ECONOMICS FOR

EVERYONE:
ON-LINE GLOSSARY OF
TERMS & CONCEPTS
By Jim Stanford
© Canadian Centre for Policy Alternatives, 2008
Non-commercial use and reproduction, with appropriate citation, is authorized.

This glossary contains non-technical descriptions of all the terms in Economics for Everyone
highlighted in SMALL CAPITALS. Italicized terms within the definitions are themselves defined
elsewhere in the glossary, for cross-reference.

Absolute Poverty: Poverty defined with respect to an absolute material standard of living.
Someone is absolutely poor if their income does not allow them to consume enough to purchase
a minimum bundle of consumer goods and services (including shelter, food, and clothing). An
alternative approach is to measure relative poverty.

Accelerator, Investment: Investment spending stimulates economic growth, which in turn

stimulates further investment spending (as businesses enjoy stronger demand for their products).
This positive feedback loop (investment causes growth which causes more investment) is called
the accelerator.

Allocative Efficiency: A neoclassical concept referring to the allocation of productive resources

(capital, labour, etc.) in a manner which best maximizes the well-being (or “utility”) of
individuals.

Automatic Stabilizers: Government fiscal policies which have the effect of automatically
moderating the cyclical ups and downs of capitalism. Examples include income taxes (which
collect more or less taxes depending on the state of the economy) and unemployment insurance
benefits (which automatically replace lost income for people who lose their jobs).

Balanced Budget: An annual budget (such as for a government) in which revenues perfectly
offset expenditures, so that there is neither a deficit nor a surplus.

Balanced Budget Laws: Laws (usually passed by right-wing governments) which require
governments to run balanced budgets regardless of the state of the overall economy. These laws

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have the negative effect of worsening economic downturns – since governments either must
reduce spending or increase taxes during a recession, in order to offset the impact of the
recession on its budget, and those fiscal actions deepen the recession.

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Bank for International Settlements: An international financial regulatory organization based
in Berne, Switzerland, which designs international regulations regarding capital adequacy and
other banking practices. The BIS is governed by government appointees from the world’s
largest capitalist economies.

Banking Cycle: An economic cycle which results from cyclical changes in the attitudes of
banks toward lending risk. When economic times are good, bankers become optimistic that their
loans will be repaid, and hence they expand their lending. More credit means even stronger
economic times, and so on. The opposite occurs when the economy becomes weaker: bankers
begin to fear more defaults on their loans, hence they issue fewer loans, and hence the economy
weakens even further.

Banks: A company that accepts deposits and issues new loans. It makes profit by charging
more interest for the loans than it pays on the deposits, as well as through various service
charges. By issuing new loans (or credit), banks create new money which is essential to
promoting economic growth and job creation.

Barter: A form of trade in which one good or service is exchanged directly for another, without
the use of money as an intermediary.

Bond: A financial security which represents the promise of its issuer (usually a company or a
government) to repay a loan over a specified time period, at a specified rate of interest. The
bond can then be bought and sold to other investors, over and over again. When the rate of
interest falls, bond prices rise (and vice versa) – since when interest rates are lower, the bond’s
promise to repay interest at the specified fixed rate becomes more valuable.

Capacity Utilization: A company or economy’s capacity represents the maximum amount of

output it can produce. The rate of capacity utilization, therefore, represents the proportion of
capacity that is actually used in production. When capacity utilization is high (so that a facility is
being used fully or near-fully), pressure grows for new investment to expand that capacity. Also,
high capacity utilization tends to reduce the unit cost of production (since capital assets are being
used more fully and efficiently).

Capital: Broadly defined, capital represents the tools which people use when they work, in
order to make their work more productive and efficient. Under capitalism, capital can also refer
to a sum of money invested in a business in hopes of generating profit. (See also: circulating
capital, fixed capital, human capital, machinery and equipment, physical capital, and
structures.)

Capital Adequacy: Capital adequacy rules are loose regulations imposed on private banks, in
hope of ensuring that they have sufficient internal resources (including the money invested by
the bank’s own shareholders) to be able to withstand fluctuations in lending and profitability.

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Capital Flight: A destructive process in which investors (both foreigners and domestic
residents) withdraw their financial capital from a country as a result of what are perceived to be
non-favourable changes in economic policies, political conditions, or other factors. The
consequences of capital flight can include a contraction in real investment spending, a dramatic
depreciation in the exchange rate, and a rapid tightening of credit conditions. Developing
countries are most vulnerable to capital flight.

Capital Gain: A capital gain is a form of profit earned on an investment by re-selling an asset
for more than it cost to buy. Assets which may be purchased for this purpose include stocks,
bonds, and other financial assets; real estate; commodities; or fine art.

Capitalism: An economic system in which privately-owned companies and businesses undertake

most economic activity (with the goal of generating private profit), and most work is performed
by employed workers who are paid wages or salaries.

Capitalist Class: The group of individuals (representing just a couple of percent of the
population in advanced capitalist countries) which owns and controls the bulk of private
corporate wealth, and which as a result faces no compulsion to work in order to support
themselves.

Carbon Tax: An environmental tax which is imposed on products which utilize carbon-based
materials, and hence contribute to greenhouse gas pollution (including oil, gas, coal, and other
fossil fuels). The level of the tax should depend on the carbon (polluting) content of each
material.

Central Bank: A public financial institution, usually established at the national level and
controlled by a national government, which sets short-term interest rates, lends money to
commercial banks and governments, and otherwise oversees the operation of the credit system.
Some central banks also have responsibility for regulating the activities of private banks and
other financial institutions.

Central Planning: An economic system in which crucial decisions regarding investment,

consumption, interest rates, exchange rates, and price determination are made by central
government planners (rather than determined by market forces).

Class: The different broad groups in society, defined according to what work they do, their
wealth, their degree of control over production, and their general role in the economy.

Classical Economics: The tradition of economics that began with Adam Smith, and continued
with other theorists including David Ricardo, Thomas Malthus, Jean-Baptiste Say, and others.
The classical economists wrote in the early years of capitalism, and they uniformly celebrated
the productive, innovative actions of the new class of industrial capitalists. They focused on the
dynamic economic and political development of capitalism, analyzed economics in class terms,
and advocated the labour theory of value.

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Climate Change: As a consequence of the cumulative emission of carbon dioxide (a by-product
of fossil fuel use) and other chemicals over the past two centuries, the concentration of these
gases in the global atmosphere is growing dramatically. These chemicals capture more solar
energy within the atmosphere, and hence average global temperatures are rising – by about a full
degree Celsius (on land) over the past half-century. The rise in global temperatures is causing
many serious consequences, including changes in rainfall, rising sea levels, extreme weather and
storms, and changes in plant and animal habitats.

Commodity: Anything that is bought and sold for money is a commodity – including produced
goods and services, inputs (such as capital or raw materials), and even labour.

Comparative Advantage: A theory of international trade that originated with David Ricardo in
the early 19th Century, and is maintained (in revised form) within neoclassical economics. The
theory holds that a national economy will specialize through international trade in those products
which it produces relatively most efficiently. Even if it produces those products less efficiently
(in absolute terms) than its trading partner, it can still prosper through foreign trade. The theory
depends on several strong assumptions – including an absence of international capital mobility,
and a supply-constrained economy.

Competition: Competition occurs between different companies trying to produce and sell the
same good or service. Companies may compete with each other for markets and customers; for
raw materials; for labour; and for capital.

Conditionality: International financial institutions (like the World Bank and the International
Monetary Fund) often attach strong conditions to emergency loans they make to developing
countries experiencing economic and financial crises. These conditions require the borrowing
countries to follow strict neoliberal policies, such as reducing government spending and deficits;
unilaterally opening markets to foreign trade; and privatizing important public assets.

Consumer Price Index: The consumer price index (CPI) is a measure of the overall price level
paid by consumers for the various goods and services they purchase. Retail price information is
gathered on each type of product, and then weighted according to its importance in overall
consumer spending, to construct the CPI. Monthly or annual changes in the CPI provide a good
measure of the rate of consumer price inflation.

Consumption: Goods and services which are used for their ultimate end purpose, meeting some
human need or desire. Consumption can include private consumption (by individuals, financed
from their personal incomes) or public consumption (such as education or health care –
consumption organized and paid for by government). Consumption is distinct from investment,
which involves using produced goods and services to expand future production.

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Corporation: A corporation is a form of business established as an independent legal entity,
separate from the individuals who own it. A major benefit, for the owners, of this form of
business is that it provides for limited liability for its owners: potential losses resulting from their
ownership of the company (should it lose money, face legal difficulties, or experience other
problems) are limited to the amount initially invested by the owners. The owners’ other personal
wealth is kept separate and protected from claims against the corporation. The corporation is
thus well-suited to the joint stock form of ownership.

Corporatism: A system for managing wage determination and income distribution, in which
wage levels are determined centrally (across industries or even entire countries) on the basis of
productivity growth, profitability, and other parameters, following some process of consultation
or negotiation involving unions, employers, and often government. Variants of this system are
used commonly in Scandinavia, parts of continental Europe, and parts of Asia.

Cost of Job Loss: When a worker is laid off or fired, they experience a significant out-of-pocket
cost. That cost of job loss depends on how much they were earning in their job, how long it
takes them to find a new job, the level of unemployment benefits they are entitled to, and the
level of their pay in the new job. The higher the cost of job loss, the more employers will be able
to threaten and discipline their workers. Cutting unemployment insurance has been one key
neoliberal strategy for increasing the cost of job loss.

Counter-Cyclical Policies: Governments can take many different actions to offset the ongoing
booms and busts of the private-sector economy. These policies include fiscal policies
(increasing government spending when the economy is weak), monetary policies (cutting interest
rates when needed to stimulate more spending), and social policies (like unemployment
insurance) to maintain household incomes and spending even in a downturn.

Credit: The ability to purchase something without immediately paying for it – through a credit
card, a bank loan, a mortgage, or other forms of credit. The creation of credit is the most
important source of new money, and new spending power, in the economy.

Credit Squeeze: At times private banks become reluctant to issue new loans and credit, often
because they are worried about the risk of default by borrowers. This is common during times of
recession or financial instability. A credit squeeze can dramatically slow down economic growth
and job-creation.

Debt: The total amount of money owed by an individual, company or other organization to
banks or other lenders is their debt. It represents the accumulated total of past borrowing. When
it is owed by government, it is called public debt, and it represents the accumulation of past
budget deficits.

Debt Burden: The real economic importance of a debt depends on the interest rate that must be
paid on the debt, and on the total income of the consumer or business that undertook the loan.
For public debt, the most appropriate way to measure the debt burden is as a share of national
GDP.

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Deficit: When a government, business, or household spends more in a given period of time than
they generate in income, they incur a deficit. A deficit must be financed with new borrowing, or
by running down previous savings.

Defined Benefit Pensions: A pension plan that pays a specified monetary benefit, usually based
on a pensioner’s years of service and their income at the time of retirement.

Defined Contribution Pensions: A pension plan that makes no specified promise about the
level of pension paid out after retirement. Instead, a pensioner’s income depends on the amount
of money accumulated in a pre-funded retirement account, on investment returns, and on interest
rates at the time of retirement.

Deflation: A decline in the overall average level of prices. Deflation is the opposite of inflation.

