CHAPTER 1- BUSINESS FOUNDATIONS

Key knowledge:
 Types of businesses, including sole traders, partnerships, private limited companies, public listed
companies, social enterprises and government business enterprises
 Business objectives, including to make a profit, to increase market share, to fulfil a market
and/or social need to meet shareholder expectations
 The areas of management responsibility, including operations, finance, human resources, sales
and marketing, and technology, support, and how each area contributes to the achievement of
business objectives.
In Australia, businesses are owned and operated by both private individuals/groups/institutions-
known as the private sector and by the government- known as the public sector.
Limited Liability- A legal structure where the debts of the company do not extend to the owners
Unlimited Liability- A legal structure where the debts of the company DO extend to the owners

BUSINESSES ARE IMPORTANT & CONTRIBUTE TO THE ECONOMY BECAUSE THEY:

 Manufacture and sell goods and/or provide services to consumers either in Australia and/ or
globally- contributing to Australia’s Gross Domestic Product (GDP)
 Create employment- Australian residents receive wages in exchange for the knowledge, skills
and labour they provide
 Provide taxation income to the government directly from their earnings
 Are an important source of innovation and product development- enhancing consumers
standard of living, increasing efficiency
 Provide infrastructure- enhanced

1.2 BUSINESS OBJECTIVES:

Objectives are statements of desired achievement which provide direction for the business. All
business must establish clear objectives if they are to succeed. Objectives should be set using the
SMART principle:
S- Specific
M- Measurable
A- Achievable
R- Relevant/ Realistic
T- Time bound

THERE IS A HIERARCHY OF OBJECTIVES AND THIS INCLUDES:

1. Vision Statement & Mission Statement
2. Corporate & strategic objectives

Mission Statement: Expresses the purpose or reason the business exists

Vision Statement: Outlines the aspirations & values of the business

TYPES OF BUSINESS OBJECTIVES:

 Financial Objectives- Relate to the desired financial performance of the business. This includes
making a profit, growing sales, increasing market share, increasing productivity.
 Marketing Objectives- Aims to maximise the appeal of a product or service & to increase market
share
 Social Objectives- Relate to business being a ‘good citizen’ and can include the provision of
community services & facilities, contribution to community, being ethical, being sustainable &
promoting positive workplace policies
 Shareholder Expectations- as shareholders are owners of a company, business must strive to be
successful and make a profit in order to increase the value of dividends to shareholders.
 Providing a service or product with budgetary constraint- aims to minimise costs and increase
efficiency and productivity within budget in order to make a profit.

OPERATIONS MANAGEMENT-
Operations management involves managing activities associated with the production of a good or
service. It is concerned with planning, organizing, leading and controlling for a transformational
process that takes inputs and produced output. The operations department is responsible for
efficiency, productivity and quality of the goods or services. A priority of the operations function is
efficiency to increase business competitiveness.

HUMAN RESOURCES-
Human resource management is the effective management of the formal relationship between the
employer and employees. It is concerned with all activities associated with acquiring, developing,
maintaining and terminating employees. Human resources aims to maintain good employee
relations for optimal productivity. This is done by developing a positive & diverse work environment,
boost employee morale, recruit & retain top talent & promote work life balance & wellness.

SALES & MARKETING-

Sales & Marketing is about communicating the value of a good or service to customers, for the
purpose of selling the good or service and for maintaining and increasing market share. The
marketing function intends to increase the name or reputation of products, while being honest in
their promotional methods in order to adhere to social responsibility principles. Sales is about
developing relationships with individual customers.

FINANCE-
Finance management involves recording and reporting monetary transactions, managing revenues,
expenses, cash flows and budgets. The finance function strives to accurately assess financial
performance and will conduct financial audits at given periods of time. The aim is to consolidate the
operations of an organisation and provide for any growth or future expansions and to assess
whether the business has achieved its financial objectives.

TECHNOLOGY SUPPORT-
Technology support aims to assist the business to create value by using technology that helps
increase efficiency, productivity and cost effectiveness. This can include the use of computers,
software packages, internet, computer and manufacturing etc.
CHAPTER 2- STAKEHOLDERS AND CORPORATE CULTURE

Key knowledge: characteristics of stakeholders of businesses including their interests, potential

conflicts between stakeholders and corporate social responsibility.

