P

P2P Peer-to-peer

Paasche, Hermann (1851–1925) German statistician and economist. He is best known for his Paasche index, which provides a calculation of the Price Index.

Paasche index Pricing index invented by German economist HERMANN PAASCHE that compares prices of goods bought by a specific population during one year to the prices of the same goods in a base year.

PABLA PROBLEM ANALYSIS BY LOGICAL APPROACH

PACE Price, assortment, convenience, entertainment; an acronym for the benefits of e-commerce.

Pacing The amount of time required for the performance of a task.

Packaging 1. Design of wrappers or containers for goods, as part of marketing. 2. Delivery of a finished product, combining all the downstream activities.

Packard, Vance (1914–1996) American journalist and social critic. In his Hidden Persuaders (1957), he explored the use of consumer motivational research and subliminal advertising to manipulate expectations and induce demand for wasteful products. He followed up in later years with a number of other books examining social trends. Among them were The Status Seekers (1959), The Waste Makers (1960), The Pyramid Climbers (1962), The Naked Society (1964), The People Shapers (1977), and The Ultra-Rich: How Much is Too Much? (1989).

Pacman defense After the pocket calculator game, a technique by which a company threatened with a hostile takeover counters with a bid to take over the challenger.

Paired comparison Rank order of elements by comparing their relative values.

Panic In business, a condition of irrational thinking in which participants fear the worst and overreact, leading to further problems; usually applied to stock market, divestment and devaluation, and decisional paralysis.

Panoptic view Perspective of an entire operation from a strategic vantage.

Paradigm Example or pattern; a set of values and norms that constitute a stable state. A change in paradigm leads to a paradigm shift.

Paradox of community size Principle that small groups have more active and committed members, who participate in community activities for the greater good.

Paradox of thrift Theory developed by British economist JOHN MAYNARD KEYNES, that efforts to increase the level of savings have the opposite effect.

Par banking Practice, enforced by the FEDERAL RESERVE SYSTEM, of one bank’s honoring checks drawn on other banks at full face value, with no check-cashing charge.

Paralysis by analysis Inability of managers to make decisions as a result of being preoccupied with meetings, writing reports, collecting statistics, and analyzing data.

Parenting As applied to business, nurturing of a subsidiary company by the directors of a parent company, with the degree of control and support extended vertically.

Pareto, Vilfredo (1848–1923) Italian economist who is noted for the PARETO RULE, or 80-20 principle.

Pareto chart Chart, named after VILFREDO PARETO, containing bars and a line graph where individual values are represented by bars in descending order and the cumulative total is represented by the line.

Pareto efficiency From Italian economist VILFREDO PARETO, the name for an alteration in the allocation of resources that leaves at least one person better off and nobody worse off.

Pareto rule From Italian economist VILFREDO PARETO, and commonly called the 80-20 rule, states that 80% of national income comes from 20% of the population. The rule can be extrapolated to apply to a number of proportional situations: 80% of systems failure is a result of 20% of possible causes; 20% of a population is responsible for 80% of that nation’s progress; 80% of a company’s profits come from 20% of its products; 20% of a company’s problems take up 80% of a manager’s time. Also termed Pareto principle.

Paris Bourse French stock exchange.

Parity Equity in pay between different groups of employees and the absence of discrimination in determining pay scales.

Parity of authority Management principle that a superior has the right to issue orders and the employee has the responsibility to obey them.

Parking securities Hiding the real ownership of stocks by buying and holding them under an assumed name.

Parkinson’s laws Observations attributed to humorous British writer Cyril Northcote Parkinson, which state that work expands to fill the time available, that expenditures rise to meet income, and that the number of employees multiplies independent of the amount of output. See also PETER PRINCIPLE, DILBERT PRINCIPLE.

Participant observation Research technique in social science whereby an observer joins the group being studied in order to acquire a stake in their activity.

Participating interest Controlling interest in a company through ownership of more than 20% of its shares, entitling the holder to a seat on the BOARD OF DIRECTORS.

Participative management Style of management that encourages worker participation on governing boards, as in an INDUSTRIAL DEMOCRACY.

Partnership Association of two or more persons for the operation of a business under existing commercial laws. Partners are generally liable for the debts of their company, unless it is a limited partnership where the liability is limited to the extent of the investment.

Pascale, Richard Tanner American management guru who developed the MCKINSEY 7S MODEL. He originated the concept of ORGANIZATIONAL AGILITY.

Passing a name Disclosure by a firm of brokers of the names of the principals on whose behalf they are acting, without guaranteeing their solvency.

Passive management Portfolio management that involves holding assets over the long term, aligned to a market index; see INDEX FUND.

Patent Grant of an exclusive right to exploit an invention registered with the U.S. Patent Office or under appropriate INTELLECTUAL PROPERTY laws.

Paternalism Authoritarian management philosophy whereby a manager acts as a benevolent dictator.

Paterson method Job evaluation technique devised by business consultant Thomas T. Paterson, which classifies jobs according to the degree of decision making involved. Also termed Paterson grading.

Pathfinder prospectus Initial prospectus for a new company that does not include details but is designed to test-market reactions and to garner support.

