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Knowledge Base

Glossary of Management Terms

This Glossary is a non-exhaustive list of Management Terms.
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Abilene Paradox

Story about a family who, collectively, decides to drive

to Abilene, Texas, despite the fact that, individually,
none of them really wants to make the trip. Used as a
parable to illustrate the dangers of
organisational groupthink where the inclination to
conform to the action of others takes priority over
independent, rational decision-making processes.

Accounts Payable

The monies the company owes for goods or services

received, but not yet paid for.

Acid test ratio

Current assets - current liabilities. This measures



One firm gains a controlling interest in another.


Referral of a dispute to a third party for settlement or

advice; method of settling an industrial dispute where a
third party renders a binding decision.


Decrease in total employment of an organisation or

industry through the normal course of events such as
resignation, retirement or death.


A strategic, measurement-based management system,

originated by Robert Kaplan and David Norton, which
provides a method of aligning business activities to the
and monitoring performance of strategic goals over

Barriers to entry

Barriers to entry are those things that make it difficult

for a new company to compete against companies
already established in the field. Examples include such
things as patents, trademarks, copyrighted technology,
and a dominant brand.


The use of performance or profiles as standards for

measuring ones own performance.

Blake and
Managerial Grid

An explanation, through the medium of a grid, of five

styles of management concentrating on concern for
people and concern for production.


This is the contribution to classical management theory

from the German academic Max Weber (1864 - 1920)

Buy Back

The repurchase by a company of some or all of its shares

from an investor, who acquired them by putting venture
capital into the company when it was formed. May also
occur when a company buys back the shares in a public
company so that it becomes privately owned again.

Buy Out

The purchase of the ownership, controlling interest,

shares etc of a company. May also occur when a
company is sold to its top managers.


The place where the actual physical work gets done as

opposed to managing and administration.


What leads to a firm being able to outmatch its rivals in

attracting & maintaining its targeted customers.


Compensation for injury to an employee arising out of

and in the course of employment that is paid to the
worker or dependents by an employer whose strict
liability for such compensation is established by statute.
Where established by statute, workers' compensation is
generally the exclusive remedy for injuries arising from
employment, with some exceptions.
Workers' compensation statutes commonly include
explicit exclusions for injury caused intentionally, by
willful misconduct, and by voluntary intoxication from
alcohol or illegal drugs.


The measurement and correction of the performance of

subordinates to ensure that organisational objectives
and the plans for attaining them are being met. See
Management information systems.


An organisations basic lines of business. Its core

strengths and abilities.

Cost Benefit

Calculation of the estimated costs and gains from an

anticipated strategic decision.

Cost Centre

Unit of firm measured by its variance from budget.

Due Diligence

The process of enquiry made during a merger and

acquisition and by the purchaser as to the various
financial, logistical and legal matters involved in such a

Economies of
scale and scope

Scale: being efficient by creating the lowest per unit

cost of production and/or marketing; and Scope: being
efficient by sharing a cost of an activity across product


Ration of outputs to inputs. Efficiency increases when

costs of inputs are reduced or value of outputs are


Political-legal - the role of government and the

legislative framework of society; Economic - the state of
the economy, both global and domestic is a crucial
factor in managerial decision making;
Competitive - management must alert organisations of
existing and potential competition; Technological - the
information, equipment, techniques and processes
required to transform inputs into outputs in the
organisation; Socio-cultural - concerned social norms,
attitudes, beliefs, values and lifestyles of the
organisations stakeholders; Physical-natural concentrates upon the natural environment and societys
awareness of ecology.


An approach to job design by focusing on the worker and

considering how s/he interacts with the machine.


Standards of conduct, moral judgement.

Expected Value

The estimated or assessed cost (or benefit) of some

action, proposal or event multiplied by the expected
probability of it occurring.

FAYOL - Henri

Fayol established the tasks of managing involving five

categories: Planning; Organising; Motivating;
Controlling; Co-ordinating.


Holding or investing of property or assets that have been

entrusted to an individual or organisation for a

Fixed Assets

Non-liquid assets that are required for the company's

day-to-day operations. They include facilities,
equipment, and real property.

Fixed Costs

Expenses that don't change based on production or sales

volumes. They include salaries, rent, insurance, etc.

Gantt Chart

Developed by Henry Gantt, an associate of Frederick

Taylor. This is part of the planning process and is an
early method of scheduling


Used exclusively for accounting and financial purposes.

It is the vague and arguable excess value of a business or
asset over its net worth (usually intangible).

Gross Profit

Gross Profit equals sales revenue minus the cost of goods


Gross Revenue

Gross Revenue is money generated by all of a company's

operations, before deductions for expenses.

Hostile Takeover

Acquisition of a company which opposes the transaction.

Handy- Charles

Writer of the best selling book on management - The Age

of Paradox.

Human relationsorientated theory

Contributed by Elton Mayo (1880 - 1949)

Insider Trading

Trading in a security (buying or selling a stock) based on

material information that is not available to the general


Intellectual Property (IP) is all of a company's patents,

trademarks, service marks, trade names, trade secrets,
and copyrights. It is distinguished from capital property.


Used in Organisational Development to describe the

range of activities by the client and consultant during an
organisation development programme.


A manager should analyse the job content along five

dimensions: skill variety, task identity, task significance,
autonomy and feedback.

Job Design

This aspect of management is part of organisation

structure. Individuals carry out activities that lead to
the achievement of the organisations objectives.

