EXPERIENTIAL PHARMACY

PRACTICE IN COMMUNITY
PHARMACY
Week 13 to 15
HUMAN RESOURCES AND
PERSONNEL MANAGEMENT
Is there a difference?
Differences between Personnel Management
and Human Resource Management
What is Personnel Management?
 Overview
•Personnel •Human Resources
Management Management
 Organization  Recruitment, Placing,
 Organizational Hiring, and Training
Behavior  Feedback
 Organizational •Financial Management
Principles Capital
 Aspects of Assets and Liabilities
Organization Financial ratios
 Organizational
Structure
ORGANIZATION

•Defined as a group of individuals working

to reach some common goal.

•Organizations can be very small in

numbers of personnel (fewer than 3) or
very large (more than 5,000).
ORGANIZATIONAL BEHAVIOR

•It is the systematic and

scientific analysis of individuals,
groups, and organizations.
Organizational behavior draws on a number
of different behavioral science disciplines.

1. Psychology
2. Sociology
3. Social psychology
4. Anthropology
5. Political Science
 PSYCHOLOGY

•allows us to understand individual

behavior and focuses on such aspects as
motivation, job satisfaction, attitude
measurement,
and work design.
Components of Psychology
 SOCIOLOGY

Contributes by helping us to understand

how individuals fulfill their roles within a
larger system through organizational
structures, behavioral norms, and
bureaucracies.
 SOCIAL PSYCHOLOGY

Focuses on the influence of individuals on

one another and helps us to understand
communication patterns, attitude change,
and group functioning.

Social Psychologists study:

conformity, persuasion, power, influence,
obedience, prejudice, discrimination, etc.
Components of social psychology
 ANTHROPOLOGY

Provides understanding of the

environment in which the organization
functions.
 POLITICAL SCIENCE

Provides insight into organizational

politics and informal organizational
structures that greatly influence the
functioning of an organization.
• Dynamics of power centers
• Structuring of conflict and conflict
resolution tactics
• Allocation of power
Components of Political Science
ORGANIZATIONAL PRINCIPLES
VALUES
•Center of any organization
•It forms the reason of existence,
philosophy and the purpose of the
organization
GOALS
Articulations of the values often
expressed as the goals of the
organization.
Organizational climate

 consist of such factors as the amount of

trust, the levels of morale, and the support
employees experience.

Organizational culture
 defined as the system of shared meaning
held by members that distinguishes one
organization from another.
 Organizational Climate is affected by the
organization’s culture

•A strong culture is characterized by the

organizations’ core values being both intensely
held and widely accepted.

•A weak culture is characterized by just

the opposite- vagueness, ambiguity, and
inconsistency.
STRUCTURE
 includes such concepts as reporting
relationships, communication patterns,
decision-making procedures,
responsibility/accountability, norms and
reward structures.
•Structures produces the climate or the
psychological atmosphere of the
organization.
Three aspects of Organization

1. Differentiation
2. Formalization
3. Centralization
 1. DIFFERENTIATION

•Aka ______________
•It refers to the degree to which units are
dissimilar.
•It occur either horizontally, vertically or
spatially
A. Horizontal Differentiation

•It describes the degree of differentiation

based on how many different types of
either people or units are included in the
organization
B. Vertical Differentiation

•It refers to the depth of the organizational

hierarchy.
•One key feature of an organization is the
chain of command, number of levels
between the owner or president of the
organization and staff.
•An organization chart depicts the reporting
relationships and the hierarchy of authority
in an organization.
 C. Spatial Differentiation

• It is the degree to which the location of an organization’s units is in

one place or spread
across several locations.

An independent community
pharmacy may have only one
location that has all operations in
one place.
•Spatial differentiation can also occur
when different departments are located
in different areas.
2. FORMALIZATION

• It can include the following;

•presence of rules
•procedural specifications (the extent to which
organization members must follow organizationally defined techniques in
dealing with situations they encounter),
•Technical competence (the extent to which organizationally
defined “universal” standards are used in the personnel selection and
advancement process),
•impersonality (the extent to which both organization members and
outsiders are treated without regard to individual qualities)
 highly formalized
• If a job is , the employee has little
discretion with regard to when and how the job is completed.
• Standardization grew out of beliefs held by early organizational
behaviorists who suggested that in order to make work more efficient,
error should be reduced.
3. CENTRALIZATION

