The AMA
Dictionary of
Business and Management
A
A1 In life and marine insurance, rating given to person or property in perfect condition.
AAA Prime rating given to securities by Standard and Poor’s.
AAP AFFIRMATIVE ACTION PROGRAM
Abandonment 1. Final stage in a product life cycle when the decision is made to discontinue it. 2. Relinquishing a product to a third party with or without a settlement or compensation.
Abandonment option Choice of terminating an investment before its scheduled closing date.
ABC AUDIT BUREAU OF CIRCULATION
Abilene paradox Theory that some decisions ostensibly based on consensus are counterproductive because they are founded on misperceptions and poor communications. Proposed by JERRY HARVEY, Professor Emeritus of Management, George Washington University, in 1974.
Abnormal return Rate of return for a risk greater than that required or expected by analysts.
Above-the-line 1. Entries in a profit-and-loss account that are within the ordinary activities of business. 2. Entries in a balance sheet dealing with revenue, as opposed to capital. Compare BELOW-THE-LINE. 3. Advertising through television, radio, newspapers, and Internet.
Abreaction channel Mechanisms for employees to express dissatisfaction with their work or their superiors.
Absence culture Corporate culture in which absenteeism is condoned.
Absenteeism Unauthorized leave from work, especially repeatedly.
Absolute cost advantage Cost of producing particular products as influenced by certain advantages, such as cheap labor or abundant natural resources.
Absolute cost barrier Built-in obstacle to entry into a new market, such as the advantage held by established or large firms.
Absolute market share Per capita income. See RELATIVE SHARE.
Absolute monopoly Severe form of monopoly in which production and distribution of a product or service is in the hands of a single corporation.
Absolute performance standard Theoretical standard of performance, such as ZERO DEFECT, against which actual performance may be judged.
Absorption costing Accounting process in which overhead costs of production are apportioned on the basis of seven elements: unit, weight, or volume; labor hours; machine hours; direct labor costs; direct material costs; prime costs; and standard hours.
Abusive dismissal Termination of an employee that is technically legal in some countries but violates accepted standards of fairness and equity.
Accelerated depreciation Rate of depreciation of assets that is faster than useful-life basis.
Acceleration principle Relationship between a change in output and the level of investment spending. The capital to output ratio is known as the ACCELERATOR.
Accelerator 1. Company that supplies office space, marketing space, and infrastructural services. 2. Capital-output ratio that indicates changes in output and level of investment.
Acceptance Agreement to the terms of a bill of exchange certifying that the person on whom it is drawn accepts the conditions of the bill, denoted by the person’s signature.
Acceptance bonus Bonus paid to a new employee upon beginning a job; part of a Golden hello.
Acceptance sampling QUALITY CONTROL technique that uses statistical methods to examine a sample before acceptance of a batch.
Acceptance theory of authority Principle that defines AUTHORITY in terms of its acceptance by subordinates and not as inherent in the office.
Accession rate Measure of the number of new employees joining a firm over a given period.
Accident analysis Use of ERGONOMIC analysis techniques to identify causes of accidents and potential hazards in the workplace, so as to create a safer working environment.
Accord and satisfaction Legal device defining a contractual obligation and the satisfaction and discharge of that obligation under the law of tort.
Account 1. A statement of transactions. 2. In advertising, marketing, and public relations, a client from whom a commission or fee is obtained in return for services.
Account executive Professional in an advertising, marketing, or public relations agency responsible for liaising with a client and implementing the client’s business program.
Account reconciliation Procedure for ensuring reliability of accounting records by verifying authorized amounts and actual payments.
Accountability 1. Relationship in which each party is responsible for the discharge of assumed responsibilities in compliance with proper legal and ethical standards. 2. Clear presentation of financial information that makes it possible to identify the legitimacy of transactions.
Accountant Trained professional in a corporation or business responsible for collating, recording, analyzing, and communicating financial information.
Accounting controls 1. Procedures for monitoring the accuracy and integrity of accounts and their compliance with accepted regulations and practices. 2. Procedures ensuring that expenditures and costs conform to projections and plans.
Accounting event Internal or external transaction or charge, either credit or debit, recognized as a valid entry in an account.
Accounting period Time frame of an account, usually a month, quarter, or year.
Accounting process Act of recoding, preparing, and analyzing financial transactions for the benefit of accountants and auditors.
Accounting rate of return Ratio in accounting that expresses profit before interest and taxation, usually for the accounting period as a percentage of the capital.
Accounts payable Amount owed by a business, person, or supplier, classified as a CURRENT LIABILITY in the balance sheet.
Accounts receivable Amount owed to a business by customers for invoice amounts classified as current accounts in the balance sheet.