Path-goal theory of leadership Management approach that sees the task of senior management as primarily setting goals for junior managers, outlining the paths to reach those goals, and giving them sufficient responsibility to achieve the goals.

Patriarchal management Close management style, usually found in family-owned businesses where the senior-most member of the family is also the chief operating officer or chairman with absolute powers.

Pattern bargaining Negotiating tactic that brings pressure to bear on one party by citing other agreements made in similar cases.

Paula principle Belief that women employees are always held below their level of competence. See also PETER PRINCIPLE.

Pay secrecy Company policy maintaining confidentiality about salaries and perquisites.

Payday loan Small, short-term unsecured loan, also known as cash advances, that carry high interest rates.

PDCA PLAN, DO, CHECK, ACT

Peak experience Transpersonal and ecstatic state, especially one characterized by euphoria, harmonization, and ineffable peace. Term coined by ABRAHAM MASLOW. It is generally associated with religion but may also be induced pharmacologically.

Pecking order Hierarchic status in an organization, showing the relative importance of individuals and their associated status symbols.

Peer group People who are of equal age and standing and have similar tastes and attitudes.

Penalty 1. Compensatory payment required for breach of contract or agreement, as a result of which the injured party has suffered damages. 2. Fee assessed for a violation of rules, late payment, or disregard for procedure.

Penetration pricing Introduction of a new product to a market at a low price so as to attract new customers, with the intention of raising the price after the product gains acceptance.

Per proc (short for Latin, per procurationem) Denotes an action by an agent not on his own authority but on that of a principal who has assumed responsibility for the action.

Perceptual mapping Use of mathematical psychology to understand the structure and behavior of a market; the track records of competing products are shown on a map or graph, and success or failure is charted to show how each fares relative to the others.

Perfect competition Market operating under ideal conditions, in which no product or company has an undue advantage over others. For such a market to exist, there would be no barriers to entry and there would be equilibrium between SUPPLY AND DEMAND. Perfect competition does not exist in the real world, but it serves the comparative purpose of exposing the inadequacies of real-world markets.

Perfect information In a state of PERFECT COMPETITION, information on products and their benefits is available to all, so that no one has to act on the basis of misinformation or incomplete facts.

Perfect storm Unusual conjunction of severe circumstances, whose cumulative effect is disastrous.

Performance Overall quality of work, judged in terms of standard norms and the completion of stated goals over a period of time.

Performance appraisal Formal review of an employee’s performance for purposes of training or review of remuneration, using accepted standards, indicators, or a calibrated scale applied without partiality.

Performance bond (p-bond) Bond that indemnifies one party against losses caused by the failure of the second party to perform to specified specifications.

Performance management Style of management that enables employees to reach their optimum level of performance, indicated by setting clear markers and standards.

Performance measurement Tool for judging an employee’s suitability for the work assigned, based on objective indicators. These indicators are (1) strategic, related to efficiency and compatibility; (2) operational, related to success and profitability, product mixes, and productivity; (3) physical, relating to income per member of staff, per customer, per offering, per outlet, per square foot, returns on investment, product durability, and longevity; (4) behavioral, relating to staff and management, attitudes and values, strikes, disputes, absenteeism, turnover, and accidents; (5) confidence, relating to company reputation, shareholder satisfaction, customer satisfaction, and contributions to community welfare; and (6) ethical, relating to the behavioral standards and how they have been met. Distinctions are sometimes made between financial indicators, such as return on capital and economic value added, and nonfinancial indicators, such as the company’s ranking in compliance with legal regulations and ethical standards and employee welfare.

Performance standard Level of work required or expected, spelled out in company memoranda relative to the level of remuneration.

Performance tolerance Acceptable level of variance from professional standards tolerated during job evaluation.

Perishable dispute Industrial dispute that becomes moot because the primary issues being contested have grown irrelevant or have been overtaken by recent events.

Perks Short for PERQUISITES.

Permalancer Blend of the words permanent and freelancer; basically, a freelancer who has no exit date.

Perpetual succession Continued existence of a corporation as a legal entity until it is legally dissolved.

Perquisite Benefits to which an employee is entitled, over and above the salary. These may include free housing, free medical care, and free tuition.

Person-job fit Extent to which a person’s skills, interests, and personal characteristics are consistent with the job description.

Person-organization fit Extent to which a person’s skills, interests, and personal characteristics are consistent with the objectives of the company.

Personal space In social psychology, the physical space immediately surrounding a person, regarded as inviolable; a violation of this space is considered an invasion of privacy. Also used figuratively to denote a person’s ingrained interests and beliefs.

Personality promotion Advertising campaign utilizing a celebrity.

Personnel Human resources department of an organization, as distinguished from its material assets.

Personnel management Business function covering the recruitment, employment, training, placement, promotion, and welfare of the company’s employees.

PERT PROGRAM EVALUATION AND REVIEW TECHNIQUE

PEST Political, economic, social, and technological; an acronym used in analysis.

PESTLE Political, economic, social, technological, legal, and environmental; an acronym used for external issues affecting the development and viability of a company apart from its markets and products.

Peter principle Devised by educator Laurence Peter and Raymond Hull, in their book The Peter Principle (1969), a humorous observation that every employee eventually rises to the level of his incompetence. See also PARKINSON’S laws.