• It refers to the extent to which decision

making is concentrated at a single point in the organization.
• Decision making and authority in this context refer to the rights inherent
to the position that one holds in the organization.
• Usually the very top levels of management make most of the policy
decisions in a centralized organization.
• More recently, the trend has been to decentralize decision making and
move it down in the organization to lower levels of management and/or
even to staff-level employees.
• Problems with this approach arise when employees are responsible for
achieving goals without the authority to make policies or gather the
needed resources.
Organizational Structure Principles

1. Division of labor,
2. Span of control,
3. Unity of command, and
4. Departmentalization.
Division of labor

•Division of labor divides work tasks into

specific parts.
•Eg. Dispensing function versus clinical
function.
•ADV: This should result in more efficient use
of the specialized skills of the individual.
•DISADV: The professional may become very
narrow in his or her abilities
Unity of Command

• Unity of command is the concept that an individual

reports to only one supervisor, to whom he or she is
responsible.
• As pharmacy organizations have tried to
decentralize, employees may have more than one
person to whom they are reporting. A structure that
makes the most of this concept is called a matrix
organization.
This works in environments that are continually changing and in need of
innovation.
Example: Pharmaceutical manufacturers and cross-disciplinary teams
Span of control

• Span of control refers to how many people a

manager effectively controls.
Departmentalization

•Departmentalization refers to grouping

individuals according to specific tasks.
•For example, persons responsible for
purchasing, distributing, and managing
drug products could constitute a
department.
What is Human Resources Management?

CHAPTER 9
HUMAN RESOURCE MANAGEMENT

•Defined as the process of achieving

organizational objectives through the
management of people.
•Tasks:
• Recruiting,
• Hiring,
• Training,
• Developing, and;
• Firing employees
RECRUITMENT AND
PLACEMENT
Importance of Recruitment and Placement

• Good hiring practices also diminish employee

dissatisfaction and turnover by matching the
right person with the right job.
• Pharmacy organizations need to exercise great
care in recruitment and placement because each
employee represents the organization and the
profession.
• Pharmacy employees can also be a source of
competitive advantage in the marketplace.
RECRUITING
•Recruiting consists of all activities associated
with attracting qualified candidates to fill job
vacancies.
•Purpose of recruiting: to attract the most
qualified candidates to interview for vacant
job positions.
•Recruiting is easier when employers are
proactive in their recruitment efforts.
• Proactive recruiting of pharmacy employees should
be a continuous activity that takes place regardless
of whether a position is open or not.
• Proactive recruiters also recognize that it is easier to
find candidates the more desirable the job, so they
attempt to build a desirable work environment
• Employers who are successful in offering the most
desirable jobs often develop a reputation as
employers of choice.
 PLACEMENT
•Placement refers to candidate application,
screening, interviewing, selection, and hiring
processes.
•Responsible persons:
• Pharmacist develop criteria for selecting employees,
to interview qualified candidates, and to make the
final choice.
• Personnel offices offer valuable assistance in
advertising positions, managing applications and
paperwork, screening candidates, advising about
legal and policy questions, checking references, and
extending job offers.
•Application
•One of the first steps in placement is for a
candidate to fill out a job application.
•Two Purpose:
• The first is to help screen unqualified
candidates. Applications can identify whether
candidates have the necessary training,
degrees, and experience for the job.
• The second purpose of applications is to
provide background about the candidate for
the interview.
•Screening
•It is a process that attempts to weed out
unqualified applicants from the pool of
potential candidates.
•Common screening criteria include lack of
job qualifications, poorly completed
applications, and negative applicant history
•Screening criteria are developed from job
analyses.
•Interviewing
•Qualified candidates normally are ranked
according to desirability, with the top-
ranked candidates receiving initial
invitations to inter view.
•Different ways to conduct interview;
1. Traditional interview- attempts to
engage candidates in a general
discussion about themselves.
2. Situation or role-play interviews- direct
applicants to describe how they would
handle a difficult imaginary situation.
3. Stress interview- attempt to replace the
polite conversation seen in traditional
interviews with a deliberate attempt by
the interviewer to unnerve the
candidate with blunt questions,
interruptions, and persistent pursuit of a
subject.
4. Behavioral interview- try to evaluate an
applicant’s past behavior, experience, and
initiative by asking for specifics about past
events and the candidate’s role in those
events.
5. Uses tools- e.g. standardized
personality and skills tests
HIRING
 Hiring

