Letter H

Handy, Charles: The author of many business books, notably Understanding organizations and Inside organizations. One of the most respected gurus in business history, Handy was one of the first persons to forecast the rise of outsourcing and the decline in the numbers of people employed as permanent workers.

Hedgehog Principle: A term coined by Jim Collins in his book, “Good to Great”. The fox knows many things, but the hedgehog knows only one big thing, i.e. survival. A company should be like a hedgehog, not like a fox. In this context, a company must answer three questions: "What can we be the best in the world at?" "What can we be passionate about?" "What is our one economic driver?" Thinking like a hedgehog can help to bring a lot of focus into the company’s plans and thinking.

Herfindahl Index: A measure of how concentrated an industry is or how intense the rivalry is. The Herfindahl index is calculated as

where s is the market share of firm i in the market, and n is the number of firms.
The Herfindahl Index (H) has a value that is always smaller than one. A small index indicates intense competition with no dominant players. If all firms have an equal share, the reciprocal of the index shows the number of firms in the industry. When firms have unequal shares, the reciprocal of the index indicates the "equivalent" number of firms in the industry.
The major benefit of the Herfindahl index, compared to the concentration ratio is that it gives more weight to larger firms because of the squaring. Take, for instance, two cases in which the six largest firms produce 90 % of the output: We will assume that the remaining 10% of output is divided among 10 equally sized producers.
• Case 1: All six firms produce 15%.
• Case 2: One firm produces 80 % while the five others produce 2 % each.
The six-firm concentration ratio would equal 90 % in both cases, but in the first case, competition would be fierce while in the second case we have a monopoly for all practical purposes. The Herfindahl index captures this important information. In case 1, H=.1350 and in case 2, H=.6420. (See Concentration Ratios, Oligopoly)
Herzberg, Frederick (1923-2000): Well-known for his two-factor theory of job satisfaction. According to Herzberg, every organization has a set of hygiene factors like working conditions, salary, etc. The absence of hygiene factors creates employee dissatisfaction but their presence does not improve satisfaction. Herzberg found five factors in particular that were strong determinants of job satisfaction: achievement, recognition, the work itself, responsibility and advancement. Motivators (satisfiers) are associated with a long-term positive impact on job performance. In contrast, hygiene factors produce only short-term changes in job attitudes and performance, which quickly fall back to their previous level.

Although Herzberg has been criticized for drawing conclusions about workers as a whole based on a study of accountants and engineers, his theory has proved very robust. Many firms have successfully put his methods into practice. Part of the reason for the popularity of his theory is that Herzberg has offered a practical approach to improving motivation through job enrichment, by redesigning workplaces and work systems.
(See Motivation)

Hierarchical Organization: A traditional organization in which, authority flows from the person in charge through various levels of supervision, while information and requests for approval, travel upward through the same channels. As the size of operations increases, the top managers become the bottlenecks. Today, many business organizations are trying to become flat by delegating much decision making to lower levels of management. This delegation is facilitated by information technology and better methods of communication that make it possible to operate with much wider spans of control, than was possible earlier.
(See Bureaucracy, Flat Organization)

Hostile Bid: A bid for taking over a company despite the resistance being shown by the takeover target. Hostile bids can lead to acrimony, war of words and unpleasant situations where sentiments run high and unreasonably high bids may be made. Another problem with hostile bids is that key employees may feel unhappy. Hostile bids are particularly avoidable in high tech industries, where acquisitions are often made to get across to a ready pool of talent.
(See Anti takeover Strategy)

Human Capital – is the degree of skill and training embodied in labor as a factor of production. The value of human capital can be increased by careful recruitment and investment, typically in education and training. Human capital is a major asset in knowledge based industries like computer software and pharmaceuticals.

Hygiene Factors: Elements of the work environment that have the potential to cause dissatisfaction, if not adequately provided. These include salary and working conditions. These aspects are taken for granted. By providing them, motivation levels will not increase. But if they are not provided, employees will be unhappy.
(See Frederick Herzberg, Motivation)