2.1 STAKEHOLDERS OF BUSINESSES

 Businesses operate in complex and rapidly changing environments. For any business to be
successful it must be able to respond quickly to change or pressures from the internal, operating
and macro environments.
 Stakeholders: are those individuals or groups who have a vested interest or stake in the
operations of an organisation. They may also be affected by the actions of the organisation.
 A stakeholder can either affect or be affected by the operations of a business. Ideally, all
stakeholders should want the business to achieve its aims or objectives but this does now always
occur as some shareholders have conflicting interests.
 Examples: A competitor would not want business to do well; lobby groups want to protect
environment but business wants to increase profits.

INTERNAL ENVIRONMENT:
Activities, functions and pressures that occur within an organisation over which it has control.
 Shareholders: are mainly interested in profit. The more profitable a business is, the more
valuable the shares become. Shareholders make money when they can sell their shares at a
profit. When a business is profitable, it is also more likely to provide its shareholders with a
dividend (a small share of the overall profit). Shareholders pressures businesses to keep
increasing profits year after year.
 Employees: want to receive a fair wage and fair treatment for their work. They are motivated to
adhere to company policy through feelings or acceptance, security in their position, the
possibility of career advancement, an ethical environment and job satisfaction.
 Management: is closely involved with the growth and developmental of the business. While also
working toward a fair remuneration package, including fringe benefits, managements secures
their position in the company through hard work that increases in the company through hard
work that increases job satisfaction and career development.

OPERATING ENVIRONMENT:
The environment immediately external to an organisation with which it has close interactions when
conducting its business over which it has some control.
 Trade unions: want to maximise the wages and working conditions of their members. The
business wants to minimise costs to order maximise profit. Wages are the cost of labour. There
is tension between the business wanting to keep wages down and trade unions wanting to push
wages up.
 Suppliers: want to ensure that the businesses they deal with are profitable, to ensure that they
get paid for the supplies they provide. Suppliers hope to establish and retain a good relationship
with their clients in order to maintain the business.

MACRO ENVIRONMENT:
 Broad operating conditions in which an organisation operates and over which it has no control.
 Community/society: wants businesses to operate in an ethical and socially responsible manner
and in a way that is environmentally responsible. Businesses want to maximise their profit.
Ethical and social/ environmental responsibility is often expensive and is therefore not always a
priority of businesses. Therefore, a conflict exists between the interests of the community and
the business.

CORPORATE CULTURE:
 Productivity
 Efficiency
 Competitive
 Corporate culture: Is the shared values and beliefs of an organisation which can influence the
actions and decision making style of managers and employees.
Benefits of a positive corporate culture:
 Increased motivation levels leading to increased productivity levels
 Greater employee work ethic
 Reduced absenteeism and staff turnover
 Reduced costs of recruitment and training
 Greater profitability
 Positive public perception
 Attract high quality employees

OFFICIAL AND REAL CORPORATE CULTURE

 Official corporate culture- a set of values & beliefs that business wants to present to the public
as its own.
 Real (unofficial) culture- is what actually prevails in a business, consider relationships between
people.

ICE-BERG
What you can see (Observable elements):
 Language/slogans/logos
 Objects
 Dress code
 Layout of Work
 Environment
What you can’t see (non-observable elements):
 Values
 Shared rules
 Beliefs

Delayering: a popular strategy to remove one or more levels of hierarchy from the organisational structure
 Before After

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Shop manager Shop manager

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 CHAPTER 3- MANAGEMENT STYLES, SKILLS AND THEIR INTERRELATIONSHIP

Key knowledge:
 Management styles including autocratic, persuasive, consultative, participative and laissez-faire
 The appropriateness of management styles in relation to the nature of task, time, experience of
employees and manager preference
 Management skills including communicating, delegating, planning, leading, decision-making and
interpersonal
 The relationship between management styles and management skills corporate culture both
official and real, and strategies for its development.
3.1 MANAGEMENT STYLES

Management style: is the manner and approach of providing direction, implementing plans &
motivating people that is adopted by a manager.
Task oriented styles: Autocratic, persuasive, consultative, participative, laissez-faire