Peters, Thomas J. (1942–) Popular writer on management. His best-selling book, In Search of Excellence (1982), inspired a whole generation of corporate executives. Later, he wrote Thriving on Chaos (1987), The Pursuit of Wow (1994), and Leadership (2005).

Philadelphia lawyer Legal professional skilled in finding loopholes in a law.

Phishing Fraudulent act of obtaining bank account numbers, credit card details, Social Security numbers, and other sensitive details via bogus e-mails and text messages.

Physical distribution Warehousing and moving of goods from one point to another, planning the logistics of controlling the flow of materials to markets, and managing the supply chain.

Piece rate Payment to an employee for each unit of work or a set output, sometimes combined with a base salary and bonus.

Piggybacking Selling the complementary goods of another manufacturer.

Pigou, Arthur Cecil (1877–1959) English economist who built up the influential Economics department. His contributions covered welfare economics, unemployment, public finance, index numbers, and measurement of national output. He was a member of the Cunliffe Committee on Currency and Foreign Exchange (1918) and the Royal Commission on Income Tax.

Pigou effect Conceived by economist ARTHUR CECIL PIGOU, the concept that output and employment is stimulated as a result of higher consumption brought about by an increase in wealth.

Pilot production Small-scale production of a new product so as to check its physical specifications and its functionality.

Pilot study Marketing research concerned with making sure that there are no surprise problems when introducing a new product to consumers.

PIMS PROFIT IMPACT OF MARKETING STRATEGIES

Pin-drop syndrome Stress caused by eerie quietness and/or silence in a work space.

Pink-collar Relating to jobs traditionally reserved for women. Compare BLUE-COLLAR, WHITE-COLLAR.

Pink slip Metaphor for a notice of termination of employment or layoff; dates back to 1929, when these notices were slipped into pay envelopes and were on pink paper.

Pipage Distribution of liquid materials through pipes.

Pipeline 1. Materials in transit after they have been purchased but not yet entered in inventory. 2. Process of goods through stages of production, as in “in the pipeline.”

Piracy Illegal copying, distribution, and sale of INTELLECTUAL PROPERTY, especially software, books, and music, across borders.

Pit Trading area of a traditional stock exchange, where traders congregate to buy and sell stocks.

Pitch Sales presentation, usually made in person.

Plain vanilla In finance, a simple and straightforward instrument, without any frills or bells and whistles.

Plan, Do, Check, Act (PDCA) A four-stage supervisory technique for continuous improvement of work procedures. The plan involves defining goals, do involves practice, check involves feedback control, and act calls for modifications in the light of experience.

Planned obsolescence Strategy in manufacturing of shortening the lifetime of a product through built-in inadequacies, and often matched by bringing out new and improved models featuring improvements.

Planning Act of anticipating future needs and resources and matching them, with a view to maximizing output and profits. Planning can be either long term and strategic or short term and mostly for scheduling.

Planning fallacy Demonstrated tendency of underestimating the time required for completion of a task. The fallacy derives from natural optimism combined with the assumption that all things will go according to plan, with the result that there are no provisions made for unintended consequences and roadblocks. There is a further tendency to screen out potential or unpleasant details, so as to reinforce the feeling that everything is under control.

Planning, organizing, staffing, directing, coordinating, reporting, and budgeting (POSDCORB) Management functions and roles defined by economist HENRI FAYOL.

Plateau Career stage at which an employee has paused at a particular level of achievement and there is little or no prospect for further promotion.

Plough back To reinvest profits, converting them into capital assets.

Pluralistic ignorance Common belief held by an employee that he or she is an exception to the general rules that apply to everyone else.

Pluralistic theory In industrial psychology, the existence of common and divergent interests among employers and employees.

Poaching In business, the unauthorized recruitment of employees or customers from a competing company, or a raid on another’s sales territory.

Point method Analytical means of job evaluation, in which jobs are scored on features such as skills, responsibility, and work conditions, and then used as a basis for creating a graded pay structure.

Point of equilibrium When supply equals demand.

Point of ideal proportion In a production process, the point at which profitability is at its optimum because of the ideal conjunction of labor and overhead.

Point of indifference When revenues barely cover expenses.

Poison pill Tactic of repelling an unwelcome or hostile takeover by ensuring that a successful bid will reduce the value and attractiveness of the company, and will trigger developments detrimental to the new owners. Poison pill strategies have multiplied since the middle of the 20th century. They include:

1. Flipover rights plan. The holders of common stock of a company receive one right for each share held, allowing them the option to buy more shares.
2. Flip-in rights plan. The holder has the right to purchase shares in the target company at a discount, when a potential acquirer accumulates a specified percentage.
3. Poison debt. The target company issues debt securities under conditions designed to discourage the hostile takeover.
4. Put rights plan. The target company issues rights in the form of dividends.
5. Voting poison pill plan. The target company issues a dividend of securities conferring special privileges to stockholders.

Poka-yoke (In Japanese, “mistake-proofing” or “fail-safety”) Range of techniques used in Japan for avoiding human errors; developed by Shigeo Shingo. It consists of three strategies: (1) source inspection to detect errors at their source; (2) one hundred percent inspection for defects using sensing devices; and (3) immediate actions to stop operations when an error is detected.

