Encyclopedia of Small Business [2nd ed] 9780787649067, 0787649066, 0787649074, 0787649082

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ENCYCLOPEDIA of

Small Business SECOND EDITION

J-Z VOLUME 2

Kevin Hillstrom Laurie Collier Hillstrom

ENCYCLOPEDIA of

Small Business SECOND EDITION

J-Z VOLUME 2

Kevin Hillstrom and Laurie Collier Hillstrom, Editors Gale Group Staff Jane A. Malonis, Senior Editor Erin Braun, Managing Editor Paul Lewon, Technical Training Specialist Mary Beth Trimper, Production Director Evi Seoud, Assistant Production Manager Cynthia Baldwin, Product Design Manager Eric Johnson, Art Director While every effort has been made to ensure the reliability of the information presented in this publication, Gale Group does not guarantee the accuracy of the data contained herein. Gale accepts no payment for listing; and inclusion in the publication of any organization, agency, institution, publication, service, or individual does not imply endorsement of the editors or publisher. Errors brought to the attention of the publisher and verified to the satisfaction of the publisher will be corrected in future editions. Library of Congress Cataloging-in-Publication Data Hillstrom, Kevin, 1963Encyclopedia of small business / Kevin Hillstrom, Laurie Collier Hillstrom. —2nd ed. p. cm. Includes bibliographical references and index. ISBN 0-7876-4906-6 (set : hardcover : alk. paper)—ISBN 0-7876-4907-4 (vol. 1)—ISBN 0-7876-4908-2 (vol.2) 1. Small business—Management—Encyclopedias. 2. Small business— Finance—Encyclopedias. I. Hillstrom, Laurie Collier, 1965— II. Title. HD62.7 .H5553 2001 658.02’2-dc21 2001033781 This publication is a creative work fully protected by all applicable copyright laws, as well as by misappropriation, trade secret, unfair competition, and other applicable laws. The authors of this work have added value to the underlying factual material herein through one or more of the following: unique and original selection, coordination, expression, arrangement, and classification of the information. All rights to this publication will be vigorously defended. 䉷 2002 Gale Group, Inc. 27500 Drake Rd. Farmington Hills, MI 48331-3535 All rights reserved including the right of reproduction in whole or in part in any form.

Printed in the United States of America No part of this book may be reproduced in any form without permission in writing from the publisher, except by a reviewer who wishes to quote brief passages or entries in connection with a review written for inclusion in a magazine or newspaper. Gale Group and Design is a trademark used herein under license. ISBN 0-7876-4906-6 (set), ISBN 0-7876-4907-4 (Vol. 1), ISBN 0-7876-4908-2 (Vol. 2)

CONTENTS

Introduction and User’s Guide . . . . . . . . xiii

Annuities . . . . . . . . . . . . . . . . . . 51 Application Service Providers . . . . . . . . 54

VOLUME 1, A—I Absenteeism . . . . . . . . . . . . . . . . . 1 Accelerated Cost Recovery System (ACRS) . . 3 Accounting

. . . . . . . . . . . . . . . . . 3

Accounting Methods . . . . . . . . . . . . . 7 Accounts Payable . . . . . . . . . . . . . . . 9 Accounts Receivable . . . . . . . . . . . . . 10 Activity-Based Costing . . . . . . . . . . . . 11 Advertising Agencies Advertising Budget

Annual Percentage Rate (APR) . . . . . . . 47 Annual Reports . . . . . . . . . . . . . . . 48

. . . . . . . . . . . . 13 . . . . . . . . . . . . . 16

Advertising, Evaluation of Results

. . . . . . 19

Advertising Media—Audio . . . . . . . . . . 20 Advertising Media—Infomercials . . . . . . . 21 Advertising Media—Internet . . . . . . . . . 22 Advertising Media—Print . . . . . . . . . . 23 Advertising Media—Video . . . . . . . . . . 25 Advertising Strategy . . . . . . . . . . Affirmative Action . . . . . . . . . . Age Discrimination . . . . . . . . . . Age Discrimination in Employment Act AIDS in the Workplace . . . . . . . . Alien Employees . . . . . . . . . . . Alternative Dispute Resolution (ADR) . Americans with Disabilities Act (ADA) Amortization . . . . . . . . . . . . . ‘‘Angel’’ Investors . . . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

26 29 32 34 36 38 40 42 45 46

Apprenticeship Programs . . . . . . . . . . . 54 Articles of Incorporation . . . . . . . . . . . 55 Assembly Line Methods . . . . . . . . . . . 56 Assets . . . . . . . . . . . . . . . . . . . 57 Assumptions . . . . . . . . . . . . . . . . 59 Audits, External . . . . . . . . . . . . . . . 60 Audits, Internal . . . . . . . . . . . . . . . 64 Automated Guided Vehicle (AGV) . . . . . . 68 Automated Storage and Retrieval Systems (AS/RS) . . . . . . . . . . . . . . . . . 69 Automation . . . . . . . . . . . . . . . . . 70 Automobile Leasing . . . . . . . . . . . . . 72 Baby Bonds . . . . . . . . . Balance Sheet . . . . . . . . Bankruptcy . . . . . . . . . Banks and Banking . . . . . Banner Advertisements . . . Bar Coding . . . . . . . . . Barriers to Market Entry . . . Bartering . . . . . . . . . . Benchmarking . . . . . . . . Best Practices . . . . . . . . Better Business Bureaus (BBBs) Biometrics . . . . . . . . . Blue Chip . . . . . . . . . .

E N C Y C L O P E D I A

O F

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S M A L L

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75 76 77 80 82 84 85 86 89 90 91 92 94

B U S I N E S S

v

Bonds . . . . . . . . . . . . . . . . . . . . 95 Bookkeeping . . . . . . . . . . . . . . . . 96 Boundaryless . . . . . . . . . . . . . . . . 97 Brainstorming . . . . . . . . . . . . . . . . 98 Brand Equity . . . . . . . . . . . . . . . . 99 Brands and Brand Names . . . . . . . . . . 101 Break-Even Analysis . . . . . . . . . . . . 103 Budget Deficit . . . . . . . . . . . . . . . 105 Budget Surplus . . . . . . . . . . . . . . . 106 Budgets and Budgeting . . . . . . . . . . . 106 Business Appraisers . . . . . . . . . . . . . 113 Business Associations . . . . . . . . . . . . 114 Business Brokers . . . . . . . . . . . . . . 115 Business Cycles . . . . . . . . . . . . . . . 117 Business Education . . . . . . . . . . . . . 120 Business Ethics . . . . . . . . . . . . . . . 121 Business Expansion . . . . . . . . . . . . . 123 Business Failure and Dissolution . . . . . . . 127 Business Hours . . . . . . . . . . . . . . . 129 Business Incubators . . . . . . . . . . . . . 130 Business Information Sources . . . . . . . . 133 Business Insurance . . . . . . . . . . . . . 135 Business Interruption Insurance . . . . . . . 139 Business Literature . . . . . . . . . . . . . 140 Business Name . . . . . . . . . . . . . . . 141 Business Plan . . . . . . . . . . . . . . . 142 Business Planning . . . . . . . . . . . . . 146 Business Proposals . . . . . . . . . . . . . 151 Business Travel . . . . . . . . . . . . . . . 152 Business-to-Business Marketing . . . . . . . 154 Buying an Existing Business . . . . . . . . . 157 C Corporation . . . . . . . . . . . . . . . 163 Cannibalization . . . . . . . . . . . . . . 166 Capital . . . . . . . . . . . . . . . . . . 167 Capital Gain/Loss . . . . . . . . . . . . . 169 Capital Structure . . . . . . . . . . . . . . 170 Career and Family . . . . . . . . . . . . . 171 Career Planning and Changing . . . . . . . 174 Cash Conversion Cycle . . . . . . . . . . . 176 Cash Flow Statement . . . . . . . . . . . . 177 Cash Management . . . . . . . . . . . . . 180 Casual Business Attire . . . . . . . . . . . 182 Census Data . . . . . . . . . . . . . . . . 184 Certified Lenders . . . . . . . . . . . . . . 185 Certified Public Accountants . . . . . . . . 185 Chambers of Commerce . . . . . . . . . . 187 Charitable Giving . . . . . . . . . . . . . 188 Child Care . . . . . . . . . . . . . . . . . 190

