Principles of Management Leadership

3 E’s
Effective, Efficient, and Ethical are the 3 E’s of a good plan.
The subordinates manager has the right to expect the subordinate to perform the job delegated to him or her and that the manager has the right to take corrective action if the subordinate fails to do so.
Acid Test
Another name for the Quick Ratio
A common business strategy focused on growth through the purchase of other businesses. Smuckers is a good example.
After the job is done the team can dissolve-contrast with department.
Administrative Management
A concept advocated by Henri Fayol (1841-1925) suggesting that there are common principles of management that apply to all types of businesses.
Affirmative Action
Taking positive steps to correct previous injustices and prejudices especially toward qualified minorities, women, persons with disabilities, and verterans.
A manager with authority to act for the organization or some part of it.
Analysis Paralyses
When planners do so much analysis that they fail to make a timely decision.
Angel Investor
Typically a wealth investor worth over $1 million who is willing to invest money to help a startup business. Some, such as a family member, may do it for free but most expect a share of the ownership and eventually a higher rate of return than the stock market provides.
Asia-Pacific Economic Cooperation (APEC)
An organization of 21 Pacific Rim countries seeking free trade and economic cooperation.
Association of Southeast Asian Nations (ASEAN)
An agreement among several nations in Southeast Asia aimed at promoting peace and free trade among nations, such as Vietnam, Indonesia, Thailand, etc.
Authentic Leadership Theory
Those who lead best derive their power from the consent of their followers.
A person with authority has the power and right to make decisions, give orders, draw on resources, and do whatever is necessary to fulfill the responsibility of his or her managerial position.
Balance Sheet
A financial report summarizing a company’s assets, liabilities, and stockholders’ equity at a specific point in time using the formula: Assets = Liabilities + Stockholders’ Equity.
Behavioral Approach to Management
A concept advocated by Elton Mayo (1880-1949) and others focusing on the psychological and sociological aspects of human behavior with regard to worker productivity and job satisfaction.
Having compassion for others.
Bernie Madoff
Person who swindled his clients out of $65 billion
Big Box Store
Describes huge retail stores, such as, Walmart and Costco that typically have very large but plain looking stores and compete on price.
Boston Consulting Group Matrix
The Boston Consulting Group (BCG) matrix classifies all units of a large business into the categories of cows, dogs, question marks, and stars.
Brazil, Russia, India, and China (BRIC)
The Big Four in terms of newly advanced economic development.
A concept advocated by Max Weber (1864-1920) suggesting organizations should be run by formal rules and procedures and that workers should advance based upon their performance instead of family connections.
Bureaucratic Control
The use of rules, regulations, and formal authority to guide the performance of employees.
Bureaucratic Structure
A hierarchical organization delineated by clear lines of authority, written rules, and administrator who strictly enforced the rules.
Business Ethics
A subset of the field of ethics focused on the ethical issues facing business leaders.
Where your passion, talent, and cause greater than yourself intersect.
Capital Budget
Planned Costs to build or buy large items such as buildings or large equipment that would not be a part of the ordinary costs of doing business.
Cash Flow Statement
Report providing summary of cash flowing in and out of the business during a specific period such as a quarter (three months) or year.
Central America Free Trade Agreement (CAFTA)
An agreement between the U.S. and several Central American countries to promote free trade.
Centralized Organization
Important decisions are made at the top of the organization with little or no input from below.
In The Shannon & Weaver Communication Model the vehicle that carries the message from the transmitter to the receiver.
Charismatic Leadership Theory
Leaders use their charm to lead others.
Clan Control
Control employees impose on themselves based upon agreed-upon norms, values, shared goals, and trust.
Cliff Baxter
Former Chairman of Enron who committed suicide in 2002.
A common business strategy focused on doing one thing (or few things) exceptionally well. Starbucks is a good example.
Chinese philosopher who lived around 550 B.C. and defined moral courage.
Conglomerate Diversification
A common business strategy focused on the purchase of other unrelated businesses. General Electric is a good example.
