the extracted mba a topical reference for the contemporary mba

EXTRACTED CONTENTS Extracted Introduction vii Extracted Management 1 Extracted Human Resources Management 20 Extracted International Business and Global Competition 39 Extracted Organiza

The Extracted MBA

extractedmba.com

The extracted mba

Copyright  2000 by Kelly Allen Vinal

All rights reserved No part of this book may be reproduced in any form

or by any means, electronic, or mechanical, including photocopying, recording, or by any information storage or retrieval system, without written permission from the author Inquiries should be made to reproduce@extractedmba.com

Vinal, Kelly Allen

EXTRACTED ACKNOWLEDGEMENTS

To my fellow MBAs out there who tirelessly manage the industries and organizations that have made the American economy the most powerful in the history of the world

To the professors, staff, students, and alumni of the University of Phoenix An innovator in the field of continuing education, the success

of UOP graduates is proof that the UOP's high standards and programs make their cutting-edge educational philosophy a template for others to follow

Finally, to my peers, subordinates, and superior officers of the United States Army The greatest asset of any organization is its people Those who serve in the defense of our way of life are the clearly best that America has to offer

For Henry G Vinal

My Extracted Father

EXTRACTED CONTENTS

Extracted Introduction vii

Extracted Management 1

Extracted Human Resources Management 20

Extracted International Business and Global Competition 39

Extracted Organizational Behavior 56

Extracted Marketing 72

Extracted Strategic Management 95

Extracted Business Law 107

Extracted Information Management 151

Extracted Electronic Commerce 167

Extracted Accounting 177

Extracted Statistics 198

Extracted Economics 211

Extracts About the Author 236

Extracted Bibliography 237

EXTRACTED INTRODUCTION

The Extracted MBA represents the culmination of a decade's worth of

undergraduate and graduate study, as well my practical management experiences, both in my work and in the courses I teach Upon being awarded my MBA in 1998, I searched for a book that could concisely provide a reference, a recap if you will, of what I had learned in my years

of study Sure, there were books out there that professed t o make MBAs out of lay folk, but they were the literary equivalent of snake oil There simply wasn't a book written for MBAs that provided what I desired, and what I truly believed that the MBA community needed I sat at my computer one night and began transcribing the four boxes of notes I had accumulated in the course of my studies It would be three weeks before I completed the first section of the first management course I had ever

taken Aptly, that was Extracted Management! I read through it and

realized that I had an opportunity to create a reference that myself and my

fellow MBAs could really use! The Extracted MBA was born I hope

these series of extractions serve you well as you recount the topics that whizzed-by in the torrent of information to which we were exposed With this tool, may your MBA skills remain as fresh as the day you walked across the stage and received your degree!

Please note that the extracts are organized in a quasi-outline format, with indentations that expound on preceding notes

Kelly A Vinal, MBA

May 15th, 2000

Fayetteville, North Carolina

Extracted MANAGEMENT

www.extractedmba.com/mgt.html

Defined

Planning, organizing, leading and, controlling resources for the purpose

of achieving organizational goals

Management functions

• Conceived by Henri Fayol in 1917

Planning: Defining the goals as directed by executive management;

developing strategy; conceptualizing coordinated efforts

Organizing: Establishing the tasks that will achieve the goals;

defining lines of leadership; determining where decisions will be made

Leading: Motivating and directing subordinates; establishing

effective communications; resolving conflicts quickly and equitably

Controlling: Ensuring tasks are accomplished as planned and

correcting deviations

The optimized organization

Organization: A collective social unit that is goal oriented and

formally structured

Performance: An organization’s actions that measurably contribute to

the achievement of organizational goals

Efficiency: The achievement of organizational goals with the minimal

consumption of resources

Effectiveness: The extent to which an organization achieves

established goals

Management skills

Technical Skills: The ability to apply specialized expertise

Human Skills: The ability to work with and motivate individuals or

groups of individuals

Conceptual Skills: The ability to mentally analyze abstract and/or

complex challenges

Core concepts

Organization: A coordinated group of individuals that functions on a

continuing basis for the purpose of achieving one or more goals

Executives: Individuals who set organizational goals and policies Managers: Individuals in an organization who achieve goals through

subordinates Commonly referred to as administrators in non-profit

organizations

Supervisors: People who provide direct leadership over line

employees for the purpose of achieving management’s goals

Supervisors are typically individuals with expertise in all of the tasks of their subordinates, and are generally promoted from the ranks of the employees they oversee