Once hired, employees must be given the

training and feedback necessary to do their
jobs.
TRAINING AND
DEVELOPMENT
TRAINING
It is any planned activity to transfer or
modify knowledge, skills, and attitudes of
the trainee through learning experiences.
The purpose of training is to help
employees meet the changing demands of
their jobs.
Training is essential for meeting current
needs, and development is an investment in
future needs.
 Types of Training for Employees

Induction Training
Training given to the new joinee (Employee) at
the time of joining the organization for awareness
of organization and organization personnel is
termed as Induction Training.
Job Training
 helps current employees learn new information
and skills to do their jobs and refresh capabilities
that may have diminished over time.
•Job training can be used to develop habits ,
knowledge, skills, procedures, and policies
Class Room Training
Training given to an employee in class
room or other than work place is termed as
Class Room Training.
For the training program, employees will
gather at the designated location
External Training
Training given to employee outside the plant
location / by the person other than the
Organization Group is termed as External
Training.
DEVELOPMENT

Development prepares employees for

new responsibilities and positions.
PERFORMANCE
FEEDBACK
PROGRESSIVE DISCIPLINE

•Progressive discipline is defined as a series

of acts taken by management in response
to unacceptable performance by
employees.
•The role of progressive discipline is to
escalate the consequences of poor
employee performance incrementally with
a goal of improving that behavior.
Progressive discipline usually consists
of the following steps:

1.Verbal warning,
2.Written warning,
3.Suspension, and
4.Termination.
Verbal Warning

•Verbal warnings are relatively common

and often the only action needed to
correct unacceptable employee
performance
Written Warning

•A written warning is the first formal step

in progressive discipline that may result in
eventual discharge of the employee.

•A written warning is a legal document

that can end up as evidence in a court
case.
Suspension

•Suspensions are punitive actions

meant to demonstrate the
seriousness of a situation.
•Suspensions are meant to act as a
final warning that current behavior is
unacceptable
Financial
Management
What is Financial Management?

Financial Management
means planning, organizing,
directing and controlling the
financial activities of the
organization.
GOALS OF FINANCIAL MANAGEMENT

The principal goal of financial

management is to increase the value
of the organization.
 A major part of this goal is
making efficient use of financial
resources.
WHAT IS ACCOUNTING?
•A service activity, whose function is to provide
quantitative information, primarily financial in
nature, about economic entities that is
intended to be useful in making economic
decisions
 ACCOUNTING
•Accounting is measuring, processing and
recording of financial transactions of an
organization.
•The process is to summarize, analyze and
record such information to be reported to
management, creditors, shareholders,
investors and the oversight officials or tax
officials.
•A specialized language to communicate
financial information.
PURPOSES OF ACCOUNTING
•To track the flow of money
(cash or credit) between
financing and investing
activities
•Determining profitability,
future growth, and tax
liability
 3 Basic Financial Statements

• Balance sheet
• Income statement
• Cash Flow statement
Obtaining Financing
•To start a business, one needs to acquire
assets. Financing activities to acquire
assets involve obtaining funds from
owners and creditors (i.e., banks).
•Shareholders
•Creditors
Making Investments
•The types of investments a company
makes depend largely on the type of
business it is conducting.
•In pharmacy settings, funds are invested
in acquisition of inventory, computer
software and hardware, robotics,
buildings, and land.
Conducting a Profitable Operation
•The operating activities of pharmacy settings
include purchasing, distribution (i.e.,
prescription-filling activities), clinical
activities, and administration
•In many pharmacies, marketing is also a
significant operation activity, in that it is
required so that others can learn of the
goods and services that the pharmacy offers
What is a capital?
 Two Types of Capital as to Ownership

1. Equity/Risk/Proprietorship/
Permanent Capital- constitutes 50-75%
or more of the total capital required.

2. Borrowed/Investment Capital- obtain

ed by temporary loans from banks or other financial
institutions,
Types of Capital as to its Use or
Length of Time

1. Fixed Capital or Investment

Capital-
representing 8-15% of annual
sales.