Contingency Theory of Leadership
Which leadership approach to use is contingent (depends upon) elements of the leader’s personality, the task, workers, and the level of power of the leader.
A person who typically thinks and acts contrary to popular or accepted opinion.
Any process that directs the activities of individuals toward the achievement of the organizations goals.
Cooperative Contracts
One firm signs a legal contract with a business in another country to make their products there.
The procedures that link the various parts of an organization to achieve the organizations overall mission.
Corporate Social Responsibility
The expectation that a corporation in return for privileges grated by the state government and lows that encourage business investment, will exhibit good citizenship and support charities and the arts.
In business a Cow is a business unit with low potential for market growth but your company maintains a large share of the market for the product.
Current Ratio
Current Ratio = current assets divided by current liabilities
Debt-To-Equity Ratio
Total Liabilities divided by Shareholders’ Equity.
Decentralized Organization
many decisions are made at lower levels and people further down the organizational hierarchy feel empowered.
Assignment of responsibilities to a subordinate.
In The Shannon & Weaver Communication Model the person who receives the transmitted message.
A common business strategy focused on setting your product apart from the competition, typically the basis of quality instead of price. Cadillac is an example.
Where a large organization is composed of many different units that work on different tasks using diverse skills and work methods.
The condition of being different, not all alike, and includes differences as to color, religion, age, disability status, military experience, sexual orientation, economic class, educational level, gender, race, ethnicity, and nationality.
Divine Command
Basing your ethics and choices of behavior on God’s commandments.
Divine Right of Kings
Belief that kings and queens derive their right to rule from the will of God.
Division of Labor
The assignment of different tasks to different people or group.
Divisional Organizational Structure
An organizational structure organized such divisions as product type, customer type, or geographic region.
In business a Dog is a business unit whose product has little or no potential for growth and your firm maintains a low percentage of the market.
Exporting products at a price below cost to establish a market in another country. Dumping is considered illegal in many countries.
Earnings Per Share (EPS)
Net Income divided by Shares Outstanding
Effectiveness Communication Problem
A problem regarding how well your message resulted in the desired behavior.
Emotion-focused behavior
An inappropriate way of dealing with job loss or disappointments where the focus is largely on damaging emotional reactions such as excessive drinking, abusing drugs, or other escape mechanisms.
In 2000, the seventh largest corporation in the U.S. with “reported” earnings of $101 Billion and 21,000 employees that was bankrupt by the end of 2001.
A person who pursues lucrative new business opportunities.
Entrepreneurial Venture
A new business having rapid growth and high profitability as its primary objective.
Equity Theory
People expect their rewards for their input and abilities will be equal to the rewards of others with similar input and abilities.
Ethical Boundary
Limiting your behavior to what is ethical as opposed to doing anything as long as there is no low specifically prohibiting it.
Ethical Leader
Someone who is ethical, teaches followers what is right and wrong is this setting, and rewards ethical behavior and punishes unethical action.
A category of wisdom focused on the study of what a society considers right or wrong.
Ethics of Conscience
An approach to ethical decision-making that takes into consideration the rights of others as human beings.
Ethics of Duty
Leaders are to make choices in light of their duty to protect and benefit others.
Ethics of Justice
An approach to ethical decision-making based upon the concept of fairness, the facts, and equal treatment for all.
Ethics of Respect
An approach to ethical decision-making that acknowledge that all human beings, regardless of their station in life, deserve respect as we respect ourselves.
Ethics of Rights
the idea that all human beings are born with certain rights and managers should not violate those rights
Ethics of Virtue
An approach to ethical decision-making based on what a good person would do.
People who are convinced their native culture is superior to all others.
European Union (EU)
An economic and political union of over two dozen European nations with the goal of preventing future wars among European nations.
The employees’ perception of the likelihood that their efforts will result in their goal attainment.
Expectancy Theory
Focuses on the expectations of employees.
Selling goods made in the home country in another country.