Accretion Growth or increase in value.
Accrual Estimate in an account of a liability not supported by an invoice at the time the account is prepared. It is classified as a CURRENT LIABILITY in a balance sheet. In accrual accounting, revenues are credited when earned and expenses are debited when incurred.
Acculturation Process of adapting to, functioning, and flourishing in new, foreign cultural and societal environments, especially without long preparation, and dealing on equal terms with those who have different cultural mores.
Accumulated depreciation. Total depreciation written off the cost or valuation of a fixed asset since it was first brought into the balance sheet. Also known as aggregate depreciation.
Accumulated dividends Dividends not paid to the shareholders but carried forward to the next balance sheet.
Achieved penetration Extent to which a product or service has gained market acceptance, expressed as a percentage or ratio of actual customers to potential customers.
Achievement culture Organizational culture that fosters achievement, a sense of accomplishment, and a positive attitude toward success.
Achievement motivation theory Principle that defines achievement as exhibiting certain social and personal characteristics, such as devotion to the task at hand, acceptance of responsibility, desire for professional growth, proper motivation, ability to interact positively with peers, expertise and training, ability to multitask, and espousal of ethical standards and values.
Acid test ratio Financial proportion of liquid assets to current liabilities, which shows how far a company is able to meet its debt obligations.
Ackoff, Russell Lincoln (1919–2009) Pioneer of operations research and systems, organizational theorist and consultant, author of Ackoff’s Fables: Irreverent Reflections on Business and Bureaucracy (1957) and Introduction to Operations Research (1957). He was Anheuser-Busch Professor Emeritus of Management Science at Wharton School, University of Pennsylvania.
Acquisition See ACQUISITION MANAGEMENT
Acquisition management Acquiring and managing an established product or company as a means of growth and diversification, thereby overcoming the disadvantage in time that growth by internal development presents. This is a painless way to enter a new market that may be difficult otherwise to penetrate. In industries where COMPETITIVE ADVANTAGE is held in assets and reputation, and back orders are built up over time, acquisitions can help to achieve a strong market position immediately. Foreign companies especially find it easier to acquire domestic companies as a way of breaking into unfamiliar markets. Financially acquisitive growth is attractive for a publicly traded company if its price-earnings ratio is high relative to that of the target company because it enhances the acquirer’s earnings per share; also, it is positive when the goodwill element of the acquisition costs is treated as reserves rather than as an asset. However, acquisition presents substantial risks, with failure rates approaching 50%. The success of an acquisition strategy depends on two factors: the acquisition must create or add value, and the acquired company must be successfully integrated into the parent company. The purchase value of an acquisition typically includes a bid premium of 30 to 40% over the market value of the target company, which makes it difficult for the acquisition to be financially viable. Many acquisitions fail because the perceived benefits of increased market share fail to meet the estimated profit margins, turnover, or cash flow, and fail to meet the additional costs of integration.
There are four mechanisms that achieve value creation and offset the downside: (1) Resource sharing, by which operating costs are combined and rationalized, leading to cost reductions through economies of scale and scope. (2) Skills transfer in production technology, financial controls, and distribution and expansion of cross-company pool of expertise. (3) Enlargement of size, which creates market dominance in sales and expertise; increased bargaining power over suppliers, bankers, and customers; reduction of competition; and use of tax credits. (4) Restructuring by closing down surplus capacity, reducing head office staff, and rationalizing unprofitable product lines. Another form of restructuring is through UNBUNDLING, whereby parts of the business that are unprofitable are spun off. In many instances, acquisitions fail because the planned values cannot be realized owing to organizational issues. Key personnel may depart and clashes of ORGANIZATIONAL CULTURES may lead to mistrust, lack of communication, or poor control systems. The degree of integration and success will determine the degree of strategic interdependence between the acquirer and the acquired. It is also necessary to preserve the autonomy of the acquired company in order to retain its distinctive character and culture.
There are three types of acquisitions integration: (1) full consolidation of operations, organization, and culture of both companies so that there are no boundary lines; (2) partial consolidation in which the autonomy of the acquired company is retained while strategic capabilities are interchanged; and (3) full autonomy of the acquired company, which becomes a standalone subsidiary. There are five ingredients for successful integration: (1) Mutual understanding of the strengths and weaknesses, history, culture, and management style of the two companies so that the values of each part are not destroyed. (2) Cultivation of a shared vision and camaraderie by employees of both companies that is strong enough to overcome the natural distrust accompanying the changes. (3) Willingness to share data and information and skills. (4) Recognition of the extent of the post-acquisition changes and willingness to confront the problems and opportunities that such changes present. (5) Management communicates openly with employees about the cost-benefits of integration.