Workers: Individuals employed to accomplish specific tasks for the

purpose of achieving the organizational goals set by executive

management

Management roles

• Conceived by Henry Mintzberg in 1973

• Also known as Mintzberg’s Managerial Roles

Interpersonal Roles

Figurehead: Symbolic chief; performs routine ceremonial functions

and solicitations

Leader: Directs and motivates subordinates

Liaison: Maintains internal and external contacts of individuals and

groups that are of benefit to the functioning of the organization

Informational Roles

Monitor: Serves as central figure in obtaining and categorizing

internal and external information relating to the organization

Disseminator: Communicates information obtained from outside

sources, as well as from subordinates, to appropriate members of the organization

Spokesperson: Transmits information relating to the organization to

external entities; is an expert in virtually all aspects of the organization, as well as its respective industry

Decisional Roles

Entrepreneur: Scours the organization in search of opportunities to

bring about positive, if not profitable results

Disturbance Handler: Implements corrective action to counter

important and unexpected turmoil within the organization

Resource Allocator: Makes or approves important decisions, and

ensures they are adequately staffed and funded

Negotiator: Represents the organization in negotiations

Activities of successful managers

• Conceived by Fred Luthans in 1988

Luthans determined that a study of 450 managers showed that the successful ones all engaged in the following activities:

Traditional Management: Decision-making, planning, and

controlling

Communication: Exchanging information and processing

paperwork

Human Resource Management: Motivating, disciplining, staffing,

training, and resolving conflict

Networking: Socializing, politicking, and interacting with outsiders

The learning organization: An organization in which problem solving is

encouraged at all levels that results in increased operational capability

Paradigm shift: A change in environmental circumstances that

leads to an altered understanding of the world

Evolution of the learning organization

Classical perspective: Management philosophies that emerged in the

late 19th and early 20th century, embracing scientific and rational

approaches to forging efficient and productive organizations

Scientific management: Management perspective that relied upon

early research and emphasized scientifically demonstrated measures to change management and increase productivity

• Conceived by Frederick Taylor in 1898

• Significantly refined by Lillian and Frank Gilbreth in the early 1900s

Bureaucratic organizations: Concept that touts impersonal and

rational management that is characterized by clearly defined authority, meticulous record keeping, and separation of management and

shareholders

• Conceived by Max Weber in 1927

Administrative principles: Focused on the organization as a whole

by delineating planning, organizing, coordinating, and controlling

• Conceived by Henri Fayol in 1930

Humanistic perspective: Management philosophies that emerged

concurrently with the classical perspective that focused upon employee needs, behavior, and attitudes

The human relations movement: Sparked by the Hawthorne studies

in 1924 and involved management in focusing upon the basic needs of employees as the primary factor in increased productivity

The human resources perspective: Philosophy that embraces

designing jobs that challenge employees to maximize their potential

Maslow’s Hierarchy of Needs : A hierarchy of five needs that

represent human drive, based on the premise that once a need is met, the next higher need becomes dominant

• Conceived by Abraham Maslow in 1954

1 Physiological: Includes hunger, thirst, and shelter

2 Safety: Includes security and defense from physical and

emotional harm

3 Social: Includes affection, acceptance, friendship, and

belonging

4 Esteem: Includes self-respect, autonomy, achievement,

status, recognition, and attention

5 Self-actualization: Is reached when an individual

become what he or she or she is capable of

Theory X and Theory Y

• Conceived by Douglas McGregor in 1960

Theory X: Is the assumption that employees are inherently

lazy, abhor work, and must be coerced into performing

Theory Y: Is the assumption that employees enjoy working,

desire responsibility, and can work without direction

The management environment: All factors that exist within and beyond

an organization’s boundaries that can affect the organization

Internal environment: The environment within an organization’s locus

of control

• Employees

• Management

• Organizational culture

General environment: The environmental layer that indirectly

influences the organization’s operations

Task environment: The external layer of the management environment

that directly affects the organization

Ethics: Code of moral values that govern the fundamental behaviors of

individuals, groups, and organizations

Ethical dilemma: A condition that arises when a decision must be

made, and the alternatives are ethically undesirable, causing difficulty in determining right from wrong