External Loves of Control
A belief that things external to the individual such as chance, fate, God, or other outside forces determine life’s events.
Extrinsic Rewards
Rewards given by someone else such as a raise or a promotion.
Fixed Cost
Something that costs the same regardless of how many you make or sell.
Fixed Costs
Costs that remain the same regardless of how many units are produced this month.
Foreign Corrupt Practices Act of 1977
Makes it illegal for any U.S. citizen anywhere in the world to bribe a foreign official.
Deciding who is on the team.
A legal contract between a successful business and an individual business manager seeking to start the same business in a new location.
One company makes a legal agreement with another organization to make and sell the first organizations product or service exactly as the first company demands.
Fred Fiedler
Professor and author of a Theory of Leadership describing the Contingency Theory of Leadership.
Functional Organizational Structure
An organizational structure organized around the basic business functions such as manufacturing, marketing, finance, information technology, and human resources.
General Agreement on Tariffs and Trade (GATT)
A multilateral agreement signed by nearly 150 countries following WWII aimed at reducing conflicts that start as business disagreement but could lead to armed conflicts between nations.
Glass Ceiling
Metaphor for an invisible barrier that makes it difficult for women and minorities to rise above a certain level in many organizations.
Global Business
A business that views the whole world as one market and itself as a global citizen.
Global New Venture
A company that starts out as a global company.
A common business strategy focused on growth through overseas expansion. Avon is a good example.
Goal Setting Theory
People have conscious goals that energize them and direct their behavior toward a particular end.
Great Man Theory of Leadership
The theory that leaders are born leaders or sent by God to lead.
Gross Margin
(Revenue – Cost of Goods Sold)/Revenue is the formula for the Gross Margin, sometimes just called Margin.
Hawthorne Effect
A concept stemming from Elton Mayo’s experiments at the Hawthorne Electric Company showing worker productivity went up when management showed more interest in the worker’s and their working conditions.
Hostile Environment
A workplace where an employee is made to feel threatened or is offended.
Human Relations Approach to Management
A concept advocated by Mary Parker Follett (1868-1933) stressing the importance of management working with workers in a cooperative mode rather than ruling over them in a command mode.
Income Statement
Report that measures a company’s revenues and expenses over a specific accounting period such as a quarter (three months) or a year.
Informal Organizational Structure
The everyday unwritten relationships among the employees working together within the organization.
Information Source
In The Shannon & Weaver Communication Model what produces the message.
to breathe life into.
The perceived likelihood that performance will be followed by a particular outcome.
Putting the differentiated units together so that work is coordinated into an overall product.
Internal Loves of Control
A belief that the individual is in charge of the things that occur in life, or at least our reaction to them.
International Business
A business that is primarily located in its home country, such as the United States, but has branch offices, and perhaps factories, in several overseas locations.
International Monetary Fund (IMF)
An organization of 187 nations working to foster global monetary cooperation and stabilization around the world.
A person who works to create new business ventures while working inside an existing large company.
Intrinsic Rewards
Rewards derived from the satisfaction of performing the job well.
Jeff Skilling
Former CEO of Enron who is currently serving a prison term for fraud.
Job Enlargement
Giving employees extra tasks to do to relieve boredom and encourage employee growth and opportunities for advancement.
Job Enrichment
Changing a job to make it more challenging and therefore more rewarding, satisfying, and motivating.
Job Rotation
Allowing employees to move through a series of jobs so they do not get bored and so they are qualified for more than one job.
Joint Venture
Two or more companies sign a legal agreement to form a third company to work together to make and sell a product or products.
Ken Lay
Former CEO of Enron who died of an apparent heart attack before going to prison for fraud.
Kohlberg’s Levels of Moral Reasoning
A classification of levels of moral reasoning defined by Lawrence Kohlberg (1927-1987) beginning with obedience to avoid punishment, through fitting into the norms of society and ending with the voluntary following of principles.