Acquisitive society A cultural group that places a premium on the acquisition and possession of material things as the path toward happiness and fulfillment. See CONSPICUOUS CONSUMPTION.
Across the board Characterization as applicable uniformly and without distinction to all participants.
Action-centered leadership Technique of management development devised by leadership thinker JOHN ADAIR, which trains leaders by practical problem solving.
Action learning Management development technique devised by business thinker R. G. Revans, which focuses on group process and solution of real problems encountered in corporate settings.
Action research Work that furthers the study of organizational processes by influencing the activity being studied and controlling the input and output under investigation. It is based on the premise that the act of investigation itself changes the nature of the subject being studied.
Active management Management style in which managers are involved in initiating corporate bonding, setting goals, and motivating colleagues.
Active partner Stakeholder who provides capital and who contributes skills to the management of the company. Active partners are also often involved in day-to-day operations.
Activity Operation in an organization for which costs are incurred. The operation may be at several levels, such as to produce a product, operate a business unit, or market goods to customers. Each activity is a unit of budgeting, management, or costing.
Activity analysis Process of identifying appropriate output measures as activities, resources, and other cost drivers and determining their effects on the costs of making a product or providing a service. This is one of the three techniques first propounded by business guruPETER DRUCKER for discovering the optimum organizational structure for a corporation; the other two were DECISION ANALYSIS and RELATIONS ANALYSIS.
Activity-based budgeting (ABB) Accounting procedure that identifies the costs involved in running each sector of a business.
Activity-based costing (ABC) Method of costing products that links overall cost to the total cost of all activities that contribute to their manufacture. It is designed to control INDIRECT COSTS and to reflect actual rather than paper costs. The method assigns costs to products based on resources actually consumed and efforts actually expended. It identifies costs for each unit of task, such as machine setup or job scheduling. As a result, ABC is a component of the strategic planning process, and unlike conventional accounting, calibrates future costs instead of simply measuring past history. It identifies areas for savings and cost reduction through streamlining processes and activities, and it measures cost drivers. While ABC assigns material costs to products in the same manner as conventional accounting, it does not treat direct labor and direct materials as elements that generate overhead. Rather, it premises that products incur indirect costs because they consume resources and these are treated as distinct elements, not as a function of direct costs. In a traditional cost system, costs are related to volume and are triggered by individual units, but in ABC, batches rather than individual units are the bases of measurement; for example, doubling the volume does not proportionately double the number of machine setups. Purchasing is another cost driven by batches whose costs are allocated in traditional accounting by material costs; in ABC, costs are directly related to the number of purchase orders and are allocated in proportion. It thus reflects ECONOMIES OF SCALE, taking into account materials handling, setups, warehousing, and other factors. In addition, ABC assigns BELOW-THE-LINE costs, such as sales, marketing, R&D, and administration, as divided by class of customer. That is, customer costs vary substantially as a result of the type of customer, order size, service levels, product size, and distribution channel and territory. Cost-reduction policies can thus be generated based on the average number of units per customer order, number of locations, type of sales promotion, pricing strategies, returns, channels of distribution, number of sales calls, and speed of bills payment. Pareto analysis (see PARETO RULE) is used to separate customer-driven and product-driven costs.
Because ABC uses more cost pools and assigns costs to a broader range of factors, it can reflect the complexity of costs more accurately. ABC assigns key manufacturing and business process costs to activity centers. First-stage cost drivers are assigned to products. The analysis of second-stage cost drivers is more rigorous, where costs are proportional to the batches produced and, in the case of design engineering, to the products themselves. Activity centers may be product driven or customer driven. They may be homogenous processes, as in an assembly line, or business processes, such as marketing. In ABC, second-stage drivers such as direct labor costs, material costs, and machine hours are supplemented by setup times, inspection costs, warehouse costs, and sales calls. ABC also distinguishes among hierarchical product-driven costs at three levels: individual, batch, and market or product. Customer-driven activities are distinguished at four levels: (1) order level, including order entry, shipping, billing, and freight; (2) customer level, including sales force, credit and collections, and service; (3) market level, including R&D, advertising, promotion, and marketing; and (4) enterprise level, including pensions and management.
ABC is generally applied to manufacturing, but it is becoming important in the service sector as well. It is growing critical in capital-intensive industries where time-based costing is considered representative of cost utilization and labor costs are assigned to the process rather than the product. Capital costs and change-over costs tend to be high in capital-intensive industries. Because fixed costs are high in capital-intensive industries, profitability is determined by high-capacity utilization. In such cases, variable pricing is called for and the cost of excess capacity should not influence pricing decisions. Large fixed costs are annually assigned to production lines rather than spread over all departments. In some process industries, logistics costs can skew overall costs. Costs to specific customer segments will vary widely. Customer sales volume, location, high-capacity utilization, limited production flexibility, and product mix also affect logistics costs. By allocating indirect costs more accurately, ABC identifies profitable opportunities and permits exit from unprofitable activities. Thus, the key elements in ABC are cost drivers. Because ABC leads to a significant rethinking of policies and overall corporate strategy, it is more realistic and simpler than traditional costing systems.