Utilitarian approach: The ethical principle that morally positive

actions invariably result in overall good

Moral-rights approach: States that moral decisions are best made by

those affected by them

Individualism approach: The concept that acts are moral when they

serve in the best interest of the individual’s long-term interests

Justice approach: The concept that moral acts must be based on

equity and impartiality

Distributive justice: States that people should be treated according

the differences between them

Procedural justice: All ethics should be derived from clearly defined

rules that are consistently applied

Entrepreneurship: The process of engaging in business ventures that

require acquiring and organizing resources, assuming risks, and reaping rewards

Entrepreneur: An individual who recognizes a business opportunity

and acts to capitalize upon it

Intrapreneur: An individual who seeks and acts upon opportunities

within an organization

Organizational planning

Goal: A future state an organization desires to achieve

Plan: A design of the actions, resources, and personnel that will

achieve a goal

Planning: Determining actions that will achieve an organization’s

goals

Organizational goalsetting

Mission: An organization’s purpose

Mission statement: A broadly stated expression of an organization’s

unique business scope and operations

Strategic goals: Broad statement of the desired future position of an

organization as a whole

Strategic plans: Actions an organization intends to take to achieve its

strategic goals

Tactical goals: Goals set for major departments in an organization

designed to achieve strategic objectives

Tactical plans: Actions that major departments must accomplish to

achieve tactical goals

Operational goals: Specific results expected from departments,

groups, and individuals within an organization

Operational plans: Specific actions developed to support tactical

goals

Management by Objectives: A system by which specific goals are set

by the entire workgroup, a timeline is established, and feedback on progress is ongoing

• Also known as MBO

• Conceived by Peter Drucker in 1954

Shewhart cycle: Quality management planning cycle used for

organizational improvement that includes:

• Plan: Determine desirable changes and prepare for

implementation

• Do: Execute the changes

• Check: Observe the result of the changes

• Act: Perform analysis of the changes and implement broadly

Single-use plans: Plans developed for goals that will only be set once Standing plans: Plans developed for guiding tasks that are performed

repeatedly

Contingency plans: Plans that spell-out an organization’s response to

specific, pre-determined events

Strategic management: Actions and guidance that serve to formulate

organization-level strategy for the purpose of achieving competitive success

Strategy: Plan of action that details resource allocation, labor,

marketing, and capitalization required to achieve organizational goals

Core competence: A business aspect upon which an o rganization

identifies itself

Synergy: Occurs when the elements of an organization produce an

outcome that is greater than all of the elements acting independently

Situation analysis: The evaluation of strengths, weaknesses,

opportunities, and threats affecting the organization

• Also known as SWOT analysis

Differentiation: Competitive strategy whereby an organization

strives to distinguish its products from its competitors’

Cost leadership: Cost-control strategy an organization undertakes to

maximize efficiency and minimize costs to increase competitiveness

Focus: Competitive strategy that is characterized by concentration on

a particular group of potential customers

Product life cycle: The stages a product endures, from development

and introduction, through maturity and growth, and finally to decline

Decision-making and problem solving

Decision: A choice made from various alternatives

Decision-making: The process of identifying problems and plausible

solutions

Programmed decision: A decision made as a result of a situation that

occurs on a regular basis

Nonprogrammed decision: A decision made as a result of a unique

situation

Risk: The possibility that a decision may prove to be the wrong one,

as well as the possibility that the potential gain plus additional resources may be lost as a result

Certainty: The level of confidence the decision-maker has in the

information available to him or her

Uncertainty: The level of confidence a decision-maker lacks as a result

of incomplete or suspected inaccurate information

Ambiguity: The goals or problems are unclear, with uncertain

alternatives, and incomplete information

Classical model: A decision-making model that assumes that

managers make decisions in the best interests of their organizations

Normative: The approach that shows how a manager should make

decisions, with guidelines for reaching solutions in the best interest of the organization