Leader-Member Exchange Theory of Leadership
Leaders lead by drawing key followers into their inner circle.
Leader-Member Relations
In Fiedler’s Contingency Theory of Leadership the degree of confidence, trust, and respect employees have in their leader.
The art and science of ethically and effectively guiding others toward a positive goal.
Leadership Trait Theory
The theory that potential leaders can be identified early by certain traits.
Lean Manufacturing
Focus on manufacturing that eliminates waste by making labor-related activities more efficient, repeatable, and impactful.
Least Preferred Co-worker
In Fiedler’s Contingency Theory of Leadership an indirect way of determining whether a leader is people-oriented by asking him or her to describe the employee they would least prefer to work with.
One company signs a legal agreement with another country to manufacture and sell the first company’s product with the first company getting a small fee or royalty per item sold.
Life Cycle of Power
The natural progression of power from its birth or beginning through growth, maturation, and eventually decline and the death or end of a leader’s power.
Lillian Gilbreth
Work by Lillian Gilbreth (1876-1972) extended the scientific method advocated earlier by Frederick W. Taylor. She became famous for raising 12 children while continuing her engineering work, which resulted in a 1950 movie entitled Cheaper by the Dozen.
Position where the manager has the direct responsibility for a principal activity of the firm.
Long-Term Focus
Looking far beyond the quarterly (every 3 months) effects when making decisions.
Low-Cost Provider
A common business strategy focused on reducing costs so the price charged to customers will be lower than competitors’ prices. Walmart is an example.
Macro Environment
The factors in the economy, government, and general business climate that could greatly affect the organizations competitive status.
Market Control
Control based on pricing mechanism; if something gets too costly, then the market will show purchases that the same product or service is available elsewhere at a lower cost.
Maslow’s Hierarchy of Needs Theory
Lower-level needs such as the need for food and water must first be satisfied before higher level needs such as esteem and self-actualization become motivators.
Master Budget
Budget of budgets where all the other budgets are combined.
Matrix Organizational Structure
An organizational structure that is a combination of functional and divisional where some employees report to two managers, a functional manager plus a divisional manager.
Mechanistic Organizational Structure
An organizational structure that is rigid and inflexible.
Micro Environment
Major factors within the organizations industry that could greatly affect its competitive status.
Monolithic Organization
An organization that employs few, if any, women, minorities, or other groups that differ from the majority and thus has a highly homogeneous employee population.
The performance of good ethics.
Multicultural Organization
An organization that highly values cultural diversity and actively seeks to utilize and encourage diversity.
Need for Achievement, Affiliation, and Power
People have varying levels of need for achievement (advancing in your career), affiliation (having strong friendships), and power (influence).
Network Organizational Structure
A collection of organizations that work together to produce a good or service and looks more like a web than a pyramid.
In The Shannon & Weaver Communication Model any interference resulting in the signal being received incorrectly.
An agreed-upon behavior within a group.
Agreeing on shared team goals and processes.
North American Free Trade Agreement (NAFTA)
An agreement between the U.S., Canada, and Mexico aimed at eliminating all trade barriers.
Ohio State Leadership Studies
Research conducted over 50 years ago at Ohio State with mixed results regarding whether concern for people was better than concern for the task.
Operating Budget
The budget that lists the revenues and expenses related to the regular and ongoing operations of the organization.
Something the organization could build or buy that would give it a future competitive advantage.
Organic Organizational Structure
A flexible organizational structure that uses teamwork and managers are more like coaches than bosses.
Path-Goal Theory of Leadership
Leaders lead best by helping their followers align their personal goals with the goals of the organization.
Getting the job done as a team.
Peter Drucher
Drucher (1909-2005) wrote the famous textbook The Practice of Management (1954) used by many colleges of business for decades, thereby influencing management thought for thousands of future managers. He especially emphasized the importance of customer satisfaction.
The love of wisdom.
Determining where an organization is now, where it could be with a few years, and what it would take to get there.
