM are:

  1. Vision
  2. Virtue and Talents
  3. Knowledge Processes
  4. Decision Rights
  5. Incentives

Spend time with a Koch team member (both inside and outside of the office) and you’ll find that they have adopted the MBM model into both their business and personal lives.  You will be inspired by their energy and moved by their commitment.

When you make MBM a part of your culture making difficult decisions becomes easier, focusing on business opportunities becomes laser-driven and obstacles or challenges are more manageable.  Will it cure all the problems in the world?  No.  But it will make you want to play a role in finding a “cure” for the things that you can impact.

As president of 4Atmos Technologies, LLC I can tell you that we have made MBM the foundation of our organization.  The hardest part was taking the first step.  Stay tuned and I’ll keep you updated on continuing success stories in our company and I hope to hear yours as well.

Remember… Be Courageous!

Important Links:

Koch Industries – MBM

“Good Profit” at Amazon.com

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