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Higher Business Management

Business Decision Areas II:

Human Resources
Human Resource Management

The role and importance of Human Resource Management

Irrespective of the size or objectives of an organisation, the most valuable

resource it possesses is its workforce. Without workers who are both efficient
and effective, the long-term success of an organisation cannot be assured. The
human resource of an organisation is its entire workforce – from managing
director to part-time cleaner. Each person is employed to perform specified
functions which play their part in the overall success or failure of an organisation.

It is the human resources employed by an organisation which generate wealth

through the provision of services or the production of goods. Consequently, just
as machinery and buildings need to be protected if they are to work properly, time
and care must be taken if an organisation is to secure and retain the human
resources that it requires. It is the responsibility of the Human Resource
Management department to devise and implement the organisation’s policies and
strategies for managing its human resources in a way that will satisfy both the
objectives of the organisation and the objectives of the human resources it

Human Resource Management (HRM) refers to that part of an

organisation’s activities designed to attract, train, develop and maintain
an effective workforce.

Human Resource Management is a relatively new term and has only come into use
over the last 20 years or so. Traditionally, the function of dealing with employees
was described as Personnel Management. Many organisations, in fact, continue to
use this term.

In many cases, Human Resource Management and Personnel Management are used
to mean the same thing. For example, some organisations which continue to use
the term ‘personnel department’ describe its work as ‘managing the human
resources of the organisation’. Despite this, HRM is often seen as different from
Personnel Management:

• HRM takes a more strategic view than Personnel Management. It is concerned

with making sure that the management of people fits in with the strategic
objectives of an organisation and, like all other departments’ is also involved
with deciding what the organisation’s strategy should be. In the past, personnel
departments often played no part in deciding strategic objectives.

• HRM is more integrated than Personnel Management. It is responsible for bringing

together all the elements of managing human resources and making sure that they fit
together in a coherent way. Traditionally, the various elements undertaken by a
personnel department were seen as separate tasks. As a result, they were often
carried out in isolation; for example, new employees would be recruited without any
consideration being given to their future training and development.

Overall, therefore, HRM differs from Personnel Management in that it takes a

much more strategic and integrated approach, although the activities it performs
are much the same. This is why the terms are often used interchangeably. In this
text we shall use HRM because it is becoming the more widely used term.

The HRM function within organisations

The range and nature of the skills and specialisms available within the Human
Resource Management function of an organisation depend on a number of factors.
These include:

• the size of the organisation;

• the nature of the labour force employed by the organisation;
• the status of the HRM department in the organisation;
• the values and expectations of senior management.

Normally all but the smallest organisations will have their own specialist Human
Resource Management department. However, the management of the human
resources of the organisation is not carried out solely by the HRM department.
Line managers, such as team leaders, have responsibility for the activities of the
workforce and work closely with them on a day-to-day basis. As a result, they
undertake a range of Human Resource Management activities. The extent of
these varies between organisations, but examples of HRM activities that line
managers might undertake include:

• drawing up job descriptions,

• selecting new staff,
• training (e.g. induction training for new staff),
• performance appraisal,
• planning future staffing requirements,
• handling grievances,
• implementing HRM policy, e.g. equal opportunities (line managers are expected
to be aware of all legal requirements affecting HRM).

Human Resource Management, therefore, is a central component in the duties of

all managers irrespective of their job title or functional responsibility.
The HRM department in an organisation is likely to fulfil a number of different

The executive role

Here, the HRM department is seen as the ‘expert’ in matters relating to Human
Resource Management and makes decisions about what should be done in this area.
For example, the HRM department will ensure that organisational policies are
developed in line with legal requirements, will decide to produce information
booklets on training, etc.

The audit role

In this capacity, the HRM department monitors organisational activities to ensure
that HRM policies are being properly implemented by all concerned.

The facilitator role

This role requires the HRM department to facilitate the work of other managers
in the organisation and help them to acquire and use the skills, techniques and
attitudes that they need to make sure that HRM policies are implemented
throughout the organisation. For example, team leaders could be given training to
help them respond to, and deal with, complex relationships between team members
that may involve HRM issues such as grievances, equal opportunities, human
resource planning, etc.

The consultancy role

In this role, the HRM department provides advice and guidance to managers at all
levels on matters to do with the management of people.

The service role

This requires the HRM department to be the provider of useful information on
HRM matters. This is most important in times of change when the organisation
needs to make sure that it is up to date with what is happening, for example with
changes in legislation on issues like equal opportunities, or with developments in
HRM practice or 360-degree feedback.


Using these notes, any textbook and if access is granted, the internet, Prepare a
short presentation answering the following question:

“Explain the role and importance of Human Resources to an organisation of

you choice.”

Select an organisation you know well so you can share examples with everyone.
The activities of the Human Resource function

The Human Resource function can be seen operating at 3 levels of management –

strategic , tactical and operational .

Strategic activities
Strategic activities are concerned with long-term planning. In order to achieve
corporate objectives it will be necessary to:

• formulate personnel policies that clearly state how things will be done across
the organisation as a whole;
• devise guidelines for the implementation of policy;
• ensure that the work of the HRM department helps to achieve corporate goals,
i.e. defining corporate culture, and cultivating and communicating this culture to

Tactical activities
Tactical (or advisory) activities refer to the provision of attainable pathways
which when followed will enable an organisation to achieve its strategic objectives.
Tactical activities include:

• Human Resource planning;

• recruitment of particular groups of staff;
• staff training and development;
• promoting effective industrial relations.

Operational activities
Operational activities refer to the ways in which policy is implemented on a day-
to-day basis. For example, in order to implement a tactical activity such as ‘a
programme for staff training and development’, it may be necessary to carry out
the following operational activities:

• identify what the training needs are;

• invite employees to indicate their willingness to participate in training;
• select the most suitable applicants;
• arrange absence cover for trainees;
• develop training materials and deliver these.
The elements of Human Resource Management

HRM covers a range of activities that can be described as the ‘elements’ of Human
Resource Management. They include:

• Human Resource planning;

• recruitment;
• selection;
• training and development;
• employee relations;
• development and monitoring of policies and procedures relating to human
resources, e.g. discipline, grievance, appraisal, health and safety, terms and
conditions of employment;
• maintenance of personnel information and record keeping.

Each will be discussed in turn.

Human Resource Planning (H.R.P)

Human Resource Planning (H.R.P) is the process of forecasting the workforce

requirements of the business for future years. It looks at how many employees the
business will require in the future, as well as the type of employee that will be required
(e.g. graduate trainees, skilled-manual and supervisors). H.R.P. also ensures that the ‘right’
employee is in the ‘right’ job, to ensure maximum efficiency and
effectiveness of the workforce.