Demand-Constrained: An economy is demand-constrained when the level of output and

employment is limited by the amount of overall demand (or spending) on its products. The
capitalist economy is usually demand-constrained. Only rarely is the economy supply-
constrained: that is, limited by the availability of workers and other productive resources.

Depreciation: This represents the loss of value from an existing stock of real capital (for an
individual company or for the whole economy), reflecting the normal wear-and-tear of
machinery, equipment, and infrastructure. A company or country must invest continuously just
to offset depreciation, or else its capital stock will gradually run down.

Depression: A depression is a very deep, long, and painful recession, in which unemployment
rises to very high levels, and economic output does not bounce back.

Derivatives: A derivative is a financial asset whose resale value depends on the value of other
financial assets at different points in time. Its value is thus “derived” from the value of other
financial assets, and is hence very difficult to predict. Examples of derivatives include futures,
options, and swaps.

Development: Economic development is the process through which a country’s economy

expands and improves in both quantitative and qualitative terms. Economic development
requires the coming together of several different processes and conditions: the accumulation of
real capital; the development of education, skills, and human capacities; improvements in
governance, democracy, and stability; and changes in the sectoral make-up of the economy.

Discretionary Fiscal Policy: Some government taxing and spending programs can be adjusted
by government in response to changing economic circumstances. These discretionary measures
(increasing or decreasing particular taxes or spending) are usually used as a counter-cyclical
policy.

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Discrimination: As a result of racist and sexist attitudes, and deliberate efforts of employers to
play off groups of workers against each other, different groups of people (defined and divided by
gender, ethnicity, language, ability, or other factors) experience very different economic
opportunities and incomes.

Distribution: The distribution of income reflects the process by which the real output of goods
and services produced by the economy is allocated to different individuals and groups of people.
Distribution can be measured across individuals (comparing high-income and low-income
households), or across classes (comparing the incomes of workers, small businesses, and
capitalists).

Dividends: Many companies pay a cash dividend (quarterly or annually) to the owners of its
shares. This is an enticement to investors to purchase that company’s shares, and represents a
way of distributing some of a company’s profits to its ultimate owners. Individual investors can
capture profits in other ways, as well – such as through capital gains.

Economic Growth: Economic growth is the expansion of total output produced in the
economy. It is usually measured by the expansion of real GDP.

Economies of Scale: Most economic production requires the producing firm or organization to
make an initial investment (in real capital, in engineering and design, in marketing) before even
the first unit of production occurs. As total production then grows, the cost per unit of that initial
investment shrinks. For this reason, most industries demonstrate economies of scale, whereby
the unit cost of production declines as the level of output grows. Because of economies of scale,
larger companies have an advantage in most industries, and the economy usually operates more
efficiently when it is busy and growing (than when it is shrinking or stagnant).

Effective Demand: The theory of effective demand was developed separately in the 1930s by
John Maynard Keynes and Michal Kalecki. It explains why the capitalist economy is normally
limited by the total amount of spending (that is, the economy is demand-constrained), and hence
why unemployment almost always exists.

Employment: Employment is a specific form of work, in which the worker performs their
labour for someone else in return for a money wage or salary.

Employment Rate: This measures the share of working age adults who are actually employed
in a paying position. The employment rate can be a better indicator of the strength of labour
markets than the unemployment rate (since the unemployment rate depends on whether or not a
non-working individual is considered to be “in” the labour force).

Enclosures: A historic process in Britain and other European countries, in the very early years
of capitalism, in which lands formerly held and used in common were fenced off and formally
assigned to private owners. This painful and often violent process was essential to the creation
of a landless, desperate new class of people who were compelled to work in the new industrial
factories.

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Environment: The natural environment is an essential aspect of the economy, whose influence
is felt in several different ways. Everyone relies on the direct ecological benefits that come from
nature: fresh air, clean water, space, climate. And every industry relies on natural resources
which are used as necessary inputs to production (land, minerals, forestry and agriculture,
energy, and other materials). Finally (and unfortunately), most economic activities involve the
creation of some waste and pollution which is expelled back into the environment.

Environmental Taxes: Taxes which are imposed on particular activities, or particular products,
which are considered to be especially damaging to the environment, with the goal of changing
economic behaviour and reducing pollution. A carbon tax is an important example of an
environmental tax.

Equilibrium: In neoclassical economics, equilibrium exists when supply equals demand for a
particular commodity. General equilibrium is a special (purely hypothetical) condition in which
every market (including markets for both final products and factors of production, the latter
including labour) is in equilibrium.

Equity: The proportion of a company’s total assets which are “owned” outright by the
company’s owners. A company’s equity is equal to its value less its debt owed to bankers, bond-
holders, and other lenders.

Exchange Rate: The “price” at which the currency of one country can be converted into the
currency of another country. A country’s currency is “strong,” or its exchange rate is “high,” if it
can purchase more of another country’s currency. A country’s currency appreciates when its
value (compared to other currencies) grows; it depreciates when its value falls.

Exports: An export is the sale of a product from one country (either a good or a service) to a
purchaser in another country.

Externalities: Many economic activities have collateral effects (sometimes positive, but more
often negative) on other people who are not directly involved in that activity. Examples of
externalities include pollution (which imposes a cost on the natural environment and everyone
who uses it), congestion (which slows down travel and productivity), and the spill-over impacts
of major investment or plant closure decisions.

Factors of Production: The basic productive resources (labour, capital, and natural resources)
that are essential inputs to every economic activity.

Feudalism: A type of economy (such as that in Europe in the Middle Ages) that is primarily
agricultural, but productive enough to support a class of artisans and merchants. Feudal societies
are composed of two main social classes: nobles and peasants. The nobility extracted the
agricultural surplus from peasants through a system of tradition, mutual obligation, and (when
necessary) brute force.

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Final Products: Products (either goods or services) which are intended for final consumption.
They are distinct from intermediate products, which are products used in the production of other
products (such as raw materials, capital goods, or producer services).

Finance: Monetary purchasing power, typically created by a bank or other financial institution,
which allows a company, household, or government to spend on major purchases (often on
capital assets or other major purchases).

Financialization: The trend under neoliberalism through which real production in the economy
is accompanied by an increasing degree of financial activity and intermediation (including
various forms of lending, financial assets, and securitization). One way to measure
financialization is by the ratio of total financial assets to real capital assets in an economy.

Fiscal Policy: The spending and taxing activities of government constitute its fiscal policy.

Fixed Capital: Real capital which is installed permanently in a specific location, including
buildings, infrastructure, and major machinery and equipment.

Flat-Rate Tax: A form of income tax in which every taxpayer pays the same rate of tax on their
personal income, regardless of their income level. It differs from a progressive tax, in which
higher-income individuals pay a higher rate of tax.

Foreign Direct Investment: An investment by a company based in one country, in an actual

operating business, including real physical capital assets (like buildings, machinery and
equipment), located in another country.

Foreign Exchange: The process by which the currency of one nation is converted into the
currency of another country.

Formal Economy: The sector of the economy which produces goods and services in return for
monetary payment, and is fully integrated into the formal structures (including tax systems) of
the economy. It is distinct from the informal economy, in which production and exchange occurs
on a non-monetary, subsistence, or barter basis.

Fractional Reserve System: A banking system in which private banks are required to hold a
specified proportion of assets on hand in their banks, to underpin a much larger amount of
lending to the bank’s customers.

Free Trade Agreements: An agreement between two or more countries which eliminates tariffs
on trade between the countries, reduces non-tariff barriers to trade, cements rights and
protections for investors and corporations, and takes other measures to guarantee a generally
liberalized, pro-business economic environment.

Full Employment: A condition in which every willing worker is able to find a paying job
within a very short period of time, and hence unemployment is near zero.

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General Equilibrium: Neoclassical economics assumes that production, employment,
investment, and income distribution are all determined by a condition of equilibrium (with
demand equalling supply) in every single market (including markets for both factors of
production and produced goods and services).

Gini Coefficient: A statistical measure of inequality. A Gini score of 0 implies perfect equality
(in which every individual receives the same income). A Gini score of 1 implies perfect
inequality (in which one individual receives all of the income).

Globalization: A generalized historical process through which more economic activity takes
place across national borders. Forms of globalization include international trade (exports and
imports), foreign direct investment, international financial flows, and international migration.

Goods: Tangible products which are produced in the economy – including agricultural products,
natural resources, manufactured goods, and construction.

Government Production: Some production in the economy is undertaken directly by

governments (or various kinds of government agencies) in order to meet public needs (as distinct
from the production for profit which is undertaken by private companies). Examples of
government production include education, health care, policing, and other public services.

Greenhouse Gases: Greenhouse gases trap more heat from the sun near the earth’s surface.
Carbon dioxide is the major greenhouse gas, but other forms of pollution (including methane and
nitrous oxide) also contribute to global warming. Because of the long-run accumulation of
greenhouse gases after centuries of industrial pollution, the planet’s average temperature is rising
notably, causing climate change, severe weather, rising sea levels, and other major effects.

Gross Domestic Product: The value of all the goods and services produced for money in an
economy, evaluated at their market prices. Excludes the value of unpaid work (such as caring
reproductive labour performed in the home). GDP is calculated by adding up the value-added at
each stage of production.

Gross Domestic Product, Deflator: A price index which adjusts the overall value of GDP
according to the average increase in the prices of all output. The GDP deflator equals the ratio of
nominal GDP to real GDP.

Gross Domestic Product, Per Capita: The level of GDP divided by the population of a
country or region. Changes in real GDP per capita over time are often interpreted as a measure
of changes in the average standard of living of a country, although this is misleading (because it
doesn’t account for differences in the distribution of income across factors of production and
individuals, and it doesn’t consider the value of unpaid labour).

Heterodox Economics: Various schools of thought (including post-Keynesian, structuralist,

Marxian, and institutionalist economics) which reject the precepts of dominant neoclassical
theory.

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Hoarding: A situation in which financial investors, companies, or individual consumers choose
to hold hoards of cash or other liquid assets, rather than spending and re-spending that money.
Hoarding often results from intense fears about future economic and financial turbulence – yet
ironically hoarding can create the very recession which hoarders fear!

Households: The basic unit of individual economic behaviour. Households offer labour supply
to the labour market, earn income (from employment and other sources), make consumer
purchases, and care for each other through unpaid labour within the home.

Hyper-Inflation: A situation of extremely rapid inflation (reaching 100% per year or more),
often resulting from a condition of economic or political breakdown.

Imports: Goods or services which are produced in a foreign country and purchased
domestically. Imports include money spent on vacations or purchases in foreign countries.

Industrial Policy: Government policies aimed at fostering the domestic development of

particular desirable or productive industries, in order to boost productivity, create higher-paid
jobs, and enhance international trade performance. Tools of industrial policy can include
measures to stimulate investment in targeted industries; trade policies (such as tariffs, export
incentives, or limits on imports); and technology policies.

Inequality: The distribution of income across individual households typically demonstrates

inequality between higher-income and lower-income households.

Inflation: A process whereby the average price level in an economy increases over time.

Informal Economy: The informal sector of the economy represents the production of goods
and services for the own-use of the producers, or for informal or “underground” trade in
particular communities (as opposed to the formal economy). It is particularly important in
developing countries.