Political correctness Consciousness of and adherence to popular attitudes and beliefs, without differing or questioning of assumptions.

Political credit risk Chance that a sovereign foreign nation will fail to honor its legal obligations and commitments, for political or other reasons. The principal forms of political risks are (1) confiscation, (2) contract repudiation, (3) currency inconvertibility, (4) discriminatory taxation, (5) embargo, (6) expropriation of property, (7) war, (8) nationalization, and (9) excessive fees for bonds or guarantees of performance. Also termed sovereign risk.

Polluter pays Principle that the company responsible for violating environmental laws, and consequently adding to the pollutants in water, land, and air, must take full responsibility for cleanup, as well as payment of damages to those adversely affected. See also CAP AND TRADE.

Polychronic culture Society in which time is organized horizontally, so that people engage in various activities at the same time and not sequentially. In such a culture, interpersonal relationships are more important than time-conscious punctuality.

Polyspecialist Person who is neither a GENERALIST nor a specialist, but is knowledgeable in a broad range of subjects.

Ponzi, Charles See PONZI SCHEME.

Ponzi scheme Fraud in which investors are enticed into investing via promised high returns, and sometimes are asked to recruit other investors. In this PYRAMID SCHEME, the money obtained from the later investors is used to pay the early ones. Named after Charles Ponzi, an Italian-born American swindler.

Pooled interdependence Relationships among parts of an organization that have the same goals but different functions and structures, and that cooperate in working toward a common outcome.

Population Group of people sharing common characteristics and who, for marketing purposes, may be considered homogeneous from which a marketing sample can be taken.

Population hypothesis In market research, the assumed characteristics of a target population, based on studies conducted on their suitability as consumers.

Porcupine provision Form of POISON PILL by which the management of a takeover target company hopes to deter unwelcome or hostile takeovers. Also termed shark repellent.

Portal-to-portal Relating to pay for time spent in traveling to and from place of work.

Porter, Michael Influential Harvard Business School writer on strategy, especially concerning COMPETITION and COMPETITIVE ADVANTAGE. See also PORTER’S FIVE FORCES.

Porter’s five forces Framework developed by business professor MICHAEL PORTER for analyzing the balance of power within a particular industry and its profitability. the five forces in the MICROENVIRONMENT that drive competition and weaken a firm’s profitability are (1) rivalry among existing competitors, (2) threats of new entrants, (3) threats of alternative substitutes or comparable products, (4) strength of the consumer public, and (5) strength of the supplier power. COMPETITION and rivalry are considered under this paradigm as negative forces in business growth.

Portfolio career Career spanning a succession of short-term freelance jobs, as opposed to a career that shows progression up the ranks as a full-time employee.

Portfolio theory Developed by HARRY MAX MARKOWITZ, the theory that rational investors are averse to taking increased risk unless the risk is accompanied by potential increased income. Most investors prefer safe investments and a lower level of risk.

Portfolio worker Worker who works for several employers and holds several jobs.

POSDCORB PLANNING, ORGANIZING, STAFFING, DIRECTING, COORDINATING, REPORTING, AND BUDGETING

Position audit Systematic assessment of the current situation of an organization, especially its strengths, weaknesses, opportunities, and threats.

Position trading In finance, holding a long-term OPEN POSITION, with an eye toward achieving profits from calculated risks.

Positioning Marketing strategy by which a company plans to carve out for itself its space in a field of competitors and build a suitable image among its consumers. To achieve and maintain this positioning in a crowded field, a strategy must include (1) cost leadership, which is achieved through lower costs of production and distribution and higher productivity per worker; (2) differentiation, enabling competitors and consumers to see the company’s distinguishing characteristics; (3) focus, or concentration of strengths and historical expertise, rather than dilution of efforts into too many areas.

Post-hoc segmentation Process of segmenting a market after penetration.

Postindustrial society Propounded by economist DANIEL BELL, the service-sector-dominated economy that will replace the manufacturing-dominated era brought about by the INDUSTRIAL REVOLUTION.

Potential market Group of consumers who profess interest in a new product or service.

Poverty trap Situation in which an employee finds him- or herself when an increase in employment benefits is cancelled out by an increase in payroll taxes.

Power 1. Ability to make things happen and exert influence on people, based on one’s hierarchic standing, acquired authority, knowledge, or charisma. Power is neutral by nature, and may be used for good or evil. Power is also corrosive and tends to abuse and excess. 2. Relating to power or influence, as in a power nap or a power lunch.

Power and influence theory of leadership Concept that leadership is based on consensus and relationships, rather than personal qualities and abilities, and that leadership flows from networking and interactions.

Power distance Employee acceptance of the span between the highest level of power in a company and the lowest rung in an organization.

Power style Characteristic ways in which managers influence and massage the behavior of their employees, overcome opposition, and achieve goals. These ways may be classified as consensus, confrontational, or transactional. Confrontational style consists of controlling and manipulating information and disinformation through spin and is designed to turn employees into people who rubber-stamp ideas from above. Consensus style encourages participative decision making and collective groupthink and problem solving, using the manager’s persuasive powers to guide employees and inspire them toward a shared vision. Transactional style involves negotiation, incentives, and cooperative undertakings to bring people together without making them feel coerced.