Administrative model: A decision-making model in which managers

make decisions in situations involving ambiguity and uncertainty

Bounded rationality: States that individuals are limited in their

decision-making abilities due to their cognitive capacity to process only a certain amount of information

Intuition: An understanding of a decision situation based

unconsciously on past experience

Birth stage: The creation of the organization

Youth stage: Characterized by rapid growth and market success

Midlife stage: Characterized by substantial size and prosperity Maturity stage: The decline of the organization due to inefficiency,

excessive size, and an overly mechanistic structure

Structure: Framework whereby an organization clearly defines roles,

leadership, resource allocation, task division, and departmental

coordination

Organization chart: The visual depiction of an organization’s

structure

Division of labor: The subdivision of labor into specialized tasks

and individual jobs

• Also known as work specialization

Authority: The legitimate power accorded managers to make

decisions, allocate resources, and otherwise act within his or her

authorized purview

Chain of command: An unbroken supervisory link that connects all

employees within an organization, from the line worker to the CEO

Accountability: The requirement for those subject to authority to

justify outcomes to superiors

Responsibility: The implicit duty of an employee to perform an

• Also known as span of control

Centralization: Decision authority is concentrated at the top of the

organizational hierarchy

Decentralization: Upper management pushes decision-making

authority to lower organizational levels

Tall structure: Characterized by a large number of hierarchical

levels and a relatively narrow span of management

Flat structure: Characterized by few hierarchical levels and a broad

span of management

Organizational change: The adoption and implementation of

innovations and new behaviors by an organization

Reactive change: Changes that occur after external forces have

affected organizational performance

Proactive change: Changes initiated in anticipation of future events

and opportunities

Sequence of organizational change

• Environmental and internal forces → Need for change → Initiate change → Implement change

Performance gap: The gulf between desired and actual performance Initiating change

Search: Discovering developments internally and externally that

can satisfy a need for change

Creativity: The creation of innovative solutions for organizational

problems

Idea champion: An employee who determines a need exists within

an organization and actively strives to satisfy it

New venture team: A temporary task force assigned to solving

organizational problems and developing innovations

New venture fund: A fund established to provide resources for

individual and group-developed innovations

Implementing change

Force field analysis: Determining which forces drive or resist

proposed changes

Communication and education: Providing employees with detailed

information on impending organizational changes through presentations and info papers

Participation: Involves employees with the organizational change

process

Negotiation: A formal bargaining process between management and

subordinate business units and employees that serves to set changes in terms that are mutually acceptable

Coercion: The use of formal managerial power to force changes

upon an organization

Top management support: The public expressions by executive

management in support of organizational changes

Categories of organizational change

Technology changes: A change that incorporates developing

technology that improves communication, management, and production

Product changes: A significant change in a company’s product or

service

Structural changes: Any adjustment of an organization’s

management or functional structure

Cultural changes: A change in employee beliefs, values, and

norms

Leadership: An individual’s ability to influence a person or group of

people to perform functions that reach goals

Trait theories: Theories that promote individual personality traits

as factors that determine leadership effectiveness

Behavior theories: Theories that promote behaviors as factors in

determining leadership effectiveness

Ohio State Studies

• Conceived by R M Stogdill and A E Coons in 1951

Initiating structure: The structuring by a manager of roles to

best achieve goals

Consideration: The propensity of a manager to form professional

relationships based on trust, respect, and regard for subordin ates’ feelings

University of Michigan Studies

• Conceived by R Kahn and D Katz in 1960

Employee-oriented leader: A leader who promotes interpersonal

relationships

Production-oriented leader: A leader who promotes

task-orientation

The Managerial Grid: A matrix that graphically illustrates

leadership styles by identifying 81 different leadership styles

• Conceived by R R Blake and J S Mouton in 1964

Scandinavian Studies

• Conceived by G Ekvall and J Arvonen in 1976

Development-oriented leader: A leader who is willing to take

risks, experiments, and develops new ideas to accomplish goals

Contingency Theories of Leadership

Fiedler contingency model: States that effective groups require a

match between a leader’s style and his or her subordinates’ personalities

• Conceived by F E Fiedler in 1967

Cognitive resource theory: States that by first making plans,

decisions, and strategy, a leader’s effectiveness is enhanced

• Conceived by F E Fiedler and J E Garcia in 1987

Hersey and Blanchard’s Situational Theory: States that leadership

effectiveness is greatly influenced by subordinates’ readiness

• Conceived by P Hershey and K H Blanchard in 1974

• Telling (high task – low relationship)

