What do Koch Industries’ “Market-Based Management” and Catholic Social Doctrine have in common? More than you might think.
This statement probably sounds pretty strange. After all, the Catholic Church is the bride of Christ, the earthly messenger of God’s kingdom, charged with leading all souls to heaven. Charles Koch, for his part, is an entrepreneur from Wichita, Kansas, who runs one of the largest private companies on earth, and Market-Based Management (MBM) is his business philosophy that has helped Koch Industries become so successful. I’ve had the privilege of working with him in many capacities, and I believe his business philosophy and the Church’s teaching have much in common. This is especially true in regards to Catholic Social Doctrine, which governs how the faithful approach economics, wealth, poverty and social justice writ large.
For both the Church and MBM, business is a noble pursuit designed to improve the world through entrepreneurship, innovation and service to our fellow man. The business leader, therefore, should focus on providing products and services that enable others to improve their lives — what MBM calls “Principled Entrepreneurship.” As a Catholic and a business leader myself, this is a message that inspires me every day. That is why, in conjunction with the Charles Koch Foundation, my wife and I recently responded to The Catholic University of America’s request to increase the educational and research options available to the school’s students and scholars, with a specific focus on Principled Entrepreneurship. The school — as the only pontifical university of the Catholic Church in America and the university that teaches a large number of our country’s bishops, priests and religious — is now uniquely suited to train the next generation of Catholic leaders to recognize the difference between destructive business behavior and the fundamentally positive role that business can, and must, play in our society. It is also a resource for the U.S. Conference of Catholic Bishops across the street and for Vatican officials who advise Church leaders on business and economic matters.
To understand why this is important, it’s worth digging into Market-Based Management and exploring its similarities with the Church’s social doctrine. In his latest book, Good Profit, Koch writes that the goal of business should be “maximising the long-term profitability of the business by creating superior value for our customers while consuming fewer resources and always acting lawfully and with integrity.” When a business does this, it creates good profit. This doesn’t mean high margins or high return on capital or lots of profit by just any means. Rather, good profit comes about by selling goods and services that customers value and voluntarily choose. The businesses that do this are making contributions that enhance society. Compare this to “bad profit,” which is acquired through theft, political connections, cronyism and corporate welfare, or other immoral means that harm others and deny their innate dignity and worth. This concept is an outgrowth of Market-Based Management. This business philosophy revolves around 10 guiding principles, including Integrity, Respect, Humility, Fulfillment and the Principled Entrepreneurship that I mentioned earlier. It also relies on five dimensions that, when practised, give a business the best chance of generating good profit — and, therefore, contributing to its community.
The dimensions are especially important, and they include:
1) A vision for how to thrive and create value for others in a way that helps them improve their lives.
2) A workforce possessing both virtue and talents.
3) An environment of knowledge sharing and processes that prizes respectful challenges and discussion.