2. Working Capital- active and

mobile funds that are investe
d in the merchandise cycle.
Working Capital
•Refers to short term funds,
to meet operating expenses.
•is a fund required by firm to
finance day-to-day
operations.

•Two concepts of Working

Capital:
– Gross Working Capital
– Net Working Capital
ASSETS

•Resource with economic value that

an individual owns or controls
within the expectation that it will
provide future benefit
Current Assets

•Current assets are short-term economic

resources that are expected to be
converted into cash within one year.
•Current assets include cash and cash
equivalents, short term investments,
short term notes receivable, supplies,
accounts receivable, inventory and
various prepaid expenses
 Examples of Current Assets
1. Cash
2. Open account for merchandise sold
3. Account receivable
4. Inventory
a. Finished good
b. Partly finished good
c. Raw materials
5. Corporate securities that are marketable:
stocks and bonds
Fixed assets

Fixed assets are long-term resources, such

as plants, equipment and buildings. An
adjustment for the aging of fixed assets is
made based on periodic charges called
depreciation, which may or may not reflect
the loss of earning powers for a fixed asset.

**Less Accum. depreciation

 Depreciation Value

•For example:
A car manufacturer purchases a machine that
will produce doors for its cars. The cost basis
of this machine is $5 million, and the
machine's expected useful life is 15 years. The
company believes that after 15 years, it will be
able to sell the machine for only $500,000.
How much is the depreciation value?
Tangible assets
•Tangible assets are assets with a
physical form and that hold value.
•Tangible assets are the main type
of assets that companies use to produce
their product and service.
•Can be current or noncurrent
 Intangible assets
•Economic resources that have no
physical presence
•Trademark, copyrights, and goodwill

Other companies cannot copy it

Patents and
Whylicensing
would Iagreements
buy a company at
Willing to pay a price higher than its market value
a price higher than its market
value?
Liabilities
A liability is defined as a company's legal financial
debts or obligations that arise during the course
of business operations. Liabilities are settled over
time through the transfer of economic benefits
including money, goods or services. Recorded on
the right side of the balance sheet, liabilities
include loans and deferred revenues
Due and payable within one year
Due and payable after one year
Examples of Current Liabilities

•Bills and accounts payable, sal

aries, wages, interest, warrant
y, and taxes.
Long term liabilities
•Obligations of the
enterprise that are not
payable within one year
of the balance sheet
date.
•Two examples are bonds
payable and long term
notes payable.
 Revenue is the amount of
money that a company
actually receives during a
Gross Revenue
specific period, including
discounts and deductions for
returned merchandise. It is
the top line or gross income
figure from which costs are
Net Revenue
subtracted to determine net
income.
Types of Revenue

Operating revenue is revenue generated

from a company's primary business
activities. For example, a retailer produces
revenue through merchandise sales, and a
physician derives revenue from the medical
services he/she provides. What constitutes
operating revenue varies per business or
industry.
Non operating revenue is revenue
generated by activities outside of a company's
primary operations; this revenue tends to be
infrequent and oftentimes unusual. Examples
of non-operating income include interest
income, gains from the sale of assets, lawsuit
proceeds, and revenues from other sources
not connected to operations.
Financial Ratios
FINANCIAL RATIOS
•Organizations, investors, creditors, and
even individuals use financial ratios to
examine an organization’s financial
performance.

•Some financial ratios, such as net

income/average total assets, provide
useful information on the profitability of
the organization.
1. Profitability Ratio
•It measures of overall success in the daily
operations of a business. More specifically,
profitability ratios provide a method to
measure the overall financial success of a
company.
•Includes:
•gross profit margin
•Net profit margin
•_________________________
•Return on equity
•The most commonly used profitability ratios are
the gross profit margin and the net profit margin.

Gross profit margin(%)=

(total sales−cost of good sold) x100
total sales
Higher gross profit margin ratios
are desirable because they indicate
the availability of funds for the
company’s other expenses.
Find Gross profit margin
•Net Profit margin
•It indicates the fraction of net profit that is
generated for every sales.
Net profit margin(%) = net income (after taxes) x100
total sales
 Net profit margin(%)
= net income (after taxes) x100
total sales

= $1,765 x 100
$5000

= 35.3%
•Financial ratios could also be used to compare the
performance of two or more pharmacies within a
chain or to assess the performance of a pharmacy
against industry averages.