Activity-based management Management based on analysis of the various activities that contribute to the running of the company.
Activity ratio Financial ratio based on the relationship of sales revenue to assets, showing how well the assets are being used.
Activity sampling Work-sampling technique in which observations of workers, processes, and machines are made and analyzed over a period of time. This technique is used by industrial engineers to determine the efficiency of each step in a large operation.
Actualization-atmosphere factors Motivational elements, encompassing favorable working conditions, job security, and remuneration.
Actuals Real costs rather than estimated costs.
Actuarial return RETURN ON INVESTMENT as measured by discounted cash-flow analysis. Also known as internal rate of return.
Adair, John (1934–) British academic and leadership theorist. Visiting professor at the University of Exeter (1990–2000) and Chair of Leadership Studies at United Nations Staff College, Turin. Author of How to Grow a Leader: Seven Key Principles of Effective Leadership Development (2006), Effective Teambuilding: How to Make a Winning Team (1987), The John Adair Handbook of Management and Leadership (2004), Leadership and Motivation: The Fifty-Fifty Rule and Eight Key Principles of Motivating Others (2007).
Adair, John Eric Management expert known for his three-circle model of leadership, representing the task, the team, and the individual, known as ACTION-CENTERED LEADERSHIP. He was Professor of Leadership Studies at the University of Surrey (1969–1984).
Adams, J. Stacey See EQUITY THEORY.
Adams, Scott Cartoonist and creator of the DILBERT PRINCIPLE.
Adaptive control Form of self-regulation in an industrial process, designed to ensure continuous performance at optimum level through a changing environment.
Adaptive expectation In MACROECONOMIC theory, forecasts of future values based on past values.
Adaptive isomorphism Experimentation with new products and processes to catch up with technology or meet emerging markets.
Adaptive management Style of management that is flexible and supple in modifying a company’s goals and plans to take advantage of changing environments and market conditions.
Added value See VALUE ADDED
Add-on Accessory or replacement part of a product sold to a customer.
Adhocracy Organizational structure characterized by an absence of bureaucratic rigidities, enabling managers to think and act out of the box. Term coined by futurist ALVIN TOFFLER.
Adjustable-rate mortgage (ARM) Mortgage for which the interest rate is adjusted at periodic intervals to reflect prevailing rates of interest in the money market.
Adjustable-rate share Type of preferred stock whose interest rate is linked to Treasury bill interest rates.
Adminisphere Department of a company that deals with administrative matters.
Administered price Set by the seller, a price that is independent of market conditions.
Administered vertical marketing system Marketing scheme in which a major retail chain acts as the captain, coordinating marketing activities at all levels, including planning and management.
Administrative management Traditional school of management associated with business thinker HENRI FAYOL and F. W. TAYLOR and sociologist MAX WEBER. It emphasizes the importance of formal structure and hierarchy.
Administrative receiver Person appointed by a court to administer and manage all the assets of a company, including the power to sell assets. Also known as administrator.
Adopter Consumer who adopts an innovation introduced by a corporation.
Adoption curve Graph showing the rate at which a new technology is embraced by consumers.
Adoption of new products Process by which consumers adopt new products and services, align them with meeting their needs, and make them part of their work life and leisure.
Adoption theory Principles behind the diffusion of innovations over time, including the time frame for their acceptance, varying with innovators, early adopters, and laggards.
ADR ALTERNATIVE DISPUTE RESOLUTION
ADR AMERICAN DEPOSITORY RECEIPT
Ad tracking research Market research that periodically measures the impact of an advertising campaign, including brand awareness.
Advanced manufacturing technologies (AMT) High technology adapted for manufacturing such as COMPUTER-AIDED DESIGN.
Adventure In business, a speculative commercial enterprise.
Advertising Promotion of ideas, goods, or services through a commercial medium with an identified sponsor. The purpose of advertising is to inform, promote brand awareness, and create confidence in the product or service offered. An advertising campaign is a systematic and orchestrated program with stated strategy, objectives, and budget.
Advocacy Promotion of a better public image, or the building of customer good-will by linking a product or service with a well-known cause or movement that enjoys public support.
Affective That which deals with an attitude or response based on emotion and desire, rather than on objective analysis.
Affiliate 1. Company associated with another company through common ownership. 2. In broadcasting, a local station that carries the programs of a national network.