Job Enrichment

Involving the assignment of more decision-making

responsibilities to the worker.

Job Rotation and


A reaction against job specialisation. Linked to the

Human Relations School.

Job Specialisation

A process of reducing the job content. There will be

minimal variety.

Just in Time (JIT)

A system of inventory control that does away with large



The following represent the leading exponents of

leadership theory: Tannenbaum and Schmidts leadership
continuum; Fiedlers contingency theory; Houses PathGoal theory of leadership; Vroom-Yetton model

Legacy Systems

Systems based on outdated technology. Organisations

usually have invested much money and effort in them
and are often unwilling or unable to replace them.


Liabilities are all of a company's financial obligations

that have a negative value.

Net Income

Net Income is total revenue minus total expense, what's

left of the monies received after all debts have been
paid, the bottom line. If Net Income is positive it is also
called Net Profit.


A Non-disclosure Agreement is a legal contract that

allows a company to share its intellectual property (IP)
with others, whose input it needs, without unduly
jeopardizing that information.

McKinseys 7-S

An alternative framework for management analysis.


The achievement of objectives by identifying and

utilising material and human resources.

Management by
objectives [MBO]

A philosophy of management that encourages all levels

of an organisation to participate in the management of
that organisations affairs.


See Control. The exercise of control depends on the

collection of sufficiently accurate and timely


Anyone who holds a senior level in a particular



The development of project organisation. Several


projects are run at one time, each project manager

having functional specialists loaned to him/her for the
duration of the project.


A combination of two or more firms into one operational


subroles for

Figurehead Leader Liaison


Informational roles


Has a subjective and objective aspect: Subjective side is

a condition in the individual, which is called a need, a
drive or a desire; Objective side is an object outside the
individual, which may be called the incentive or goal.
When the natures of the need and the incentive are such
that obtaining the incentive satisfies the need, we call
the situation motivating .


An organisation established solely for providing a

service, not for making a profit.


Peter Drucker in The Practice of Management cites eight

key areas in which objectives of performance and results
should be set: Market standing; Innovation; Productivity;
Physical and financial resources; Profitability; Manager
performance and development; Work performance and
attitude, and; Public responsibility.


Usually occurs as a result of, or in response to, pressures

from outside (external) and/or from within (internal)
the organisation.


planned, organisation-wide effort, managed from the

top, to increase organisational effectiveness through
planned interventions in the organisation process using
behavioural science knowledge.


A description of the intended result, effect, or

consequence that will occur from carrying out a program
or activity. A long-term, ultimate measure of success or
strategic effectiveness.


Assistance provided to employees who are losing their

Pareto Principle

In any normal situation it is found that approximately

20% of items account for 80% of the effect. The 80/20
rule. EG With 100 products there are likely to be 20 best
selling products which account for 80% of the profit. Also
there will be about 20 products (not necessarily the
same 20) which account for about 80% of the profit. 20
of the products will account for about 80% of the
customer complaints.


A particular value or characteristic used to measure

output or outcome.


Proprietary knowledge of a firm that is not related to its

most important product or service.

Peter Principle

In any hierarchy a person is promoted until that person

has reached his/her level of maximum competence.
Once this occurs there is no further promotion.

Planning and

There are two techniques used widely by management

for planning and control: Critical Path Method; and
Precedence Diagramming Method

PORTER - Michael

The C. Roland Christensen Professor of Business

Administration at the Harvard Business School. He
expounded the Porter Analysis model in his books Competitive Strategy and Competitive Advantage.

Power Position

Three bases of power relate to a managers official

position in a hierarchy of authority. Reward power is the
capability to offer something of value, a positive
outcome, as a means of controlling other people.
Coercive power is the capability to punish or withhold
positive outcomes as a means of controlling other
people. Legitimate power is the capability to control
other people by virtue of the rights of office.

Profit Centre

Unit the firm controls (measures) by its profit or loss


Risks Anaylsis

Measures the risk of loss, including financial, insurance

and hazardous waste risks, and political/economic issues
impacting company operations.

Return on
Investment (ROI)

Abbreviation for Return on Investment. It is a measure of

a company's ability to use its assets to generate
additional value for shareholders. It is calculated as Net
Profit divided by Net Worth, and expressed as a


Classical-orientated theories associated with Frederick

Winslow Taylor (1856 - 1915)


An ongoing programme of activity which is designed to

help an organisation or an individual achieve goals and
objectives. A corporate strategy can be evaluated on six
basic criteria: Internal consistency; Consistency with the
environment; Appropriateness in the light of available
resources; An acceptable degree of risk; An appropriate
time horizon; Feasibility of the strategy.


Determining an organisations Strengths, Weaknesses,

Opportunities and Threats.


Maintaining an information system; may involve system

analysis, design, application development and

Test Marketing

Introducing new product in a limited area to reduce the

financial risk of a full introduction and to determine its
likely acceptance in the market.

Total Quality

TQM is concerned with quality right throughout the

organisation, not just at the production stage.

Value Chain

All the activities that a firm uses to design, produce,

market, deliver and support its product.

Variable Costs

Expenses that vary based on production volumes. They

include material, labour, production utilities, etc.

Virtual Reality

Computer-generated simulation of reality in which users

can interact with the use of specialised peripherals.


Long-term goal of strategy. What an organisation is and

wants to become.

Working Capital

The funds tied up in such things as inventories and

debtors as distinct from fixed assets such as building and