vi

E N C Y C L O P E D I A

O F

S M A L L

Children’s Online Privacy Protection Act (COPPA) . . . . . . . . . . . . . . Choosing a Small Business . . . . . . . Clean Air Act . . . . . . . . . . . . . Clean Water Act . . . . . . . . . . . .

. . . .

. . . .

193 195 197 199

Closely Held Corporations . . . . . . Clusters . . . . . . . . . . . . . . . Collateral . . . . . . . . . . . . . . Collegiate Entrepreneurial Organizations

. . . .

. . . .

. . . .

200 201 203 204

Communication Systems Community Development Community Relations . . Comp Time . . . . . .

. . . .

. . . .

. . . .

204 208 209 210

. . . . . . . Corporations . . . . . . . . . . . . . .

Competitive Analysis . . . . . . . . . . . . 211 Competitive Bids . . . . . . . . . . . . . . 214 Comprehensive Environmental Response Cleanup and Liability Act (CERCLA) . . 216 Computer Applications . . . . . . . . . . . 218 Computer Crimes . . . . . . . . . . . . . 221 Computer-Aided Design (CAD) and Computer-Aided Manufacturing (CAM) . . 224 Computers and Computer Systems . . . . . . Consolidated Omnibus Budget Reconciliation Act (COBRA) . . . . . . . . . . . . . . Construction . . . . . . . . . . . . . . . . Constructive Discharge . . . . . . . . . . . Consultants . . . . . . . . . . . . . . . . Consulting . . . . . . . . . . . . . . . . . Consumer Advocacy . . . . . . . . . . . . Consumer Price Index (CPI) . . . . . . . . Consumer Product Safety Commission (CPSC) . . . . . . . . . . . . . . . . . Contracts . . . . . . . . . . . . . . . . . Cooperative Advertising . . . . . . . . . . Cooperatives . . . . . . . . . . . . . . . . Copyright . . . . . . . . . . . . . . . . . Corporate Culture . . . . . . . . . . . . . Corporate Image . . . . . . . . . . . . . . Corporate Logo . . . . . . . . . . . . . . Corporate Sponsorship . . . . . . . . . . . Cost Control and Reduction . . . . . . . . Cost Sharing . . . . . . . . . . . . . . . . Cost-Benefit Analysis . . . . . . . . . . . . Costs . . . . . . . . . . . . . . . . . . . Coupons . . . . . . . . . . . . . . . . . . Credit . . . . . . . . . . . . . . . . . . . Credit Bureaus . . . . . . . . . . . . . . . Credit Card Financing . . . . . . . . . . .

B U S I N E S S

226 229 232 233 235 237 241 241 242 244 246 247 249 254 255 257 259 261 263 264 265 268 269 273 275

Credit Evaluation and Approval . . . . . . . 276

Eldercare . . . . . . . . . . . . . . . . . . 369

Credit History . . . . . . . . . . . . . . . 278

Electronic Bulletin Boards

Crisis Management . . . . . . . . . . . . . 279

Electronic Data Interchange . . . . . . . . . 372

Cross-Cultural/International Communication . . . . . . . . . . . . . 282

Electronic Mail . . . . . . . . . . . . . . . 374

Cross-Functional Teams . . . . . . . . . . . 285

Emerging Markets

Cross-Training . . . . . . . . . . . . . . . 289

Employee Assistance Programs

Customer Retention

Employee Benefits

. . . . . . . . . . . . 291

. . . . . . . . . 371

Electronic Tax Filing . . . . . . . . . . . . 376 . . . . . . . . . . . . . 377 . . . . . . . 378

. . . . . . . . . . . . . 382

Customer Service . . . . . . . . . . . . . . 292

Employee Compensation . . . . . . . . . . 386

Data Encryption . . . . . . . . . . . . . . 295

Employee Hiring . . . . . . . . . . . . . . 388

Database Administration . . . . . . . . . . 296

Employee Leasing Programs . . . . . . . . . 391

Day Trading . . . . . . . . . . . . . . . . 300

Employee Manuals . . . . . . . . . . . . . 394

Debt Collection . . . . . . . . . . . . . . 302

Employee Motivation . . . . . . . . . . . . 395

Debt Financing . . . . . . . . . . . . . . . 304

Employee Performance Appraisals . . . . . . 398

Decision Making . . . . . . . . . . . . . . 307

Employee Privacy . . . . . . . . . . . . . . 401

Decision Support Systems . . . . . . . . . . 310

Employee References . . . . . . . . . . . . 403

Delegation . . . . . . . . . . . . . . . . . 312

Employee Registration Procedures . . . . . . 405

Delivery Services . . . . . . . . . . . . . . 315

Employee Reinstatement . . . . . . . . . . 406

Demographics . . . . . . . . . . . . . . . 316

Employee Retention

Depreciation . . . . . . . . . . . . . . . . 318

Employee Retirement Income Security Act (ERISA) . . . . . . . . . . . . . . . . 408

Desktop Publishing . . . . . . . . . . . . . 319 Difficult Customers . . . . . . . . . . . . . 320

. . . . . . . . . . . . 406

Difficult Employees . . . . . . . . . . . . . 322

Employee Reward and Recognition Systems . . . . . . . . . . . . . . . . . 409

Direct Mail

. . . . . . . . . . . . . . . . 324

Employee Rights . . . . . . . . . . . . . . 412

Direct Marketing . . . . . . . . . . . . . . 327

Employee Screening Programs . . . . . . . . 413

Direct Public Offerings . . . . . . . . . . . 331

Employee Stock Ownership Plans (ESOPs) . . 415

Disability Insurance . . . . . . . . . . . . . 334

Employee Strikes . . . . . . . . . . . . . . 417

Disabled Customers . . . . . . . . . . . . . 336

Employee Suggestion Systems . . . . . . . . 419

Disaster Assistance Loans . . . . . . . . . . 337

Employee Termination . . . . . . . . . . . 421

Disaster Planning . . . . . . . . . . . . . . 338

Employee Theft

Discount Sales . . . . . . . . . . . . . . . 341

Employer Identification Number (EIN) . . . . 426

Discounted Cash Flow . . . . . . . . . . . 344

Employment Applications . . . . . . . . . . 427

Discretionary Income . . . . . . . . . . . . 345

Employment Contracts . . . . . . . . . . . 428

Distribution Channels

. . . . . . . . . . . 346

Employment Interviews . . . . . . . . . . . 430

Distributorships and Dealerships . . . . . . . 349

Employment of Minors . . . . . . . . . . . 432

Diversification . . . . . . . . . . . . . . . 352

Employment Practices Liability Insurance

. . 435

Dividends . . . . . . . . . . . . . . . . . 353

Empowerment Zones . . . . . . . . . . Endorsements and Testimonials . . . . . Enterprise Resource Planning (ERP) . . . Entrepreneurial Couples . . . . . . . . . Entrepreneurship . . . . . . . . . . . . Environmental Audit . . . . . . . . . . Environmental Law and Business . . . . Environmental Protection Agency (EPA) Equal Employment Opportunity Commission . . . . . . . . . . . . . Equipment Leasing . . . . . . . . . . .