Prahalad, C. K. (1941–2010) Indian-born academic who, together with GARY HAMEL, developed a new theory of competitiveness, strategy, organizations, and core competencies in their book Competing for the Future (1994).

Prairie-dogging Working in an OPEN-PLAN OFFICE, divided into cubicles with little privacy.

Preapproach Selling or learning process in which the target is studied in depth and information is gathered about tastes and habits before directly approaching the prospect.

Predatory pricing Strategy of pricing goods and services at such a low level that other firms cannot compete and are forced to leave the market, opening the door for raising the prices.

Predictive bargaining Approach to collective bargaining that tries to anticipate future demands.

Preemption Right of first refusal granted to a party, such as a shareholder, either as a courtesy or in compliance with a contract.

Preference (preferred) share Share in a company yielding a fixed rate of interest rather than a variable dividend. It is an intermediate form of security, between an ORDINARY SHARE and a DEBENTURE. Preferred shares confer some degree of ownership and their claims take precedence over ordinary shares in the event of a LIQUIDATION.

Presenteeism Situation in which an employee is physically present but slacking in work effort. See also ABSENTEEISM.

President Chief executive or CEO of a company, ranked below a CHAIRMAN.

Pressure group Interested parties who actively canvass private or public organizations for favors or benefits that are not available under normal circumstances.

Prestige price Artificially high price charged for a luxury product, conveying the impression that it is of high quality and implying that its cheaper competitors are of poor quality.

Prevention costs Expenses incurred in complying with regulations that enforce environmental standards or in keeping machinery in proper working order to maintain efficiency.

Price and incomes policy Program by a state authority to impose strict controls on market forces in order to rein in INFLATION and reduce or freeze wages. In a FREE MARKET economy, this is usually a temporary measure.

Price controls Restrictions on the prices of goods, enforced by the government during times of economic hardship or to control INFLATION.

Price discrimination Sale of the same products at different prices to different buyers, taking advantage of the needs of different markets but not necessarily related to quality.

Price/earnings ratio (P/E ratio) Current market price of a company share divided by the earnings per share of the company. The P/E ratio usually refers to annual earnings per share and is usually expressed as a number, called the multiple of the company. The multiple corresponds to the number of years it would take the company to earn an amount equal to its market value. High multiples, associated with low yields, indicate that the company is growing rapidly, while low multiples indicate the opposite. Most investment decisions are based on P/E ratios.

Price-to-sales ratio Relationship of a company’s stock price to its sales for the past 12 months; used as a means of determining its market strength.

Price leader Dominant company in an industry, which sets the prices in the knowledge that competitors will follow suit. If the price leader has an insurmountable lead as in an OLIGOPOLY or CARTEL, its position will be challenged under antitrust laws.

Price support Government policy of providing subsidies for certain basic sectors or industries, for political or economic reasons; the goal is to shore up prices and prevent them from falling below set levels, to avoid having the sector or industry turn unprofitable. Such support may be either by purchasing, and sometimes stockpiling, surplus products or by cash payments directly to the producers.

Price war Severe competition between two or more firms in the same industry, each seeking to increase its market shares by cutting prices sharply.

Pricing strategy Historically, a method of pricing goods to get them to move out off the shelves and into the shopping carts. Companies use a number of pricing options, such as (1) markup pricing, (2) value pricing, (3) target pricing, (4) going-rate pricing, (5) sealed-bid pricing, (6) penetration pricing, (7) skimming pricing, and (8) experience-curve pricing.

Primary labor market Workers with a narrow range of skills who need retraining for any new type of technology.

Primary market In finance, the market into which a new issue of securities is launched.

Prime rate Rate at which banks lend to their first-class borrowers, based on the FEDERAL RESERVE interest rates.

PRINCE PROJECTS IN CONTROLLED ENVIRONMENTS

Principle of selectivity Maxim that, in any given situation, a minority of agents are responsible for the majority of results or outcomes.

Private enterprise Economic system that allows or encourages citizens to own capital and property, run businesses, and accumulate wealth and profits without state interference. Also FREE ENTERPRISE. Opposite of COMMAND ECONOMY.

Private equity firm Investment firm that seeks to own and control public companies with a potential for high return. The firm turns these companies into private companies and subjects them to radical financial and organizational restructuring, usually by cutting unprofitable divisions and laying off employees. When the companies regain profitability, the firm sells them or floats them on a stock exchange. Most private equity investment is funded by debt and the acquisitions generally take the form of highly leveraged buy-ins or buyouts. In some views, private equity firms engage in asset stripping and industrial cannibalism strictly to maximize profits.

Private sector Part of an economy that is not under government control. In FREE MARKET economies, this sector is the largest and most efficient sector. See also PUBLIC SECTOR.

Privatization Process of selling a publicly or state-owned company or industry to the private sector, often for political reasons. This generally happens when a government moves from socialism to capitalism. The move is accompanied by increased efficiency and a broadening of stakeholders in the economy. Also gained are liquid funds for the state, thereby allowing it to reallocate resources. Sometimes the changeover is rapid; other times it follows a gradual privatization, with steps such as DEREGULATION, LIBERALIZATION of regulations, and diversification. Also termed denationalization.