Clearly the process of H.R.P. requires that the business make

estimates of the number of workers that it believes it will require at
all levels in the business in the future. This can be done in a number
of ways:

1. Using past data (e.g. if the workforce has grown at 4% per year over the past 3 years,
this trend may well continue).

2. Analysing the expected levels of customer demand and sales (e.g. more employees
will be required if the number of customer orders is estimated to rise significantly).

3. Estimating the level of labour turnover. For example, if the number of employees
that are expected to leave the business next year is 50 (due to retirement or transfers),
then the business will have to recruit many new employees to replace those that are

4. The views of the management (the management are often in the best position to
estimate the number of new employees that will be required in their department or
5. Expected changes in working practices. For example, if a manufacturing business is
wishing to change its production technique from labour-intensive to capital-intensive, then
it is not likely to require many new employees in the future.

Business may decide to meet any requirements for employees at the supervisory and
management levels from within the existing workforce. This can be done by promoting
those employees who have already demonstrated their potential and effectiveness in their
current posts. These employees have the advantage of already knowing about the systems
and the routines of the business, but they would still require the relevant training and
development in order to prepare them for their new, more senior positions.

Alternatively, the business may decide to fill these (and more junior) positions from
outside the business.


1. The rate of unemployment in the area.

2. The extent of the infrastructure in the area (e.g. price and availability of housing or
availability of public transport).
3. Government incentives and subsidies (paying the training costs for the business).
4. The availability of workers with the necessary skills and qualifications.
5. The number of competitors in the area.


1. Will the ‘new’ employees mix effectively with the existing workforce?

2. Changes in the external environment (e.g. a recession) could lead to the business having
to make redundant several of the recently-appointed employees.

It will always be difficult for a business to accurately forecast the number of new
employees that it will require, because both the business-world and the internal
requirements of the organisation are very dynamic.

The Shamrock
Organisation, right, is a
modern concept in business,
whereby firms are made up of
regular core workers which are
supplemented by part-time staff and
New Working Patterns

Manpower plans have to be amended to account for changes in working patterns. The
traditional view of employment is of a full-time permanent contract with a single employer.
Whilst this still applies to many firms and employees, increasing numbers are being
employed under new working patterns. The labour market is more flexible nowadays, with
2 workers in 4 outside permanent employment. The benefits to a firm include lower total
labour costs and a more flexible workforce. Trade union representation and negotiating
power are also reduced. The following are the main new working patterns.

Part-time Work – although part-time seasonal work is traditional in the agriculture and
tourism industries, part-time work has grown in importance in the rest of the economy.
Firms such as the Burton Group and British Home Stores have converted many full-time
posts into part-time ones; up to two-thirds of the staff of Sears plc are now part-time.

One UK worker in four is now a part-timer. Many ‘women returners’ are employed on a
part-time basis: in 1992 only 6 per cent of men, but 45 per cent of women were part-time
workers. People employed for less than 16 hours a week do not enjoy the same
employment-related rights (eg redundancy payments) as full-time staff, employers can
avoid NI contributions to low-paid part-time workers, and the existence of more part-
timers and weaker unions has made it easier for firms to shed staff.

Flexible hours – the number of workers of ‘flexitime’ has increased: a core time band (eg
between 10 am and 4 pm) is established when all employees must be present, with the rest
of their weekly hours being flexible to suit individuals themselves.

Shift Work – continuous 24-hours operation is appropriate for many industries. Employees
may rotate shifts or may be based on ‘permanent nights’. Although the hourly labour costs
will rise the increased production helps account for fixed costs, and so unit costs still

Job Sharing – two or more employees may decide to share a full-time post, with the
employer’s agreement. One benefit to the firm is the likelihood of increase cover at times
of sickness or absence.

Fixed Contracts – a firm might recruit staff on a short-term contract, perhaps to carry
out a project. This is often found in the construction industry and is now used in many
other areas, for example in recruiting certain managers and senior staff. Benefits to the
firm include greater control over labour costs, the opportunity to bring in ‘new blood’, and
a highly motivated employee where the ‘carrot’ of a renewed contract exists. Firms may
also employ people on a consultancy basis to complete a project. In such cases the person
is self-employed and the consultancy will be terminated once the project is completed.

Sub Contracting – this is when a firm lets out work to an external company. It is also
referred to as Outsourcing. Types of jobs commonly subcontracted include printing and
publishing, computer technical support, general cleaning, window cleaning, and security.
In-House - When work is carried out within the company. it does have several benefits:
The in-house

Why produce in-house?

Keeping the work within the organisation does have several benefits: The firm has more
control over costs (both wages and materials) and can cut their cloth accordingly. They
also have control over quality and importantly, delivery dates. Relying on other people to
meet deadlines always carries an element of risk. Look at the Scottish Parliament building:
over-budget and delayed!

Confidentiality is also kept within the firm since no outsiders are privy to information with
regards to the company’s activities.

Why use subcontractors?

If a firm does sub-contract work out it may be due to several factors: the company may
not be specialists in the work needed to be carried out; the cost of undertaking the task
may be too expensive and is more cost effective to hire someone else’s services and/or
equipment, in particular relating to ICT and Computer Technical Support within firms. The
company may be working at the factory’s maximum capacity and rather than let orders go,
they can use other firms to meet demand. If an order is a one-off and unlikely to be
repeated, perhaps due to the size of the order, then again work may be carried out.

Strengths of Subcontractor
Normally the external firm will have more experience in the particular job or skill
required, and properly trained individuals capable of higher performance than in-house
employees. They also will have more up-to-date equipment and machinery. For example a
school could produce its own Yearbook, but to save production costs and be guaranteed of
a large order completed to a deadline by professionals, they may let a printing firm carry
out the work.

Benefits of outsourcing to the firm

When firms use subcontractors they achieve other benefits in addition to having the task
done more expertly. The firm can ‘stick to the knitting’, in other words concentrate on
what they excel at. It also frees up workers’ time, especially managerial time, which can
be spent on another project.

Customer supply and demand can be matched better without resulting in excess capacity
being left idle during quiet times.

In terms of facilities it also means that they may not have to update machinery to do a
particular job and again can free up resources within the factory. Stock levels can be
reduced, as finished orders will be delivered at an agreed date to the customers. This can
result in a Just-in-time system being used. Finally, the firm can diversify into other
products by using the subcontractors’ strengths.
TCHART: define Outsourcing and then find + & -

Outsourcing -

Advantages Disadvantage

The recruitment and selection process commences when the business realises that there
is a vacancy in the organisational hierarchy which needs to be filled.