• Selling (high task – low relationship)

• Participating (low task – high relationship)

• Delegating (low task – low relationship)

R1: People are both unwilling and unable accomplish a task R2: People are unable but willing to accomplish a task

R3: People are able but unwilling to accomplish a task

R4: People are both able and willing to accomplish a task

Leader-Member Exchange Theory: States that leaders form “in”

and “out” groups and that individuals in the “in” groups will perform better than those who are not

• Conceived by F Dansereau, J Cashman, and S G Green in

1973

Path-goal theory: States that subordinates accept a leader’s

behavior, as they view it, as a source o f satisfaction

Attribution theory of management: Postulates that leadership is an

attribution made by individuals of others

Charismatic leadership theory: A subcomponent of attribution

theory that states followers attribute heroism or extraordinary leadership skills based on observing certain behaviors

Characteristics of charismatic leaders:

• Self-confidence

• Ability to articulate vision

• Strong convictions about the vision

• Extraordinary behavior

• Perception as an agent of change

• Environment savvy

Transactional leaders: Those who are goal-oriented and motivate by

clarification of roles and tasks

Transformational leaders: Achieve by providing individualized

direction, intellectual stimulation, and demonstrating charisma

Power: The ability of an individual to influence behavior in others to

perform functions they would otherwise not perform

Dependency: The relationship between two entities where one

possesses something the other requires

Basis of power

Coercive power: Based on fear

Reward power: Based on the ability to provide rewards for desired

behavior

Legitimate power: Based on the position one holds as bestowed by

an organization

Expert power: Based on specialized skills or abilities

Referent power: Based on the possession of resources or traits Elasticity of power: The impact of power in variable alternatives Power tactics: Means by which individuals exercise their power into

• Sanctions

Politics: Behaviors that are distinct from formal roles and seek to

influence the distribution of resources within an organization

Legitimate politics: Using sanctioned lines of communication and

command to influence leadership

Illegitimate politics: Circumventing the system and using unfair

tactics to influence leadership

Communication: The transmission, receipt, and understanding of

information

Communication model

• Encoding: The conversion of a message to symbolic form

• Message: The actual information

• Channel: Medium that carries the message

• Decoding: The deciphering of the message by the recipient

• Feedback: Communicating that the message was understood

Communication networks: Routs by which information flows Formal networks: Authority-based information links

Informal networks: The “grapevine"

Nonverbal communications: Information conveyed by body

movements and expressions

Barriers to communication

Filtering: Information distorted by a sender to gain a more

favorable reaction by the receiver

Selective perception: Information distorted by the receiver to suit

his or her own needs

Managing quality and productivity

Total Quality Management (TQM): A management system that

focuses on continuous achievement of customer satisfaction by

perpetually improving all organizational processes

Elements of TQM:

Intense focus on the customer: Involves the customer’s needs

and satisfaction

The drive to continual improvement: Central to the TQM

philosophy is the commitment to never being satisfied with progress There is always room for improvement

Improvement of quality: TQM mandates an improvement in

quality in all functions of the organization

Accurate measurement: Statistical analysis of performance

benchmarks is compared against standards and the industry

Employee empowerment: Focuses on all levels of employees to

suggest improvements and participate in managerial decision-making

Reengineering: A process of restructuring an organization from

scratch to improve quality and productivity

Extracted hrm

www.extractedmba.com/hrm.html

Defined

Activities and programs of an organization designed to attract, develop, educate, and maintain an effective workforce

