Introduction
There has been an intensified competition in the global market as major multinational and small local organizations seek their competitive strategies, to achieve competitive advantage. This has led to the proliferation of various management ideologies and strategies that have been developed and adopted to ensure achievement of a competitive advantage, such as just-in-time and market-based management. Market-based management is a concept and management strategy based on customer orientation. It is based on a culture with various attributes and standards of policy evaluation, practices and conduct, where norms and behaviors are established and building shared values, which guide the actions of the individuals.
/>
Market based management is based on various principles and keys systems that enable its application and operations. These key systems include the mission system, roles and responsibilities, values and culture, internal markets, open communication and compensation and motivation. The system is guided by various guiding principles such as focus on the customer, change, knowledge, value creation and integrity among others. This paper will mainly focus on the open communication and compensation and motivation systems of the market-based management strategy. In addition, the paper will also seek to explore the application and functionality of the two systems of market-based management strategy at Microsoft Inc.
Generation and Communication of Knowledge
In the current competitive and innovative global business environment, organization must ensure that they are able to tap into the vast and diffused knowledge of their employees. The process of decision making in an organization should be based on informative and detailed information. The success of majority of the organization globally lies in the ability of management to get the right information. Market-based management is based on promotion of a free society and use of knowledge forms a basic component in the process of ensuring a free society. The adoption of market-based management is based on the ability of the organization to generate and utilize knowledge and ideas in its operations. Microsoft has developed a mechanism and management strategy that ensures that decision making in the organization is based on the best knowledge (Koch, 2012). This has been through the creation of incentives to employees and encourages employees to develop new innovative ideas.
Organizations adopting market-based management strategy acknowledge that knowledge is widely dispersed among the employees, in the firm. Therefore, there is a need to develop a decentralized mechanism that allows people to engage in decision making. In addition, the system must ensure that there are people with appropriate knowledge engaged in making choices of the right decisions in the organization based on the diverse knowledge from the employees. With the wide spread of market economy in the global economies, there has been an increase decentralization of power to facilitate comprehensive decision making in the organization level to achieve its potential.
Microsoft encourages generation of knowledge and ideas are encouraged from all employees. The generated ideas are then filtered by the senior management teams through the hierarchy to capture the ideas that can be adopted for the advantage of the organization. To achieve innovations, the organization believes that new knowledge can invalidate the existing one. To encourage and create incentives to employees towards contribution of new knowledge and innovations, the organization has created an incentive mechanism of promoting the people who contribute to significantly into the success of the organization. Therefore, leadership in the organization is based on merit rather that rank or political power.
There is a need for the organization to develop a mechanism and incentive system that ensures that the interest of the decision makers and the overall organization is harmonized. To tap and capture new knowledge, the organization needs to understand the tacit nature of knowledge. An organization can achieve this objective through permitting application of employees’ creativity, experiments and initiatives in their daily chores at work. The system must ensure flexibility and creativity of the organization operations, in achievement of the overall organization goals. The management in an organization must acknowledge that maximum performance in the organization is not based on a command system, where the organization implements an articulated and explicit set of regulations. Rather, it should develop a mechanism that encourages new approaches to be adopted in achieving maximum performance.
Creativity and innovations are embedded in the value system of Microsoft Inc. This is based on the concept of encouraging employees to adopt innovative and creative ideas, through their own initiatives in their daily operations, in the organization. This has enabled the organization to encourage competitiveness through innovations and development of new knowledge. The employees are allowed to make decisions regarding the operations and activities they are involved. For example, the engineering department encourages and allows engineers engage in various experiments, which can lead to the development of innovations through their own creativity (Koch, 2007). Overall, the organization encourages employees to employ their own creativity and initiatives in achieving the organization objectives.
Much of knowledge and ideas of people are untested, and their impact on the organization remains unknown. A market-based management system is based on encouraging people to express their ideas. Mobilization of the employees’ knowledge initiatives and creativity into the organization operations such as a process leads to increased productivity of the production process. This has been attributed to the fact that the employees are given the freedom of expression, in which multiple ideas are generated and filtered in a process that ensure that these processes achieve optimal results. This kind of approach in management is referred to as explorative approach, which is different from the dogmatic approach where leadership and management are based on a command based system. Microsoft has been able to adopt an explorative approach to management of the organization affairs. This has developed a system through, which ideas are communicated throughout the organization encouraging employees to remain innovative. This system has also been essential in the process of developing innovative ideas, which has enabled the organization to remain competitive.