. . . . . . . .

Dot-coms

. . . . . . . . . . . . . . . . . 354

Double Taxation . . . . Downloading Issues . . . Drug Testing . . . . . . Due Diligence . . . . . Economic Order Quantity Economies of Scale . . . Economies of Scope . . 8(a) Program . . . . . . Elasticity . . . . . . . .

. . . . . . . . . . . . . . . . (EOQ) . . . . . . . . . . . . . . . .

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356 357 359 361 363 364 365 366 369

E N C Y C L O P E D I A

. . . . . . . . . . . . . . 424

O F

S M A L L

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436 438 440 443 445 449 452 455

. . 456 . . 457

B U S I N E S S

vii

Equity Financing . . . . . . . . . Ergonomics . . . . . . . . . . . Estate Tax . . . . . . . . . . . . European Union (EU) . . . . . . Expense Accounts . . . . . . . . Export-Import Bank . . . . . . . Exporting . . . . . . . . . . . . Exporting—Financing and Pricing . Facility Layout and Design . . . . Facility Management . . . . . . . Factoring . . . . . . . . . . . . Family Limited Partnership . . . . Family and Medical Leave Act . . Family-Owned Businesses . . . . . Feasibility Study . . . . . . . . . Federal Trade Commission (FTC) . FICA Taxes . . . . . . . . . . . Fiduciary Duty . . . . . . . . . . Finance Companies . . . . . . . . Finance and Financial Management Financial Analysis . . . . . . . . Financial Planners . . . . . . . . Financial Ratios . . . . . . . . . Financial Statements . . . . . . . Firewalls . . . . . . . . . . . . . Fiscal Year . . . . . . . . . . . . Fixed and Variable Expenses . . . Flexible Benefit Plans . . . . . . . Flexible Spending Account (FSA) . Flexible Work Arrangements . . . Flow Charts . . . . . . . . . . . Focus Groups . . . . . . . . . . Forecasting . . . . . . . . . . . . Fortune 500 . . . . . . . . . . . 401(k) Plans . . . . . . . . . . . Franchising . . . . . . . . . . . Free-lance Employment/Independent Contractors . . . . . . . . . . Gender Discrimination . . . . . . Globalization . . . . . . . . . . . Goodwill . . . . . . . . . . . . . Government Procurement . . . . . Graphical User Interface . . . . . Green Marketing . . . . . . . . . Green Production . . . . . . . . Grievance Procedures . . . . . . . Groupthink . . . . . . . . . . . Groupware . . . . . . . . . . . .

viii

E N C Y C L O P E D I A

O F

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S M A L L

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459 462 463 464 467 468 469 473 477 479 482 484 486 488 491 492 495 496 497 498 498 501 502 505 509 511 512 513 514 516 519 520 523 525 526 529 533 537 540 542 543 546 547 550 551 553 554

Health Insurance Options . . . . . . . . . . 557 Health Maintenance Organizations and Preferred Provider Organizations . . . . . 560 Health Promotion Programs . . . . . . . . . 562 High-Tech Business Home Offices

. . . . . . . . . . . . 563

. . . . . . . . . . . . . . . 565

Home-Based Business . . . . . . . . . . . . 568 Hoteling . . . . . . . . . . . . . . . . . . 571 HTML . . . . . . . . . . . . . . . . . . . 572 HUBZone Empowerment Contracting Program . . . . . . . . . . . . . . . . . 574 Human Resource Management

. . . . . . . 575

Human Resource Management and the Law . . . . . . . . . . . . . . . . . 579 Human Resource Policies . . . . . . . . . . 580 Income Statements . . . . . . . . . . . . . 583 Incorporation

. . . . . . . . . . . . . . . 585

Individual Retirement Accounts (IRAs) . . . 589 Industrial Safety . . . . . . . . . . . . . . 591 Industry Analysis . . . . . . . . . . . . . . 593 Industry Life Cycle . . . . . . . . . . . . . 595 Information Brokers

. . . . . . . . . . . . 597

Initial Public Offerings . . . . . . . . . . . 598 Innovation . . . . . . . . . . . . . . . . . 602 Insurance Pooling

. . . . . . . . . . . . . 603

Intellectual Property . . . . . . . . . . . . 604 Intercultural Communication . . . . . . . . 605 Interest Rates

. . . . . . . . . . . . . . . 607

Internal Revenue Service (IRS) . . . . . . . 609 International Exchange Rate

. . . . . . . . 610

International Marketing . . . . . . . . . . . 611 Internet Domain Names

. . . . . . . . . . 614

Internet Payment Systems . . . . . . . . . . 615 Internet Security . . . . . . . . . . . . . . 618 Internet Service Providers (ISPs)

. . . . . . 621

Internships . . . . . . . . . . . . . . . . . 624 Interpersonal Communication . . . . . . . . 626 Intranet . . . . . . . . . . . . . . . . . . 627 Intrapreneurship . . . . . . . . . . . . . . 630 Inventions and Patents . . . . . . . . . . . 632 Inventory . . . . . . . . . . . . . . . . . 635 Inventory Control Systems . . . . . . . . . 639 Investor Presentations . . . . . Investor Relations and Reporting IRS Audits . . . . . . . . . . . ISO 9000 . . . . . . . . . . .

B U S I N E S S

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641 643 644 645

VOLUME 2, J—Z Job Description . . . . . . . . . . . . Job Sharing . . . . . . . . . . . . . Job Shop . . . . . . . . . . . . . . Joint Ventures . . . . . . . . . . . . Keogh Plan . . . . . . . . . . . . . Labor Surplus Area . . . . . . . . . . Labor Unions . . . . . . . . . . . . Labor Unions and Small Business . . . Layoffs and Downsizing . . . . . . . . Learning Curves . . . . . . . . . . . Leasing Property . . . . . . . . . . . Legal Services . . . . . . . . . . . . Letter of Intent . . . . . . . . . . . Leveraged Buyouts . . . . . . . . . . Liabilities . . . . . . . . . . . . . . Licensing . . . . . . . . . . . . . . Licensing Agreements . . . . . . . . Life Insurance . . . . . . . . . . . . Limited Liability Company . . . . . . Liquidation and Liquidation Values . . Loan Proposals . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . Local Area Networks (LANs) . . . . . Loss Leader Pricing . . . . . . . . . . Mailing Lists . . . . . . . . . . . . . Mail-Order Business . . . . . . . . . Management Information Systems (MIS) Management by Objectives . . . . . . Manager Recruitment . . . . . . . . . Managing Organizational Change . . . Manufacturers’ Agents . . . . . . . . Market Analysis . . . . . . . . . . . Market Questionnaires . . . . . . . . Market Research . . . . . . . . . . . Market Segmentation . . . . . . . . . Market Share . . . . . . . . . . . . Marketing . . . . . . . . . . . . . . Markup . . . . . . . . . . . . . . . Material Requirements Planning (MRP) Medicare and Medicaid . . . . . . . . Meetings . . . . . . . . . . . . . . . Mentoring . . . . . . . . . . . . . . Merchandise Displays . . . . . . . . . Mergers and Acquisitions . . . . . . . Metropolitan Statistical Area (MSA) . Mezzanine Financing . . . . . . . . . Minimum Wage . . . . . . . . . . .