Affinity card Credit card issued to a member of a group that carries with it certain advantages.
Affirmative action program (AAP) Procedures to achieve or remedy an imbalance in hiring and employment as applied to minorities and women. Often mandated by government, it sometimes includes quotas governing the percentage of minorities and women represented in an organization.
AG (Aktiengesellschaft) Abbreviation used in German-speaking countries to designate a publicly traded company.
Age analysis Breakdown of outstanding ACCOUNTS PAYABLES, divided by the time the accounts have been overdue.
Age and life-cycle segmentation In market research, a demographic breakdown of the customer base by age, gender, and marital status.
Age discrimination Action showing bias against older people and senior citizens when providing services or recruiting employees. As an attitude, termed ageism.
Agency relationship Relationship in which a principal engages an agent to perform some official duty or service on his or her behalf and delegates the necessary authority for this purpose. The costs of monitoring and bonding in such a relationship are known as agency costs. When the interest of a principal and an agent collide, it may lead to an agency problem. Agents may be either special agents or general agents, depending on the scope of their authority and purview. See also AGENCY THEORY.
Agency shop Requirement that nonunion employees in a bargaining unit pay the union a sum equivalent to union fees and dues, even if they are not members of the union.
Agency theory Delegation of responsibility from one party to another, and the relationship between the delegator and the delegate; see also AGENCY RELATIONSHIP. Such relationships exist between managers and shareholders, employers and employees, professionals and their clients, and politicians or civil servants and citizens. Delegation need not be explicit, and may cover a wide range of transactions. There are costs associated with delegation, including: (1) monitoring costs incurred by the principal to regulate the agent’s conduct; (2) bonding costs to insure against mala fides; (3) residual costs, including loss against actions by the delegate that cause loss; and (4) communication costs incurred to maintain the flow of information between the delegator and the delegate.
Information asymmetries inhibit effective delegation in two ways: (1) information may be withheld by the agent deliberately to increase his or her own value; or (2) information may be hidden by the agent by contrarian actions. The former is known as hidden information and the latter as MORAL HAZARD. These factors play a part in the most common agency relationship between shareholders and management, where the delegators are too dispersed to exercise effective control and the delegates or managers have extraordinary discretion to pursue policies that may be against the interests of the delegators. Managers may take unwarranted risks, build personal empires, and build up expense accounts. To reduce the temptation to do so, shareholders may introduce SHARE OPTIONS and PROFIT-SHARING schemes as incentives for managers to perform better.
Agenda Items to be discussed in a business meeting or goals included in a plan of work or other nature.
Agent 1. Person or company authorized to act on behalf of another. 2. Vector of an action that is carried out, as in agent of change.
Agglomeration economies Benefits occurring when a large number of consumers live in close proximity or in clusters.
Aggregate demand The sum of demand for all goods and services in an economy at a particular time, a key concept in KEYNESIAN ECONOMICS. It comprises investment, government expenditure, and imports less exports.
Aggregate planning Efficient planning process designed to produce the optimum output at the right costs within the best lead time. It contains long-term targeted sales forecasts, production levels, inventory levels, and customer backlogs, and is designed to satisfy the demand forecast at optimum cost. Aggregate planning begins with a determination of demand in relation to current capacity. Demand may be increased through pricing, promotion, back ordering, and new demand creation. It may also be increased through other means such as hiring, overtime, part-time or casual labor, inventory, subcontracting, and cross-training. Aggregate planning strategies include a LEVEL-OUTPUT STRATEGY that maintains a steady production rate and a CHASE DEMAND STRATEGY that matches SUPPLY AND DEMAND period by period.
Aggregate supply Total supply of all goods and services in an economy, as determined after DEREGULATION, COMPETITION, and unrestricted labor supply.
Aggressive In management or investment, a willingness to take high risks to realize higher than average gains.
Agile development Process of development that is not rigid, quickly adapts to changing circumstances, and incorporates implementation.
Agile manufacturing Production system that meets the demands of customers by adopting flexible schedules without sacrificing quality or incurring additional costs. It emphasizes customer satisfaction and the establishment of flexible supply pipelines.
Agility Organizational ability to respond with flexibility and speed, as a source of competitive advantage; recommended by business writer TOM PETERS and professor ROSABETH MOSS KANTER.
Agreement corporation Firm that conducts international banking transactions that are exempt from normal banking and ANTITRUST LAWS; Also called edge corporation.
AIDAS Acronym for attention, interest, desire, action, and satisfaction, regarded as components of effective communication and marketing.