Pluralistic Organization
An organization that has a relatively diverse employee population as the result of a proactive effort to involve employees from different gender, racial, and cultural backgrounds.
Position Power
In Fiedler’s Contingency Theory of Leadership the amount of power the leader has over variables such as hiring, firing, discipline, promotions, and salary increases.
Positive Psychology
The study of what makes for a healthy psychological approach to life.
The ability to implement change despite resistance.
Judging someone in advance, before an objective, fact-based review.
Price-Earnings Ratio (P-ER Ratio)
Price per share divided by earnings per share.
Problem-focused behavior
An appropriate way of dealing with job loss focused on defining the problem, generating alternative solutions, and acting to solve the problem in a non-emotional manner.
Production Budget
Forecasts units to be produced each month per product.
Profit and Loss Statement
Another name for the Income Statement that lists the revenues and expenses for a specific time period, also called P&L Statement.
Psychological Contract
The basis for an understanding between workers and management.
Quantitative Management
Concept advocated by Ford W. Harris and others suggesting how mathematics can improved business decision-making.
Question Mark
In business a Question Mark is a business unit where your company has a low percentage of the market but the potential for growth is high.
Quick Ratio
(current assets – inventory) divided by current liabilities
Quid Pro Quo
A situation where one person, typically a manager, offers something to another, typically an employee, in exchange for a sexual favor.
In The Shannon & Weaver Communication Model what decodes the message from the channel.
A person assigned a task is supposed to carry it out.
Return on Equity (ROE)
(Net Income – Preferred Dividends) divided by Common Shareholders’ Equity.
Robert House
Professor, author and advocate of the Path-Goal Theory of Leadership.
Robert K. Greenleaf
Former AT&T executive and college lecturer who authored the book Servant Leadership and founder of the Servant Leadership movement.
Sales Budget
Contains forecasts of sales by month, sales area, and product.
Scientific Management
Concept advocated by Frederick W. Taylor (1856-1915) involving breaking complex tasks down into a series of small movements and then analyzing each movement for efficiency and speed to save time and money.
Belief that you are in control of your life and that your decisions and actions shape that life.
Semantic Communication Problem
A problem regarding how accurately the meaning of your message was conveyed.
Separation of Labor
Each worker in a factory stays at his or her work station doing a specialized task while the product being made moves along a belt.
Servant Leadership Theory
The leader considers himself or herself to be a servant to all and leads out of a desire to serve rather than out of a need for money, power, and prestige.
Service Corps of Retired Executives (SCORE)
An organization of retired executives who volunteer to help others start or grow their small businesses.
Sexual Harassment
Any unwanted and offensive action of a sexual nature.
Shannon & Weaver
Authors of famous model of communication.
Short, Fat Organizational Chart
Few layers of managers between the workers and the CEO so each manager has a broader span of control with more workers reporting to him or her.
In management a silo is when workers in one department work in isolation on their part of the project-contrast with teamwork.
Six Sigma
A concept borrowed from statistics referring to less than 3.4 defective parts per million.
Six Sigma
A control standard of less than 3.4 defects per million.
Slippery Slope
Making small infractions to ethics that gradually lead to making larger ones.
Small Business
One with less than 100 employees and independently owned and operated.
Small Business Administration (SBA)
Division of the U.S. government dedicated to helping anyone start or grow a small business.
Goals or targets that are specific, measurable, attainable, relevant, and timely.
Social Loafer
Team member who fails to do his or her fair share of the work but expects to reap the team’s reward.
Greek philosopher who lived around 470 B.C. and defined ethics as how we ought to live.
Span of Control
The number of subordinates who report directly to a manager or supervisor.
The process in which different individuals and units perform different tasks and develop high skills.
Position where the person provides specialized or professional skill and advice in support of the line departments.
Stages in Team Building
Forming, Storming, Norming, Performing, and Adjourning.
An expected performance level.
In business a Star is a business unit whose product has a high potential for market growth and your company maintains a large share of the market.