Minority Business Development Agency . . . 747 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

649 651 653 654 657 659 660 664 667 669 670 674 676 678 680 681 684 685 687 689 691 692 694 697 699 702 706 707 709 710 712 714 715 716 719 722 723 727 728 730 731 735 736 738 742 743 745

Minority-Owned Businesses . . . . . . . . . 748 Mission Statement . . . . . . . . . . . . . 751 Mobile Office

. . . . . . . . . . . . . . . 752

Modem . . . . . . . . . . . . . . . . . . 753 Money Market Instruments . . . . . . . . . 755 Multicultural Work Force . . . . . . . . . . 756 Multilevel Marketing . . . . . . . . . . . . 760 Multiple Employer Trust . . . . . . . . . . 761 Multitasking . . . . . . . . . . . . . . . . 762 Myers-Briggs Type Indicator (MBTI) Mystery Shopping

. . . . 763

. . . . . . . . . . . . . 764

National Association of Small Business Investment Companies (NASBIC) . . . . 767 National Association of Women Business Owners . . . . . . . . . . . . . . . . . 768 National Business Incubation Association (NBIA) . . . . . . . . . . . . . . . . . 769 National Labor Relations Board (NLRB) . . . 770 National Venture Capital Association (NVCA) . . . . . . . . . . . . . . . . 771 Negotiation . . . . . . . . . . . . . . . . 772 Nepotism

. . . . . . . . . . . . . . . . . 774

Net Income . . . . . . . . . . . . . . . . 775 Net Worth . . . . . . . . . . . . . . . . . 776 Networking

. . . . . . . . . . . . . . . . 776

New Economy . . . . . . . . . . . . . . . 778 Newsgroups

. . . . . . . . . . . . . . . . 779

Non-Competition Agreements

. . . . . . . 781

Nonprofit Organizations . . . . . . . . . . . 782 Nonprofit Organizations, and Human Resources Management . . . . . . . . . . 787 Nonprofit Organizations, and Taxes . . . . . 790 Nonqualified Deferred Compensation Plans . . . . . . . . . . . . . . . Nontraditional Financing Sources . . . Nonverbal Communication . . . . . . North American Free Trade Agreement (NAFTA) . . . . . . . . . . . . . North American Industry Classification System (NAICS) . . . . . . . . . . Occupational Safety and Health Administration (OSHA) . . . . . . Office Automation . . . . . . . . . . Office Romance . . . . . . . . . . . Office Security . . . . . . . . . . . . Office Supplies . . . . . . . . . . . . Online Auctions . . . . . . . . . . .

E N C Y C L O P E D I A

O F

S M A L L

. . . 793 . . . 796 . . . 797 . . . 797 . . . 800 . . . . . .

. . . . . .

. . . . . .

805 809 812 815 818 819

B U S I N E S S

ix

Operations Management . . . . . . . . Opportunity Cost . . . . . . . . . . . . Optimal Firm Size . . . . . . . . . . . Oral Communication . . . . . . . . . . Organization Chart . . . . . . . . . . . Organization Theory . . . . . . . . . . Organizational Behavior . . . . . . . . Organizational Development . . . . . . Organizational Growth . . . . . . . . . Organizational Life Cycle . . . . . . . . Organizational Structure . . . . . . . . Original Equipment Manufacturer (OEM) Outsourcing . . . . . . . . . . . . . . Overhead Expense . . . . . . . . . . . Overtime . . . . . . . . . . . . . . . Packaging . . . . . . . . . . . . . . . Partnership . . . . . . . . . . . . . . Partnership Agreement . . . . . . . . . Part-Time Business . . . . . . . . . . . Part-Time Employees . . . . . . . . . . Patent and Trademark Office (PTO) . . . Payroll Taxes . . . . . . . . . . . . . Penetration Pricing . . . . . . . . . . . Pension Plans . . . . . . . . . . . . . Per Diem Allowances . . . . . . . . . . Personal Selling . . . . . . . . . . . . Physical Distribution . . . . . . . . . . Point of Sale Systems . . . . . . . . . . Portability of Benefits . . . . . . . . . . Postal Costs . . . . . . . . . . . . . . Pregnancy in the Workplace . . . . . . Present Value . . . . . . . . . . . . . Press Kits . . . . . . . . . . . . . . . Press Releases . . . . . . . . . . . . . Price/Earnings (P/E) Ratio . . . . . . . Pricing . . . . . . . . . . . . . . . . . Private Labeling . . . . . . . . . . . . Private Placement of Securities . . . . . Privatization . . . . . . . . . . . . . . Pro Forma Statements . . . . . . . . . Probationary Employment Periods . . . . Product Costing . . . . . . . . . . . . Product Development . . . . . . . . . . Product Liability . . . . . . . . . . . . Product Life Cycle . . . . . . . . . . . Product Positioning . . . . . . . . . . . Productivity . . . . . . . . . . . . . . Professional Corporations . . . . . . . .

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O F

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

S M A L L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

821 824 825 825 827 828 832 833 836 837 839 840 841 844 845 847 850 854 855 857 859 861 863 864 866 867 869 872 873 874 875 878 879 879 881 882 886 888 890 893 896 897 899 902 904 906 908 911

Profit Center . . . . . . . . . . . . . . . . 913 Profit Impact of Market Strategies (PIMS) . . 916 Profit Margin . . . . . . . . . . . . . . . . 917 Profit Sharing . . . . . . . . . . . . . . . 918 Program Evaluation and Review Technique (PERT) . . . . . . . . . . . . . . . . . 920 Promissory Notes . . . . . . . . . . . . . . 921 Proprietary Information . . . . . . . . . . . 922 Prototype . . . . . . . . . . . . . . . . . 923 Proxy Statements . . . . . . . . . . . . . . 925 Public Relations . . . . . . . . . . . . . . 925 Purchasing . . . . . . . . . . . . . . . . . 929 Quality Circles . . . . . . . . . . . . . . . 933 Quality Control . . . . . . . . . . . . . . 935 Racial Discrimination . . . . . . . . . . . . 941 Rebates . . . . . . . . . . . . . . . . . . 944 Reciprocal Marketing . . . . . . . . . . . . 946 Record Retention . . . . . . . . . . . . . 946 Recruiting . . . . . . . . . . . . . . . . . 948 Recycling . . . . . . . . . . . . . . . . . 950 Reengineering . . . . . . . . . . . . . . . 953 Refinancing . . . . . . . . . . . . . . . . 955 Regulation D . . . . . . . . . . . . . . . . 956 Regulatory Flexibility Act . . . . . . . . . . 957 Relocation . . . . . . . . . . . . . . . . . 959 Remanufacturing . . . . . . . . . . . . . . 961 Renovation . . . . . . . . . . . . . . . . 963 Request for Proposal . . . . . . . . . . . . 965 Research and Development . . . . . . . . . 966 Re´sume´s . . . . . . . . . . . . . . . . . . 971 Retail Trade . . . . . . . . . . . . . . . . 972 Retirement Planning . . . . . . . . . . . . 973 Return on Assets (ROA) . . . . . . . . . . 977 Return on Investment (ROI) . . . . . . . . 978 Return Policies . . . . . . . . . . . . . . . 979 Revenue Streams . . . . . . . . . . . . . . 980 Right-to-Know (RTK) Laws . . . . . . . . . 981 Risk Management . . . . . . . . . . . . . 984 Risk and Return . . . . . . . . . . . . . . 986 Robotics . . . . . . . . . . . . . . . . . . 987 Royalties . . . . . . . . . . . . . . . . . . 989 Royalty Financing . . . . . . . . . . . . . 993 Rural Businesses . . . . . . . . . . . . . . 994 S Corporation . . . . . . . . . . . . . . . 997 Sales Commissions . . . . . . . . . . . . . 999 Sales Contracts . . . . . . . . . . . . . . 1002 Sales Force . . . . . . . . . . . . . . . . 1003 Sales Forecasts . . . . . . . . . . . . . . 1004

