Human capital management: jargon buster

Section six of the Personnel Today Management Resources one stop guide on human capital management, comprising a glossary of key terms. Other sections .

Balanced business scorecard The concept of a set of balanced measures, rather than just financial data. Popularised, some would say over-promoted, by Kaplan and Norton (see Section 4).

Book value A company's book value is total assets minus intangible assets and liabilities such as debt. A company's book value might be more or less than its market value. It can also be the net amount shown in the accounts for an asset, liability, or owners' equity item.

CLR (Company Law Review) Currently being undertaken in the UK, with the recommendations likely to become law in 2005.

EFQM (European Foundation for Quality Management model of excellence) An EU sponsored organisation that also runs the European Quality award. A very sophisticated model that spells out everything that is implicit in the PDCA cycle.

FTSE 100/250 The Financial Times shares indices for the top 100/250 quoted companies in terms of market capitalisation.

Inputs/outputs Inputs are time cost and effort expended, outputs are the results the organisation needs (cost reductions, more products delivered, more revenue, better quality service).

IPR (intellectual property rights) A generic phrase encompassing intangible property rights, including, among others, patents, trade and service marks, copyrights, industrial designs, rights in semiconductor chip layout designs, and rights in trade secrets.

Line of sight Imagine a telescopic sight on a rifle, can you see the target in the distance? If we improve employee satisfaction, can we see a distant improvement in sales as a result?

Loops (closed/single/double) A closed loop system is one where there is feedback (for example, did that new marketing campaign work?) so that we can learn. A single loop system looks at one specific variable (for example, was the advertising copy any good?). A double loop system looks at all of the possible variables (competing products, current market conditions, price, advertising copy and quality of advertising etc).

Market capitalisation The product of a company's share price multiplied by the total number of shares issued by that company.

Measures Measurement in management will never be an exact science but a distinction can be made between activity measures (those that only measure activity without any output e.g. sales visits per day), performance measures (number of sales per visit) and added value measures (profit on those sales).

OFR (Operating and Financial Review) Will specify reporting requirements when it is included in future legislation.

PDCA (Plan, Do, Check, Act) A simple but powerful continuous improvement cycle based on a plan to improve something already measured. Goes back as far as the 1920s (Walter Shewart), but made popular by the quality guru, Deming. Demands an open, no-blame culture to work well.

P&L (profit and loss account) The basic building block of accounting systems and usually reported on monthly and annually. A fundamental management tool used every day.

Plc A publicly limited company whose shares are traded on the stock market.

ROI (return on investment) A simple financial formula for calculating the net, percentage return on an original investment:

Sarbanes-Oxley Act of 2002 The single most important piece of (US) legislation affecting corporate governance, financial disclosure and the practice of public accounting since the US securities laws of the early 1930s. Came about because of scandals such as Enron. Places much greater burden on corporations in terms of governance and auditing of accounts. Even though it is American, it is being accepted as a basis for accounting practices throughout the world.

S&P rating (Standard & Poor's rating) Rates how financially sound a company is. You will see good ratings such as 'AAA', or hear about the rating reducing the shares to 'junk' status when the business is not very viable or insolvent.

Zero defects A term that describes a philosophy of searching for perfection. No error or defect is acceptable. Perfection is never reached but the pursuit continues nonetheless as a means of continuous improvement.