Environmental influences on HRM

Downsizing: An effort designed to reduce costs and increase

efficiency by reducing the ranks of management and employees

• Also known as rightsizing

Discrimination: The hiring and promotion of employees on bases that

are independent of job criteria

Affirmative action: Government-imposed policies that guarantee equal

representative employment of minorities and other protected groups

Federal laws significantly affecting HRM

Equal Pay Act of 1963: Prohibits pay differences between sexes

where employees perform substantially equal work

Civil Rights Act of 1964 (Title VII): Prohibits discrimination in

employment on the basis of race, religion, color, sex, or national origin

Executive Orders 11246 and 11375: Requires federal contractors to

eliminate discrimination through affirmative action programs

Age Discrimination Act of 1967: Prohibits age discrimination and

imposes restrictions on mandatory retirement

Occupational Safety and Health Act of 1970 (OSHA): Establishes

mandatory safety and health standards in organizations

Health Maintenance Organization Act of 1973 (HMO): Requires

employers with 25 or more employees to provide an HMO alternative to regular insurance, if an HMO is available in the organization’s area

Vocational Rehabilitation Act of 1973: Prohibits discrimination

based on physical or mental impairments

Employee Retirement Income Security Act of 1974: Prescribes

rules of eligibility, vesting standards, and insurance programs for private pension plans

Vietnam-era Veterans Readjustment Act of 1974: Prohibits

discrimination against disabled veterans and veterans of the Vietnam War era

Pregnancy Discrimination Act of 1978: Prohibits discrimination

against pregnant employees

Consolidated Omnibus Budget Reconciliation Act of 1985

(COBRA): Requires continued employee-funded health insurance

coverage following termination

Immigration Reform and Control Act of 1986: Prohibits employers

from knowingly hiring illegal immigrants and prohibits employment on a basis of national origin or citizenship

Older Workers Benefit Protection Act of 1990: Requires that

waivers of the Age Discrimination Act of 1967 be voluntary

Americans with Disabilities Act of 1990: Prohibits discrimination

of otherwise-qualified handicapped individuals by employers and provides that “reasonable accommodations” be provided for employees with disabilities

Civil Rights Act of 1991: Shifts the burden of proof under the civil

rights act of 1964 from the employee to the employer

Family and Medical Leave Act of 1993: Requires employers to

provide up to 12 weeks of unpaid leave for childbirth, adoption, or family medical emergencies

Uniformed Services Employment and Reemployment Act of 1994:

Protects the rights of individuals who enter military service for short periods of time

Human resource manager essential competencies:

Business mastery

• Problem solving skills

• Innovation and creativity

Personal credibility

• Trust

• Personal relationships development

• Adherence to corporate values

• Courage and conviction

HRM trends

Globalization: The expansion of companies across national borders

that requires strategic employment consideration

Workforce diversity: The increased saturation of employees of

varying ethnic and social backgrounds

Labor supply: Fluctuations due to regional economic conditions that

require addressing in HRM strategy

Employment at will: The increased propensity of employers and

employees to contract and terminate employment contracts, with notice and no cause

Outsourcing: Hiring outside an organization to perform jobs that were

previously done by employees

Employee leasing: Employees who are hired by an external company,

but continue to perform their jobs

Industrial engineering: Field of study focused on the analysis of

work methods and the establishment of job time standards

Ergonomics: The design of work equipment to accommodate human

operators in a comfortable and healthy manner

Attracting an effective workforce

Matching model: An approach that an organization uses to match an

applicant’s skills to labor needs

Human resources information system (HRIS): Computerized system

that places accurate HRM information in the hands of managers

Human resource planning: The forecasting of anticipated HRM needs

and the matching of prospective employees to those needs

Cultural audits: Assessments of organizational culture and quality

of life in an organization

Trend analysis: An approach to forecast labor needs based upon

organizational performance indexes

Management forecasts: Forecasts of labor needs by managers who

use their own experience in the organization and/or industry

Recruiting: The active efforts of an organization to seek-out desired

candidates for employment

Realistic Job Preview (RJP): A recruiting tactic that gives a

prospective employee all pertinent information about the job and the organization

Job market: The regional area from which applicants will be actively

recruited

Sources of recruits (in order of effectiveness)