B U S I N E S S

Sales Management

. . . . . . . . . . . . 1009

Sales Promotion . . . . . . . . . . . . . . 1013 Scalability

. . . . . . . . . . . . . . . . 1018

Search Engines . . . . . . . . . . . . . . 1018 Seasonal Businesses . . . . . . . . . . . . 1020 SEC Disclosure Laws and Regulations . . . . 1024 Securities and Exchange Commission (SEC) . . . . . . . . . . . . . . . . . 1025 Seed Money

. . . . . . . . . . . . . . . 1027

Self-Assessment . . . . . . . . . . . . . . 1028 Self-Employment . . . . . . . . . . . . . 1029 Self-Employment Contributions Act (SECA) . . . . . . . . . . . . . . . . 1031 Selling a Business . . . . . . . . . . . . . 1032 Seniority . . . . . . . . . . . . . . . . . 1036 Service Businesses . . . . . . . . . . . . . 1037 Service Corps of Retired Executives (SCORE) . . . . . . . . . . . . . . . 1039 Sexual Harassment

. . . . . . . . . . . . 1040

Shared Services . . . . . . . . . . . . . . 1044 Shoplifting . . . . . . . . . . . . . . . . 1045 Sick Leave and Personal Days . . . . . . . 1046 Simplified Employee Pension (SEP) Plans . . 1048 Site Selection . . . . . . . . . . . . . . . 1049 Small Business Administration . . . . . . . 1052 Small Business Consortia

. . . . . . . . . 1056

Small Business Development Centers (SBDC) . . . . . . . . . . . . . . . . 1057 Small Business Innovation Research (SBIR) Program . . . . . . . . . . . . . 1057 Small Business Investment Companies (SBIC) . . . . . . . . . . . . . . Small Business Job Protection Act . . Small Business/Large Business Relationships . . . . . . . . . . . Small Business Technology Transfer (STTR) Program . . . . . . . . . Small Business-Dominated Industries . Small Claims Court . . . . . . . . . Smoke Free Environment . . . . . . Sole Proprietorship . . . . . . . . . Spam . . . . . . . . . . . . . . . . Span of Control . . . . . . . . . . . Standard Mileage Rate . . . . . . . . Stocks . . . . . . . . . . . . . . . Strategy . . . . . . . . . . . . . . Subcontracting . . . . . . . . . . . Substance Abuse . . . . . . . . . .

. . . 1058 . . . 1060 . . . 1061 . . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

1064 1065 1066 1068 1070 1072 1074 1075 1076 1081 1083 1085

Succession Plans . . . . . . . . . Supplier Relations . . . . . . . . . Supply and Demand . . . . . . . . Sustainable Growth . . . . . . . . Syndicated Loans . . . . . . . . . Target Markets . . . . . . . . . . Tariffs . . . . . . . . . . . . . . Tax Deductible Business Expenses . Tax Planning . . . . . . . . . . . Tax Preparation Software . . . . . Tax Returns . . . . . . . . . . . Tax Withholding . . . . . . . . . Telecommuting . . . . . . . . . . Telemarketing . . . . . . . . . . Temporary Employment Services . . Testing Laboratories . . . . . . . . Toll-Free Telephone Numbers . . . Total Preventive Maintenance . . . Total Quality Management (TQM) . Trade Shows . . . . . . . . . . . Trademarks . . . . . . . . . . . . Training and Development . . . . Transaction Processing . . . . . . . Transportation . . . . . . . . . . Transportation of Exports . . . . . Tuition Assistance Programs . . . . Undercapitalization . . . . . . . . Underwriters Laboratories (UL) . . Uniform Commercial Code (UCC) . U.S. Chamber of Commerce . . . . U.S. Department of Commerce . . . U.S. Small Business Administration Guaranteed Loans . . . . . . . . Valuation . . . . . . . . . . . . . Value-Added Tax . . . . . . . . . Variable Pay . . . . . . . . . . . Variance . . . . . . . . . . . . . Venture Capital . . . . . . . . . . Venture Capital Networks . . . . . Vertical Marketing System . . . . . Virtual Private Networks . . . . . Virus . . . . . . . . . . . . . . . Warranties . . . . . . . . . . . . Web Site Design . . . . . . . . . Wholesaling . . . . . . . . . . . Wide Area Networks (WANs) . . . Women Entrepreneurs . . . . . . . Work for Hire . . . . . . . . . .

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O F

S M A L L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1088 1089 1092 1093 1095 1099 1100 1101 1104 1107 1109 1110 1111 1113 1117 1118 1121 1122 1122 1125 1128 1130 1135 1136 1137 1139 1143 1144 1145 1146 1147

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

1148 1153 1155 1156 1158 1159 1162 1163 1164 1166 1169 1171 1173 1175 1175 1177

B U S I N E S S

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Workers’ Compensation Workplace Anger . . . Workplace Safety . . . Workplace Violence . . Workstation . . . . . Written Communication

xii

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. . . . . .

. . . . . .

O F

. . . . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . .

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1178 1179 1183 1185 1188 1189

Young Entrepreneurs’ Organization (YEO) . . . . . . . . . . . . . . . . . 1191 Zoning Ordinances

. . . . . . . . . . . . 1193

MASTER INDEX . . . . . . . . . . . . . 1195

B U S I N E S S

J JOB DESCRIPTION

At the heart of the recruitment process lies the general concept that a company needs to hire people to complete certain tasks or group of tasks within the organization. The description of the various responsibilities of each position can usually be found within the ‘‘job description’’ or ‘‘job specification’’ that is typically put together by business owners or managers. Recruiters and personnel managers rely on clear and concise job descriptions to streamline the application and interviewing process and to judge work performance after a person has been hired. Job descriptions and specifications usually include known duties and responsibilities, required levels of education and work experience, salary and benefits provided to employees in exchange for their labor, and information regarding the work environment. Job descriptions also may include helpful details addressing other workrelated issues, such as the position’s travel obligations, normal work schedule, physical location where duties of position will be carried out, union status, supervisory relationships, bonuses, and any other information directly pertinent to the execution of any and all responsibilities associated with the job. In essence, wrote Philip B. Crosby in The Eternally Successful Organization, effective job descriptions let employees know what is expected of them: ‘‘If people are going to perform their assigned task, then they obviously have to know what it is, how to do it, and how to measure the results. Either someone has to explain it all to them or they have to figure it out themselves.’’