People leave their posts due to getting promoted, getting a job with another organisation,
getting fired, retiring or taking a career break due to personal circumstances.

Firstly, job analysis has to be conducted to identify whether a position is needed at all.
Then a job description needs to be written, this outlines the job title, as well as the tasks
and the responsibilities that will be covered by the successful applicant. Once this is
completed, then a job specification needs to be written, this goes beyond a description of
the job, and it lists the physical and mental attributes that will be desirable or essential
for the successful applicant (such as the level of intelligence, their disposition and their

The H.R.M. department will then need to write an advertisement for the job and to place
it in a variety of media (newspapers, job centres, job agencies, the internet, radio, and
internal notice-boards), in order to get as many people as possible to apply for the post.

The advertisement will include the hours of work, the pay and fringe benefits, the job
title, the relevant experience and qualifications that are required, and a contact name and
address. It is likely that the job will be advertised within the business as well as through
external media. The advantages of recruiting from within the existing workforce include
the fact that a shorter training and induction period is necessary, as well as far less time
and money being spent on the whole process.

The H.R.M. department will then need to send out application forms to, and request
Curriculum Vitae (CVs) from, all those people who write to the business expressing a
desire to apply for the job.

It is vitally important that the application form is tailored to the specific post that is
being advertised, as well as asking questions that are relevant, legal, inoffensive and
essential. Once these application forms have been completed and returned to the business
(often with a CV and a covering letter) then the short-listing process will ensue, this
involves analysing the CVs and the application forms and deciding which applicants appear
to be most suitable for the post. Once this is done, then the H.R.M. department will
contact the successful applicants and ask them to attend an interview.

The interview process is very time-consuming but is, nevertheless, an essential factor in
getting the ‘right’ person for the ‘right’ job. A good interviewer will have studied the job
description, the job specification and the job advertisement before interviewing the
applicants, as well as studying their application forms, CVs and covering letters in order to
know as much information as possible about the applicants before the interview
A good interview needs to be well structured, uninterrupted, and conducted in a friendly
manner, with the use of open-ended questions which will give the applicants the chance to
talk openly about themselves. The interviewer must listen carefully to the applicants’
comments and make notes as necessary.

At the end of the interview, the applicants must be given the opportunity to ask questions
about the job and about the business, and then the interviewer must inform the applicants
when they will be notified of the decision.

It is likely that applicants for a job will be interviewed by a number of people. This can be
in sequence (i.e. the applicant will have one interview quickly followed by another) or it can
be simultaneous (i.e. the applicant will be interviewed by a panel of people). Whichever
method of interviewing is chosen, the purpose remains the same, to select and appoint the
’best’ applicant for the job.

It is possible that the business may choose to use a variety of tests to complement the
interview process, in order to measure the applicants’ intelligence, their performance in
certain scenarios, and their personality traits.

Once a business has selected the most suitable applicant for the available post (often
involving much discussion between the different interviewers), then he/she will be

This will involve the new employee being given a Contract of Employment, which is a
written statement covering the terms and the conditions of employment (e.g. date
employment commences, job title, pay, hours of work, holiday and pension entitlements), as
well as the process for disciplinary and grievance procedures.

Recruitment Process

The Human Resources department is usually responsible for recruiting new staff and for
training them to do their job. When job vacancies arise, it draws up documents for
specific purposes, organises and runs interviews. The Human Resources
department has to follow certain procedures before a job can be
advertised. This page will explain these different stages in detail.

Vacancy occurs - Three reasons why a vacancy may arise in a business:

• retirement
• promotion
• to go to a new job

The Human Resources manager then draws up a job description - The job description
should contain these basic details about the vacancy:
• the job title
• the position in the organisation chart
• a list of duties
Person specification drawn up - The person specification represents the ideal qualities of
the person required to fill the vacancy:
• qualifications
• experience
• personality

The job is advertised- The Human Resources manager needs to consider the following:
• what details need to go in the advert
• where the advert should be placed

Candidates apply for the job - The advert tells candidate what to send in:
• a letter of application or a completed application form
• a copy of their curriculum vitae or CV. The CV contains personal information about
their qualifications and interests.

Application forms filtered to create shortlist of candidates being considered - If you

compare these documents you can assess whether the person has the right skills for the
• the CV
• the job application form
• the job specification

Arrange the interviews - Why are the candidates interviewed? Whether a person gets
the job or not depends on their performance at interview

The interview is held - What are the interviewers looking for?

• good answers to all the questions
• the candidates' attitude and dress
• body language

Follow up references - What is a reference? The names and addresses of people who can
provide details of your performance with a previous employer or give evidence of your
good character

Appoint candidate to the job - What happens if references are not satisfactory?
• the job offer will be withdrawn and offered to someone else
• it might be necessary to re-advertise
The Apprentice: Recruitment and Selection
The vacancy of Teacher of Business Education has arisen due to a member of staff
leaving the school.

You are a recently graduated Teacher who currently finds themselves unemployed.

The class will be divided into two main categories:

 Applicants

The SMT will prepare the Job Description and the Person Specification while the
Applicants prepare their CV.

Once completed the Job Advert will appear and applicants will be given an
application form to fill in.

Once applications forms are completed they will be returned to the SMT who will then
short-list the applicants and invite for interview. Unsuccessful candidates will form an
audience and take notes on what they are going to witness.

The Chair of the Panel will be a specially invited guest and whose decision is final.

The interviewees will be rated on their appearance, their ability to answer questions and
their body language.

At the end of the interviews the candidates will be asked back in to be given feedback
and one lucky person will get the job!
Job description: Teacher of Business Education

Organisation: Hamilton Grammar High School

Job title: Teacher of Business Education

Line manager: Mr M McGowan

Hours: Full-time


1. To teach a range of Business Educuation subjects from S3-S6

(including ICT in S1-S2)

2. To plan lessons and mark students’ work

3. To set and mark tests and examinations for Business Education


4. To report on individual pupil progress to parents by attending

parents evenings

5. To take responsibility for a tutor group

6. To attend all after school meetings as directed by the headteacher

7. To undertake any other duties that are reasonably asked of the

Curriculum Vitae
Name: Address:

Date of Birth:

Telephone Number: Nationality:

National Insurance Nos:


School Dates


Subject Exam Board Date Grade

Work Experience

Place Date Details of Work


Standard Application Form
Candidate ref:

Employer applied to:

Personal Details (please print this section)
Title Surname First Name(s) (indicate (*) the one you are known by

Home Address Term Address

Postcode Postcode
Telephone: Telephone:
E-mail: E-mail:
Dates at above: Dates at above:

Do you need a work permit for permanent employment in the UK? YES  NO 
Do you have one? YES  NO 

Do you hold a full UK driving licence? YES  NO 

Education - Professional, Postgraduate, First Degree/Diploma

Please list all degrees/diplomas/professional qualifications etc held at or currently studied for, whether at first degree or postgraduate level.
List most recent first and give all results known whatever the outcome.