AUTOCRATIC MANAGEMENT STYLE

Autocratic Management Style: is a manager who likes control and authority, has a high regard for
production & efficiency (task-orientated), except employees to comply with their decisions and have
low concern for employees.
 Centralised decision making & communication with strict top-down or hierarchical chain
of command approach to management
 Policies & procedures are maintained in detail & enforced by checks
 Has high regard for production & efficiency (task oriented)
 Managers expect team members to comply with their decisions & not concerned about
attitude & thinking of group
 Results in passive resistance from team members & requires continual pressure &
direction from manager in order to get things done
 Managers use punishments & rewards to achieve their objectives

Advantages of Autocratic Disadvantages of Autocratic

 Direct communication from senior management to  Teamwork is not encouraged
lower levels  A strict top-down chain of command is
 Employees roles & expectations are defined & bureaucratic structure- leads to repetition of
monitored communication & restrict decision making
 High regard for production & efficiency  Low motivation and job satisfaction- no
 Decision making is immediate & completed by responsibility to employees
experienced leaders  Poor relationship between management &
 Good for difficult decisions employees
 PERSUASIVE MANAGEMENT STYLE
Persuasive management style: occurs when a manager makes a decisions and then tries to convince
the employees that what they have decided is in their best interests
 Uses their ability to interpret a situation, people’s actions to do a task or achieve goals their way
 Try to change everyone to their view, but also stick to their decision with or without agreement
 Under this type of management style, employees will have a better idea of what to do when
there is a change externally or internally because the manager has explained their intentions
 It is a centralised system because communications are still one way & it reflects hierarchical
system
 Does not encourage initiative & commitment from employees

Advantages of Persuasive Disadvantages of Persuasive

 Task oriented as employees are clear in what they  Low teamwork because no input from employees
have to achieve  Centralisation of power due to hierarchical structure
 Communication is direct to employees  Low motivation & job satisfaction as style does not
encourage initiative & commitment from employees

CONSULTATIVE MANAGEMENT STYLE

Consultative management style is when the manager listens to the opinion of the team members
but ultimately the leader makes the decision.
 Consultative manager is that their power is more employee-based and less centralised than
autocratic and persuasive styles
 Employees provide ideas, concepts or suggestions to the manager, who will make a decision
based on their input
 Employees are task-oriented, motivated and perform at their best in achieving the orgs goals &
objectives

Advantages of Consultative Disadvantages of Consultative

 A variety of ideas from the suggestions of the  Time consuming as team members are consulted
employees  Overlooking for some ideas in final decision may
 Reasonable employee involvement cause conflict or ill feeling among employees
 Strong motivation and job satisfaction  Consultation on all issues may not be suitable due
 Ideas are discussed in depth, so the manager can to nature of issue. Employees may become
make a clear informed decision confused on their role

PARTICIPATIVE MANAGEMENT STYLE:

Participative management style is when a manager shares the decision making with group
members.
  Communication is open as there is high employee involvement & a flatter structure
 This management style is based on the manager’s role empowering employees by being a leader
& coach in their actions & words
 A manager allows their team to decide how the task will be tackled & who will perform task
 Employees are encouraged to make contributions to design of their work

Advantages of Participative Disadvantages of Participative

 Open communication within the organisation  Conflict can emerge with diverse viewpoints or
 A diversity of viewpoints is evident in discussions stakeholder interests
 High motivation and job satisfaction  Compromises are made in the decision making
 Productivity & efficiency is high due to employee process rather than being clear and sound, due to
involvement different opinions
 Empowerment & coaching of employees, which  Time consuming in reaching outcomes as all team
encourages opportunities for employee members are involved in decision making
development  Lack of contribution by all team members due to
 Good employee-employer relations those employees who may not want to be
 Shared vision between management and employees involved in discussions
of the org’s goals & objectives

LAISSEZ-FAIRE MANAGEMENT STYLE

Laissez-faire management style is when a manager has little control over their group, leaving them
to sort out their roles and tackle their work, without participating in the process themselves.
 Also called free-rein
 Group members are allowed to perform as they like, so far as this does not violate the
organisation’s policy, goals or objectives