• Employee referrals

• College recruiting

• Executive search firms

• Professional search firms

• Want ads

• Direct applications

• Private employment agencies

• Public employment agencies

• Unions

Employee selection: The proces s of hiring a qualified employee by

matching skills with job requirements

Employment interviews

Nondirective interview: An interview in which an applicant is given

broad discretion in guiding the course of the conversation and that is characterized by minimal interviewer intervention

Structured interview: An interview in which an applicant is asked

standardized questions for which there are established acceptable answers

Situational interview: An interview in which an applicant is given

hypothetical situations and is gauged upon how he or she responds

Behavioral description interview (BDI): An interview in which an

applicant is asked how he or she responded to actual events

Panel interview: An interview in which an applicant is questioned

by a board of interviewers

Job description: A narrative description of duties that pertain to a

particular job that includes the requirements to fill the position

Job characteristics model: Job design that identifies task

characteristics that result in improved performance and lower

absenteeism

1 Skill variety

2 Task identity

3 Task significance

4 Autonomy

5 Feedback

Validity: The relationship between an applicant’s score on a pre

-employment examination and his or her future job performance

Criterion-related validity: Extent to which a selection tool relates to

actual job requirements

Concurrent validity: Extent to which a selection tool matches

criterion data obtained from employees already performing prospective jobs

Predictive validity: The correlation between selection tool results

and the performance of employees who have been on the job for a period

of time

Cross-validation: The verification of selection tool results by

comparison with different groups of individuals from the same population

Content validity: The extent to which a selection tool adequately

samples the knowledge and skills relating to the performance of a

particular job

Construct validity: The extent to which a selection tool measures

theoretical models or traits

Application form: A device for collecting pertinent information from an

applicant that relates to a particular job opportunity

Assessment center: A technique for selecting candidates with high

managerial potential based upon their performance in simulated

managerial scenarios

On-the-job training (OJT): A form of employee education in which a

seasoned employee “adopts” a trainee and develops him or her through actual performance of tasks

Apprenticeship training: A form of employee education in which an

entry-level worker is given a thorough education in his or her tasks, both

on and off the job

Internships: Programs sponsored by large organizations that allow

students to gain real experience in their prospective fields

Developing an effective workforce

Continuing training and development: A formal education program

intended to facilitate positive enhancement of employee job-related behaviors

Orientation training: Initial training whereby new employees are

introduced to the organization, its culture, and its structure

Classroom training: Lectures, films, and simulations in a structured

setting

Computer aided instruction: Self-paced program that involves

employees learning on computers

Conference groups: Forums in which participants analyze problems

and scenarios in team efforts

Performance appraisal: The process of a supervisor documenting

employee performance for use in promotion consideration, administrative actions, employee feedback, and employee development

Behaviorally anchored rating scale (BARS): A rating technique

that links an employee’s performance to specific job-relates tasks

Performance appraisal interview: A formal review of an employee’s

performance that takes place between a supervisor and the employee

Self-appraisal: Evaluation of one’s own job performance and

significant contributions

Subordinate appraisal: Evaluation of a manager’s performance by

subordinates

Peer appraisal: Evaluation of an employee’s performance by

co-workers at the same level

Team appraisal: TQM-based appraisal that evaluates team

performance rather that that of individuals within the team

Customer appraisal: Evaluation of an employee solicited from

internal and external customers

Appraisal errors

Halo effect: A rating error that occurs when a supervisor rates an

employee the same across the board, regardless of actual performance

Homogeneity: A rating error that occurs when a supervis or rates

all of his or her subordinates similarly, regardless of actual performance

• Also known as error of central tendency

Leniency or strictness error: A rating error where an appraiser

gives unusually high or low marks, regardless of actual performance

Recency error: A rating error where an appraiser bases the bulk

of an employee’s rating on recent events

Contrast error: A rating error where an employee is rated either

higher or lower because of comparison with an employee who was just evaluated

Similarity error: A rating error where an appraiser inflates an

employee’s ratings based upon personal mutual connections or

similarities

Maintaining an effective workforce

Compensation: Money and benefits used to reward employees for

performance

Human capital: The contributions of employees that have

economic value to an organization

Job valuation: The process of placing a value on a job through an

examination of job tasks

Point system: A job valuation system that assigns points for

each compensable job factor that results in a determination of a job’s overall value