Proactive management Philosophy of management that emphasizes being ahead of the curve, in anticipation of problems and as a way of managing change.

Probability In statistics and mathematics, the likelihood that a particular event or result will occur, especially when represented on a chart or scale from 1 to 10.

Probation Trial employment period for verifying the ability and suitability of a new recruit before being entered on the rolls.

Problem analysis by logical approach (PABLA) A problem-solving method to improve design processes using cards.

Problem definition First stage in market research, consisting of composing a statement that identifies the nature of the problem and its probable causes.

Problem solving Act of using a systematic approach to overcoming obstacles in the management of an enterprise, including such techniques as BRAINSTORMING, FISHBONE CHARTS, and PARETO CHARTS. Problem solving is a seven-step process: (1) identification of the problem, (2) verification, (3) definition, (4) root-cause analysis, (4) evaluation of alternatives, (5) implementation of solution, (6) post-implementation review, and (7) institutionalization and control.

Process Specific, structured, and managed set of activities with known inputs, designed to produce a desired output; or a configuration of operational capabilities and restrictions that are designed to produce a desired result.

Process choice Selection of the type of process ideally suited to create a particular product or service, varying from one-off approach (in which third-party contractors are involved), to batch production, to continuous processing. Each option involves a different combination of skills, design, planning, control, and scheduling. The process also must be in sync with consumer needs and preferences. Process choice calls for costing mechanisms to be in place because costs are accumulated over the lifetime of the product and yield different unit costs, as well as sometimes normal or abnormal losses. Different processes also require different plant layouts in which resources will flow through different routes and workstations.

Process control Statistical and engineering tool that deals with architecture, mechanisms, and algorithms for maintaining the output of a process within a desired range. It is used extensively in industry to enable continuous manufacturing of oil, paper, chemicals, and electric power. It enables automation by which a small staff can operate a complex factory from a central control room.

Process departmentation Grouping of departments or subunits on the basis of their primary organizational operations. See MATRIX DEPARTMENTATION, GEOGRAPHICAL DEPARTMENTATION, FUNCTIONAL DEPARTMENTATION, and PRODUCT DEPARTMENTATION.

Process improvement Feature of organizational development consisting of a series of actions to identify, analyze, and improve business performance and processes to meet new goals and objectives and increase profits, reduce costs, and accelerate schedules. These methods include BENCHMARKING, capability maturity model, HOSHIN PLANNING, ISO SERIES, IT governance, JUST-IN-TIME, LEAN manufacturing, REENGINEERING, redesign, SIX-SIGMA, software process improvement, THEORY OF CONSTRAINTS, trillium model, and twelve leverage points.

Process management Integrating quality and performance excellence into strategic management, this is Category 6 in the BALDRIDGE AWARD. It includes process design, process definition, process documentation and description of existing processes, process analysis and control, and process improvement.

Process mapping Effort to present all the interdependent processes within an organization on a table or chart. A PROCESS is a coordinated set of activities that meets customer requirements. This is important, as many organizations undergoing BUSINESS PROCESS REENGINEERING change from a functional structure to a horizontal structure. Process mapping analyzes the flow of work across the functions and even within them. There are three phases in which process maps may act as a focus: (1) process capture and business modeling, (2) process redesign, and (3) process support. Companies are typically organized into functional and vertical hierarchies, such as marketing and finance, with a high degree of hierarchy in which status, power, control, and rank are more important than efficiency, cooperation, and service. Maps help companies to move into a cross-functional management structure.

Process principle Organizational concept defined by economist HENRI FAYOL, which describes the desirable traits of managers in the dealing with subordinates.

Process production Continuous and capital-intensive production cycle designed to fit the requirements of a process, as in chemicals, rather than mass production, as in an assembly line. Process production requires intensive planning, specifying the sequence and the nature of the end product.

Procurement Act of purchasing. It includes determining needs, identifying potential suppliers, conducting market studies, analyzing proposals, selecting suppliers, issuing purchase orders, negotiating with suppliers, administering contracts, checking the quality of received materials, and maintaining records. Also called supply management.

Product Anything that meets a need and yields measurable economic value, and that needs to be processed before the consumer can consume or utilize it.

Product bundling Sales of related products together at a combined price that is lower than when priced individually.

Product churning Flooding the market with new, similar products in the hope that one of them will become successful.

Product class Broad group of products that perform similar functions, meet similar needs, and provide similar benefits, although they may have distinctive features.

Product departmentation Organization and division of a firm on the basis of its product portfolio, placing a group or team in charge of each product or group of products.

Product development Strategy for company growth that relies on the generation of new ideas and concepts to get new products to new markets or new segments of existing markets.

Product differentiation Effort to stress unique features of a product. It is successful when there’s a difference that convinces consumers that they are getting a better deal. Product differentiation may be generally only in packaging and design, but may sometimes extend to content and operability. Producers also offer new and improved versions to distinguish from earlier versions.

Product liability Legal responsibility assumed by the manufacturer and seller for any material loss or damage suffered by users of its products, often as a result of a defect in manufacturing or raw materials.

Product life cycle Lifetime of a product in terms of its use, sales, or profitability. A product has five distinct stages to its life cycle: (1) development, (2) introduction, (3) growth, (4) maturity, and (5) decline. Many products reappear in a reincarnation stage.