From - To Higher Education Institution Award and Title of Award Results (expected/awarded)
Month/year (HND/Degree/Dipl/Msc/
PhD etc) List main subjects below

Education - Prior to Higher Education

Please list date (year)/qualification/subjects (grade) of all of the highest level examinations that qualified you for your Higher Education
course(s) (A/AS Levels/Scottish Higher/Irish Leaving/Access/GNVQ/Baccalaureate etc). Include all examinations taken at this level whatever
the outcome.

Number of Standard Grade passes Date(s) gained Grade for Maths Grade for English Number of A/A* grades
(Grade C & above) Language
Employment and Work Experience

Please describe briefly any work (whether paid or unpaid) which you have undertaken. Highlight(*) the two most relevant and note what you

From - To Employer Job Title/Responsibilities Achievements


Personal Interests/Achievements

Use the space below to describe with dates (year) any part-time activities. Include organising, leading or group activities. Those requiring
initiative, creativity or giving intellectual development are also of interest.

Specific Evidence

The following questions are designed to encourage you to provide specific abilities. Your examples can be taken from your education, work experience,
placements or spare-time or other voluntary activities but do not write solely about course-work.

Planning, implementation and achieving results:

Describe a challenging project, activity or event which you have planned and taken through to a conclusion. Include your objective, what you
did, any changes you made to your plan and state how you measured your success.

Influencing, communication and teamwork:

Describe how you achieved a goal through influencing the actions or opinions of others (perhaps in a team context). What were the
circumstances? What did you do to make a difference? How do you know the result was satisfactory?

Analysis, problem solving and creative thinking:

Describe a difficult problem that you have solved. State how you decided which were the critical issues, say what you did and what your
solution was. What other approaches could you have taken?
Additional Information

Please write here any additional information, not covered elsewhere which will strengthen your application.

Where did you hear of us/see an advertisement?

Specific Skills
1. List any languages that you know indicating level of proficiency (basic/working knowledge/fluent/mother tongue).
2. Specify your experience with any generic computer packages/programming languages (limited/working knowledge/extensive).
3. Indicate any other specific relevant skills (laboratory techniques, graphics skills etc).

Career Choice
Explain why you have applied for the job function(s) that you noted on the first page. Offer evidence of your suitability (e.g. courses
undertaken, work shadowing, skills, strengths and experiences). Emphasise why you consider yourself to be a strong candidate.

Health Declaration
Please give details of any health matters of relevance to the work applied for (see note within Guidance Notes and Monitoring Data).

Academic Referee Other Referee

Name: Name:

Position: Position:

Address: Address:

Telephone: Telephone:

The statements made on this form are true. I understand any false statements may jeopardise my application and may lead to an offer being
withdrawn. I have attached the Equal Opportunities Monitoring Data.

Signed ………………………………….. Name (please print)…………………………………….… Date……………………

Mock interview questions
Job: teacher

1. What qualities do you feel you can bring to the job?

2. Are you good at managing classes or groups of pupils?

3. Do you enjoy forming relationships with pupils?

4. What do you think your strengths are for the job?

5. Have you had any experience or involvement with pupils already?

6. Do you have lots of patience?

7. When are you available to start?

8. In your opinion – what is the worst part of being a teacher?

9. Are you hard working? Can you give me an example of when you worked really
hard towards a goal or deadline?

10. What motivates you in your everyday life?

11. What hobbies and interests do you have?

12. Tell me a little bit about yourself

Candidate interview sheet

Interviewee name
Comment on: 1) Presentation (tie, shirt, shoes) 2) First impressions 3)
Quality of answers 4) Relationships between interviewer and interviewee

Overall comment

Interviewee name
Comment on: 1) Presentation (tie, shirt, shoes) 2) First impressions 3)
Quality of answers 4) Relationships between interviewer and interviewee

Overall comment

Interviewee name
Comment on: 1) Presentation (tie, shirt, shoes) 2) First impressions 3)
Quality of answers 4) Relationships between interviewer and interviewee

Overall comment

Name: _________________Date:

1. 2. 3.

4. 5. 6.

7. 8. 9.
Selection Methods

Once the job has been advertised and applications have flooded in, the next step is to
filter out the people not suitable for the job. Then, when you have the right candidates,
how do you eliminate the others to find the right candidate?

The main selection methods used are:

• Mental and Physical Ability (IQ) Tests

• Achievement Tests
• Employment Interview
• Reference Checks
• Assessment Centres

Mental and physical ability tests (IQ)

When properly applied, ability tests are among the most useful and valid tools available
for predicting success in jobs and training across a wide variety of occupations. Ability
tests are most commonly used for entry-level jobs, and for applicants without professional
training or advanced degrees. Mental ability tests are generally used to measure the
ability to learn and perform particular job responsibilities.

Examples of some mental abilities are verbal, quantitative, and spatial abilities. Physical
ability tests usually encompass abilities such as strength, endurance, and flexibility.

• General ability tests typically measure one or more broad mental abilities, such as
verbal, mathematical, and reasoning skills. These skills are fundamental to success
in many different kinds of jobs, especially where cognitive activities such as
reading, computing, analysing, or communicating are involved.
• Specific ability tests include measures of distinct physical and mental abilities,
such as reaction time, written comprehension, mathematical reasoning, and
mechanical ability, that are important for many jobs and occupations. For example,
good mechanical ability may be important for success in auto mechanic and
engineering jobs; physical endurance may be critical for fire fighting jobs.

