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Ad Hoc

"For this purpose" or "One off"

What does the term “Ad hoc” mean?

The term “ad hoc” is a Latin phrase that literally means “to this” and commonly understood as meaning “for this purpose.” It can also be used to mean “as needed.” It is commonly used in both business and government settings. Ad hoc refers to actions taken to address a specific situation, circumstance, or problem, and not usually intended to address other or ongoing issues. It can be thought of as a “one off”.

 

Ad hoc

 

Examples

Business organizations and governments frequently form ad hoc committees to study a particular problem or issue and make recommendations to address it. The following diagram shows examples of the common differences between issues that are addressed on an ad hoc basis versus normal company operations.

 

Ad hoc

 

Sometimes unforeseen circumstances arise, such as changes in a country’s tax laws, that prompt companies to put together an ad hoc group to determine how best to respond to the change in circumstances. An important element of such actions is that they are typically designed only to address a specific situation and are not intended to be an ongoing part of an organization’s operations.

Ad hoc’s secondary meaning of “as needed” is used, for example, when an organization decides to take on additional personnel on a non-permanent basis. When a company takes on a new project and is therefore uncertain as to how many employees will be required to complete the project, the company’s management may assign a primary group of employees for the project, with the note that additional personnel “will be added on an ad hoc basis.”

A specific technical meaning of the term is used when referring to an “ad hoc network,” which is a network of computers or other devices that communicate directly with each other, often bypassing a gatekeeping access point like a router.

 

Benefits of using Ad hoc actions

Taking ad hoc actions offers two primary benefits. Assembling a temporary team to address a special circumstance or emergency that has arisen can enable an organization to respond more quickly, and therefore more efficiently, to a situation than if dealing with the situation were merely assigned as additional work for existing employees.

Dealing with things on a non-permanent basis may also be more cost-effective. For example, if a company hires a specialist on a temporary basis to address a specific problem and pays them as an independent consultant, it may be less expensive than taking on a new full-time employee who may not be needed past the point of solving the specific problem.

 

Risk of taking Ad hoc actions

Handling issues on a short-term basis comes with risks, such as the focus on a specific issue may ignore other important factors that may impact the overall organization’s effectiveness. Temporary actions taken to address a specific problem may result in an unintended negative impact on other operational functions of an organization.

For example, an ad hoc committee formed to address an unexpected cash flow crisis may recommend terminating or laying off a considerable number of employees. While the move may solve the immediate problem, it may also end up creating larger problems for the company in the future as a result of losing valuable personnel and negatively affecting employee morale among the remaining staff.

 

More resources

We hope you’ve enjoyed reading CFI’s explanation of the term “ad hoc.” CFI offers many other educational articles to help you further your career:

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Additional Resources

CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or are looking for a career change, the CFI website has a multitude of free resources to help you jumpstart your Career in Finance. If you seek to improve your technical skills check out some of our most popular courses. Below are some additional resources for you to further explore:

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