Innovation: Producers (including private companies) will endeavour to develop new products
(new goods or services) and new processes (new ways of producing those goods or services),
with the goal (in a capitalist context) of enhancing market share and hence profitability. More
generally, innovation simply refers to finding better ways to produce better goods and services.

Institutionalist Economics: A school of heterodox economics which emphasizes the

importance of institutional development and evolution (as opposed to “pure” market forces) in
explaining economic and social development.

Interest: A lender charges interest as the price of lending money (or some other asset) to a
borrower. Interest is typically charged as a specified percentage of the loan’s value, per
specified time period (eg. percent per year).

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Intermediate Products: Products (including both goods and services) which are not produced
in order to be consumed, but rather are produced in order to be used in the production of some
other good or service. Capital goods and raw materials are examples of intermediate products.

International Monetary Fund: An international financial institution established after World

War II with the goal of regulating and stabilizing financial relationships among countries, and
ensuring free flow of finance around the world economy. Based in Washington, D.C., it is
governed by a system which grants disproportionate influence to the wealthier economies (based
on their contribution to the Fund’s operating resources).

Investment: Investment represents production which is not consumed, but rather is utilized in
the production of other additional output. Investment also represents an addition to the capital
stock of an economy.

Joint Stock: A form of business in which the company’s assets are jointly divided among a
large number of different individual owners, each of whom owns a specified share of the
company’s total wealth. Joint stock companies are governed by a weighted voting system in
which investors’ influence depends on the number of shares they own.

Labour Discipline: Employers are interested in maximizing the extent to which employees
expend effort and “follow the rules” in the workplace. The degree of labour discipline reflects
the cost of job loss and other measures of employers’ power over their workers.

Labour Extraction: Most employees under capitalism are paid according to the time they
spend at work. But employers then face a challenge to extract genuine labour effort from their
workers while they are on the job. Employer labour extraction strategies utilize a combination of
labour discipline, supervision, technology (to control and monitor work), and threat of dismissal.

Labour Force: The total population of working-age people who are willing and able to work,
and who hence have “entered” the labour market. The labour force includes individuals who are
employed, and those who are “actively” seeking employment.

Labour Intensity: The ratio of labour effort expended, compared to total on-the-job
compensated labour time. A higher ratio of labour intensity reflects a more successful employer
labour extraction strategy.

Labour Market Segmentation: Deep and systematic differences among various groups of
workers, in which different types of workers are effectively “assigned” to different types of jobs
(reflecting differing productivity and income opportunities). Typically, access to different
segments of the labour market is organized on grounds of gender, race, ethnicity, or age.

Labour Supply: The total number of workers available and willing to work in a paid position;
usually measured by the labour force (although the labour force usually excludes many workers
who do not officially qualify as “actively” seeking work, but who can nevertheless be mobilized
into employment if necessary).

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Long Waves: Longer-term periods of growth or stagnation in the economy, that can last for a
decade or more and reflect broader changes in technology, politics, and international relations.
For example, most developed capitalist countries experienced a long wave of economic
expansion after World War II (the “Golden Age”), followed by a long period of stagnation
during the 1980s and 1990s.

Machinery and Equipment: One form of fixed capital asset, consisting of machines,
computers, transportation equipment, assembly lines, and other equipment. Economists believe
that investment in machinery and equipment is very important to productivity growth.

Macroeconomics: The study of aggregate economic indicators such as GDP growth,

employment, unemployment, and inflation. Conventional economics makes a distinction
between macroeconomics and microeconomics (the study of individual businesses or industries).

Managers: Top managers and directors of larger companies who are assigned the task of
initiating and organizing production, disciplining workers, and accounting to shareholders for the
performance of the business.

Market Income: A household’s total pre-tax income obtained from its activities in the formal
economy, including wages and salaries, investment income, and small business profits. Excludes
government transfer payments.

Market Socialism: A form of socialism in which productive companies are owned through
public or non-profit forms, but relate to each other through markets and competition (with little
or no central planning).

Mercantilism: An economic theory from pre-capitalist times which held that a country’s
prosperity depended on its ability to generate large and persistent surpluses in its foreign trade
with other countries.

Microeconomics: The study of the economic behaviour of individual “agents” such as

particular companies, workers, or households.

Migration: The movement of human beings from one country or region to another. Sometimes
migration is motivated by economic factors (such as the search for employment), sometimes by
other forces (such as war, natural disaster, or famine).

Monetarism: Strictly speaking, monetarism was a right-wing economic theory (associated with
the work of Milton Friedman, in particular) which believed that inflation could be controlled or
eliminated by strictly controlling, over long periods of time, the growth of the total supply of
money in the economy. This theory was proven wrong in the 1980s (when it became clear that it
is impossible, in a modern financial system, to control the supply of money). More broadly,
monetarism believes that inflation is a major danger to economic performance, and should be
controlled through disciplined policies; modern “quasi-monetarists” agree with this view, but
now use high interest rates (rather than monetary targeting) to indirectly regulate the money
supply.

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Monetary Policy: Monetary policy reflects the use by government and government agencies
(especially the central bank) of interest rate adjustments and other levers (such as various
banking regulations) to influence the flow of new credit into the economy, and hence the rate of
economic growth and job-creation. A “tight” monetary policy tries to reduce the growth of new
credit (through higher interest rates); a “loose” monetary policy tries to stimulate more credit-
creation and hence growth.

Monetary Targeting: A policy which attempts to directly limit the growth in the total supply of
money in the economy. It was the main policy tool used by strict monetarists. This policy
approach failed in the 1980s, when it became clear that the supply of money could not be directly
controlled by a central authority.

Money: Broadly speaking, money is anything that can be used as a means of payment (for
example, to settle a debt). It includes actual currency, bank deposits, credit cards and lines of
credit, and various modern electronic means of payment.

Mortgage: A mortgage is a special kind of credit, usually longer-term in duration, used to

finance the construction or purchase of property or a long-lasting structure (such as a home or
building).

Multinational Corporation: A multinational corporation (MNC) is a company which directly

undertakes productive facilities or operations in more than one country. Foreign direct
investment is the act of investing in, or expanding, those actual productive operations in other
countries.

Multiplier: An initial stimulus to spending (in the form of new business, consumer, or
government purchases) usually results in a larger final increase in total spending, production, and
employment in the economy. This magnifying effect is called the multiplier. The strength of the
multiplier depends on many factors, including the type of initial spending, the importance of
imports in spending, and the amount of unused capacity that initially existed in the economy.

Mutual Fund: A financial vehicle which involves pooling investments in the shares of many
different joint stock (or publicly traded) companies, in order to reduce the risk and overhead
costs associated with investing in corporate shares. An investor buys a unit in the mutual fund,
and receives a pro-rated portion of the fund’s total income (including both dividends and capital
gains).

Natural Monopoly: In some industries, economies of scale are so strong that it makes most
economic sense for there to be only one supplier. This type of industry is considered a natural
monopoly, since competition will eventually tend to concentrate output in one producer (and this
is, in any event, the most efficient way to organize production). Governments usually attempt to
oversee the operation of natural monopolies through either public ownership or regulation.

15
Natural Rate of Unemployment: According to neoclassical economics, the wage rate is
determined by a process of labour-market clearing (in which workers and employers compete
with each other, ensuring that labour supply equals labour demand). Why, then, do we almost
always observe unemployment? Neoclassical theorists argue that observed unemployment
reflects frictional, structural, or disguised effects that are consistent with labour market clearing.
In other words, this “natural” level of unemployment is, in fact, full employment. It is fruitless,
in this view, to try to reduce unemployment below this natural level: misguided attempts to do so
only create inflation. Unions, minimum wages, and other “market-inhibiting” measures will tend
to increase the natural rate of unemployment.

Neoclassical Economics: Neoclassical economics is the dominant approach to economics

currently taught and practiced in most of the world (and especially dominant in Anglo-Saxon
countries). It attempts to explain the behaviour of the economy on the basis of competitive,
utility-maximizing behaviour by companies, workers, and consumers. Their actions in the
markets for both factors of production and final products will ensure that all available resources
are fully utilized (that is, the economy is supply-constrained) and every factor is paid according
to its productivity.

Neoliberalism: A modern, more harsh incarnation of capitalism which became dominant

globally beginning in the early 1980s, largely as a reaction to international economic and
political problems encountered at the end of the postwar “Golden Age.” Neoliberal policies have
emphasized deregulation (including of labour markets), privatization, globalization, and strict
monetary policy.

Nominal GDP: Nominal gross domestic product measures the total value of all the goods and
services produced and traded for money in the formal economy, evaluated at their current money
prices. Nominal GDP can grow from one period to the next because of an increase in actual
(real) output, and/or because of an increase in average prices (that is, as a result of inflation).

Non-Accelerating-Inflation Rate of Unemployment (NAIRU): This theory is a variant of the

neoclassical natural rate of unemployment. As in original natural rate theory, NAIRU advocates
believe that unemployment cannot be reduced below a certain level without sparking a
continuous acceleration in inflation. Unlike the original natural rate theory, however, the
NAIRU doctrine does not strictly define this position as “full employment.” The policy
prescriptions of the natural rate and NAIRU theories are practically identical (namely, don’t try
to reduce unemployment through demand-side measures, but instead attack unions and minimum
wages to allow labour markets to function more “efficiently”).

Non-Tradeable: Some products cannot be transported over long distances, or otherwise sold to
consumers from far-off locations. These products (including some goods and most services) are
hence considered non-tradeable: they must be consumed near to where they are produced. Non-
tradeable products include most construction, some manufacturing (such as highly perishable or
extremely bulky products), most private services, and nearly all public services.

16
Paradox of Thrift: An individual household, business, or government may attempt to save
money by reducing their current expenditures. However, those attempts to save, once
amalgamated at the level of the overall economy, may reduce aggregate spending levels and
hence output and employment, thus undermining overall growth or even causing a recession. If
this occurs, the revenue of households, businesses, and governments will decline, and overall
saving may end up no higher (and potentially be even lower) than before the effort to boost
savings. Because of this paradox, it is not usually possible to improve economic performance by
boosting saving.

Participation Rate: The proportion of working-age individuals who decide to “participate” in

the labour force, by either being employed or actively seeking work. The precise definition of
what constitutes “actively seeking work” varies from one country to another, and this can affect
measurements of the labour force and unemployment.

Pay-As-You-Go Pension: A pay-as-you-go pension plan sponsor simply pays for pension
benefits to retired plan members out of its current incoming revenues. Many government
pension plans are funded on a pay-as-you-go (or “paygo”) basis, with pension benefits financed
directly from current taxes. It is difficult for private companies to pay for pensions on this basis,
however, since their long-term revenue streams are not as reliable as governments’. For this
reason, many private employers use (or are required to use) pre-funded pensions.

Payroll Tax: A tax levied on current employment or payrolls (collected either as a fixed amount
per employee, or as a percentage of total wages and salaries paid). Payroll taxes are most
commonly used to finance employment-related social programs, such as pension or
unemployment insurance programs.

Pensions: Pension benefits are paid to individuals who have retired from active employment, in
order to support themselves in the last years of their lives. Pension programs can be sponsored
by governments or by individual employers; they can be based on pre-retirement years of service
and wage levels, or paid on a universal per-person basis.