Although mental ability tests are valid predictors of performance in many jobs, use of
such tests to make employment decisions often results in adverse impact. For example,
research suggests that mental abilities tests adversely impact some racial minority groups
and, if speed is also a component of the test, older workers may be adversely impacted.
Similarly, use of physical ability tests often results in adverse impact against women and
older persons.
Achievement tests

Achievement tests, also known as proficiency tests, are frequently used to measure an
individual's current knowledge or skills that are important to a particular job. These tests
generally fall into one of the following formats:

• Knowledge tests typically involve specific questions to determine how much the
individual knows about particular job tasks and responsibilities. Traditionally they
have been administered in a paper-and-pencil format, but computer administration
is becoming more common. Licensing exams for accountants and psychologists are
examples of knowledge tests. Knowledge tests tend to have relatively high validity.
• Work-sample or performance tests require the individual to actually demonstrate
or perform one or more job tasks. These tests, by their makeup, generally show a
high degree of job-relatedness. For example, an applicant for an office-machine
repairman position may be asked to diagnose the problem with a malfunctioning
machine. Test takers generally view these tests as fairer than other types of
tests. Use of these tests often results in less adverse impact than mental ability
tests and job knowledge tests. However, they can be expensive to develop and

Employment interviews

The most common assessment tool, the interview can range from being totally unplanned,
that is, unstructured, to carefully designed beforehand, that is, completely structured.
The most structured interviews have characteristics such as standardized questions,
trained interviewers, specific question order, controlled length of time, and a
standardized response evaluation format.

At the other end of the spectrum, a completely unstructured interview would probably be
done "off the cuff," with untrained interviewers, random questions, and with no
consideration of time. A structured interview that is based on an analysis of the job in
question is generally a more valid predictor of job performance than an unstructured
interview. Keep in mind that interviews may contain both structured and unstructured

Regardless of the extent to which the interview is structured or unstructured, the skill of
the interviewer can make a difference in the quality of the information gathered. A
skilful, trained interviewer will be able to ask job-relevant follow-up questions to clarify
and explore issues brought up during the interview.

It is unlawful to ask questions about medical conditions and disability before a conditional
job offer. Even if the job applicant volunteers such information, you are not permitted to
pursue inquiries about the nature of the medical condition or disability. Instead, refocus
the interview so that emphasis is on the ability of the applicant to perform the job, not on
the disability. In some limited circumstances, you may ask about the need for reasonable
Where disability is concerned, the law requires that employers provide reasonable
accommodations (meaning a modification or adjustment) to a job, the work environment or
the way things are usually done so that qualified individuals with a disability are not
excluded from jobs that they can perform.

These legal requirements apply to all selection standards and procedures, including
questions and rating systems used during the interview process.
Following a structured interview format can help interviewers avoid unlawful or
inappropriate inquiries where medical conditions, disability, and age are concerned.

Reference checks

Reference checks are often used to verify education, employment, and achievement
records already provided by the applicant in some other form, such as during an interview
or on a resume or application form. This is primarily done for professional and high-level

These verification procedures generally do not help separate potentially good workers
from poor workers. This is because they almost always result in positive reports. However,
use of these measures may serve two important purposes

• They provide an incentive to applicants to be more honest with the information

they provide
• They safeguard against potential negligent hiring lawsuits.

Assessment centres

In the assessment centre approach, candidates are generally assessed with a wide variety
of instruments and procedures. These could include interviews, ability and personality
measures, and a range of standardized management activities and problem-solving
exercises. Typical of these activities and exercises are in-basket tests, leaderless group
discussions, and role-play exercises. Assessment centres are most widely used for
managerial and high level positions to assess managerial potential, promotability, problem-
solving skills, and decision-making skills.

• In-basket tests ask the candidates to sort through a manager's "in-basket" of

letters, memos, directives, and reports describing problems and scenarios.
Candidates are asked to examine them, prioritise them, and respond appropriately
with memos, action plans, and problem-solving strategies. Trained assessors then
evaluate the candidates' responses.
• Leaderless group discussions are group exercises in which a group of candidates is
asked to respond to various kinds of problems and scenarios, without a designated
group leader. Candidates are evaluated on their behaviour in the group discussions.
This might include their teamwork skills, their interaction with others, or their
leadership skills.
• In role-play exercises, candidates are asked to pretend that they already have
the job and must interact with another employee to solve a problem. The other
employee is usually a trained assessor. The exercise may involve providing a solution
to a problem that the employee presents, or suggesting some course of action
regarding a hypothetical situation. Candidates are evaluated on the behaviour
displayed, solutions provided, or advice given.

Assessors must be appropriately trained. Their skills and experience are essential to the
quality of the evaluations they provide. Assessment centres apply the whole-person
approach to personnel assessment. They can be very good predictors of job performance
and behaviour when the tests and procedures making up the assessment centre are
constructed and used appropriately.

It can be costly to set up an assessment centre. Large companies may have their own
assessment centres; mid-size and smaller firms sometimes send candidates to private
consulting firms for evaluation.
Advantages and Disadvantages of Different Types of
Assessment Instruments
Type of
assessment Advantages Disadvantages
Mental Ability • Are among the most useful predictors • Use of ability tests can
tests (IQ) of performance across a wide variety result in high levels of
of jobs adverse impact

• Are usually easy and inexpensive to • Physical ability tests can be

administer costly to develop and
Achievement/ • In general, job knowledge and work- • Written job knowledge
proficiency sample tests have relatively high tests can result in adverse
tests validity impact
• Job knowledge tests are generally easy
and inexpensive to administer • Work-sample tests can be
expensive to develop and
• Work-sample tests usually result in less administer
adverse impact than ability tests and
written knowledge tests
Employment • Structured interviews, based on job • Unstructured interviews
interviews analyses, tend to be valid typically have poor validity

• May reduce adverse impact if used in • Skill of the interviewer is

conjunction with other tests critical to the quality of
interview (interviewer
training can help)
Reference • Can be used to verify information • Reports are almost always
checks previously provided by applicants positive; they do not
• Can serve as protection against typically help differentiate
potential negligent hiring lawsuits between good workers and
poor workers
• May encourage applicants to provide
more accurate information
Assessment • Good predictors of job and training • Can be expensive to develop
Centres performance, managerial potential, and and administer
leadership ability
• Specialized training
• Apply the whole-person approach to required for assessors;
personnel assessment their skill is essential to
the quality of assessment

Having a motivated workforce is vital for most businesses, since it can lead to higher
rates of productivity, better quality output, and low rates of absenteeism and labour
turnover. The main factors which affect the motivation of workers are pay levels, job
security, promotional prospects, being given responsibilities, working conditions, fringe
benefits, participation in decision-making and working in a team.