Advantages of Laissez-faire Disadvantages of Laissez-faire

 High employee orientation as employees can set  Little guidance could be problematic for
their own tasks with little involvement from employees who are not highly motivated or
management skilled
 Strong motivation, empowerment & job satisfaction  Loss of control by management can cause
since employees are encourages to be creative and informal leaders to emerge & behaviour of
innovative employees may not be in accordance with
 Immense teamwork as employees enjoy working organisation’s goals
together to develop the process of achieving orgs
goals
 Decentralised and flatter structure encourage s
good communication as ideas are openly discussed
Management styles: Location of control Communication process Decision making authority

Autocratic centralised One way Manager-formal

Consultative Centralised- final Two way Employees & then manager

decision
Decentralised also

Participative Decentralised Two way Employees & managers

Laissez-faire Decentralised Two way Employees

3.2 MANAGEMENT SKILLS

Skills: are the ability to do something well, gained through training & experience, in order to achieve
the required goal.

COMMUNICATION SKILLS:
A process of creating & exchanging information between people that produces the required
response. This skill is essential- need to be able to communicate clearly to staff what you want them
to do, why and how you want them to do it. Communication can be written, oral, reading &non-
verbal (body language)

The main forms of communication that managers will be involved in:

 Personal communication- involves sharing information & understanding between two people
 Internal organisational communication- where systems are used to inform & share information
with employees (internal stakeholders) of the business
 External operational communication- occurs when managers need to communicate with
stakeholders external to the business- such as suppliers, customers, shareholders etc.

DELEGATION SKILLS
Is the process where formal authority is passed down the hierarchy of a business. It can occur at all
levels and the authority to delegate needs to come right from the top of the business. The
acceptance of authority by a person indicated their acceptance of responsibility & accountability
 Benefits Problems
 Manager’s time is freed up for other tasks  If manager is not organised, they may not want to
 Stress is reduced delegate as they don’t know what is going on
 Organisation runs more smoothly when boss is away themselves
 Employees feel trusted and valued  Managers fear their inadequacies being ‘shown
 Increased motivation and promotion prospects up’
 Opportunity for skill training, personal development  Managers might not have the time or inclination
to train staff- lack of trust
 Managers might have an autocratic/persuasive
style that does not really welcome delegation

PLANNING SKILLS
Planning is described as a decision making process that is future oriented. It involves understanding
the purpose or mission of a business and formulating the various levels or objectives for the
business. Undertaking planning assists a business to reduce levels of uncertainty
The planning process has the following steps:

1. Set the goal- consider the values held by management

2. Gather information, establish the cause of the problem using SWOT analysis
3. Establish promoting and restraining factors- determine possible opportunities & threats or
problems which currently or in future affect the business
4. Develop the action plan to reach the goal(s)- create strategies of courses of action to take
advantage of the opportunities
5. Evaluate & review- evaluate results to see if plan was useful & accurate

LEADING SKILLS
Leading involves influencing others towards attaining the objectives of the business. Effective leading
requires a manager to establish conditions that motivate, engage and inspire subordinates, be a
good communicator, act as a role model & effectively use power, resolves conflicts.

An effective leader also needs to understand emotional intelligence- such as having, emotional self-
awareness to understand what they are feeling and how impact others; self-regulation to control
emotions; have motivation to achieve goals; having empathy to sense emotions of others; and social
skills to manage relationships.

DECISION MAKING SKILLS

Decision making is a multistep approach whereby a selection is made between a range of different
alternatives. The decision making process involves the following steps

1. Identify the problem/define objectives- what is the issue needing a resolution

2. Gather info, establish the cause of the problem- investigate circumstances or factors that have
created the problem
3. Develop alternatives solutions- consider alternatives & status quo
4. Analyse and rank alternatives- consider strengths & weaknesses of each alternative
5. Select an alternative and implement- decide on the best outcome & communicate clearly the
decision taken
6. Evaluate the decision/implementation- provide feedback on progress

INTERPERSONAL SKILLS
Interpersonal skills are those used by a manager when dealing with people on a personal basis, such
as being able to lead, motivate, communicate, manage conflict and build team rapport. This includes
being a team player to work effectively with others, being empathetic & assertive, be a good
communicator, able to motivate & encourage others and be ethical, honest and able to respect the
values, beliefs, aspirations & contributions of others.