Perfect Competition: An abstract assumption, central to neoclassical economics, in which

companies are so small that none can influence total output or price levels in an industry, none
can distinguish its products from those of competing firms, and none can anticipate or interact
with the actions of its competitors. Perfect competition has never existed in real life; it is a
theoretical assumption developed solely in order to defend the internal logical integrity of
neoclassical economic theories.

Physical Capital: A tangible tool, building, machine, or other productive asset which is used to
produce other goods or services.

Physiocrats: A very early school of economics (originating in France in the 18th Century) which
likened the interactions between different sectors and classes of the economy, and the monetary
flows between them, to the circulation of blood through the human body.

17
Pollution: Many economic activities involve the discharge of waste products (including solid
waste, air pollution, and water pollution) into the natural environment, as a negative side-effect
of production.

Post-Keynesian Economics: A modern heterodox school of economic thought which

emphasizes the more non-neoclassical or radical aspects of John Maynard Keynes’ theories.
Post-Keynesians pay primary attention to the monetary system, and the impact of monetary
behaviour and policies on employment, output, and other economic indicators.

Poverty: A state of having inadequate income or other resources to support a household or

group of households at a basic standard of living. Poverty can be measured in absolute or
relative terms.

Poverty Rate: The proportion of individuals or households in a jurisdiction which are defined
as poor, according to either absolute or relative definitions of poverty.

Pre-Funded Pension: A pension plan in which funds are accumulated and invested throughout
an individual’s working life in order to pay for the subsequent disbursement of pension benefits
after that person has retired. Pre-funded pensions can be individual or collective (ie. pooled) in
nature; individual pre-funded pensions are similar to individual savings accounts.

Preferences: According to neoclassical economic theory, individuals’ preferences regarding the

sorts of consumer goods they most enjoy will exercise an ultimate influence on both the
composition of output in the economy, and the prices paid for final products and factors of
production.

Price Level: The overall average level of nominal prices in the economy can be calculated,
most often as a weighted average of the prices of individual goods and services (with weightings
reflecting the importance of each product in overall spending or output). Price levels can be
calculated for consumer spending, for wholesale trade, for producer inputs, or for any other
category of production. The most common measures of the overall price level are the consumer
price index and the gross domestic product deflator.

Primary Products: Products which are harvested directly from the natural environment, with
minimal subsequent processing, are considered primary products. These typically include
agricultural, fishing, forestry, mineral, and energy products.

Private Equity: A form of business in which the company’s entire equity base is owned by one
or a small group of individual investors. Under the private equity model, the company does not
issue shares onto the stock market, and hence is not usually required to release public financial
statements or comply with other securities regulations. Private equity firms are generally
considered to be more ruthlessly focused on generating shorter-term cash profits from their
operations than joint stock companies.

Product Markets: The markets where produced goods and services are bought and sold
(distinguished from markets for factors of production).

18
Production: The process by which human labour (or “work”) is applied, usually with the help
of tools and other forms of capital, to produce useful goods or services.

Production, for Profit: Under capitalism, most production is undertaken by private companies
(of various forms), with the goal of generating a profit to the company’s owners. Profit is
attained when the company’s output is sold, generating revenue that exceeds the costs of
production (including labour).

Productivity: In general, productivity measures the effectiveness or efficiency of productive

effort. Productivity can be measured in many different ways. Physical productivity measures
the actual amount of a good or service produced (eg. tons of steel, or number of haircuts).
Productivity can also be measured in terms of the value of output. Most commonly, productivity
is measured as the amount of output produced over a certain period of work (eg. output per
hour); this is considered a measure of labour productivity. But other approaches are also
possible, including measurements of capital productivity (output relative to the value or physical
quantity of invested capital) and “total factor productivity” (which is an abstract statistical
measurement of the overall effectiveness of production).

Profit: This is the surplus left over after a company sells its output, and pays off the cost of
production (including labour costs, raw materials, and a proportional share of its capital
equipment). Its calculation is: revenue – cost = profit.

Program Spending: Government spending which is undertaken to provide useful public

programs. Program spending includes both direct government production of services (like health
care or education), and transfer payments which are intended to supplement the income of
households (through programs like unemployment insurance or public pensions). Program
spending does not include government debt service charges.

Progressive Tax: A tax is considered progressive if a larger proportionate share of its total
burden falls on individuals with higher average incomes.

Public Goods: True public goods are those which cannot be provided to one group of
consumers, without being provided to any other consumers who desire them. Thus they are
“non-excludable.” Examples include radio and television broadcasts, the services of a
lighthouse, national security, and a clean environment. Private markets typically underinvest in
the provision of public goods, since it’s very difficult to collect revenue from their consumers.
More broadly, public goods can refer to any goods or services provided by government as a
result of an inability of the private sector to supply those products in acceptable quantity, quality,
or accessibility.

Public Investment: Real investment spending by government or public institutions on

structures, infrastructure, machinery and equipment, and other real capital.

19
Public-Private Partnerships (PPPs): A form of financing public investment, and sometimes
the direct provision of public services, in which finance is provided by private investors (in
return for interest), and private firms are involved in the management of the construction or
operation of the publicly-owned facility. PPPs have been heavily criticized for increasing the
cost of public projects and generating undue profits for private investors.

Real GDP: The value of total gross domestic product (that is, all the goods and services
produced for money in the economy) adjusted for the effects of inflation. In theory, real GDP
represents the physical quantity of output.

Real Interest Rate: The interest rate on a loan, adjusted for the rate of inflation. The real
interest rate represents the real burden of an interest payment. Real interest rates must be
positive for the lender to attain any real income from the loan.

Real Wages: The value of wages, adjusted for the level of consumer prices. If the nominal
value of wages is growing faster than consumer prices, then real wages are growing, and hence
the real consumption possibilities offered to workers are improving.

Recession: A condition in which the total real GDP of an economy shrinks (usually, for at least
two consecutive quarters).

Recovery: A condition in which real GDP begins to grow again, following a recession.

Regressive Tax: A tax in which lower-income individuals or households bear a proportionately

greater burden of the tax. Sales taxes are generally considered regressive (since lower-income
households do not generally save, and hence must pay the sales tax on a larger proportion of their
total income).

Relative Poverty: A measure of poverty based on an individual or family’s relative income

compared to the overall average level of income in the economy as a whole. Relative poverty
thresholds change over time with growth in overall income levels. Distinct from absolute
measures of poverty, which are defined according to a specified level of real consumption.

Relative Price: The price of any product or commodity measured relative to the overall level of
prices (for example, compared to the consumer price index).

Reproduction: The economic process of recreating the work force. Reproduction involves
caring for one’s self and one’s family, and raising children.

Retained Earnings: Business profits which are not distributed to shareholders (through
dividends or other payouts), but instead are retained within the company in order to finance
future investment or other expenditures.

Return on Equity: A measure of business profitability equal to net after-tax income divided by
the average level of shareholders’ equity in the business.

20
Sales Tax: A tax imposed as a proportion of consumer spending on specified goods or services.
Also known as a “value-added” tax.

Saving: The portion of income which is not spent on consumption. Saving can be undertaken
by individuals and households, by businesses, or by governments.

Securitization: A process in which financial relationships (such as loans) are converted into
financial securities or assets (such as bonds) which can be bought and re-sold in securities
markets.

Services: A form of output which consists of a function performed for one person by another –
such as cooking and serving a meal, teaching a lecture, completing a telephone call, or delivering
a package. Distinct from goods.

Shares: Financial assets which represent the ownership of a small proportion of the total equity
(or net wealth) of a corporation. Shares can be bought and sold on a stock market.

Slavery: An economic system in which most work is performed by individuals who are forcibly
compelled to work with no formal compensation, under the control of a slave-owning elite.

Social-Democracy: A reformist political strategy which aims to win certain improvements in

social and economic conditions under capitalism, without challenging the underlying precepts of
wage labour and production for profit.

Socialism: An economic system in which most wealth is owned or controlled collectively

(through the state, other public institutions, or non-profit organizations), and the operation of
markets is influenced or managed through regulation and planning.

Speculation: The purchase of an asset (such as a financial asset or real estate) purely in the hope
that its market price will increase, allowing a profit (known as a capital gain) to be made on its
subsequent resale.

Stock Market: A place where shares of joint stock corporations are bought and sold. Most
modern stock markets no longer have a physical presence, but rather consist of connected
computer networks.

Structuralist Economics: A form of heterodox economics which emphasizes the relationships

between effective demand, income distribution, and political and economic power.

Structures: A form of fixed capital consisting of buildings and other large constructed assets
(including bridges, pipelines, mines, highways, etc.).

Supply-Constrained: An economy is supply-constrained when its total output is limited only

by the supply of factors of production (including labour, capital, and natural resources).
Contrasts with a demand-constrained economy.

21
Surplus: Any agent or sector in the economy (household, business, or government) experiences
a surplus when its income exceeds its expenditure.

Surplus, Economic: For the economy as a whole, the surplus equals the amount of production
over and above what is required for the reproduction of the existing economic system (including
the necessary consumption required to reproduce the population, and depreciation on the
existing stock of capital). An economy’s aggregate surplus can be consumed (to allow for a
standard of consumption higher than mere subsistence, or to finance wasteful projects like wars
or monument-building), or re-invested to expand future production.

Surplus, Government: A government surplus exists when a government’s tax revenues exceed
its total spending (including both interest charges and program spending).

Sustainability: A condition in which the economy does not utilize more resources from the
natural environment than can be replenished by the normal reproductive capacity of the
environment, and does not expel more pollution into the environment than can be absorbed
without ongoing deterioration in environmental quality. Only a sustainable economy can
function long into the future without encountering natural or environmental limits.

Tariff: A tariff is a tax imposed on the purchase of imports. It is usually imposed in order to
stimulate more domestic production of the product in question (instead of meeting domestic
demand through imports).

Taxes: Compulsory government levies collected to pay for public spending. There are many
different types of taxes (income, corporate, sales, wealth, payroll, and environmental taxes); each
has a different impact on the economy, and on different groups within the economy.

Technology: Technology is the knowledge which humans collectively possess regarding how to
produce goods and services in more efficient ways.

Terms of Trade: The ratio of the average price of a country’s exports, to the average price of its
imports, is its terms of trade. In theory, an improvement in a country’s terms of trade raises its
real income (since it can “convert” a given amount of its own output into a larger amount of
consumable products through trade) – although in practice it depends on how those terms of
trade gains are distributed.

Tradeable: A product (a good or service) is tradeable if its purchaser can buy it far away from
the place where it is produced. Most goods (other than perishable or extremely perishable
products) are tradeable, and some services (such as tourism, and specialized financial, business,
and educational services) are also tradeable.

Transfer Payments: Governments typically redistribute a share of tax revenues back to

specified groups of individuals in the form of various social programs (such as welfare benefits,
unemployment insurance, public pensions, or child benefits). These transfer payments
supplement the market income of the households which receive them.

22
Underdevelopment: Poor countries can be prevented from progressing through the stages of
economic development by barriers such as specialization in natural resources, an
overdependence on foreign investment, and an inability to stimulate higher-value manufacturing
and services industries.