Researchers, executives, and small business owners all agree that job descriptions—if studied and created carefully and used appropriately as a productivity measurement tool—can help organizations, especially in the early stages of a worker’s employment. ‘‘Job descriptions are potentially one of the most powerful tools available to help managers improve employee performance and productivity,’’ stated Philip C. Grant in Supervision. ‘‘They have great utility for every phase of human resource administration. From designing jobs and reward systems, through staffing and training to performance evaluation and control, the job description is literally indispensible if the human resource is to be managed properly. A recent analysis of job description usage uncovered 132 major management uses for job descriptions. Probably no other management tool has such potential for usage in such a wide variety of significant ways.’’

JOB DESCRIPTIONS AND COMPANY CULTURE The level of detail utilized in the creation of job descriptions and the monitoring of employee execution of the duties articulated therein can vary tremendously from organization to organization. A multinational corporation, for example, may have job descriptions that are far more formal and detailed in their contents than those used by a small local business. Companies in different industries tend to approach the issue of job descriptions differently as well (tool and die manufacturers, for example, are more likely to institute job definitions for various positions than are fishing charter services). And, finally, some business owners and management teams simply institute and nourish different company cultures that may 649

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have dramatically different conceptions of job descriptions and their utility. For example, companies that operate in a flexible working environment in which employee roles are fluid and expectations change may find the quest to define various job parameters to be a daunting one. ‘‘The essence of the problem is how clear directives, where these are needed, can be reconciled with flexible work systems,’’ wrote Belbin, Watson, and West in People Management. ‘‘One approach to this is for a manager to set up a job as a working hypothesis on how the work should be carried out. Added to this is a system of continuing feedback to check whether the job is proceeding as expected. Thus, the boundaries and content of the job can be defined through an interactive communication process.’’ But researchers note that on the whole, larger organizations will often, out of either real or imagined necessity, institute more formalized job description/ monitoring procedures. Still, in many companies with detailed plans in this area, ‘‘job descriptions are usually thought of as something for the lower-level people in an organization,’’ said Crosby. ‘‘Higher-ups have ‘mission statements’ which sound good but are hard to measure. So we have all these people doing things which we may or may not have agreed to do. It doesn’t take very long before a great deal of the organization’s work has very little to do with the main objectives of the business.’’ He and other business consultants contend that job descriptions can help business enterprises maintain their focus at all job levels, including top management and ownership positions. Owners of family establishments or very small business enterprises, meanwhile, may simply decide that formal job descriptions are unnecessary. Ultimately, each small business owner needs to consider the unique aspects of his or her own business situation when deciding how to define and monitor the responsibilities of each work position.

JOB DESCRIPTIONS AND PERFORMANCE APPRAISALS One major advantage associated with formal job descriptions is that it provides business owners and supervisors with a useful tool of performance measurement. ‘‘Fundamentally, productivity means producing—getting the work done with the most advantageous results using the best possible methods,’’ observed Levesque. ‘‘Doing work and getting results is a measurement of what we do, while the methods used to carry out work is a measurement of how we conduct ourselves and our work transactions. Therefore, each job is represented by what is within the defined scope of the position (job description) in relation to others we work with, and how each job function is carried out. . . . What does good communications of performance criteria constitute? At the very

minimum it means giving employees copies of their job description and appraisal form, then explaining what kinds of job functions are evaluated against performance dimensions and standards.’’ In addition, job descriptions are often used to provide potential job applicants with a sense of the various obligations and rewards of that position, to help businesses develop salary grades, and to help maintain a recognizable organizational structure. But while the benefits that accrue to businesses that take the time and effort to devise and update job descriptions are numerous, consultants note that firms still need to be cognizant of the potential for legal difficulties therein. ‘‘I’d be willing to wager that there’s a potential legal nightmare lurking in your office. It’s probably hiding where you would least expect it, tucked away in a file folder or notebook you haven’t opened in months or years. It’s called a job description,’’ said Allen Halcrow in Folio: The Magazine for Magazine Management. ‘‘In today’s litigious climate . . . those seemingly innocuous documents can come back to haunt you on issues such as overtime, performance reviews, and terminations.’’ According to Halcrow, ‘‘the fundamental problem is that the job descriptions you may consider merely guidelines about work tasks and expectations may be seen as much more definitive by attorneys and the courts.’’ Annual or semi-annual performance reviews are fixtures in most establishments, and they are useful to both employee and employer for many reasons. But employers should know that they can also run into trouble here if they give an employee poor marks for their work on tasks that are not delineated in their official job description. ‘‘You’re at legal risk if you hold employees responsible for work that has not been defined in writing,’’ Halcrow flatly stated. He noted that this problem is most likely to crop up in situations where a reorganization or attrition has prompted a reallocation of responsibilities within the organization. Of course, bestowing praise on an individual who takes on responsibilities not mentioned within his or her job description is unlikely to have unwanted repercussions. ‘‘The key,’’ said Halcrow, ‘‘is to be careful not to tie negative outcomes (such as discipline or denial of a raise) to duties outside the job description’’ or to unduly focus on those duties at the expense of those responsibilities that are specifically mentioned. PERFORMANCE REVIEWS

OVERTIME Practically all employers are aware of the differences in classifying employees as exempt or non-exempt in the area of overtime compensation. But Halcrow noted that many employers are not aware that overtime liability can be linked to an employee’s duties as they are described in his or her job description, not according to what tasks the employee actually performs: ‘‘For example, suppose you decide that

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Small business owners that decide to terminate an employee for poor performance have to make sure that they are doing so because of their dissatisfaction with the targeted employee’s work on tasks that are discussed in the job description.

EMPLOYEE DISMISSALS

USING AND MAINTAINING JOB DESCRIPTIONS

quirement is that employers should react quickly when an employee quits or is terminated. In such instances, each task formerly carried out by the ex-employee should be formally reassigned in writing to another person’s job description. 2) Proper classification—Employers who remain cognizant of job descriptions and classifications when assigning various tasks are far less likely to get tripped up on overtime hassles than businesses that are careless about such issues. 3) Communication—In addition to regularly scheduled performance reviews, employers should make sure that employees who find their duties and responsibilities undergoing change have the opportunity to ask questions—and even raise objections. FURTHER READING:

Job descriptions can be valuable business resources when used correctly. But many companies do not take full advantage of these documents, either because they are ignorant of their possibilities or because of company-wide perceptions that they are of limited use. Grant noted several factors that can limit the effectiveness of these documents:

Arthur, Diane. Recruiting, Interviewing, Selecting & Orienting New Employees. New York: AMACOM, 1991. Belbin, Meredith, Barrie Watson, and Cindy West. ‘‘True Colours.’’ People Management. March 6, 1997. Crosby, Philip B. The Eternally Successful Corporation: The Art of Corporate Wellness. New York: New American Library, 1990. Degner, Jim. ‘‘Writing Job Descriptions that Work.’’ Credit Union Executive. November-December 1995.

●

Managers unfamiliar with purpose and usage of job descriptions.

Dorf, Paul, and Ethel P. Flanders. ‘‘Classify Jobs Properly to Avoid Overtime Trap.’’ HRMagazine. April 1994.

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Vague, inaccurate, outdated, or incomplete job descriptions.

Grant, Philip C. ‘‘Why Job Descriptions are Not Used Anymore.’’ Supervision. April 1998.

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Managers not motivated to utilize job descriptions.

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Job descriptions arranged in format that is not standardized or friendly to managers or employees.