Alderfer, Clayton (1940–) American psychologist who developed Maslow’s Hierarchy of Needs by categorizing the hierarchy into his ERG theory (Existence, Relatedness, and Growth) in his book Existence, Relatedness and Growth: Human Needs in Organizational Settings (1972). He further developed his ideas in The Five Laws of Group and Intergroup Dynamics (2005).
Alienation In human resources management, source of employee dissatisfaction resulting from any of several factors: (1) powerlessness, or the inability to influence work conditions; (2) isolation, or the absence of human interaction during working hours; (3) meaninglessness, or the absence of recognition for work well done; (4) low self-esteem, resulting from lack of individual worth; (5) loss of identity with corporate culture or brand; (6) lack of prospects, or the sense that there is little chance for advancement within a group; and (7) lack of equality, or discrimination based on factors extraneous to work.
A-list Top names in an industry or profession.
All-inclusive income concept In accounting, inclusion of all items of profit and loss in an earnings statement.
Allocation base In management accounting, cost-allocation basis used to assign costs to each cost object.
Allotment Method of distributing unissued shares in a limited company in exchange for a contribution of capital.
Allowable marketing costs Optimum marketing cost under which a healthy or desirable profit margin can be maintained.
Alpha-release First stage in release of a product or service in which lead users and company employees participate.
Alternative dispute resolution (ADR) Avenue for settling business disputes in foreign countries other than through their legal systems, including ARBITRATION, MEDIATION, and CONCILIATION.
Altman, Edward (1941–) Professor of Finance at Stern School of Business at New York University. He is best known for his development of Z-score for predicting bankruptcy, which he published in 1978. His other books include Corporate Financial Distress and Bankruptcy (2005) and Recovery Risk (2005).
AMACOM Publishing division of the American Management Association.
Amalgamation Merger of two or more companies under one of several scenarios, such as: (1) the dissolution of an existing company and the formation of a new one, (2) the acquisition of one company by the other, and (3) the straightforward merger of two companies to form a new company with a new name.
Ambit claim Exaggerated demands on an ARBITRATION board to leave room for subsequent concessions.
American depository receipt (ADR) Receipt issued by a bank that may be traded as a security in the financial market.
American option Financial OPTION that can be exercised until the expiry date.
Amortization In accounting, a form of depreciation in which the annual amount deemed to waste away from a FIXED ASSET is treated as an expense. In the case of a lease, the cost is divided by the number of years of its term and is treated as an annual charge against profit. GOODWILL may be amortized as debt and front-end fees charged for a loan. In mortgages, interest payments are divided on a sliding scale by which they take precedence over the principal in the repayment schedule.
AMT ADVANCED MANUFACTURING TECHNOLOGIES
Analysis Set of accepted procedures that examines issues as a whole and in part, using mathematical techniques, setting expectations, and creating ratios to determine whether the expectations have been met.
Analyzer strategy Strategy in strategic management that is less risky than prospector strategy. It analyzes emerging markets for possible opening before entering them.
Angel investor Backer in a high-risk enterprise, such as startups or theater.
Angyal, Andras (1902–1960) Hungarian-born American management specialist who coined the term biosphere, which he described in terms of interlocking systems governed by autonomy and homonomy. Author of Foundations for a Science of Personality (1941).
Annual account Audited financial statement of a corporation, by law published annually and including profit and loss, balance sheet, cash-flow statement, director’s report, and auditor’s report.
Annual general meeting Obligatory meeting of all the shareholders of a company for approving the annual report and voting on proposals.
Annual hours Practice of averaging employees’ working hours over a year rather than the traditional number of hours per week or month.
Anomaly In financial markets, abnormal returns that influence the prices of many financial obligations, such as DERIVATIVES.
ANSI American National Standards Institute
Ansoff, Igor (1918–2002) Russian-American mathematician and father of Strategic Management. Professor of Industrial Administration at Carnegie Mellon University (1963–68) and Professor of Management, Vanderbilt University (1968–73). Ansoff is known for his research in environment turbulence, contingent strategic success paradigm, and real-time strategic management. Author of Strategic Management (2007) and Corporate Strategy (1965).
Ansoff matrix Classification device for four basic marketing strategies, developed by mathematician IGOR ANSOFF: (1) market penetration, (2) market extension, (3) product development, and (4) diversification.
Antagonistic cooperation Temporary cooperation between two parties who are normally rivals.
Antitrust laws Any of several laws passed by the U.S. Congress making illegal any restraints on trade and any monopolies that inhibit or interfere with FREE TRADE and COMPETITION.
App Application for a computer program.
Applied research Market research aimed at solving a specific business problem that will lead to a better understanding of the way a market works, how it responds to a particular strategy, and how to reduce uncertainty.