Unemployment: Individuals who would like to be employed, and are actively seeking work, but
cannot find a job, are considered “officially” unemployed. Individuals who are not working, but
not actively looking for work, are considered to be outside of the labour force, and hence don’t
count as “officially” unemployed.

Unemployment Rate: The number of unemployed people measured as a proportion of the

labour force.

Unions: Organizations of working people which aim to bargain collectively with employers in
order to enhance workers’ bargaining power, raise wages, and regulate working conditions.

Unit Labour Cost: How much an employer pays for the labour required to produce each unit of
a good or service. Unit labour cost can be calculated by dividing a worker’s hourly (or annual)
labour cost, by the amount (in physical units or value terms) that they produce during that hour
(or year). It is thus the ratio of labour costs to productivity. Companies try to reduce their unit
labour cost, either by increasing productivity (the denominator) or by reducing labour costs (the
numerator).

User Fees: A form of tax in which the users of public services are charged a specified fee to
cover some or all of the cost of providing that service.

Value Added: The value added in a particular stage of production equals the value of total
output, less the value of intermediate products (including capital equipment, raw materials, and
other supplies). By definition, value added is ascribed to the various factors of production
(including the wages paid to workers, the profit paid to a company’s owners, and interest paid to
lenders). Value added in the total economy equals its gross domestic product (GDP).

Wage Labour: A form of work in which employees perform labour for others, under their
direction, in return for wages or salaries. The employer owns and controls the product of the
labour.

Wealth Tax: A tax in which owners of particular forms of wealth (such as financial wealth, real
estate, or inheritances) must pay a specified proportion of that wealth to the government, usually
on an annual basis.

Working Capital: A business requires a certain revolving fund of finance to pay for regular
purchases of raw materials, initial labour, and other inputs to production. Working capital may
refer to the actual physical inventory of raw materials and goods-in-production, or it may refer to
the financial resources required on a normal basis to pay for those things.

23
World Bank: An international financial organization formed after World War II and based in
Washington D.C. Its supposed goal is to promote the economic development of poor regions of
the world through subsidized loans, economic advice, and other forms of assistance, but in
practice it has played an important role in reinforcing neoliberal economic policies in developing
countries, including through the aggressive use of conditionality strategies.

World Trade Organization: An international economic organization formed in 1995 and based
in Geneva, Switzerland, which is dedicated to promoting greater trade and investment among its
members. Most countries in the world now belong to the WTO, and hence have committed to
reducing tariffs on imports, reducing non-tariff barriers to trade, reducing restrictions on foreign
investment, and generally following a pro-market vision of economic development.

24
See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/297713075

Glossary of Human Resource Management

Research · March 2016

DOI: 10.13140/RG.2.1.4698.7922

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 Human Resource Management

Glossary
Achievement test. A test that is held to measure the degree to which the candidate
possesses knowledge, skills and attitudes with regard to the relevant job.
Adapter role. A role whereby HR department correctly anticipates changes and train
employees to adapt to these changes.
Advisory role. Advisory role of the HR department is a role whereby the department
provides advice to all the managers in respect of HRM.
Agent method. A method of layoffs in which layoff and hiring are done by a separate
organisation on behalf of the organisation under a certain fee. This is called
outsourcing alternatively.
Apprentice training. A training method that gives training to people who are new to the
jobs which are craft jobs such as plumber, barber, machinist, carpenter, printer,
electrician and tool and die maker.
Appropriate employee/work force. Employees of the organization who are competent,
motivated, committed and involved.
Aptitude test. An examination that measures the candidate’s capability of learning the
duties and other related things of a particular job or acquiring certain competencies
relating to a particular job.
Arbitrary dates approach. To evaluate job performances of all employees under the
evaluator at different dates.
Assessment centre. A special selection method that uses multiple methods of selection and
multiple evaluators lasing for one day or two days or several days.
Audit or monitoring role. A role whereby HR specialists check on the extent to which HR
systems are being adhered.
Autonomy. The degree of independence and freedom the job holder has.

Background investigation. A selection method that attempts to reveal real nature of the
job applicant in terms of character, employment history, academic history or financial
history.
Bandwidth time. All the possible hours of working per day under flex-time.
Behaviour modelling. A modern method of training primarily focusing on teaching
interpersonal skills and cognitive skills.
Behaviour modification approach to discipline. A step-by-step procedure to be followed
in practicing positive corrective discipline. This involves giving the offender an oral or
written warning.
Behavioural elements. One category of elements of job design that is concerned with
elements which lead to employee satisfaction.
Behavioural Observation Scales (BOS). A method of performance evaluation in which
directly related job behaviours are put on 5-point scales and the evaluator is to check
on scales how often the employee was actually observed engaging in the behaviours.
Behaviourally Anchored Rating Scales (BARS). A method of performance evaluation in
which behaviours directly related to the job are arranged on certain scales and job
performance is rated by selecting behaviours relevant to the employee being
considered.
Behaviours. The ways the employee acts in relation to the job. They include particular
activities carried out in performing the job.

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 Human Resource Management

Benefit. An indirect reward paid by the organisation to the employee because he/she is a
member of the organisation.
Blind advertisement. A recruitment advertisement that does not reveal the name and
address of the organisation.
Bonus. One-time payment, usually per year to the employee as an additional income.
Buddy system. A method of utilizing an experienced employee of the organisation to
induct a new employee.

Career anchors. Self-perceived talents and values guiding a person to make his/her career
decisions.
Career development. A process by which an employee undertakes personal improvement
actions in order to accomplish a career plan (the career goal and the career path to
reach that goal).
Career goal. A job that is expected by the employee to get.
Career management. The HRM function that plans and develops careers of employees for
the benefits of employees and the organisation.
Career path. The sequential pattern of jobs that forms a career of an employee.
Career planning. A process by which an employee chooses career goals and determines
career paths to achieve those career goals.
Career plateau. A state where an employee has no upward movements further.
Career. A series of jobs that a person had in his/her life.
Case study method. A managerial training method that gives training through a written
description of a problematic situation that requires to be analysed for solution.
Central tendency. An evaluator error that occurs when the evaluator rates an employee
averagely on many or all PE criteria though he/she has not performed averagely.
Centralisation. Centralisation in the HR department involves concentration of HR
decision-making authority within top management of the department.
Checklist method. A method of performance evaluation under which the evaluator is
required to choose statements from the list of statements relating to the job.
Coaching. A training method in which a senior manager or an expert works as the coach
and trains a trainee or a few trainees on the job.
Coherence. In the HRM context, coherence refers to a state in which all the HRM
functions (relevant schemes or systems developed for implementation in a particular
organisation) fit together well and logically so that they form a united whole.
Collective bargaining. A process in which employer’s representatives/managers and
worker representatives/trade union meet, discuss and attempt to negotiate about
working conditions and terms of employment. The purpose of collective bargaining is
to reach an agreement what is called collective agreement.
Combined salary and commission plan. A plan of the sales incentives that includes a
straight salary and a commission.
Competence/competency. An individual’s capability or ability of performing a certain task
or a role or a job successfully.
Competency approach to job analysis. An approach focusing on the competencies which
individuals should have to perform jobs successfully.
Competitive advantage. The ability that an organisation can have a relatively better
market share and then a better profit or rate of return on investment compared with
its competitors.
Compressed workweeks. A non-traditional work schedule in which employee works for
fewer days per week but more hours for each day of working.

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 Human Resource Management

Compulsory consultation. A state that it is compulsory for manager to consult the human
resource manager before making any decision relating to his/her subordinates.
Conceptual competency. The ability to understand the organisation as a total entity and
the ability of defining phenomena, imagining, analysing, synthesising, theorising,
planning and organising.
Concurrent authority. A form of higher legitimate power delegated to the human
resource manager compared with compulsory staff consultation. A state where
manager is not in a position to take a human resource decision without getting the
approval of the human resource manager.
Concurrent validity. The extent to which the test scores obtained by current employees
relate to some measure of their job performance.
Consistency. A criterion stating that decisions should be consistent with business strategy.
Conspect reliability. The extent to which two interviewers agree with their evaluations
about the interviewees.
Construct validity. The extent to which the construct (a special concept that is basically
abstract and is believed to be a determinant of job performance) is related to job
performance.
Constructive termination. Purposefully the employer influences the employee so that
he/she leaves the organisation permanently.
Content validity. The extent to which the test adequately represents what is involved in
the job being considered.
Continuity. A criterion that states that bases for decisions should not be changed within a
short time.
Core time. A time when all employees must be present under flex-time system.
Corrective discipline. Activities carried out to deal with rule infractions in the way that
will discourage future infractions.
Cost leadership. A strategy in which an organisation gains a competitive advantage by
providing the same services or goods as its competitors, but at a lower cost.
Critical incident method. A managerial training method that gives training through a short
description of a very important event that involves at least a problem needed to be
solved.
Critical incidents method. A method of performance evaluation under which the
evaluator prepares and maintains a logbook for employees with the intention of
recording important incidents of negative and positive behaviours and results when
they occur over the period of evaluation.
Culture shock. A strong feeling of fear or distress of the new employee owing to a
significant difference between the organisational culture and his/her own home or
previous organisational culture.

Decentralisation. Decentralisation in the HR department involves distributing HR

decision-making authority to managers who are at middle and first level management
in the department.
Delphi technique. A forecasting technique of HR demand that solicits estimates from a
group of experts having HR department planner acting as an intermediary. The HR
estimate is based on the consensus of opinion of the expert group that is usually
obtained from several rounds of soliciting.
Demotion. The appointment of an employee who is currently working in the
organisation to a job that is lower than the job being performed by him/her.
Depth of a job. Authority and responsibilities for planning and controlling the job.

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Development. Making the employee ready to perform a future job of higher rank.
Differential piecework. A type of individual incentive plan in which employee is paid a
piece rate for each of the units up to a standard output and a higher piece rate for
each of the units produced over the standard.
Disciplinary investigation. A systematic and fair inquiry conducted by the organisation in
respect of a rule violation (serious) with the objective of determining whether the rule
violator is guilty or not evidently.
Discipline interview. A face-to-face formal session between the manager and the
offending employee and this represents a higher level of concern with a breach of
rule/s. This interview implements corrective discipline in terms of written warning or
other more severe penalty.
Discipline meeting. A face-to-face discussion between the manager and the employee who
has violated the rule or rules. This involves punitive discipline in terms of oral
warning.
Dismissal. The moving of an employee out of the organisation permanently on
disciplinary ground.
Displacement effect. A negative result of grievances: employee work time diverted from
production tasks to grievance processing.
Division of labour. This element of job design refers to breaking works into their smallest
parts and employing separate persons to do each part separately.
5Ds. An individual approach to managing stress that includes five developments (develop
a right attitude about your stress, develop right interaction with your work life and
non-work life, develop a right physical competence to cope with your stress, develop
opportunities to change your stressful environment, and develop your related
knowledge and skills).
Dual-career couple. A family where both husband and wife are working and are
concerned with careers.