There are many different methods of payment that a business can

choose from, each of which can have different effects on the level of
motivation of the workforce. The main methods are:

1. Time-rate (‘flat rate’) schemes.

This payment method involves the employee receiving a basic rate of pay per time period
that he works (e.g. £5 per hour, £50 per day, £400 per week). The pay is not related to
output or productivity. Any time that the employee works above the agreed number of
hours per week may make him eligible for overtime payments, often at ‘time and a half’
(e.g. £7.50 per hour instead of £5 per hour).

2. Piece-rate schemes.
This payment method involves the employee receiving an amount of money per unit (or per
‘piece’) that he produces. Therefore his pay is directly linked to his productivity level.
However, it is possible that in order to boost his earnings, an employee may reduce the
quality and craftsmanship per unit, so that he can produce more output in a given period of

3. Commission.
This is a common method of payment for salesmen (e.g. insurance, double-glazing,
telesales). The employee receives a very small percentage (say 0.5%) of the value of the
goods that he manages to sell in a period of time.

4. Performance-related pay (PRP).

This is a method of giving pay rises on an individual basis, related to the employee
achieving a number of targets over the past year. This is common with managerial and
professional workers.

5. Profit sharing.
This involves each employee receiving a share of the profit of the business each year,
effectively representing an annual pay rise. It aims to increase the levels of effort,
motivation and productivity of each employee, since their annual pay-award will be related
to the profitability of the business. However, if the business makes low profits (or even a
loss) then this is likely to have a detrimental effect on the level of motivation of the
6. Share ownership.
A common form of payment in many PLCs is what is termed ‘share options’. This basically
involves each employee receiving a part of each month’s salary in the form of shares
(usually at a discounted price). This forms a profitable savings-plan for the employee, and
he can sell them after a given period of time. This should motivate the employees to work
harder and increase their efforts, since the share price will rise as the company becomes
more profitable, therefore increasing the capital gain on their shares.

Many of these different methods of pay are likely to be supplemented by fringe benefits
(or ‘perks’) such as private health schemes, pension schemes, subsidised meals, discounts
on holidays and travel, cheap mortgages and loans, company cars and discounts when
buying the company’s products. The total package of pay plus fringe benefits is known as
the remuneration package.


Most people work to satisfy needs of one kind or another. Abraham Maslow developed his
hierarchy of needs based on research about what motivates people to work. He suggested
that there were 5 levels of need that influence a person's behaviour.

Basic needs: for food, drink and shelter

Safety needs: protection against danger, threat,
Social needs: the need for belonging, acceptance,
Self-esteem needs: reputation, status
Self-actualisation: the need for realising one's own
potential for continual self-development.

In a hierarchy the things at the top are more important than those at the bottom. Maslow
said the lower levels have to be satisfied first. Only when these needs have been satisfied
will the individual strive to satisfy the higher needs. For example, hungry, cold people will
seek food and shelter first. Once they are well fed and comfortable, they will turn their
attention to higher needs, for example the pleasure of being with colleagues.

How can a business provide for these needs?

Basic needs: A fair wage, a meal and rest facilities.

Safety needs: Job security, safe working conditions, pension schemes.

Social needs: Met by introducing team work and perhaps providing social facilities like a
club or sports pitch.
Self-esteem needs: This is about how others see us at work and can be provided for by
rewarding staff with status symbols like cars, offices and new job titles. Allowing staff to
gain qualifications at work can boost self-esteem too.

Self-actualisation: Achieving your full potential. A business must ensure that promotion is
possible and that there are opportunities to use initiative.


There is no universal rule for motivating employees, and there are many
methods which are used by different managers to achieve the goal of a
motivated and satisfied workforce. These include:

Delegation. This occurs when managers pass a degree of authority down

the hierarchy to their subordinates.

Empowerment. This involves a manager giving his subordinates a degree of

power over their work (i.e. it enables the subordinates to be fairly autonomous and to
decide for themselves the best way to approach a problem).

Job enlargement. This involves increasing the number of tasks which are involved in
performing a particular job, in order to motivate and multi-skill the employees.

Job enrichment. This is a method of motivating employees by giving them more

responsibilities and the opportunity to use their initiative.

Job rotation. This involves the employees performing a number of different tasks in turn,
in order to increase the variety of their job and, therefore, lead to higher levels of

Quality circles. This is a group of workers that meets at regular intervals in order to
identify any problems with quality within production, consider alternative solutions to
these problems, and then recommend to management the solution that they believe will be
the most successful.

Teamworking. This is the opposite production technique to an assembly-line which uses an

extreme division of labour. Teamworking involves a number of employees combining to
produce a product, with each employee specialising in a few tasks. Cell production is an
example of teamworking.

Worker participation. This refers to the participation of workers in the decision-making

process, asking them for their ideas and suggestions.

Works council. This is a type of worker participation and it consists of regular discussions
between managers and representatives of the workforce over such issues as how the
business can improve its processes and procedures (in production or marketing, for
Worker-directors. These are workforce representatives who participate in the meetings
held by the board of directors. Worker-directors are not very common in the UK, since
employers often believe that they can slow down the decision-making process, as well as
‘leaking’ confidential information to employees.


Symptoms of poor motivation amongst the workforce include high

rates of absenteeism and labour turnover, poor timekeeping, high
rates of waste, low quality output and an increasing number of

Douglas McGregor describes

Whentwo different
a poor levelattitudes that employers
of motivation exists inhave towards employees.
a workforce, then the
management should:
Theory X says that workers Theory Y says that workers
x are lazy and don't want to work y like to work
x can't be trusted y want responsibility
a) Develop a strong corporate culture and team-spirit.
x have no initiative or ambition y can be trusted
b)x Ensure
must bethat pay levels
watched all theare fair.
time and forced to y will work hard for rewards, which are not
Design more challenging jobs. only money
d)x Introduce
work only decision-making
for money at lower levels in the organisation.
e) Give praise and recognition to employees for their efforts and achievements.
Ensure that communication
advice flows
to employers wasare
thateffective and that
if they treated the relevant
all employees messages
like theory get to they
Y workers,
the work harder and be more productive, because they are all naturally motivated. Theory Y says
that workers have a strong desire to participate in the decision-making process, an attitude we see
more and more in present day workers. If the employee is allowed to develop his potential, by
making his work exciting and challenging, the result is an increase in the effectiveness of the

Theory X style (authoritarian/autocratic) is suitable for factory supervisors or indeed army/police

style hierarchies. X is obsessive about controlling and directing the workforce.

