Management by Market
Management by Market steers the company by comparing company performance with market performace. This is called indexed performance measurement. Instead of judging performance as a target deviation like in Management by Objectives, performance is assessed as a market deviation.
With indexed performance measurement, company performance can be better evaluated because it shows performance independent of external factors, such as economic or business cycles, the ups and downs of exchange rates and raw material prices and extraordinary events such as mergers & acquisitions.
Management by Market is used in pay for performance and strategy controlling:
- Indexed Compensation
Indexed compensation compares company performance with a market index. This indexed performance measurement motivates for profitable growth that target-based compensation systems typically hinder, even if growth targets are used. More about Indexed Compensation.
- Indexed Strategy Controlling
Indexed strategy controlling expresses performance relative to the market which makes strategic controlling independent of the business cycle which classic strategic controlling cannot achieve. More on Indexed Strategy Controlling.