Effective utilization. Employment of human resources for organizational effectiveness,

which is the extent to which goals of the organization have been realized.
Efficiency elements. One category of elements of job design that is concerned with
elements which lead to minimise time, effort and cost which are needed to perform a
particular job.
Efficient utilization. Optimum use of employees by eradicating (or minimizing) wastage.
Employee discipline management. A systematic process of controlling and influencing all
employees in the organisation to achieve and maintain standards of behaviour (rules
of behaviour, alternatively the code of behaviour at work) in order to accomplish
organisational goals and objectives.
Employee induction. The HRM function that systematically and formally introduces new
employees to the organisation, the jobs, the work groups to which they will belong
and the work environment where they will work.
Employee mentoring programme. A special programme designed to induct, train and
develop the new employee so that he/she intends to stay within the organisation for
a long time. It involves use of mentor who is a well-qualified and experienced senior
employee.
Employee performance evaluation. The systematic process of identifying, measuring,
influencing and developing job performance of the employees in the organisation in
relation to the set norms and standards for a particular period of time in order to
achieve various purposes.

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Employee productivity. The relationship between employee inputs and outputs.

Employee welfare management. The group of activities involved in the development,
implementation and maintenance of a fair and adequate system of facilities and
comforts to enhance standard of living of employees.
Employee welfare. All the facilities and comforts provided by the employer to the
employees for enhancing their economic state, social status, health, efficiency and
effectiveness.
Employment function. The combination of recruitment function and selection function.
Employment test. An examination specially held to assess the degree of the suitability of
the job applicant for the job vacancy.
Ergonomics. A job design technique that considers matching physical setting of work with
physiological characteristics of the employees.
Essay appraisal. A method of performance evaluation under which the evaluator writes
an essay in respect of the employee’s job performance.
Ethics of PE. Moral beliefs and rules about right and wrong behaviour of evaluators.
Evaluator manual. A handbook that tells evaluator how to do performance evaluation.
External employee referrals. Informing present employees who are working in other
organisations about job vacancies and requesting them to recommend their friends or
relatives or other qualified persons seeking jobs.
External equity. Degree to which pay received by an employee in an organisation is
related to pays received by similar employees in other organisations.
External recruitment policy. Procuring candidates to fill vacancies from outside of the
organisation.
Extrapolation. A forecasting technique of HR demand that is based on past data and an
attempt is made to find a trend that might continue into future. Based on the trend,
forecast is developed.

Face validity. The degree to which the test appears superficially what it is supposed to
measure.
Factor analysis sheet. A special form used to evaluate a job under the point system.
Factor comparison method. A quantitative job evaluation method that evaluates several
selected jobs (called key jobs) according to several evaluation factors and then
evaluates other jobs based on results of evaluation of the key jobs.
Feedback. The extent to which clear information of results of the employee’s efficiency
and effectiveness is provided.
Field review method. A method of performance evaluation under which a personnel
management specialist does the evaluation of an employee.
First-In-First-Out (FIFO). A method of layoffs which involves doing first layoff of the
employee who had been hired first.
Fixed time approach. To evaluate employees’ performances within a certain period of
time that may be one day or two days or several days depending on the number of
employees and workload of the evaluator.
Flexible welfare services plan. A welfare plan that allows employees to select the facilities
and comforts which match with their individual needs.
Flex-time. A non-traditional work schedule in which employee works for a certain
number of hours (usually eight) per day but varying times of starting and ending the
daily work.
Flex-tour. A form of flex-time in which employees are required to choose starting and
ending times from an established list of various options.

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Forced distribution method. A method of performance evaluation under which the

evaluator is required to sort employees into different classifications (approximate
gradings such as best 10 percent, next 20 percent, middle 40 percent, next 20 percent
and lowest 10 percent).
Formal expert survey. A technique of HR demand forecasting that surveys managers who
are experts about their department’s future employee needs and centralises
information obtained.
Formal grievance settlement procedure. A written guideline to action setting forth a list of
chronological steps to be followed in handling employee grievances.
Functional authority. A form of authority that gives line authority to the human resource
manager with regard to some specified HRM functions.
Functional HRM metrics. Statistics used to measure the degree of successful performance
of functions of HRM.

Gainsharing incentive plan. A group incentive programme under which employees and
the organisation share financial gains obtained due to improvements of productivity
and profits according to a predetermined formula.
Gliding time. A form of flex-time that has no particular flex option to be selected by the
employee. The employee can come at any time during flex-hours and leave the
organisation at any time during flex-hours.
Graphic rating scales. A method of performance evaluation under which the evaluator is
supposed to provide a subjective evaluation of an employee’s performance along a
scale from very poor to excellent or from very low to very high.
Grievance handling. To accept and solve grievances effectively (in order to maintain good
labour-management relationship and employee motivation) and efficiently
(minimising wastage of resources including time of handling).
Grievance. Any discontent or dissatisfaction arising from a feeling or a belief of injustice
felt by an employee or a group of employees in connection with the work
environment.
Group technique. A job design technique that focuses on designing jobs to be performed
by groups of employees. Team contemporary approach or team working method are
two alternative terms.

Halo effect. An evaluator error that occurs when an evaluator appraises an employee
high or low on many or all criteria because of one criterion.
Harshness. An evaluator error that occurs when the evaluator tends to be too harsh in
evaluating performance.
Hazards. Those aspects of the work environment which suddenly or slowly and
cumulatively (and often irreversibly) lead to deteriorate health of an employee.
Head hunter. A special recruiter that tries to locate and attract the best or excellent
people in the industry to apply for job vacancies of the client organisation on a fee.
Health and safety management. All the activities involved in protecting and promoting
physical and mental health of the employees so that they can perform jobs efficiently
and effectively.
Health. A state where physical and mental problems, which impair general and special
activities of a person, do not exist within that person.
Hiring. The process of appointing the candidate selected to the post/job which is vacant.

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Hoarding. A problem due to promotions that occurs when a superior hides or keeps a
subordinate because the release of the subordinate hampers or reduces the efficiency
and effectiveness of the superior’s department.
Hot stove rule. A useful guide for corrective discipline that states that disciplinary action
should have the same characteristics as the penalty a person receives from touching a
hot stove and these characteristics are warning, immediacy, consistency and
impersonality.
HR field. An area or a major system of HRM consisting of several functions and a major
work for which a separate HRM specialist can be employed.
HR generalist. A human resource management person who is competent in several fields
or areas in HRM because of performing many HRM functions or areas.
HR requisition sheet. A special form used for the purpose of obtaining special requests
from managers in respect of filling job vacancies.
HR scorecard. A framework that links HRM with strategic objectives and shows the causal
link between HRM and strategic objectives in a quantitative way. It is an evaluative
technique that attempts to measure HRM contribution to achievement of strategic
goals of the organisation.
HR specialist. A human resource management person who is highly competent in one
particular field of HRM because of usually specialising in one area of HRM.
Human relation competency. The ability of understanding and dealing with people
without creating disorders, conflicts and confusions.
Human resource department. A special section of an organization established under the
leadership of a manager specialized in HRM for ensuring that HRM is properly
performed throughout the organization.
Human resource management. The efficient and effective utilization of human resources
to achieve goals of an organization.
Human resource manager. Manager who is responsible for the HRM function of an
organization.
Human resource planning. The process of determining future employee needs and
deciding steps or strategies to achieve those needs for the purpose of accomplishing
organisation goals and objectives.
Human resource. Employees working for an organization who possess unique
characteristics.

Ideal profile matching model. A general selection approach that involves development of
an ideal profile, match of candidates with the ideal profile and selection of the
candidate who matches best with the ideal profile (assuming there is one vacancy to
fill).
In-basket technique. A training method under which the trainee is given a special box that
includes a number of business papers such as memoranda, reports, letters, e-mails and
telephone messages that would typically come across a manager’s desk, and is
required to act on the information contained in these business papers.
Incentive. A type of reward that is paid to encourage the employee to increase his/her
productivity (normally beyond the normal level of productivity).
Individual character. The aggregate of all of the relatively persistent moral qualities
person has that combines to form his/her real nature. It is the degree to which a
person has virtues (responsibility, respect, honesty, patience etc.) and vices (greed,
jealousy, anger, stinginess, hostility etc).

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Individual incentive plans. A broad category of incentive plans which focus on individual
job performance and then incentives are paid individually.
Individual interview. An interview consisting of one interviewer and one interviewee.
Industrial relations. A wider concept relatively that involves all the feelings and dealings
among workers and their organisations (trade unions); employers and their
representatives; the Government and its agents (Labour Ministry, Labour Department
etc.); employer federations; and union associations.
Informal forecast. A technique of forecasting demand for HR under which future demand
for human resources is determined without a systematic base and it is done quickly
and randomly.
Informal talk. A sort of counselling to be followed in case of a non-serious offence done
for the first time or second time. It is not punitive.
In-house union. Union set up within one organisation that accepts members working in
that organisation only (alternatively called enterprise union).
Innovator role. A role whereby HR department provides up-to-date application of
current techniques and developing innovative approaches to HR problems.
Inputs equity. Degree to which pay received by a particular employee in an organisation
is related to his/her inputs used to perform duties of the job.
Intelligence test. A test that is held to assess the degree of general reasoning ability of the
job applicant.
Interitem consistency reliability. The degree of reliability showing the consistency of
answers given by the persons to all items in a test paper (or a part relating to a major
concept or construct).
Internal consistency. The consistency or coherence of the scores obtained by job
candidates across the question items.
Internal employee referrals. Requesting current employees who are working for the
organisation concerned to send suitable job applicants for the job vacancies.
Internal equity. Degree to which the pay is related to the relative worth of jobs. Similar
pays must be paid for similar jobs and dissimilar pays must be paid for dissimilar jobs.
Dissimilarity of pays must be equal to dissimilarity of jobs.
Internal recruitment policy. Procuring candidates to fill vacancies within the organisation
itself.
Interview. A face-to-face, oral and observational evaluation method of appraising an
applicant’s acceptability with regard to a certain job.

Job analysis checklist. A special form used to collect data about jobs and job holders.
Job analysis. A systematic investigation of jobs and job holder characteristics in order to
create a collection of information that can be used to perform various HRM functions.
Job cycle approach. To evaluate employee’s job performance after he/she finishes all the
duties of the job for one time.
Job description. A document that describes duties and responsibilities, working conditions
and other aspects of a particular job.
Job design. The function of arranging tasks, duties and responsibilities into an
organisational unit of work for the purpose of accomplishing the primary goal and
objectives of the organisation.
Job enlargement. To increase the scope of a job by including a new related duty or duties
in addition to the current duties. Horizontal loading is an alternative term.
Job enrichment. To increase the depth of a job by expanding authority and responsibility
for planning and controlling the job.

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Job essentiality. Degree to which the job is important or critical to the overall success of
the organisation.
Job evaluation. A systematic process of determining the relative worth of jobs which are
available within an organisation.
Job exclusivity. Degree of difficulty in replacing the job holder.
Job grading/classification method. A job evaluation method in which job classes (larger
groups) and grades (smaller groups) are created and then existing jobs are analysed
and grouped according to the predetermined classes and grades. These classes are
arranged according to the order of relative importance.
Job inflation. A possible behavioural problem at job analysis. Employees may tend to
inflate the importance of their jobs with an intention of getting higher pay or higher
status or better title/more prestigious title.
Job involvement. The degree to which the employee takes part in the job.
Job needs analysis. A systematic attempt to identify training needs at the level of job.
Job posting and bidding. Notifying job vacancies inside the organisation and calling for
applications from the working employees within the organisation.
Job pricing. The activity of assigning pays to a hierarchy of jobs in terms of their relative
value to the organisation.
Job ranking method. A job evaluation method under which jobs are ranked from the
most important to the least important according to the degree of relative
contributions given by each job to achieve the organisational success.
Job rotation. To shift an employee from one job to another job within a certain period
of time without limiting the employee to do a particular job only.
Job satisfaction. The extent of enjoyment an employee feels towards his/her job.
Job sharing. A part-time employment arrangement whereby two or more part-time
employees share one full-time job.
Job specification. A document that specifies key qualifications an individual needs to
perform a particular job.
Job. A grouping of similar positions which have same duties and responsibilities.
Job-hopping. A practice of an employee in which he/she frequently changes jobs (within
a shorter time).
Joint consultation. A method of worker participation in which management and workers
get together to discuss about problems of concern to both and, where appropriate,
make decisions acceptable to both parties.