Theory Y style is more prevalent in the creative arts and professions such as graphic designers,
engineering, architects. Y offers more individual freedom, and indeed empowerment.
In the news… Motivation in Practice

In and out of the news this year have been the large bonuses that are being paid out to
executives and company staff. In February, banking firm HBOS was reported as paying
each employee £7500 in bonuses (a total of £550m) after the achieving an 18%
increase in sales over the year (BBC, 28th February 2007). In March, Wal-Mart, often
criticised for the poor pay conditions provided to staff, was reported as paying out
$529m (£270m) in bonuses to 800,000 of its US workers (BBC, 22nd March 2007).

The clothing retailer, Next, was also reported as offering large bonuses to top staff.
They were asked to match the £2 million they were collectively paid in bonuses with
their own money. The Times reports the bonus system:

“If the shares are below £20 in August next year — against the £15 when it was
put in place — they lose everything. But if the stock tops £24.50 by August 2009,
the scheme pays out fivefold, or ten times their personal stake” (The Times,
March 23rd 2007).

The incentives available to some staff are often complex to calculate. Search engine
giant Google only paid its three executives salaries of 50p in 2006, accounts show
(BBC, 4th April 2007). However these executives saw the value of the shares they own
significantly increase to a massive $31.5bn by the end of the year, whilst they also saw
benefits, such as the use of their own corporate jet.

However motivation isn’t always about financial rewards. Nick Read, chief executive of
Vodafone, recently spoke at a conference for talent-management professionals. He
was reported as criticising the approach taken by many leaders in their management of

He said:

“They should remember that these talented people are not necessarily looking for
material rewards. What they want is different types of experience. They want to be
tested.” (The Sunday Times, 1st April 2007).

In the Times 100 case study focusing on people management at Egg, the online bank,
it describes how employees are given control over the planning of their career and the
decisions made. Egg describes their approach to motivating their workforce as
'unleashing the power of people'.

Study Questions:

1. With reference to relevant motivational theory, explain how: a) financial rewards

might be able to motivate workers
b) non-financial rewards might be as useful in a firm’s approach to motivate
2. What types of non-financial reward might a firm use to motivate workers?
In the news … McJobs – an outdated definition
The term McJob was coined by the Canadian novelist Douglas Coupland in his 1991
novel Generation X. It was used to describe a "low-prestige, low-dignity, low-benefit,
no-future job in the service sector" and its increased usage in everyday language lead
to the term being entered as a dictionary definition in 2003 (BBC, 9th November 2003).
McDonald’s has complained about the use of the term ever since it was recorded in the
dictionary, but now they have taken this a step further by launching a petition to get the
definition changed (BBC, 23rd May 2007).

McDonald's senior vice president David Fairhurst states: “The current definition is
extremely insulting to the 67,000 people who work for us within the UK. It is also
insulting for everyone else who works in the wider restaurant and tourism sectors.”

There is support for McDonald’s petition from some academics. The Brighter Futures
report, authored by Professor Adrian Furnham of University College London, suggests
that McJobs are wrongly derided. The report suggests that many people in these jobs
are often young and that this first experience of work can have a positive experience on
their lives. The BBC suggests it can result in benefits ranging from “having increased
self-esteem, to being cleaner around the house, the benefits are both personal and
practical” (BBC, 8th June 2006).

There is also evidence that McDonald’s is investing in its workforce. This includes
branches of McDonald’s becoming exam centres, as the organisation offers
qualifications equivalent to GCSEs in numeracy and literacy at work (19th September
2006). This could lead to improved motivation of its workforce with benefits such as
improved recruitment and lower labour turnover.

There does seem to be some evidence that the definition of a McJob is becoming
outdated. However, there are other examples of service sector companies offering a
wider range of benefits to their workers. The Times 100 presents a case study of the
Total Reward system used at the Royal Bank of Scotland that includes financial and
non financial rewards.

Study Questions

1. What are the benefits to McDonald’s of having the definition of a McJob

2. With reference to motivational theorists, how might the provision to earn
qualifications at work increase motivation within the workforce?
3. What types of non-financial rewards are provided by the Royal Bank of Scotland
to workers?
Training And Development

Learning is not a spectator sport. -

D. Blocher

Once a new employee has been appointed to a business, it is likely that they will receive
induction training in order to help them settle into the new job. This induction training
covers the basics of the new employee’s job, as well as the background details and the
history of the business (e.g. number of employees and the range of products).

However, training is not limited to the new employees of a business. Training courses are
likely to be targeted at all employees in the business at various stages in their career (e.g.
management training courses, training on how to use new machinery and technology).

There are many reasons for the extensive use of training across the workforce of a

1. Training can improve employee productivity.

2. Training can create a multi-skilled, flexible


3. Training can increase the levels of job satisfaction

and motivation of the employees.

4. Training employees increases the chances of their


Training can be classified as either ‘on-the-job’ or ‘off-the-job’.

‘On-the-job’ training involves the employees receiving their training at the place of work
(using such techniques as work-shadowing, apprenticeships, and mentoring).

‘Off-the job’ training involves the employees attending courses away from their workplace
(e.g. at local colleges, conference centres and universities).


“Sitting next to Nellie” – task demonstrated then trainee undertakes task

Coaching – trainee taken through step by step by trainer

Job Rotation – trainee learns tasks in different departments/jobs

Self-paced/distance learning – trainee receives resources and works on their own

It is also imperative that all training courses that are attended by employees are
evaluated in order to determine if the training course provides value for money for the
business. This evaluation is often carried out by asking the employees to complete short
questionnaires and provide feedback to the H.R.M. department.

IN THE NEWS… British Energy Cuts Training Time in Half

British Energy has an acute shortage of experienced nuclear staff and has cut the
time required to complete some of its basic training programmes by half. Some of
the group’s training programmes have been trimmed from 18 to nine months (The
Times – 29 November 2007).

Jean McSorley, senior adviser to Greenpeace on nuclear issues said: “The idea that
you can just cut that in half is something you have to question. It has to have a
bearing on safety.” (The Times – 29 November 2007).

British Energy, which operates eight nuclear power stations, denied that this means
a lowering of standards, claiming that it puts safety at the centre of all its activities. It
has hired a company called KorteQ to help it overcome its skills shortage. The Head
of Operations at KorteQ said that its programme would g reatly reduce the length of
time required to train British Energy staff to Suitably Qualified and Experienced
Personnel (SQEP) level, a standard set by the Nuclear Installations Inspectorate
(The Times – 29 November 2007).

