Business Studies

AS Level

People in Business

Revision Notes

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PRODUCTIVITY AND PERFORMANCE 3

LABOUR PRODUCTIVITY: 3
- LABOUR PRODUCTIVITY CAN BE INCREASED BY: 3
LABOUR TURNOVER: 3
-EXTERNAL CAUSES OF HIGH LABOUR TURNOVER: 3
- CONSEQUENCES OF HIGH LABOUR TURNOVER 4
- BENEFITS OF HIGH LABOUR TURNOVER 4
- HOW TO REDUCE HIGH LABOUR TURNOVER: 4
EVALUATING THE SUCCESS OF PERSONNEL MANAGEMENT 4
ABSENTEEISM 4
- CAUSES OF ABSENTEEISM (THE UNAVOIDABLE): 4
- CAUSES OF ABSENTEEISM (THE AVOIDABLE): 4
- WAYS TO REDUCE ABSENTEEISM: 4

ORGANISATIONAL STRUCTURE 5

SPAN OF CONTROL 5
ADVANTAGES AND DISADVANTAGES OF A NARROW SPAN OF CONTROL: 5
DELEGATION 5
BENEFITS OF DELEGATION: 5

RECRUITMENT AND TRAINING 6

THE RECRUITMENT PROCESS: 6

TYPES OF RECRUITMENT: 6
INTERNAL RECRUITMENT: 6
EXAMPLES OF THE ADVERTISEMENTS USED: 6
ADVANTAGES OF INTERNAL RECRUITMENT: 6
EXTERNAL RECRUITMENT: 7
EXAMPLES OF EXTERNAL RECRUITMENT ADVERTISING: 7
ADVANTAGES OF EXTERNAL RECRUITMENT: 7
SELECTION TECHNIQUES 7
TRAINING AND ITS PURPOSE 7
INDUCTION TRAINING 7
ON-THE-JOB TRAINING 8
OFF-THE-JOB TRAINING 8

MOTIVATION 9

FINANCIAL MOTIVATORS: 9
WAGES AND SALARIES 9
PIECE-RATE 9
FRINGE BENEFITS 9
PERFORMANCE-RELATED PAY 10
PROFIT SHARING 10
SHARE OWNERSHIP 10
NON- FINANCIAL MOTIVATORS: 10
JOB ENRICHMENT 10
JOB ENLARGEMENT 11
TEAMWORKING 11
EMPOWERMENT 11
KEY MOTIVATION THEORIES 11
- FW TAYLOR 11
- MASLOW 12
- HERZBERG 12
KEY TERMS(that haven’t already been mentioned) 12

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Bethany Archer Page 3 03/06/2023
Productivity and Performance

Productivity is a measurement of a firm’s efficiency by measuring outputs in relation to inputs.

The firm’s efficiency can be increased by producing more with the same amount of inputs or by producing
the same amount but with fewer inputs.

Labour Productivity:
- A measure of the output per worker in a given time period.

- The formula for labour productivity is as follow:

Labour productivity = output per period ÷ No. of employees per period.

- Another formula that you need to know is:

Labour Cost = Cost x People

Output
per period

- Labour productivity can be increased by:

Recruiting skilled and trained employees
Providing training to enhance skills
Providing both financial and non-financial benefits to improve motivation
Improve working practices, technologies and Capital equipment.

- Output per employee is very important as a measure of the companies overall performance. If
productivity increases and wages stay constant then the company will make a higher profit. Therefore
with lower labour costs and high productivity the firm is likely to be in a more competitive position.

- BY INCREASING PRODUCTIVITY A BUSINESS CAN IMPROVE ITS COMPETITIVENESS.

Labour Turnover:
- The proportion of employees leaving a business in a given period of time

- The formula for Labour turnover is as follows:

No. of staff leaving (in a given time) x 100

Average No. of Staff (in a given time)

- Internal causes of high labour turnover:

Poor management
Poor communications
Low wages in comparison to other Business
Poor selection procedures
Boring and unchallenging jobs
Poor working conditions and low morale

-External Causes of high labour turnover:

More local vacancies arising
Better transport links enabling more opportunity further out
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- Consequences of high labour turnover
Cost of recruitment of replacements
Training costs
New employees will take time settling in
Loss of productivity as new workers adjust

- Benefits of high labour turnover

New workers can bring new ideas and enthusiasm to the firm
Workers with specific skills can be employed
New perspective on things

- IT IS IMPORTANT FOR A COMPANY TO GET THE RIGHT BALANCE OF LABOUR TURNOVER

- How to reduce high labour turnover:

Have a detailed and in depth recruitment process, possibly offer a trial day
Enhance the managers skills and ability
Include a reasonable amount of job rotation for motivation purposes
Offer a competitive wage rate
Offer social opportunities to improve communication.