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JOB SHARING

one of your supervisors should be moved to a larger office, or to one closer to the production department. If the employee comes in over the weekend to pack or move boxes, you may be liable for overtime—even if the employee is exempt—because packing and moving are not part of the employee’s usual job activities. . . . This principle applies to any tasks not normally performed by the employee, or to tasks that are not directly related to his or her normal job duties [such as going to the post office or addressing envelopes]. The important issue to consider isn’t whether the activity is a one-time event, but whether the task relates to the employee’s usual job duties.’’

Job in question ‘‘escapes definition’’ because of fluidity, variety of tasks, etc.

Entrepreneurs and managers, then, need to attend to all of these potential pitfalls when creating job descriptions for their workforce. In addition, human resource management experts hasten to point out that job descriptions are only effective if they are subject to continuous review and revision. 1) Continuous updating—‘‘Each employee’s job description should be amended when his or her duties change,’’ observed Halcrow. ‘‘Reassigning tasks or simply letting them drift until someone steps in to do them is not a good idea. It doesn’t matter that everyone in the company know who’s doing the work, and that the situation is ‘understood.’ ’’ One commonly overlooked aspect of this re-

Halcrow, Allan. ‘‘Hidden Traps in Job Descriptions.’’ Folio: The Magazine for Magazine Management. December 1, 1992. Levesque, Joseph D. The Human Resource Problem-Solver’s Handbook. New York: McGraw-Hill, 1992. ‘‘Reality Doesn’t Have a Job Description.’’ Workforce. December 1999. Wanous, John Parker. Organizational Entry: Recruitment, Selection, Orientation and Socialization of Newcomers. New York: Addison-Wesley, 1992.

JOB SHARING

Job sharing is a flexible work option in which two or possibly more employees share a single job. For example, one person may work in a certain position Monday and Tuesday, and a second person may occupy that same position Thursday and Friday. The two people may both work on Wednesday and use that time to update each other on the current status of the various projects on which they collaborate. A variety of other arrangements are possible as well. 651

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Job sharing is a somewhat controversial alternative to telecommuting, flexible working hours, compressed work weeks, and other arrangements used by small businesses looking to offer their employees a bit more flexibility while maintaining productivity. It is aimed at the small number of employees in the work force who do not have a problem with earning less money if it offers them the opportunity to pursue the other interests in life that are important to them. A job sharing position should not to be confused with a parttime job. These types of employment opportunities are usually ones that require all the attention and dedication that is standard to the typical work day and week. Job sharing offers small businesses a chance to retain valued employees that they would normally be in danger of losing if not for the flexible schedule. It can also help eliminate the need to train new employees if a valued employee were to leave the company. Job sharing can seem intimidating to managers, who may fear that it could lead to confusion, more paperwork, and a host of other hassles. If a proper plan is in place and each job sharer is held accountable for their duties, however, these issues can be avoided.

PLANNING A JOB SHARING POSITION In order for a job sharing program to succeed, a solid plan must be put in place to ensure that the work gets done properly. Managers must pay close attention to how the system is working. Solid communication between work partners and management, as well as other employees who are not in the job sharing program, is a must. Done right, job-sharing can lead to a high level of productivity—perhaps even higher than the level contributed by a single, traditional employee. The first step in implementing a job sharing program is to decide whether the job can be shared and if there are likely candidates with whom to share it. Most often, these candidates already exist within the company, although potential job sharers can be recruited from the outside workforce. Jobs with clearly defined individual tasks are the best to consider for job-sharing. Those that are more complex have a tendency of failing under this type of arrangement. Above all, management has to be committed to the job sharing program, as do the employees who are participating in it.

JOB SHARING AND EMPLOYEES It is important to find partners in a job sharing position that have work styles, habits, preferences, quality standards, and communications skills that are compatible and closely matched. Many times, it can be advantageous if the employees select their own partners to ensure that these conditions are met. Most

often it is important for employers to find job sharing partners with comparable skill levels, but there are still possible benefits if they do not. For instance, a more experienced worker can train an up-and-coming employee in a job sharing situation. When this happens, the employer can cut back on the time and money it would normally take to train the new employee, while also paying them a lower salary than the veteran worker during this time. Employees who participate in job sharing divide their responsibilities in several different ways. They can share the job evenly or separate it into individual tasks that better suit each individual. If the job has unrelated tasks, those can also be divided. The work week can be split in half and shifts can be alternated so one employee works three days one week and two the next. Job sharing employees must be able to coordinate their schedules to make sure someone is always on the job when they are required to be.

THE ADVANTAGES OF JOB SHARING It would seem that the one who benefits most from job sharing is the employee. This type of arrangement allows the employee to work part-time in order to spend more time with their families, attend school, or pursue other personal interests. New mothers find that it is a way to continue their careers while not having to deal with the stress and guilt that comes with putting their child in full-time day care. Experienced senior workers who wish to cut back a bit while still continuing their careers also benefit from job sharing, as do employees who wish to pursue more than one career opportunity at the same time. In addition, job sharing employees often find that this type of arrangement helps them to cut down on work-related stress and burnout. Despite its often intimidating nature and the possibility of large-scale confusion, job sharing can also be seen as advantageous and desirable to small business owners and managers. First, there is the simple theory that two or more individual employees can bring a greater variety of abilities to the job than a single employee can. In some instances, job sharing can also lead to extended work days and therefore more productivity without having to pay employees overtime. Employers can also ask job sharers to work more during busy times, therefore eliminating the hassles of having to hire and train temporary employees. Job sharing can also help to cut back on lost time due to vacations, sick days, and other personal situations that can cause someone to miss a day of work. Job-sharing employees might be more inclined to help work around the schedules of their partners to not only keep the work flowing smoothly, but also to accumulate time for when these type of situations come up for them and require the assistance of the job-share part-

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HOW TO KEEP A SHARED JOB RUNNING SMOOTHLY Employees who share a job have an arsenal of resources at their disposal to communicate with each other and ensure that the job is getting done. These resources include e-mail, phone and fax messages, checklists, and daily logs. It is probably in the best interest of small business owners to conduct performance reviews of employees involved in a job sharing program to ensure that things are going smoothly. These reviews can either be individual evaluations of each worker or take the form of a team review. If one person is carrying the weight of the team and the other is not doing their fair share, it is up to management to decide if this is just an isolated problem with that particular team or if the job sharing program is just not a successful one for their business. If a meeting that is pertinent to the job comes up, the employees and management must decide if both employees should attend or just one. It often helps if the job sharing employees who work on the same days are able to overlap their schedules in order to interact and keep things running as smoothly as possible. Benefits for employees who participate in jobsharing can be handled in a variety of different ways. Full or partial benefits can be given to the job-sharer according to the specific situation. Benefits such as insurance and pension plans are easier to negotiate and are often prorated. Vacation time, personal and sick days, and even salary can be also be prorated to the amount of time each employee spends on the job. In order to avoid any unwanted difficulties, these issues should be established before the job-sharing program is implemented. A guide or formal contract is suggested to make sure everyone involved understands these issues. Usually job sharing results in a slight increase in benefit costs, mainly in covered statutory benefits like Social Security and employment taxes. Small business owners must decide if the assumed increase in productivity is enough to offset these costs. Since job sharers work fewer hours than typical employees do, overtime pay is rarely an issue in these types of situations.

JOB SHOP

ner to ensure that the job gets done. Finally, because this type of arrangement allows a company to have more employees while not requiring them to be in the office at the same time, it is also an effective way to deal with a lack of office space, which can be a problem for many small businesses.