Incentives, Compensation and Motivation
Creation of rewards for the people who aid in achievement of the organization's objectives is essential in the market system. Entrepreneurs are driven by the prospects of profits, where they seek to deliver high quality value to the employees through the use of the least cost. On the other hand, customers always reward organizations or people who satisfy their needs, while fewer resources are used. The aspect of profitability has been conceived as a short term objective of the organization, and there is a need for organizations to develop a long term perspective. To facilitate future productivity and profitability, organizations create incentives that lead to strategies that minimize future costs while maximizing revenues in future.
The issue of rewards has been the most controversial issue in most of the organization. This has been due to the complexity on the basis through which people should be rewarded. There have been various theories that have been used to explain the concept of motivation in an organization. For example, there have been views that naturally people are lazy and financial, and material rewards are the main factors that motivate them. However, in the market based management. There is a need for the organization to create a mechanism that facilitates intrinsic motivation among the employees. Intrinsic motivation has been found to be the major factor behind significant achievement in an organization (Koch, 2007). It provides employees with the desire to achieve better results on individual and organization level.
Market-based management motivation perspective aims at creation of a motivation and incentive system, which reinforces the natural and general desire of people to do the right things. This is done through various approaches and measures within the organization. For example, the organization should ensure development of properly and clearly defined roles and responsibilities in the organization. In addition, the system should ensure that the interests of the employees are harmonized with those of the organization. Compatibility of individual goals with those of the organization creates intrinsic motivation among the employees to achieve their objectives. This is attributed to the fact that employees view that the success of the organization will also contribute to their own success. There is also need to ensure natural adherence of employees to the organization code of conduct, principles and the various personal characteristics.
A clear incentive, motivation and compensation program, should be based on both the monetary and non-monetary mechanisms. These programs should be administered sensibly, in a way that makes the employees recognize that they added value to the employees. However, there is a need, for the organization to ensure matching of people with the most appropriate duties, roles and responsibilities. Microsoft Inc has an expansive human resource management department that ensures that the employees in the organization are matched with their respective skills. This is essential in the organization as it creates motivating instincts in an employee since such employees also get to advance their skills.
In addition, it improves the decision making processes of the organization, as well as facilitating effective allocation of resources within the organization. It also facilitates career development of the employees since the duty and role are given to the person with the best knowledge, interest and judgment of the process. Incentives and rewards within the organization should be based on merit and performance of such employees (Koch, 2007). There have been various arguments from psychologist, arguing that incentives based on performance and merit makes people work harder because it makes people feel better about their work.
Leadership in organizations operating under market based management strategy such as Microsoft Inc should be based on merit and performance of the employees. This makes the organization has the right people in the leadership positions; hence the right decisions in the organizations are made. Microsoft has developed an incentive system, which is based on merit and performance of the employees (Koch, 2012). This has led to increased motivation of the employees and increased commitment towards achievement of the organization since it is embedded in their own success.
References
Alvesson, M., & Willmott, H. (2003). Studying Management Critically. Sandhurst: SAGE.
Daley, S. (2005, September 13). Will Microsoft become the IBM of the 80's? Retrieved April 28, 2013, from Mraket-Based Management Institute: http://mbm.blogs.com/team_weblog/2005/09/will_microsoft_.html
Gable, W., & Ellig, J. (2013). Introduction To Mraket Based Management. Retrieved April 28, 2013, from http://www.scribd.com/doc/134558819/Introduction-to-Market-Based-Management-2
Koch, C. G. (2012). INTRODUCTION TO MARKET-BASED MANAGEMENT. Retrieved April 28, 2013, from http://www.huizenga.nova.edu/5012/textbooks/mbm.htm
Koch, C. G. (2007). The Science of Success: How Market-Based Management Built the World's Largest Private Company. Massachusetts: John Wiley & Sons.
Weinstein, A. (2012). Superior Customer Value, Third Edition. New York: CRC Press.