Labour relations. A narrower concept relatively that involves all the feelings and dealings
between unions and managers in an organisation.
Labour-Management Relationship (LMR). Perceived degree of how well labour unions
and managers in an organisation feel and behave towards each other.
Last-In-First-Out (LIFO). A method of layoffs which involves doing first layoff of the
employee who had been hired last.
Layoff. A temporary stoppage of the employment of an employee due to a reason or
reasons which is/are generally not controllable by the management of the
organisation.
Learning curve. A curve that shows the relationship between level of learning of an
individual and time spent on that learning.
Learning principle. A guideline to be followed to develop a more successful training
programme. It makes learning more effective.

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Learning. The process of acquiring knowledge, skills and attitudes so as to create a

relatively permanent change in learner’s behaviour.
Legal compliance. The extent to which management of employees is done in accordance
with labour laws.
Leniency. An evaluator error that occurs when the evaluator is too easy in his/her
evaluation of job performance of an employee.
Letter of appointment. A special letter given by the employer to the new employee
containing terms and conditions of employment.
Line authority. Legitimate power for giving orders to others to carry out.
Line manager. Manager who manages a line department which makes or distributes the
organisation’s goods or services.
Loose employee market. A market condition where the employee supply is abundant.
Lump-sum merit pay. An individual incentive plan under which a single lump-sum merit
pay is given to an excellent employee at the time of job performance review and this
pay is not added to the base pay.

Macro requirements. Conditions to be met at the national level for enhancing LMR.
Management by Objectives (MBO). A method of performance evaluation that deals with
determining objectives to be accomplished by the employee within a certain period of
time and assessing the degree of success in accomplishing those objectives.
Management inventory. A document that catalogues education, experience and
competencies of a manager.
Management of incentives. The process of development, implementation and
maintenance of a fair and adequate system of incentives.
Management. A process that deals with efficient and effective utilization of resources in
order to achieve goals of an organization.
Managerial straitjacket. A possible behavioural problem at job analysis that limits
management flexibility to assign new duties to an employee because employees may
reject to perform duties which are not mentioned in the job description.
Maxiflex system. A form of flex-time that has no core times and all the hours of working
are flexible.
Mediator. A role whereby HR department works as a conflict handler.
Medical examination. A special selection test that focuses on the physical fitness of the job
candidate.
Meditation. A strategy used for managing stress that involves pondering or reflecting.
Merit pay. A type of individual incentive plan that gives a pay increase awarded to an
employee based on his/her individual job performance (outstanding).
Merit. The degree of efficiency and effectiveness of the employee. It is the value of the
employee for organisational success and progress of success.
Micro requirements. Conditions to be met at the organisational level for enhancing LMR.
Mission statement. A formal statement of the purpose of a particular organisation. It
shows the reason or reasons for existence of the organisation being considered.
Mixed interview. An interview that has a blend of structured questions and unstructured
questions.
Motivation. The extent to which employee exerts the needed effort to perform his or her
job successfully.
Multiple career. All the jobs a person has held in more than one certain field of
professions.

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Multiple choice method. A method of performance evaluation that has four or five
statements under each performance evaluation criterion and the evaluator is supposed
to select the statement which best applies to the relevant employee.
Multiple cut-off model. A general selection method that have a cut-off point with regard
to each of the selection criteria to be considered for selection and to be selected for
filling the job vacancy. This model is an improved version of ideal profile matching
model.
Multiple time-series design. An extension of the pre/post-measure control-group design
with a difference that measuring happens at several times.

Negative approach. An approach of penalising an offender with the objectives of

retaliation, dismay, shame or discredit.
Nominal Group Technique (NGT). A technique that uses a group of seven to fifteen
people who are competent for the purposes of identifying training needs of the
organisation and/or a particular job or a particular group of employees and
prioritizing those training needs identified.
Nonmonetary incentives. Incentives which do not involve money. Incentive rewards (gift
certificates, time off etc.) and recognition awards (plaques, employee of the month
etc.) are two major nonmonetary incentives.

Objective criteria. Factors of evaluation which are quantifiable distinctly.

Occupational accident. A sudden event which causes a physical injury or physical injuries
to an employee or two employees or more working on the employment in the
organisation.
Occupational disease. An ailment that catches an employee due to the reason of
performing tasks, duties and responsibilities of his/her job.
Ombudsman. A method of handling grievances in which a special respected, neutral
person is appointed to cope with grievances. He/she will accept grievances and
facilitates towards settling the grievances.
On-the-job training. A training method under which training is given by allowing the
trainee to perform duties of the job. Alternative term is job instruction training.
Open advertisement. A recruitment advertisement that gives the name of the organisation
which wants to recruit and the address of the organisation.
Open-door policy. A method of handling grievances that allows every employee to see
the chief executive officer of the organisation with grievance to settle.
Organisational incentive plans. A broad category of incentive plans which focus on entire
organisation performance and then incentives are paid organisationally.
Organisational needs analysis. A systematic attempt to identify training needs at the level
of the organisation.
Organization. A formal group of two or more people who function in an official structure
that was set purposefully to accomplish a certain goal or goals (common).
Organizational citizenship. The degree to which the employees are willing to engage in
non-official behaviours that help the organization achieve its goals as they love or
wish its success and progress.

Paired comparison method. A method of performance evaluation under which the

employees are evaluated in pairs taking an employee at a time and completing
him/her against every other.
Panel interview. An interview consisting of more than one interviewer.

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Parallel-form reliability. The degree of reliability obtained by giving two comparable tests
to the same group of persons at two different times. Alternative term is equivalent
form reliability.
Participative approach. An approach that can be used for informal talk under which both
discipline controller and offending employee get together, discuss and find a solution
in order to avoid future rule violations.
Pay management. The HRM function that deals with development, implementation and
maintenance of a base pay system that is fair.
Pay secrecy/openness. The act of not revealing/revealing pay information to employees.
Pay survey. A type of research that deals with collection and analysis of information
about wages and salaries being paid by similar/competitive organisations to
employees who are doing similar jobs.
Pay. Major payment given by the employer to an employee for the contribution or
service rendered by that employee. It may be called wage or salary.
PE interview. A performance review session that gives evaluee feedback in respect of
his/her past performance assessed and improvement of future performance.
PE renewal. Revision of the PE programme to keep it dynamically alive and productive
according to the result of the PE review.
PE review. Measuring the degree of effectiveness and efficiency of the PE programme and
determining what should or should not be done in the future as a result of such
measurement.
Penalties. Actions that follow rule violations or infractions. Alternatively called as
sanctions.
Perceptual-motor technique. A job design technique that considers matching requirements
(tasks and duties) of the job with mental abilities and characteristics of the employees.
Performance evaluation criterion. A measure or factor of identifying success of job
performance.
Person needs analysis. A systematic attempt to identify training needs at the level of
employee.
Person/job fit. To match characteristics of the employee with characteristics of the job.
Personal prejudice. An evaluator error that occurs when excessively low or high ratings
are given by the evaluator only to a certain evaluee or certain evaluees because of
race, age, sex, religion, cast, personal relationship, jealousy, dislike etc.
Personality test. An examination that attempts to identify personality (psychological
characteristics) of the candidate.
Personality. It is about values, preferences, likes, and dislikes of a person. It includes your
talk, your physical appearance, your walk, and other unique features.
Point allocation method. A method of performance evaluation under which the evaluator
is given a total number of points and is required to allocate these points among
employees in the group according to the relative worth.
Point matrix. The way of allocating points among the critical factors, sub critical factors
and the levels under the point system.
Point system. The most appropriate job evaluation method in which jobs’ relative worth
is evaluated according to a systematic quantitative procedure that takes into account
several specific factors and their levels. This method uses points for factors and levels.
Policy initiator and formulator. A role whereby HR department initiates and formulates
new policies regarding HRM issues.

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Politicalisation. Politicalisation of labour unions refers to a situation where labour unions

become more political or involved in politics rather than becoming engaged in the
protection and promotion of the standard of living of their union members.
Position. A collection of tasks, duties and responsibilities to be performed by one person.
Positive approach. An approach of penalising an offender with the objective of
reformation.
Post-employment vetting. A systematic attempt done to make sure that someone is
suitable for a particular post after hiring.
Post-measure. Assessing success of the training programme after ending it.
Practicability. The degree to which the test can be used for selecting a particular person or
persons to fill job vacancies.
Practical or work sample text. An examination that measures how well the candidate can
do a sample of actual duties on the job.
Pre/post-measure control-group design. A good training evaluation approach in which the
exact impact of training on performance is determined by using two groups, i.e,
control group (to which training is not given) and experimental group (to which
training is given).
Pre/post-measure. Assessing the training programme’s success before the training and after
the training as well.
Predictive validity. The extent to which the test relates to some measure of job
performance.
Preventive discipline. Activities carried out to encourage employees to adhere to
organisational rules in order to prevent from breaches of them.
Primary equity. Degree to which pay is capable of meeting primary needs of the
employee.
Probationary period. A certain period of time during which a new employee, who was
hired for a permanent post, works for an organisation. During this period the new
employee will have to prove that he/she is capable of performing the job successfully
in order to get confirmation.
Problem solving. A PE feedback interview type that involves a participative problem
solving in which an active and open dialogue is established between the evaluator
and the evaluee, focusing on performance problems.
Problem-solving interview. An interview that has a set of questions that the applicant will
have to face actually or may have to face on the job if he/she is placed on that job.
Product differentiation. A strategy in which an organisation gains a competitive
advantage by producing a good or service that is preferred by customers.
Professional technique. A job design technique by which jobs are designed according to a
certain accepted profession.
Profit sharing. An organisational incentive plan that shares profits with all the employees
of the organisation.
Programmed instruction. A training method that allows the trainee to learn through self
study and it involves distance learning.
Progressive discipline. A discipline programme, which progresses from the least severe to
the most severe in terms of disciplinary actions.
Promotion. The advancement of an employee who is currently working in the
organisation to a job that is higher/greater than the job being performed by him/her.
Essentially there must be an increase of the pay and a better/more prestigious job title
in case of a movement to be called as a promotion.

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Quality of work life. The degree to which employee expectations are met by the job and
the job environment. It includes level of well-being enjoyed by employees by fulfilling
their expectations relating to the jobs. Also it is the extent to which all employees
have the opportunity of presenting their ideas, suggestions, and opinions before
making decisions which affect them.
Quasi method. A method of handling grievances in which a human resource specialist
represents the grievant and attempts to find a solution for the grievance to a certain
degree of satisfaction of the grievant.
Quasi-promotion. A type of promotion that does not have a change with regard to duties
and responsibilities.