Pay-trend line: A graphical representation of the relationship

between job point values and pay rates

Pay-for-performance: A standard by which managers tie

compensation to employee performance

Pay equity: A perception by employees that compensation

received is commensurate to the value of performed work

Hourly employees: Employees who are paid based upon the

number of hours worked

Salaried employees: Employees who are paid based upon

positions they hold

Piecework: Pay that is based upon units of production

Nonexempt employees: Employees covered by the overtime

provisions of the Fair Labor Standards Act

Exempt employees: Employees not covered by the overtime

provisions of the Fair Labor Standards Act

Job enrichment: The enhancement of a particular job that makes it

more challenging, rewarding, and satisfying for the employee

Transfer: Placement of an employee in another job for which

skills, duties, responsibilities, and pay are similar to the previous job

Promotion: An assignment to a higher level of in the organization

that is characterized by increased responsibility and compensation

Relocation services: Services provided by an employer for

transferred employees that are intended to ease transitions

Outplacement services: Services provided by an employer for

terminated employees that assist in finding replacement jobs outside the organization

Job progression: A schedule of positions an employee may

attain as they prove themselves in an organization

Career paths: Graphically depicted lines of advancement in an

occupational field within an organization

Fast-track program: A program that identifies young managers

with high potential and provides opportunities for accelerated

advancement over other less talented employees

Work Schedules

Compressed workweek: The shortening of the workweek and

extending of the workday (example: 4 days @10 hours a day, as opposed

to 5 days @8 hours a day)

Flextime: Adjustable working hours that allows employees the

opportunity to set start and quit times, provided they work a certain amount of hours a day or week

Telecommuting: Enabling an employee to accomplish work at a

convenient location, such as a telecommuting center, or at a home office

Exit interviews: Interviews conducted with departing employees to

determine the reasons for their resignations for the purpose of identifying potential organizational problems

Incentive programs

Straight piecework: Incentive plan that rewards in direct correlation

to units produced

Differential piecework: Compensation for units of production

above a standard production rate

Bonus: Incentive that supplements a base wage and is generally

based upon the prosperity of the organization

Spot bonus: Unplanned bonus for an employee for performance

unrelated to regular job functions

Group incentive pl an: Incentive plan where a group of employees

earns additional compensation for producing above standards

Standard hour plan: Incentive plan that compensates based upon

completion of tasks within set amounts of time

Merit raises: Incentive raises tied to outstanding performance

and/or acquisition of new skills

Profit sharing: Incentive that distributes a portion of the

organization’s profits to the employees

Gainsharing: Incentive that distributes a portion of the

organization’s market gains to the employees

Scanlon plan: Incentive program that uses employee-management

teams to gain cost-reducing improvements

Employee stock ownership plans (ESOPs): Stock plans in which

corporations set aside certain amounts of shares for employees to purchase at discounted prices

Incentives for sales employees

Straight salary plan: Compensation is paid regularly without

consideration of sales

Straight commission plan: Compensation is paid based upon a

percentage of sales made

Combined salary and commission plan: Compensation that

includes a relatively low salary that is supplemented by a percentage of sales made

Incentives for professional employees

Career curves: Incentive plan in which performance or

experience increases compensation

• Also known as maturity curves

Incentives for executives

Perquisites: Special benefits that symbolize an executive’s

importance to an organization

• Also known as perks

Bonus for performance: Incentive plan that ties bonus amounts

to corporate earnings growth

Stock for performance: Incentive plan that offers stock options

to executives for corporate earnings growth

Defined-benefit plan: Pension plan that specifies the amount an

employee receives upon retirement

Defined-contribution plan: Pension plan that establishes the basis

by which an employer contributes

Vesting: A guarantee of accrued benefits to be disbursed at

retirement age regardless of employment status at the time of retirement

Employee services

Employee assistance programs (EAPs): Programs provided by

employers to assist workers in dealing with problems that may affect work performance

• Child care referral

• Elder care referral

• Time off for children’s school activities

• On-site child care