Apprenticeship programs First developed in Germany, these are on-the-job training programs of four or five years’ duration, during which participants are also enrolled in school. The coursework is equal, rather than supplemental, to the on-the-job training, and often there is compensation for the work or the promise of employment following completion of the training. Apprenticeships are distinguished from internships, which are more common in the United States and are unpaid, shorter-term on-the-job training programs, sometimes with the prospect of employment afterwards but no guarantee of it.
Approach-approach conflict A situation in which a person faces two potentially satisfying but incompatible goals.
Appropriate technology Low-level technology that is feasible and applicable to lesser developed countries that lack the infrastructure necessary to sustain higher-tech operations.
Appropriation 1. Allocation of net profits in an account after determining its costs and expenses. 2. Allocation of payments to a particular debt out of several existing debts.
A priori segmentation Process of dividing markets on the basis of conventional assumptions rather than on market research.
Arbitrage Financial operation that takes advantage of a difference in interest rates or commodity prices between one market and another. It is nonspeculative because the trader, or arbitrageur, enters into the transaction only when there is a clear differential in price and both prices and rates are known.
Arbitrary allocation Cost assignment in which the costs are based on variables that cannot be controlled.
Arbitration Settlement of a civil dispute using an arbitrageur or arbitrator or tribunal. The judgment of an arbitrator may be either binding or nonmandatory.
Argyris, Chris (1923–) American business theorist, Professor Emeritus at Harvard Business School, and a Thought Leader at Monitor Group. He is best known for his seminal work in the area of learning organizations. In his book Action Science (1985) he advocated solutions to practical problems by generating new knowledge. Other terms developed by Argyris includes actionable knowledge, ladder of inference, and double loop learning. His books include Flawed Advice and Management Trap: How Managers Can Know When They are Getting Good Advice and When They Are Not (2000), On Organizational Learning (1993), and Personality and Organization: The Conflict Between the System and the Individual (1957).
Arm’s length Characteristic of a transaction in which the parties are unrelated and neither party receives any special terms or preference.
Article In law, part of a document that governs the status of a corporation, association, or professional body, which details the rights, duties, powers, and privileges of the members and the officers, the authorized share capital, and the conduct of meetings.
Articles of Association Numbered clauses in a document serving as the constitution of an organized group, stipulating the conditions, purposes and procedures governing the group.
Articulated accounts Accounts prepared under the double bookkeeping system in which the retained earnings in the PROFIT-AND-LOSS ACCOUNT equals the increase in the net worth of the business.
Artificial intelligence (AI) Computer software that exhibits or mimics intelligent human behavior, including a capacity to learn, reason, analyze, discern relationships between facts, and communicate ideas. AI is divided into two categories: (1) knowledge representation systems, also known as EXPERT SYSTEMS, that capture and encode expert knowledge; and (2) systems that create new knowledge by extrapolating data and patterns.
ASA ATTRACTION-SELECTION-ATTRITION
ASCII American Standard Code for Information Interchange, a standard code for the transfer of information between computers.
Ascribed status Social status that a person enjoys outside his or her professional circle.
A shares Most important class of ORDINARY SHARES. Compare B SHARES.
Aspirational brand Product or product line that lends prestige to its users and sets them apart as connoisseurs.
Aspirational group Reference group in market research consisting of peers who have common interests and aspirations.
Assembly line Means of mass production invented by industrialist HENRY FORD, based on the ideas of management thinkers FRANK GILBRETH and F. W. TAYLOR. It dominated manufacturing in the first half of the 20th century and helped to reduce dependence on skilled craftsmen.
Assertiveness training Courses designed to help employees develop potential abilities, exercise initiatives, enhance self-esteem, articulate cogent ideas, and exercise boldness in translating vision into action. It uses behavior modification to enable people to overcome inhibitions.
Assessment center Human resources program by which employee behaviors and abilities are evaluated, including planning and organizing, leadership and communication, tolerance for stress, and initiative. Participants are assessed while engaging in such activities as IN-BASKET TRAINING, leadership group discussions, ROLE-PLAYS, interviews, and management games.
Asset Tangible or intangible possession that has VALUE in economic terms and can be listed on the positive side of a BALANCE SHEET. For example, securities and funds are generally backed up by assets.
Asset management 1. Management of the financial assets of a company to maximize RETURN ON INVESTMENT. 2. Investment service offered by banks and other institutions for wealthy customers.
Asset stripping Acquisition or takeover of a corporation whose shares are valued below their real worth and whose subsequent sale of these assets is done without regard to the wishes of shareholders, employees, suppliers, or creditors.
Asset substitution effect Situation in which the major portion of a risky investment is borne by bondholders rather than shareholders.
Asset value Total value of a company’s ASSETS less its LIABILITIES, divided by the number of ORDINARY SHARES in issue.