Evaluating the success of personnel management

Productivity and labour turnover data provide the firm with information on the success of the business.
Good managers analyse figure to identify:
Changes over time (value this year VS value last year)
How the firm compares to other, similar, firms.
Performance against targets

Absenteeism
- The proportion of employees not at work on a given day

- Causes of absenteeism (the unavoidable):

Illness/sickness
Personal loss
Weather
Transport issues

- Causes of absenteeism (the avoidable):

De-motivated staff, do not want to go to work
Holiday leave
Maternity / paternity

- Ways to reduce absenteeism:

Offer an attendance bonus
Improve relations
Improve working conditions
Create more interesting and challenging jobs
Offer more flexible working practices.

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Organisational Structure

A formal and systematic way the management of a business is organised

Organisations often have department structure. This could be based upon products, regions or countries.
For most organisations it is based on the key functions of a business; such as marketing, finance, human
resources etc.

- Levels of hierarchy is the number of layers of authority within the business

- Chains of command are lines of communication that exist within a business

- Delegation is the passing of authority (not responsibility) down the organisational structure.

- An organisational chart is a diagram that shows the lines of authority and layers of hierarchy in an
organisation

- An organisation hierarchy is the Verticle division of authority and accountability in an organisation.

TALL ORGANISATIONS have lots of LEVELS

FLAT ORGANISATIONS have very few LEVELS

Span of Control

- Span of control is the number of employees (or subordinates) that individuals are directly responsible
for
A narrow span of control = few people to look after
A wide span of control = lots of subordinates to look after

Advantages and disadvantages of a narrow span of control:

Advantages Disadvantages
- Allows close management supervision -Workers may feel over supervised
- May improve communications -Vertical communication will be harder
- May lead to more promotion opportunities - Restricted scope for promotion

REMEMBER NARROW SPAN OF CONTROL = MORE LAYERS OF HIERARCHY

Delegation

- This is the passing of authority down the hierarchy of a business

Benefits of delegation:
Can motivate staff
Makes it easier in the future to identify staff with the qualities needed for promotion
Allows the boss the opportunity to spend time planning and thinking, rather than doing.

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Recruitment and Training
-Recruitment is the process of filling job vacancies
-Training is a provision of work-related education

The recruitment process:

1. A vacancy arises
2. A job description is written or revised, based on job analysis
3. A person specification or job profile is written
4. A decision is made about whether to recruit internally or externally
5. Advertises are drawn up and placed in the appropriate media (on company website or intranet for
internal, in local newspapers for external)
6. Application forms are issues and/or CV’s and letters of application are requested
7. Short listing takes place
8. Interviews are held and assessment & testing takes place
9. Selection takes place and someone is appointed.

- Job description is a document that outlines the duties and responsibilities associated with a particular
role
- Person specification is a document that outlines the qualifications, skills and other qualities required in
order to carry out a particular job successfully.

Types of recruitment:

- There are two main types of recruitment; internal or external

- The decision as to whether to recruit internally or externally is based upon many things and the process
used then to recruit will depend on which type is used.

Internal Recruitment:

- This is filling a job vacancy by selecting someone from within the organisation

Examples of the advertisements used:

Newsletter
Intranet
Word of mouth
Notice board
At meetings

Advantages of internal recruitment:

Abilities of candidates is already known
Motivating for workforce (prospect of promotion)
Quicker
Shorter induction period required
Reduces risk of employing the wrong person and is less expensive
Individual already knows the company well

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External Recruitment:

- Filling a job vacancy by advertising outside of the firm

Examples of External recruitment advertising:

Newspapers
Internet
Shop windows
Agencies
Job centres

Advantages of External recruitment:

Better qualified
New ideas
Wider range of candidates
Could add more motivation to the firm

Selection techniques

- In order for a firm to ensure that they employ the best candidate possible they can ask the employee to
go through a series of tests and assessments.