State of Flow
A frame of mind where the person is concentrating so completely on what they are doing that other thoughts are temporarily set aside.
Ironing out differences about team goals and individual roles.
Strategic Alliance
Two companies sign a legal agreement to work together, often in a joint venture, to make and sell a product or products.
Something the organization does exceptionally well.
Sunk Cost
Money a business has already spent and can’t get back.
A tool of analysis where the organizations strengths, weaknesses, opportunities, and threats are identified.
Tall Organizational Chart
Many layers of managers between the workers and the Chief Executive Officer.
A tax on fees a country charges to a business importing products into that country.
Task Structure
In Fiedler’s Contingency Theory of Leadership the degree to which the job assignments of workers are structured (well-defined) or unstructured.
A process of cooperative work that most organizations use to increase productivity, reduce costs, improve quality, enhance speed, and capture the creativity and innovation of their employees.
Technical Communication Problem
A problem regarding how accurately your message was conveyed.
The Art of War
Book written by Sun Tzu over 2,500 years ago containing words of wisdom about leadership.
The Prince
Book written by Niccolo Machiavelli 500 years ago describing the leaders responsibility to defend his followers.
The Theory of Moral Sentiments
Book written by Adam Smith in 1759 admonishing business leaders to operate with high morals and not greed.
The Wealth of Nations
Book written by Adam Smith in 1776 describing how supply and demand work to establish a fair price.
Theory X
Managers perceive employees as lazy and unmotivated to do good work.
Theory Y
Managers see employees as naturally motivated to do a good job.
Theory Z
Concept advocated by William Ouchi suggesting American business leaders should learn from the success of Japanese businesses and build long-lasting relationships with their workers.
Thorndike’s Law of Effect
A behavior that is followed by positive consequences (a reward) will likely be repeated.
Something that could substantially reduce the organizations revenues or increase its expenses.
Three Planning Scenarios
Optimistic, Pessimistic, and Most Likely are the three planning scenarios most successful planners consider.
Transactional Theory of Leadership
Leaders use pay and other rewards to trade off with followers to get them to do what the leader wants done.
A psychological tendency to transfer our feelings for one person onto another.
Transformational Theory of Leadership
Leaders inspire their followers to implement major organization shifts or sea changes.
In The Shannon & Weaver Communication Model what encodes the message into signals.
Two-Factor Theory
Some factors such as company policies, working conditions, pay, etc. are likely to cause employee dissatisfaction while other factors such as the nature of the work itself and feelings of achievement are likely to cause satisfaction on the job.
A concept of ethics based primarily upon the notion that choices should be made that result in the greatest good for the greatest number of people.
The value or importance a particular outcome holds for an employee.
Any action or process that a customer would be willing to pay for.
Variable Cost
An expense that increases with volume, for example, raw material that goes into each item produced.
Variable Costs
Costs, such as raw materials used, that go up as the level of production goes up.
Venture Capital
Money provided by a group of wealthy investors, investment banks, or other financial institutions representing groups of individual investors who pool their funds and seek to invest those funds into small businesses with perceived long-term growth potential.
Venture Capitalist
Person or group that invests money in startup companies in return for a share of the ownership and high returns.
W. Edwards Deming
American statistician (1906-1993) who helped Japan’s industrial efforts to recover from World War II by advocating statistical quality control, a concept later accepted in America.
Something the organization lacks or does poorly.
Wholly Owned Affiliate
A contractual agreement between two companies where one company called the parent, wholly owns the other company, for example Honda Motors of America is owned by Honda Motors of Japan.
Working Capital Ratio
Another name for the Current Ratio.
Working Group
A collection of people carefully chosen for their complementary skills who trust one another and are committed to a common goal, a common approach, and have agreed to hold each other mutually accountable.
World Bank
An organization first formed near the end of WWII to rebuild France and other nations devastated by WWII but more recently to provide loans to poor and developing nations.
World Trade Organization (WTO)
A global international organization formed in 1995 involving over 150 nations to administer trade agreements.
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