TIME MANAGEMENT SKILLS

Time management is the efficient utilisation of work time, which involves setting and prioritising
tasks, allocating time and avoiding time wasting activities. Time is a fixed resource and there are
three types of work time:

 Boss determined- doing work initiated by management

 Organisation determined- completing work initiated by the business- colleagues, customers
 Self-determined- time spent completing work which you have control
 List objectives
 Rank the objectives based on their importance
 List the activities needed to achieve the objectives
 Assign priorities (based on urgency of task importance) to each activity
 Schedule activities according to priorities set

STRESS MANAGEMENT
Stress management skills require a manager to reduce the level or stress/distress in both themselves
and their subordinates

Factors that can lead to stress:

 Increased workload
 Coping with organisational change
 Conflict with co workers
 Lack of communication
 Bullying
 Technology- new or breakdown
 Lack of training

ANALYTICAL SKILLS
Analytical skills are the ability to analyse or study the nature of a given situation or set of
circumstances. Managers should apply logical thinking or understanding facts, causes or issues. Then
manager can develop the most effective course of action to achieve desired outcome.
TECHNICAL SKILLS
Technical skills represent a manager’s ability, knowledge of a proficiency in a specialised field, for
example accounting, IT, finance to undertake a particular task- usually needed by front line and
middle managers.
CHAPTER 4- EMPLOYEES: BUSINESS OBJECTIVES AND MOTIVATION

Key knowledge-
 The relationship between managing employees and business objectives
 Key principles of the following theories of motivation: Hierarchy of Needs (Maslow), Goal Setting
Theory (Locke and Latham) and the Four Drive Theory (Lawrence and Nohria)
 Motivation strategies including performance related pay, career advancement, investment in
training, support and sanction
 Advantages and disadvantages of motivation strategies and their effect on short, and long term
employee motivation
4.1 OBJECTIVES

Business objectives- are the stated, measurable targets of how to achieve business goals. In order
for these to be achieve and for the success of the business, effective relationships have to be created
between management and employees.

This involves human resource management policies. HMR is the management of a wide range of
responsibilities relating to employees (human resource function) within a business in order to
increase the efficiency of both employees and the business.

These HMR policies include:

 Recruitment & selection procedures

 Written OH&S guidelines
 Performance management & evaluation practices

Employees are the biggest cost for any business, as well as being their most valuable asset. For a
business to be productive & profitable, it is imperative that its staff are performing to their full
potential. By employees setting individual goals to organisational objectives, the performance of
BOTH the individual and the business improves.

MANAGEMENT BY OBJECTIVES
Management by objectives (MBO) is a process of setting goals, using the SMART principle, which
relate to an employee’s key areas of responsibility. It creates a sense of direction and provides a
measure for assessing the work performance of that employee.

 Adopting this management system, where performance of employees is measured, helps create
a view of close relationship in the way employees are being managed with the achievement of
business objectives.
 Employees become more engaged with their work because they feel they’re making a direct
contribution, helps increase productivity, and helps lower absenteeism and staff turnover.

Employee engagement- Which is the commitment employees feel towards a business based on
identifying with the values, vision, objectives and the way business operates can be achieved by
ensuring employees know and understand organisational goals, how their job contributes to their
attainment, ensuring open communication is practised and well-designed jobs coupled with
opportunities for career advancement helps to engage and motivates employees.
 4.3 MOTIVATION

Motivation- is the willingness of a person to expend energy and effort in doing a job or task. A
manager must understand what motivates employees and this can be done by ensuring jobs are
designed correctly, a system of rewards is in place, an appropriate management style is being used,
a positive corporate culture exists and the business is structured to allow employees to work to their
optimum level.

HIERARCHY OF NEEDS- MASLOW

 Needs based theory, arranged based on importance of the needs
 A five stage representation of human needs arranged based on importance to individuals- what
employees need changes as they are, move jobs
 Employees must satisfy lower order needs before higher order needs can be satisfied.
 Once level of need is satisfied, it’s no longer effective in motivating employees behaviour
 Five levels of needs separated into lower order needs (likely to be satisfied externally) and
higher order needs (likely to be satisfied internally)
 HRM job is to find where employees are & what need must be satisfied to increase motivation