- These are called selection techniques – the processes used by an organisation to ensure the choose
the most appropriate candidate possible

Aptitude tests are a measurement of the level of ability of a candidate

Psychometric testing is an examination of personality and attitudes

Assessment centres/ group assessment is a more in depth assessment of a candidates suitability

by subjecting them to real life situations.

Training and its purpose

- The purpose of training is to help employees to develop existing skills or gain new ones. There are
three main types of training:

-It is a cost to firms to pay for the training and also to suffer the loss of working hours whilst an employee
is being trained. However, the potential gains from employee training are significant. The main benefits of
training are improved productivity and motivation of staff and also better quality products being made.

Induction Training
- aims to make newly appointed workers as fully productive as possible as soon as possible by
familiarising them with they key aspects of the business; This may include

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 Information on important policies and procedures
A tour of the organisation and an introduction to colleagues
Details of employment and basic duties

On-the-job Training
- This is where employees are not required to leave their workplace but actually receive instruction while
still carrying out their job.
- Advantages include:
The employee can train and still remain productive
It can be cheaper and may help to motivate others.
- Disadvantages include:
Requires a mentor to take up time to look after candidate
Still requires the candidate to complete all of their normal work – may be too challenging and
therefore de-motivate the employee.

Off-the-job Training
- This is where employees leave their place of work in order to receive instruction and training.
- Advantages include:
Allows candidate to concentrate on their learning
Allows more experienced instructors
- Disadvantages include:
Temporary loss of production

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Motivation
Motivation is the will to work. This comes from the enjoyment of the work itself and/or from the desire to
achieve certain goals e.g. earn more money or achieve promotion.

Managers spend considerable time working out how best to motivate their workers and there are a
number of different opinions about how this can be best done.

A well-motivated workforce can provide the following advantages:

 Better productivity (amount produced per employee). This can lead to lower unit costs of
production and so enable a firm to sell its product at a lower price
 Lower levels of absenteeism as the employees are content with their working lives
 Lower levels of staff turnover (the number of employees leaving the business). This can lead to
lower training and recruitment costs
 Improved industrial relations with trade unions
 Contented workers give the firm a good reputation as an employer so making it easier to recruit
the best workers
 Motivated employees are likely to improve product quality or the customer service associated
with a product

Financial Motivators:

Wages and Salaries

Wages are normally paid per hour worked and workers receive money at the end of the week. Overtime
is paid for any additional hours worked during the week. However salaries are annual (based on a year’s
work) and are paid at the end of each month.

Advantage Disadvantage
Workers may resent being paid the same as a
Simple and easy to use for businesses
colleague who they feel is not so productive
 

Piece-rate
Piece-rate is paying a worker per item they produce in a certain period of time. It was recommended by
the motivation theorist Taylor and had close links with working on production lines.

Advantages Disadvantages
Increases speed of work and therefore Workers do not concentrate on quality of work as
productivity emphasis on speed of work
Often workers not entitled to sick pay or holiday Workers may ignore company rules, such as
pay which reduces cost Health and safety issues, in they try to speed up
output
 

Fringe Benefits
These are often known as ‘perks’ and are items an employee receives in addition to their normal wage or
salary e.g. company car, private health insurance, free meals.

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Advantages Disadvantages
Encourages loyalty to a company so employees Widespread use to a majority of employees will
may stay for longer increase costs sharply
Helps meet a workers human and social needs  
 

Performance-related pay
This is paid to those employees who meet certain targets. The targets are often evaluated and reviewed in
regular appraisals with managers. It is system that is being increasingly used in businesses in the UK.

Advantages Disadvantages
Easier for managers to monitor and control their It can be difficult to measure the performance of
staff employees in service based industries
Reduces the amount of time spent on industrial It does not promote teamwork and can lead to
relations (negotiations with trade unions) workers feeling they are treated unfairly if
colleagues are awarded more
 

Profit sharing
This is a system whereby employees receive a proportion of the company’s profits. This means staff are
in the same position as shareholders.

Advantages Disadvantages
Should improve loyalty to the company and The share given to employees is often too small
break down the “them and us” barrier if all staff to provide a worthwhile incentive
given same amount

Workers are more likely to accept changes to Workers may feel that however hard they work it
their working practices if they can see that it may will not have a noticeable effect on the
decrease costs and so increase profit company’s profit level, so therefore no incentive
 

Share ownership
This is a common incentive for senior managers who are given shares in the company rather than a
straightforward bonus or membership of a profit sharing scheme. It means that some staff are also
shareholders.