Rank order method. A method of performance evaluation that requires the evaluator to
rate employees from the best to the worst on some given criteria.
Ratio analysis. A forecasting technique of HR demand that makes forecasts based on the
ratio between some causal factor and the number of employees required.
Real shock. A strong feeling of distress of the new employee owing to realizing that the
expected state is different from the actual state. Reality shock is an alternative term.
Realistic job preview. A method of providing deliberately actual information to the
applicant or the new employee with regard to the job, the organisation’s expectations
of the job holder and the work environment.
Recency effect. When the evaluator’s ratings are heavily influenced by results and/or
behaviours done and/or exhibited by the evaluee near the end of the PE period, the
error of recency effect occurs.
Recruitment message. A notice used to notify people that there are job vacancies in the
organisation and to invite them to apply for the vacancies.
Recruitment. The process of finding and attracting suitably qualified people to apply for
employment.
Reliability. The extent to which the test produces consistent results when it is repeated to
the same person or group of persons.
Replacement chart. A visual representation of successors in the event of job vacancies.
Succession chart is an alternative term.
Replacement summary. A document in which successor for a job vacancy has been
decided and mentioned with his/her relative strengths and weaknesses.
Resignation. A quit or giving up the job by an employee.
Results. Outcomes or outputs produced by the employee.
Retirement. A form of employee separation that involves leaving an employee from the
organisation after he/she has reached the age at which a pension can be obtained.
Retrenchment. The permanent termination of the employment of an employee or the
employments of employees due to a surplus of employees within the organisation. An
alternative term is redundancy.
Rewards. A generic term to include wages and salaries, incentives, and welfare facilities
and benefits. Compensation and remuneration are two alternative terms.
Role playing. A training method that gives training by allowing learners to act out a
particular situation.
Rules. Official instructions in respect of what employees must and are allowed to do and
what they are not allowed to do.

Safety. Protection of the physical health of employees from the danger of accidents.

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Sandwich approach. An approach that can be used for informal talk under which a
corrective comment (negative) is sandwiched between two positive comments in
order to make the corrective comment more acceptable to the offender.
Scientific technique. A technique that groups a limited number of small parts to create a
job which is specialised. Mechanistic approach is an alternative term.
Scope of a job. Contents of the job or amount and variety of duties.
Selection ratio. The proportion of job applicants selected and hired to the number of job
applicants for a certain job.
Selection. The process of making the choice of the most appropriate person from the pool
of job applicants recruited to fill the relevant job vacancy.
Self evaluation and discussion. A method of performance evaluation under which the
employee himself or herself does evaluation and later the superior modifies it during
the discussion.
Self-discipline. The ability of an employee to control himself/herself and to make
himself/herself behave in the expected way without needing management to tell
him/her what to do.
Seniority. The length of time an employee has served for the organisation.
Sensitivity training. A training method that gives training in a group setting in order to
enhance interpersonal skills.
Shift. A group of employees who work for a period of time during the day or evening or
night, and then replaced by another group of employees in order to continue
producing a certain good or providing a certain service.
Skill variety. The extent to which the job requires use of different skills.
Skills builder. An assignment or an exercise that aims at allowing the trainee to develop a
certain skill or certain skills rather than knowledge.
Skills inventory. A document that catalogues education, experience and competencies of a
non-manager.
Socialisation. A period of adjustment in which the new employee learns what is expected
by the organisation and tries to become a part of social fabric of the organisation.
Specialisation. An employee’s concentration on one particular type of work so that he/she
secures an expertise in that type of work.
Split-half reliability. The degree of reliability obtained after dividing the test into two
parts.
Stability. Consistency of the examination scores obtained by the same person when
repeated over two or several times.
Staff authority. Legitimate power for giving advice and suggestions.
Staff manager. Manager who manages a staff department which provides line managers
with necessary instructions, facilities and supports to produce and distribute the
organisation’s goods or services efficiently and effectively.
Staffing table. A short-term HR plan that specifies job vacancies by type and number
which need to be filled.
Standard hour plan. A type of individual incentive plan under which the employee is paid
an incentive if he/she completes a work or job in less than the standard time.
Standard of living. The level of well-being enjoyed by people by fulfilling their legally and
morally acceptable needs.
Standardisation. Discover the ‘one best way’ to do a particular duty/job with more
simplicity and lower cost through studies, informing that best way to every employee
to accept and having each employee to follow it.

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Standards. Levels of successful and unsuccessful performance with regard to a performance

evaluation criterion. They indicate rating scales.
Statutory welfare. Welfare services to be given by the organisation according to legal
requirements imposed by the Government.
Stock options. An employee ownership plan that gives employees the opportunity to buy
the company’s stock at a previously fixed price.
Straight commission plan. An incentive plan that rewards the employee by paying an
incentive based on a percentage of sales made by that employee.
Straight piecework. A type of individual incentive plan in which the employee is paid a
sum for each unit produced by him/her.
Straight salary plan. An incentive plan that gives a fixed salary to the sales employee
irrespective of the value of sales or number of units sold.
Strategic HRM metrics. Statistics used to measure the degree of success of accomplishment
of the strategic goals and objectives of HRM.
Strategic HRM. Formulation and implementation of HR systems which generate
appropriate competencies, appropriate behaviours and appropriate results of
employees at all levels so that the organisation will be able to achieve vision, mission
and strategic goals. The purpose of SHRM is to generate or enhance competitive
advantage or support achievement of strategic needs/goals of the organisation.
Strategic management. A systematic process of defining organisation’s philosophy, vision,
mission and objectives, and determining a strategy for achieving its vision, mission
and objectives. Purpose of strategic management is to accomplish a sustainable
competitive advantage.
Strategic metrics. Statistics used to measure the degree of success of accomplishment of the
strategic objectives of the organisation.
Strategy. The organisation’s long-term plan (strategic plan) for how it will match its
internal strengths and weaknesses with its external opportunities and threats to
achieve or maintain or enhance a competitive advantage.
Strategy-oriented HRM system. A system of HRM functions, strategies and actions which
leads directly to achieve the strategic objectives, mission and vision of the
organisation. It is a system of HRM functions directly linking with the strategic needs
of the organisation to achieve and enhance the competitive advantage.
Stress interview. An interview that has questions which are asked intentionally to annoy,
embarrass or frustrate the applicant with the purpose of examining the ability of the
candidate to face such questions.
Stress. What an employee experiences internally in response to an event or a situation or
a thing he/she finds difficult to deal with. It is the pressure or strain an employee feels
in life.
Structured interview. An interview that includes a predetermined set of questions that is
addressed to each applicant.
Subject competency test. A paper and pencil type examination designed to evaluate the
candidate’s knowledge and skills on a particular subject acquired usually as a result of
classroom education or standardized instruction.
Subjective criteria. Factors of evaluation which are not quantifiable distinctly.
Succession planning. The process of deciding replacements to fill job vacancies.

Task identity. The extent to which the job involves doing some complete piece of work.
Task significance. The extent to which the job has an impact on other employees’ works.

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Task-based approach to job analysis. An approach that focuses on analysing jobs in terms
of tasks, duties, responsibilities and key qualifications needed to perform those tasks,
duties and responsibilities.
Team incentive plan. A collective incentive plan which gives an incentive bonus to all
team members when certain production or service standards are met.
Team incentive plans. A broad category of incentive plans which focus on group job
performance and then incentives are paid collectively.
Technical competency. The ability to use tools, techniques and methods to perform a task
or an activity.
Telecommuting. An alternative work schedule whereby the employee works at home
usually using a computer.
Tell-and-listen type. A PE feedback interview type where the evaluator allows the evaluee
to explain reasons, excuses and defensive feelings regarding performance ratings, by
enhancing two-way communication.
Tell-and-sell type. A PE feedback interview type where the evaluator tells the degree to
which the evaluee has performed the job during the period and sells him/her steps to
be taken for improvement, by allowing for one-way communication only.
Termination. The complete end of service of an employee by the employer. This is a type
of employee separation that may be initiated and finalised either by the management
of the organisation or by the particular employee whose service is ended
permanently.
Test-retest reliability. The degree of reliability obtained by giving the same test to the
same group of persons (job candidates or employees) at two different times.
The scatter plot. A forecasting technique of HR demand that is used to help identify the
relationship between a measure of business activity and the number of organisation’s
employees graphically.
Tight employee market. A market condition where the employee supply is scant.
Trade union. A formal organisation of employees established with the primary purpose of
protecting and enhancing the well-being of its members.
Training and development. Formal process of changing employee behaviour and
motivation in the way that will enhance employee job performance and then
organisational overall performance. It formally and systematically provides new
learning to increase employees’ capabilities so as to increase their current job
performance and future job performance as well.
Training. Making the employee ready to perform the current job.
Traits. Particular qualities or characteristics the employee possesses.
Transfer. The moving of an employee within the same job/class/grade. Moving may be
from one job to another job, from one place to another place, from one time to
another time, or from office to field or vice versa.
Type I structure of HR department. Organizational structure of the HR department
usually adopted by a small growing organization where head is in the first line
management.
Type II structure of HR department. Organizational structure of the HR department
usually adopted by a medium-size organization where head is in the middle
management.
Type III structure of HR department. Organizational structure of the HR department
usually adopted by a large organization where head is in the top management.

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Understudy. A training method in which a senior manager trains a junior manager on the
job so that the senior manager is replaced by the junior manager at a later time.
Uniformity. A criterion stating that similar decisions for the same issue should be made by
all managers in the organisation.
Union multiplicity. A situation where there are more than one trade union existing at
organisational level.
Unit forecasting. A forecasting technique of HR demand that uses a ‘bottom up’ approach
under which each unit head prepares relevant unit’s employee needs and finally the
CEO prepares the plan of employee needs for the whole organisation basing on
units’ needs.
Unitary career. All the jobs a person has held in a certain field of employment or a certain
profession.
Unstructured interview. An interview that does not have a predetermined set of questions
and in which different questions are asked from applicants depending on their
backgrounds and responses.

Vacation of employment. A type of terminations that occurs due to a long absence of the
employee without authorized leave raising the reasonable inference that he/she does
not intend to return to work.
Validity. A test’s validity is the extent to which the test measures what it intends to
measure.
Vestibule training. A training method that involves simulation. Training is given in an
artificial place.
View point. A standpoint referring to the way of thinking about a thing in particular.
Vision. A mental picture or dream of the long-term future of the organisation in which
one imagines how organisational affairs should be different from the way they are
now.

Walk-ins. Job seekers who come to the organisation in search of jobs.

Welfare programme. A scheme that has been developed for a particular welfare service. A
welfare scheme consists of objectives, policies, rules, budget and other elements.
Work sharing. An alternative work schedule whereby all employees have to share a
condensed work (reduced number of working hours per day).
Work simplification. To reduce the scope of the job by removing some duties (increasing
specialisation).
Worker reaction effect. A negative result of grievances: reduced worker effort as a
reaction to the perceived unfair administration of the employment contract.
Write-ins. Job seekers who write to the organisation by sending their applications.

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