Product line Group of related products with similar functionality, comparable in price and utility, and sold through the same channels to the same markets.

Product management Development of products, including invention, design, production, and marketing.

Product-market strategy Marketing planning model in which companies try to achieve a optimum mix between existing products and new products. Using the ANSOFF MATRIX gives a choice of several models: (1) market penetration, in which companies sell more of their existing products in the existing markets through price manipulation and better advertising and promotion; (2) product development, by which companies modify or improve their existing products for their current customers; (3) market development, by which companies sell their existing products to new customers; and (4) product diversification, by which new products are developed for new markets.

Product mix Spectrum of product lines offered by one company, covering a variety of needs.

Product-process matrix Tool for analyzing the relationship between the product life cycle and the technological life cycle, a concept introduced by business consultants ROBERT H. HAYES and STEVEN C. WHEELWRIGHT.

Production Output in a manufacturing process that results in the creation of an identifiable and marketable product, by hand or machine.

Production orientation Goods produced for sale whose production determines the selection for consumers, rather than consumer demand.

Production system Management guru PETER DRUCKER’S classification of production methods, including process production, mass production, and unique product production.

Production unit In accounting, a method of computing the depreciation charge for a given period on a piece of machinery, based on the number of units manufactured.

Productivity Measure of output per unit by input such as labor, raw materials, or capital; used as an indicator of profitability and efficiency.

Productivity ratio Measurement of the relationship of input to output, yielding output per person, per unit of raw material or unit of time.

Professionalization Introduction of professional standards into an occupation, so as to bring uniformity to the credentials of its members, institute requirements for training, evaluate performance, and standardize the claims and qualifications of the field.

Profile Collection of parameters on a subject or person or activity either as text or graphs.

Profit Revenues above and beyond the costs of producing and distributing a product, or income beyond expenditures for a business.

Profit-and-loss account Assignment of monies showing profits and expenditures. Profits may be classified further as net profits and retained profits.

Profit center Unit of an organization that is treated as a separate entity for purposes of financial control and that is allocated income targets for a specified period.

Profit impact of marketing strategies (PIMS) Widely used database that profiles characteristics of successful marketing strategies and products and brands. Also the name of a database examining the relationship between marketing outlays and profitability. At the heart of the PIMS program is a database of thousands of businesses with data on market environments, competitive situations, costs, asset structures, and profit performances. Key determinants include marketplace standing, market environment, differentiation from competitors, and capital and production structure.

Profit sharing Incentive plan in which companies distribute a portion of their profits to their employees in addition to their wages. There are three types of profit-sharing plans: (1) cash, (2) deferred, and (3) combination.

Profit variance Difference between standard operating profits in a budget and actual profits made.

Profit-volume ratio Sales revenue less variable costs, divided by sales volume; this shows which products are most profitable at which levels of sales.

Profit warning Official statement from a company that its profits may be less than expected for a coming quarter or year.

Profitability Return on capital employed and the ratio of net profit to sales.

Profitability Index Ratio of payoff to investment. It is a useful tool for ranking projects. Also profit investment ratio or value investment ratio.

Profiteer Person who makes excessive profits by charging inflated prices for a commodity in short supply.

Program Evaluation and Review Technique (PERT) Statistical tool used in project management designed to represent and analyze tasks. It is commonly used in conjunction with the critical-path method. It is designed as a decision-making tool for saving time in achieving goals and for measuring and forecasting progress in research and development.

Progress chaser Person responsible for monitoring the progress of a project and ensuring that it is completed on time.

Progressive consumer Prospective consumer who has an interest in buying newer and more advanced versions of the same product.

Progressive tax Tax in which the tax rate advances as the taxable base increases. It reduces the tax incidence of people with a lower ability to pay and shifts the incidence proportionately to those with a higher ability to pay. It also applies adjustment of the tax base by using tax exemptions or tax credits, as in the case of lower sales tax on food and higher taxes on luxury items. Opposite of REGRESSIVE TAX.

Project Set of activities or tasks designed to produce a desired result within a specified time. Since the activities are interrelated, they are prioritized and the tasks are assigned to specialists.

Project champion Manager in charge of a particular project, with full responsibility for bringing it to completion.

Project financing Money borrowed for a specific project, secured only by the project, and payable upon completion.

Project management Oversight of a project with time-limited objectives and a budget that crosses departmental boundaries; usually involves work with dedicated teams.

Projects in controlled environments (PRINCE) A method of project management in which the project moves through its cycle under predetermined and structured variables, using standardized procedures. The controlled environment enables the managers to concentrate on content rather than process.

Promoter Principal person involved in securing approvals and funding for a project, and in organizing the people who will take charge of it.

Promotion from within Policy of promoting junior staff to senior positions when the openings occur, rather than advertising and recruiting from outside.

Propensity to consume Proportion of income in an economy that enters the circular flow from consumer to producer, and that stays there and is not withdrawn into inactive savings.

Proportionate stratified sampling Probability sampling method for identifying different social and demographic strata, and the elements drawn from each stratum proportional to their numerical strengths.

Proprietary accounts Accounts showing assets and liabilities.