Advantages Disadvantages
Employees will work harder as they have a stake Often only available to senior managers so can
in the company, just like a shareholder has cause resentment among other staff.
Workers are less likely to leave the firm

Non- Financial Motivators:

Job enrichment
Job enrichment means giving workers more interesting, challenging and complex tasks. Workers should
also be given the opportunity to complete a whole unit of work rather than individual separate tasks.

This is motivating for several reasons:

It gives workers the chance to test themselves and use their full range of ability

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It is more motivating than job enlargement or job rotation (see below) as it increases the complexity or
challenge involved in the task, rather than just simply providing more variety to the work.

Workers should obtain a greater sense of achievement and possibly more praise or recognition of their
work when they have successfully completed a tougher task.

The managers need to judge carefully however what an appropriate task is for a worker to handle- if it is
too complex for the workers or they do not posses the correct skill level, then expensive mistakes could
be made.

Job enlargement
Job enlargement means simply giving workers more tasks to do of a similar nature or complexity. This
will reduce the monotony or repetition involved in a persons work but over time this will not increase a
person’s satisfaction or sense of achievement.

Job rotation is a part of this and involves having a wider variety of tasks to do, perhaps rotating jobs with
other members in your team, but not increasing the challenge of the job.

Teamworking
Teamworking is where employees work in groups or teams. This can meet a worker’s social needs as a
person can more easily build friendships and feel a sense of belonging to a unit or group and hopefully to
the business as a whole. This applies in much the same way as being a member of a sports team or any
other team representing a school or college.

A business can create a number of different types of team; examples include production teams (often
known as cells), quality circles and management teams.

Teamworking has other advantages to a firm over and above improving motivation. It can lead to greater
flexibility of production, as employees are likely to be multi-skilled (able to do more than one persons job)
as they have learnt from other team members or undertaken formal job rotation. This means they can
cover any absences and can quickly adapt to a new production technique.

Empowerment
Empowerment is like delegation. It is when power or authority is given to employees so they can make
their own decisions regarding their working life. For instance workers have control over how to use their
time and deciding the priority of tasks that need to be done. They are encouraged to consider problems
they face and come up with some solutions.

For empowerment to be successful, workers must have adequate training and/or good skill levels in order
to be trusted to make the correct decisions. If they do not, then expensive mistakes can be made that
could affect the whole business. It is the manager’s job to judge whether a subordinate can cope with
more authority and decision-making power. It should be noted however, that even if managers pass
down authority to their subordinates, they are still responsible for the work that is done by them.

Key Motivation theories

- FW Taylor
Frederick Winslow Taylor (1856 – 1917) put forward the idea that workers are motivated mainly by pay.
His Theory of Scientific Management argued the following:

Workers do not naturally enjoy work and so need close supervision and control

Therefore managers should break down production into a series of small tasks

Workers should then be given appropriate training and tools so they can work as efficiently as possible
on one set task.

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Workers are then paid according to the number of items they produce in a set period of time- piece-rate
pay. (DISADVTANGE – Items not as good quality)

As a result workers are encouraged to work hard and maximise their productivity.

- Maslow

Maslow put forward a theory that there are five levels of human needs which employees need to have
fulfilled at work.

All of the needs are structured into a hierarchy (see below) and only once a lower level of need has been
fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy
satisfied. For example a person who is dying of hunger will be motivated to achieve a basic wage in order
to buy food before worrying about having a secure job contract or the respect of others.

A business should therefore offer different incentives to workers in order to help them fulfil each need in
turn and progress up the hierarchy (see below). Managers should also recognise that workers are not all
motivated in the same way and do not all move up the hierarchy at the same pace. They may therefore
have to offer a slightly different set of incentives from worker to worker.

- Herzberg
Herzberg believed that businesses should motivate employees by adopting a democratic approach to
management and by improving the nature and content of the actual job through certain methods. Some
of the methods managers could use to achieve this are:

Job Enlargement
Job Enrichment
Empowerment.

KEY TERMS(that haven’t already been mentioned)

Division of Labour – subdividing a job into small, repetitive fragments of work
Group Norms – Types of behaviour and attitude seen as normal within a group
Job satisfaction – the sense of well-being and achievement that stems from a satisfying job
Hygiene factors – everything that surrounds what you do in the job (Herzberg theory)
Fringe benefits – a form of reward other than income
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