Level in hierarchy Relevance to HRM

1. Psychological needs- basic needs (food, water)  A job
 Remuneration (pay)
2. Safety needs- security from physical + emotional harm  Job security
 Safe & healthy conditions
 Superannuation and insurance
3. Social needs- acceptance, affection  Friendly workmates
 Organised employee activities
4. Esteem needs- recognition, attention, self-respect  Job title and task responsibilities
 Promotion
 Prestigious workplace facilities
5. Self-actualisation- ultimate need (personal growth)  Challenging work for creativity
 Participative decision making

Advantages of Maslow Disadvantages of Maslow

 Tailored to each employee’s individual needs by  Needs of ALL employees are not uniform E.G some
identifying their level of matching strategies to are satisfied which physiological and job security
specifically motivate them  Time consuming and difficult to work out where
 Social and esteem needs emphasise good each employee is on the hierarchy. Difficult to
relationships, improving corporate culture assess when a level has been ‘satisfied’
  Can motivate employees by physiological needs,
which can easily be provided by the business

GOAL SETTING THEORY-

 A theory of motivation focusing on the setting and attaining of CLEAR & achievable goals
 The theory is based on goal setting & task performance- measured by a report
 Principles include- Clarity, challenge, commitment, feedback & task complexity
 Clarity required- clear goals created by setting a personal mission statement
 Setting challenging goals helps increase effort, task focus and persistence & improved individual
and org. performance
 Established goals must apply SMART principles
 Requires commitment- team to understand & agree to goals “buy in”
 Managers must provide feedback to employee on progress of goals being set; time set to
analyse progress; Regular feedback opportunities for expectation clarification, adjusting goal
difficulty & gaining recognition
 Task complexity- not overwhelming goals, breakdown goals into smaller goals
 Participation between managers and subordinates, goal-setting linked to management by
objectives (MBO)
 Management by Objectives, benchmarking & MIS strategies that focuses efforts of all members

Clarity Challenge Commitment Feedback Task Complexity

 Goals should be  The extent to  To be effective,  Staff must be given  Work should not
clear and specific which a goal is your team must feedback on become too
so you know challenging and understand and progression overwhelming when
what you’re states that, to a agree to the towards goal goals or assignments
trying to achieve certain extent goals- team  Gives the are high complex
 Can measure motivation will members are opportunity to
results increase as the more likely to buy clarify people’s
accurately difficulty of a task into a goal if they expectations and
increases have been adjust difficulty of
involved in setting their goals
it

Advantages Disadvantages
 Easier to measure individual performance of set  Time consuming
goals  May be difficult to align individual goals with
 Goals can be set on an individual or team basis. organisational goals
Improves manager & employee relationship due to  Goals set may be too difficult or not challenging
feedback & support given by manager with goal enough and manager may not recognise this
setting
 Improves both individual employee performance &
organisational performance as strategic goals

FOUR DRIVE THEORY- (LAWRENCE AND NOHRIA)

  Based on four basic motivational needs that act to drive people- the level to which these needs
are satisfied directly affects our emotions and behaviour.

Four drives include:

 The drive to acquire- basic need to acquire job complex need to acquire status, accomplishments
& power
 The drive to bond- motivation is improved when employees feel proud to belong to a business
 The drive to comprehend- motivation enhanced when employees learn & type of work engages
them
 The drive to defend- employees motivated to defend themselves particularly if there’s fear and
resistance to change.

Drive Business Manager

1. Drive to acquire  Develop a reward system linked to individual  Reward an individual employee
performance (includes material goods, status & with praise, recognition &
wealth) interesting work
 Offer opportunities for advancement to best
performers
2. Drive to bond  Develop strong culture of collaboration,  Encourage teamwork
openness, friendship & pride
3. Drive to comprehend  Good job design to ensure challenge & increase  Ensure jobs are meaningful,
motivation of employees. This will reduce interesting & challenging
absenteeism & staff turnover
4. Drive to defend  Create fair, trustworthy & transparent processes  Less desirable drive because
to alleviate fear & resistance. Offer work life threats can trigger drive to
balance, consider staff welfare, grievance defend
resolution, performance management  Use participative style- open
communication, delegation &
decentralised decision making to
overcome resistance & fear of
change

MOTIVATION STRATEGIES

Consider the following motivation strategies-

1. Performance- related pay (financial motivation)

2. Career advancement (non-financial motivation)
3. Investment in training (non-financial motivation)
4. Support & sanction (non-financial motivation)