Prospect theory Developed by psychologists DANIEL KAHNEMANN and AMOS TVERSKY, the theory that improbable events are more frequent in real life than probable events, and that losses are more consequential than gains. This work seeks to explain how individuals make decisions when faced with uncertainty. It is an attempt to link psychology and financial decision making, and has three components: decision frames, mistakes in evaluating probabilities, and risk preference.

Prospector strategy Aggressive business strategy seeking large gains and taking significant risks. It is willing to bet on unproven technologies.

Prospectus Manifesto of a new organization or project, stating its goals and objects, its resources, its principals, its likely profitability, and a description of its principal markets.

Prosuming Situation whereby a company or person is both consumer and producer.

Protean career Career that involves frequent changes of organization, work profile, and job content; there’s no pattern of loyalty to a single company or career path, but, rather, is shaped by an individual’s own needs.

Protestant work ethic Belief in the virtue of thrift, hard work, and self-discipline. It is believed that this guiding principle was instrumental in launching the INDUSTRIAL REVOLUTION and especially in the development of U.S. industrial strength.

Protocol Rules governing professional conduct, or the guiding principles of a field of study or particular discipline.

Prototype Preproduction model developed to evaluate the feasibility of new materials, technology, or design, as part of NEW PRODUCT DEVELOPMENT.

Provision Amount set aside out of profits for a known liability of an uncertain amount.

Prudence Concept that anticipated or expected revenues and profits should not be included in a company’s accounts unless they have been realized in cash, lest they skew the financial information.

Psychic income Satisfaction derived from a job, over and beyond the salary.

Psychological contract Relationship based on expectations and implied assertions. They may take a number of forms: (1) coercive contract, such as between a public utility and its customers, where the corporate entity has the law on its side; (2) alienative contract, where the workers have no control over work procedures and quality; (3) remunerative contract, as between management and staff, which is based on monetary and quantitative terms; (4) calculative contract, where there is a direct correlation between worker skills and the remuneration and work satisfaction, as is between a doctor and a hospital; and (5) normative contract, in which there is professional camaraderie and ideological affinity between workers and the administration, as in religious organizations, trade unions, and political parties.

Psychological price Retail price that meets little consumer resistance because it appeals to the consumer’s aesthetic sense.

Public company Company whose shares are available to the public through a stock exchange.

Public corporation State-owned business that operates as a branch of the government and is fully or partially funded out of the state’s budget. It is generally accountable to the legislature.

Public limited company Company legally registered as corporation, but with limited liability and operating under the relevant regulations.

Public policy Decisions that advance the interests of a community, rather than particular segments of it.

Public relations Manipulation of images and information in the media, with the ostensive purpose of creating a favorable impression and softening a negative image. It is work done by professionals who maintain good relations with journalists and other information gatekeepers.

Public sector Part of the economy that is owned and run by the state, including nationalized industries and public corporations. See also PRIVATE sECTOR.

Public utility In a mixed economy, the sector that is owned and run by the government or by utilities that serve basic public needs.

Publicity Use of the media to spread information about a company, product, or person in a favorable light or to mitigate the effects of wrong or misleading information. Publicity, in essence, is free ADVERTISING.

Pull manufacturing Systems, such as JUST-IN-TIME, in which production takes place only in response to demand from the customer.

Pull strategy Tactic that requires high spending in advertising and consumer promotion to build up customer demand.

Pulsing Scheduling of advertisements and commercials in short bursts over a short period.

Pumping Injection of money into the banking system by the FEDERAL RESERVE BOARD.

Punter Speculator in the financial market out to make a quick profit.

Purchase method Type of accounting in which cash and other assets are distributed as liabilities incurred. The net assets are recorded as acquired at fair value and any excess is recorded as goodwill.

Purchasing power Ability of a currency to be exchanged for goods and services. Monetary assets have less purchasing power in times of INFLATION, and companies with outstanding loans gain purchasing power while lenders recover money that has lost value.

Purchasing power parity Principle that the value of a currency is based on its purchasing power in terms of a consistent basket of goods and services.

Pure competition Ideal state in which there are no barriers to entry, and there is unlimited freedom for all traders.

Pure monopoly Market in which there is only one seller for each commodity or service.

Push manufacturing System in which production is driven solely by demand.

Push strategy Strategy by which a company creates demand for a product or need that did not exist before.

Put option Contract between two parties to exchange an asset at a specified price (strike price) by a predetermined date (maturity or expiry). The buyer has the right but not the obligation to buy and the seller has the obligation to buy.

Pygmalion effect The greater the expectation placed upon people, the better they perform. Named after the character in the play by George Bernard Shaw.

Pyramid hierarchy Organizational structure in which there are fewer people in each succeeding higher level of management. See TALL ORGANIZATION.

Pyramid scheme Nonsustainable and illegal business model that promises incentives for enrolling people in a scheme without involving any direct sale or products or investments. The most common pyramid scheme is the PONZI SCHEME.

Pyramid selling Method of selling franchises using an array of part-time entrepreneurs, with the principal instigator recruiting others who are required to take stock in the company. They may then resell to their associates on the same conditions, in a pyramid that broadens as it descends. It is a con job, comparable to a PONZI SCHEME, by which the principals take all the money while those lower down do all the work and never realize any return.