Assignment Act of transferring a property, material interest, benefit, or right.
Assumpsit Common-law action to recover damages for BREACH OF CONTRACT.
Assurance 1. Conveyance of a property and the instrument by which it is conveyed. 2. In the U.K., insurance.
Asymmetric information Information possessed by one party to a transaction that is not available or accessible to the other.
At call Money lent on a short-term basis that must be repaid on demand.
Atkinson system Wage incentive plan allowing payment of 1.3% for each 1% of production, with a 5% step bonus on completion of the task, with only base wage when production drops below 75% of target.
At limit Instruction to a broker to buy or sell shares of stock, commodities, or currencies at a specified price.
Attachment 1. Proceeding that authorizes a creditor to secure an amount due from a debtor on the basis of a judgment. 2. Data file embedded in an e-mail message.
Attention management Method of ensuring that employees are focused on their tasks and are in tune with organizational goals.
Attitude Mindset or perspective that determines behavior and conduct. An attitude may be COGNITIVE (involving perception or thinking), BEHAVIORAL (involving measurement of behavioral responses), or AFFECTIVE.
Attraction-selection-attrition (ASA) Characteristic of management culture in which individuals are attracted to an organization that has value systems comparable to their own and in which organizations select employees based on similar compatibility. As a result, employees who do not conform to this management culture are attrited.
Attribution Theory of leadership that pays attention to the performance and behavior of employees and learns what motivates them. Attributions are critical to management because perceived causes of behavior influence judgments and actions. Thus, leaders determine whether success or failure is due to causes that are within the individual’s control. Attribution is a three-stage process: (1) the behavior is observed over a period of time; (2) the behavior is deemed intentional and deliberate; and (3) the behavior is caused by external or internal factors. The assessor then examines the behavior for three key elements: consistency, distinctiveness, and consensus.
Attrition 1. In human resources, the decline in employment through retirement and resignation rather than dismissal or layoff. 2. Gradual decline of equipment and machinery through wear and tear.
Audience Total population who can access and receive a particular mode of communication and is receptive to its message.
Audience research In the communications industry, research concerned with the goal of discovering audience interests, tastes, and habits.
Audit Independent examination of the financial state or health of an organization, usually on the basis of accepted accounting principles, policies, regulations, standards, rules, or controls. Audits may be external or internal. Generally, audits are conducted by licensed professional or chartered auditors.
Audit Bureau of Circulation Organization representing advertisers and advertising agencies, charged with scrutinizing and verifying the circulation of newspapers and periodicals.
Audit trail Sequence of documents, files, and other records examined during an AUDIT, showing the legitimacy of transactions.
Auditing by rotation Pattern of auditing in which parts of a company are subject to in-depth AUDITS every three years.
Autarky Policy of economic self-sufficiency advocated by a country’s nationalists to discourage imports and investments abroad.
Authoritarian management Style of management that emphasizes discipline and obedience to a person of superior rank, rigid adherence to tradition, highly personal and undemocratic methods, and low tolerance for consensus.
Authority Right derived from legitimacy to command others to act in a desired fashion.
Authority of knowledge Right to issue orders, held by a person most intimately involved in a situation or with most knowledge about its details.
Authority of situation Right to issue orders, held by a person closest to an emergency situation.
Authorized capital Shares that a new company is allowed to issue under the terms of its ARTICLES OF ASSOCIATION.
Autocratic management Leadership style involving unquestioned authority and personal decision making; there are no efforts made to synthesize or integrate opposing viewpoints. Opposite of DEMOCRATIC MANAGEMENT.
Autogestion Management by a committee of workers.
Automatic stabilizer Trigger mechanism in fiscal policy that kicks in automatically when certain targets are reached. It counterbalances the undesirable feedback effect of changes in economic activity.
Automation Independent performance by machines of tasks that are traditionally done by humans.
Autonomous work group (AWG) Form of work organization in which workers have limited autonomy and manage their affairs without direct supervision of management.
Autonomy Degree to which a job provides an employee with the discretion and independence to schedule his or her work. Managers tend to have increased autonomy in decentralized organizations. Increased autonomy gives workers a feeling of greater responsibility for their outcomes and thus greater motivation and sense of accomplishment. The degree of autonomy is governed by the CORPORATE CULTURE and the management style of the boss.
Avant-garde New and original, as in the fine and performing arts.
Avoidable costs Expenses incurred as a result of a management decision, usually involving risk, rather than costs that are normal to business operations.
Avoidance Risk-management strategy that eliminates or reduces political risks by calibrating the possibilities of political instability.
Avoidance conflict resolution Strategy that ignores the causes of a conflict and instead focuses on controlling its fallout.