Return on assets (ROA) = net income_ x 100

total assets

This ratio provides

information on the company’s
ability to generate profits
using the company’s assets
 Return on assets (ROA) = net income____ x 100
average total assets

Calculate ROI

= 900 %
Calculate ROA
You bought a 1,100 pesos collectible item back
in 2005. If you can sell it at an auction for
5,300 pesos, how much is your ROA?

5,300 – 1,100 x 100

1,100 = 381.81%
•Return on equity is a measure of
how well the company can make profits
from funds provided by owners or
investors.

Return on equity(ROE) = net income ÷

average owner’s equity

•High ROE levels are desirable because

investors— similar to companies—are
interested in maximizing their profits.
2. Liquidity Ratios
•Liquidity ratios provide information on
the business’s ability to meet its short-
term financial obligations.
•The current ratio is the ratio of
current assets to current
liabilities.

Current ratio = current assets ÷

current liabilities

•An organization with a high

current ratio is taking fewer risks
in meeting its financial
obligations.
•While high current ratio values generally
are considered desirable, values greater
than 5.0 are considered by some to be
too high.

•This might be a sign of a company that is

too conservative, leaving too much of its
money in the bank rather than investing it
in ways that could help the organization
grow (e.g., building new pharmacies or
expanding existing services).
•A low current ratio (= or <1) indicates
that the organization has low current
assets (especially cash) relative to its
current liabilities (often bills that are due
in 30-60 days)
Current ratio = current assets ÷ current liabilities
 Example of current ratio
If a Company B holds:
• Cash = $10 million
• Marketable securities = $10 million
• Inventory = $25 million
• Short-term debt = $15 million
• Accounts payables = $15 million
Compute for Current Ratio.

Total Current assets = 10 + 10 + 25 = $45

million
Total Current liabilities = 15 + 15 = $30 million
Current ratio = current assets ÷ current liabilities
= 45 million / 30 million = 1.5
•Quick assets are defined
as assets that are easily
converted to cash.
•The quick ratio considers
only assets that are easily
converted to cash (and
therefore can be used to
pay bills, etc.), it provides
a better picture of a
company’s liquidity and
its ability to meet its
financial obligations.
Quick ratio= (current assets − inventories − prepaid expenses)
current liabilities
Quick ratio
•The standard quick ratio that any
organization strives to obtain is at least 1.0
•Having a quick ratio of greater than 1.0
means that the organization has more quick
assets than it has current liabilities.
•Having a quick ratio of less than 1.0 means
that the cash that organization has on hand
would not be sufficient to pay all its current
liabilities, particularly its short-term bills and
other obligations
3. Turnovers
•Turnover ratios measure the efficiency with
which an organization uses its assets.
•Also known as Asset Utilization Ratios and
___________________________.
•The two most commonly used turnover
ratios are inventory turnover and receivables
turnover.
Inventory turnover ratio =
cost of goods sold ÷ average inventory (at cost)

•The inventory turnover ratio measures how

quickly, on average, an organization’s
inventories are sold.
 Calculate the Inventory
Turnover Ratio of Company A
2012 2013
Beginning inventory 81,600
Ending inventory 24,200
Ave. inventory 27,400
Cost of Goods Sold 240,000 245,200
Inventory Turnover
81,600 - 24,200 = 57,400 / 2 = 28,700
240,000 245,200
= 8.76 = 8.54
27,400 28,700
Receivables turnover ratio
= credit sales ÷ average accounts receivable
•This ratio measures how quickly
receivables (money owed to the
organization by others) are turned into
cash.
Break-even Point
•Break-even point can be defined as a
point where total costs (expenses) and
total sales (revenue) are equal

•Break-Even Volume =
Fixed Costs___________
Sales Price – Variable Cost Per Unit
Find the Break-Even point = Costs___________
Fixed

Sales Price – Variable Cost Per Unit

You’re selling watches for 700 pesos per watch.
Each watch costs 450 pesos to be produced. How
many watches must you sell per month to break-
even, if you are paying 4,000 pesos for rent and
699 pesos for internet plan per month?
Fixed cost: 4,000 + 699= 4,699 pesos
Sales Price= 700 pesos
Variable Cost Per Unit= 450 pesos

4,699 pesos = 18.79 watches or 19 watches

250 pesos