PERFORMANCE RELATED PAY

  Performance-related pay is financial reward to employees whose work has reached or exceeded
a set-standard. This can also be given to a work group. It can be recognised and rewarded in a
monetary form of sales commission, profit sharing, share allocation or a bonus being paid.
 Performance related pay is better linked to the achievement of short term motivation as they
are considered an extrinsic reward that encourages higher effort from employees, particularly
from junior ranked employees at the lower end of the pay scale.
 In the long term however, as employees become more highly paid, financial rewards become
less important as other needs such as their self-esteem and career advancement become more
important in increasing their motivation.

Features of these schemes include:

 An individual performance appraisal is undertaken to review against agreed objectives or

performance standards
 After the appraisal period, employees are then sorted into performance level groups to
determine if any and what level of reward will be given
 Method of reward will vary- usually monetary

Advantages of motivation strategies Disadvantages of motivation strategies

 Provides a direct financial reward to employee  Reduces equality in employees’ pay
 Tangible way of recognizing achievement  Generates a ‘performance’ culture
 Encourages goal setting  Acts to demonstrate if goals set are too
 Can improve productivity levels challenging
 Rewards best performance  Difficult to measure productivity levels in some
types of jobs
 Danger of sacrificing safety & quality to
increase quantity
 Short term focus

CAREER ADVANCEMENT-
This involves promoting employees to positions that include more responsibility or authority- acts as
a long term motivator. Employees are motivated for a promotion because:

 Desire for increased remuneration

 Increased job experience
 Greater ambition and status

Business understand that providing challenging work, will motivate them and this can be achieved by
offering opportunities to increase the skill base of employees, while also developing them
personally. Career advancement offers long term motivation for staff as they are able to fulfil their
self-actualisation needs. Opportunities to develop their skills and apply them in a more challenging
 role of position helps to improve motivation, productivity and staff retention in a business. Examples
of these opportunities include:

 Job enlargement- making job bigger or more challenging by combing various operations at a
similar level
 Job enrichment- increasing the depth of content as well as the degree of control the job
holder has over their work
 Job rotation- workers are moved between different jobs to increase variety, increase
flexibility, reduces boredom. Broadens knowledge & skills of employees.

Advantages Disadvantages
 Acts as a reward to employee for past performance  Can demotivate employees who are overloaded
 Helps business retain talented employees knowing for promotion
there are opportunities for better pay & positions  Employee may be promoted beyond their
 Retains intellectual property & continuality of capability
knowledge in business  Creates feeling of unrest if promotion was not
 Opportunity to increase employees contribution warranted or inequitable
to business  Employees level of productivity may decrease
as they now have broader responsibility and
added pressure

INVESTMENT IN TRAINING
 Employees gain skills & job knowledge through training and job experience. Important to train
employees in skills needed to perform their jobs properly, improves safety, employees feel they
are contributing and helps in tram building.
 Investing the time and money on training programmes for employees will ensure staff feel
valued and empowered to strive to do their best, allowing for greater job satisfaction and
helping to reduce staff turnover and motivation both in the short and long term.

Advantages- Disadvantages-
 Shows that the business values its employees  Expensive investment if business has inefficient
 Demonstrates that business want to advance careers systems
of its employees s  If employees are in wrong jobs, won’t act to
 Creates a sense of loyalty to business motivate
 Creates a positive corporate culture  Highlights areas in which business is lacking

SUPPORT & SANCTION-

 Employees are more motivated to work for a business if they feel supported, encouraged and
acknowledged for their work performance. Frequent and positive communication, good
corporate culture helps to motivate.
 In addition, sanctions work to increase motivation by disciplining employees who may not take
work tasks seriously and are threatened with some form of sanction (eg. No bonus, demotion,
redundancy). Sanctions & coercion however only work in the short term, employees should
 then be encouraged to respond to positive motivators to encourage increased performance in
the long term.

Advantages of sanction Disadvantages of sanction

 Supported employees work more diligently  Support needs a positive corporate culture at the
 Support is a long term motivator business
 Sanctions can act as a motivator  Support relies on manager using good
 Support does not cost the business money communication skills
 Imposing sanction only acts a short term motivator