JOB SHOP

A job shop is a type of manufacturing process structure where small batches of a variety of custom products are made. In the job shop process flow, most of the products produced require a unique set-up and sequencing of processing steps. Examples of a job shop include a machine tool shop, a factory machining center, paint shops, a French restaurant, a commercial printing shop, and other manufacturers that make custom products in small lot sizes. Volume and standardization is low and products are often one of a kind.

CHARACTERISTICS OF A JOB SHOP In the job shop, similar equipment or functions are grouped together, such as all drill presses in one area and grinding machines in another in a process layout. The layout is designed to minimize material handling, cost, and work in process inventories. Job shops use general purpose equipment rather than specialty, dedicated product-specific equipment. Digital numerically controlled equipment is often used to give job shops the flexibility to change set-ups on the various machines very quickly. Job shops compete on quality, speed of product delivery, customization, and new product introduction, but are unlikely to compete on price as few scale economies exist.

LAYOUT

ROUTING When an order arrives in the job shop, the part being worked on travels throughout the various areas according to a sequence of operations. Not all jobs will use every machine in the plant. Jobs often travel in a jumbled routing and may return to the same machine for processing several times. This type of layout is also seen in services like department stores or hospitals, where areas are dedicated to one particular product (men’s clothing) or one type of service (maternity ward).

Employees in a job shop are typically highly skilled craft employees who can operate several different classes of machinery. These workers are paid higher wages for their skill levels. Due to their high skill level, job shop employees need less supervision. Workers may be paid a standard hourly wage or by an incentive system. The role of management is to bid on jobs and to establish prices for customer orders. The key activity in a job shop is processing information.

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Information is the most critical aspect of a job shop. Information is needed to quote a price, bid on a job, route an order through the shop, and specify the exact work to be done. Information begins with quoting, then a job sheet and blueprint are prepared before the job is released to the floor. Once on INFORMATION

FURTHER READING: Laqueur, Maria, and Donna Dickinson. Breaking Out of 9 to 5: How to Redesign Your Job to Fit You. 1994. SEE ALSO: Flexible Work Arrangements

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the production floor, employees complete job sheets and time cards for labor cost calculations and to update records for quoting future jobs when variances are present. While it is often easy to bid on jobs the shop has manufactured before, new jobs require accurate costing of labor, materials, and equipment as well as accurate assigning of overhead to the job. Tickets follow each job through the shop, where time and activities are recorded. Because the job shop makes specialty, custom items, it competes on quality and customer service and not on price. The job shop has little if any raw materials inventory because customers bring in the parts and materials to be worked on. The job shop has work-in-process inventory while jobs are being completed, but typically the customer is waiting on the order and expects prompt delivery, so there is no finished goods inventory in this make-toorder environment. Some job shops, like many small businesses, thrive on managing cash flow. They may work on small jobs to complete them by the end of the month so they can bill customers for the work. SCHEDULING A job is characterized by its route, its processing requirements, and its priority. In a job shop the mix of products is a key issue in deciding how and when to schedule jobs. Jobs may not be completed based on their arrival pattern in order to minimize costly machine set-ups and change-overs. Work may also be scheduled based on the shortest processing time.

Capacity is difficult to measure in the job shop and depends on lot sizes, the complexity of jobs, the mix of jobs already scheduled, the ability to schedule work well, the number of machines and their condition, the quantity and quality of labor input, and any process improvements.

JOB SHOPS AS AN EARLY FORM OF MANUFACTURING ORGANIZATION Most manufacturers today began as job shops and grew into the other manufacturing processes as volume allowed. The job shop allows entrepreneurs the most flexibility in making a variety of products to meet customer quality and service standards. As customers request repeat jobs and as volumes grow, the job shop may group machines into work cells to process batches of like jobs. Job shops are one of the first structures for a manufacturer in the process life cycle. As volume increases and manufacturers reduce or standardize their product offerings, structures change from the job shop to a batch flow to an assembly line and then to a continuous flow. Over the life cycle, flexibility decreases due to high volume and standardization, but unit costs decrease. The job shop is organized by

process, where assembly lines or continuous flow operations are organized in a product layout. In the latter layout, equipment or work processes are arranged according to the exact steps in which the product is made and the path for each part resembles a straight line. FURTHER READING: Chass, R.B., N.J. Aquilamo, and F.R. Jacobs. Operations Management for Competitive Advantage. 9th ed. Burr Ridge, IL: McGraw-Hill Irwin, 2001. Schmenner, Roger W. Plant and Service Tours in Operations Management. Saddle River, NJ: Prentice Hall, 1998.

JOINT VENTURES

A joint venture is a business enterprise undertaken by two or more persons or organizations to share the expense and (hopefully) profit of a particular business project. ‘‘Joint ventures are not business organizations in the sense of proprietorships, partnerships or corporations,’’ noted Charles P. Lickson in A Legal Guide for Small Business. ‘‘They are agreements between parties or firms for a particular purpose or venture. Their formation may be very informal, such as a handshake and an agreement for two firms to share a booth at a trade show. Other arrangements can be extremely complex, such as the consortium of major U.S. electronics firms to develop new microchips. . . . A joint venture is, in effect, a form of partnership that is limited to a particular purpose.’’ Joint ventures have grown in popularity in recent years, despite the relatively high failure rate of such efforts for one reason or another. Creative small business owners have been able to use this business strategy to good advantage over the years, although the practice remains one primarily associated with larger corporations. Most joint ventures are formed for the ultimate purpose of saving money. This is as true of small neighborhood stores that agree to advertise jointly in the weekly paper as it is of international oil companies that agree to work together for purposes of oil and gas exploration or extraction. Joint ventures are attractive because they enable companies to share both risks and costs. Equity-based joint ventures benefit foreign and/or local private interests, groups of interests, or members of the general public. Under non-equity joint ventures (also known as cooperative agreements), meanwhile, the parties seek technical service arrangements, franchise and brand use agreements, management contracts, rental agreeTYPES OF JOINT VENTURES

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LEGAL STRUCTURE OF JOINT VENTURES As Lickson observed in A Legal Guide for Small Business, joint ventures are governed entirely by the legal agreement that brought them into existence. ‘‘Unless the joint venture is formalized by creation of a corporation or partnership, it never ripens into a taxpaying, legal entity on its own. Instead, the joint venture functions through the legal status of the venture participants, known as co-venturers or venture partners,’’ Lickson wrote. ‘‘Since the joint venture is not a legal entity on its own, it does not hire people, enter into contracts, or have its own tax liabilities. These matters are handled through the co-venturers. Corporate law, partnership law, and the law of sole proprietorship do not govern joint ventures; contract law governs joint ventures.’’ And as Marc J. Lane noted in the Legal Handbook for Small Business, ‘‘since the venture ends at the conclusion of a specific project, issues of continuity of life and free transferability become moot.’’

WHY JOINT VENTURES FAIL Small business owners should not engage in joint ventures without adequate planning and strategy. They cannot afford to, since the ultimate goal of joint ventures is the same as it is for any type of business operation: to make a profit. Experience dictates that both parties in a joint venture should know exactly what they wish to derive from their partnership. There must be an agreement before the partnership becomes a reality. There must also be a firm commitment on the part of each member to the project and to one another. One of the leading causes for the failure of joint ventures is that some participants do not reveal their true business agendas, or mislead their partners about their ability to uphold their agreed-upon responsibilities. Many small business consultants counsel clients to approach joint ventures cautiously. They acknowledge that such partnerships can be most valuable in nourishing a company’s growth and stability, but also point out that smaller businesses usually have far less margin for error than do multinational corporations, or e