A spokesman for the Health and Safety Executive, which monitors the standards of
staff at all nuclear sites, said that any doubts about their competence would lead to
loss of operating licenses and possibly prosecution (The Times – 29 November

Look at the Times 100 case studies on the work of National Grid and Marks &
Spencer to see the role and value of training and development in major

Study Questions:

1. Explain the value to an employer and to a new employee of ‘Induction Training’.

2. Discuss the importance of training and development programmes for its
employees to a company like British Energy.
3. At times of downturn in the economy or recession, companies often cut back on
training. Assess the long term effects of this for:

a) the country
b) a company
c) an employee

Appraisal – this is a report on how well an employee is progressing. It is usually

carried out at regular intervals (normally once a year) by the employee’s line
manager. The process may require the completion of an appraisal form by both
parties which is then followed up with a formal interview. It is important that
the employee does not feel that they are on trial, otherwise an element of
distrust/resentment can enter the process. The appraisal may highlight training
needs and the potential of an employee for possible promotion. A successful
appraisal may determine if an employee will receive a bonus or be moved up the

"Staff appraisal" is better called "performance and development review". The

purposes of this review are generally stated as

 to assess performance over the review period and examine the scope for
improvement to current performance
 to assess training & development needs
 to set performance objectives relating employee development objectives to
unit objectives
 to support career planning and progression discussions
 (for probationers) to make retention decisions
 to discuss the potential for "promotability" and job change
 to assess/review "rewards" and motivation

It is a review stage of a process which begins with

 clarification of role and performance expectations and directions.

 involves a comparison of actual performance during the review period and
discussion to set future directions and scope for personal development
 the review usually involves formal documentation for use in various
employee reward, promotion and development decisions.
 the member of staff should be continously aware of their individual
performance (related to expectations) throughout the review period.
 The review should not be the occasion for the member of staff to be
confronted with how well he/she has performed or not performed or to
discover that the "goal posts" have moved without being told during the
review period.

It usually takes place between the employee and whoever he/she is responsible
and accountable to - generally their direct line manager. The emphasis is on
"the organisation" (through the manager) talking to each member of staff - as
"an individual". Each manager, in essence, has to give time and attention to each
member of staff he/she is responsible for.

Even where there is a formal policy for giving systematic, job-related feedback on
performance, many appraisal encounters between a boss/subordinate result in
frustrating and problematic experiences for appraisers and appraisees. Yet
companies and many participants say they obtain considerable benefit from
formal appraisal processes.

Types of Staff Appraisal Scheme

Prescriptions : Rating and forms based focusing on employee

 competencies/behaviours
 Results-based (against "agreed" targets)
 360° appraisal (stakeholder feedback to the manager)
 Self-appraisal and continuing professional development

Such prescriptions have origins in the work of Douglas McGregor and (for results-
based appraisal) on the work of Peter Drucker. Of McGregor's - Theory X and
Y, the Theory Y model stresses the importance of diagnosing the needs of
individuals and integrating these with the needs of the organisation. By
satisfying individual needs, the organisations capacity for performance is

McGregor advised that processes of job/role definition, targeting and planning

(within staff appraisal) coupled with a supportive, mutually evaluative boss-
subordinate relationship - offer potential for improved individual performance
and development. Employee energy is thus focused on business objectives as
driven by competitive, quality, performance-based values. Theory Y purposes
and performance-related criteria link the business's objectives and goals to job
holder contribution.

Employers are recommended to adopt and maintain staff appraisal policies and
reap the assumed benefits -

 a milestone in communication between manager and individuals in the staff

 better linking of business and unit priorities to how the individual delivers
on job performance
 nurturing of shared values, loyalties, motivation and commitment to work,
personal identification.


1. What do you understand by the term ‘Appraisal’?

2. What are the benefits to both the employer and employee of an
3. Explain the drawbacks of the appraisal system
4. In pairs, conduct an appraisal of your studies so far. Use the target
booklet as a starting point for a discussion about how you think you
are peforming
Trade Unions


A trade union is a group of workers who join together in order to
protect their own interests and to be more powerful when
negotiating with their employers.

Each employee who wishes to join a trade union must pay an annual
fee, which contributes towards the costs and expenses that the
trade union incurs when it provides services to its members, and supports industrial action
by the workers.

Trade unions have a number of aims:

1. To improve the pay of its members.

2. To improve the working conditions and the working practices of its members.

3. To support the training and the professional development of its members.

4. To ensure that their members’ interests are considered by the employers when any
decision is made which will affect the workforce.

There are four main types of trade union in the UK:

1. General Unions. These are for skilled and unskilled workers performing different jobs
in different industries (e.g. cleaners, clerical staff, transport workers).

2. Industrial unions. These are for different workers in the same industry (e.g. the
National Union of Miners (N.U.M), covering workers at all levels in the hierarchy).

3. Craft Unions. These are fairly small unions for skilled workers, performing the same
or similar work in different industries (e.g. musicians).

4. White-collar Unions. These are for ‘white-collar’ (or professional) workers who
perform the same or similar tasks in different industries (e.g. teachers, scientists).
Industrial Relations

The terms ‘labour relations’, ‘employee relations’ and ‘industrial relations’ refer to the
relationship between employers and employees. Employers have historically been in a much
stronger position – the ‘master and servant’ relationship, for example – which led to the
growth of organised labour. Employers have realised the value of formal organisation and
have responded by establishing their own associations.

Trade Unions

A trade union is an organisation of workers which has been established to represent their

Union rights

UK legislation up to 1980 concentrated on protecting unions; since 1980 the emphasis has
shifted to protecting the individual union member. Trade unions and their members have
rights under several main items of legislation:

The Trade Union and Labour Relations Act 1974 defines a union and a trade dispute.

The Employment Acts 1980, 1982, 1988 and 1990

- require secret ballots to be held to get approval to take strike action, and for
elections to union posts;
- allow a member to prevent the union from strike action if no ballot has been held;
- protect members from disciplinary action if they refuse to take part in a strike;
- make ‘closed shops’ and all forms of secondary action illegal;
- allow damages to be awarded against union members who are not involved in a
dispute but who take secondary action.

The Trade Union Act 1984 make a union liable for damages if it has not carried out a
secret ballot to get approval from its members for strike action.

The Trade Union Reform and Employment Rights Act 1992 makes it unlawful for
employers to collect union dues without the written consent of workers.

Union aims

A trade union seeks to improve the working life of its members.

To do this it:

Advises, represents and protects members:

- it advises on procedures following industrial accidents, represents employees at
industrial tribunals, and gives general legal advice
- it ensures that members receive sick pay and other benefits to which they are
- it helps protect against redundancy, unfair dismissal, disciplinary action,
discrimination, etc.

Negotiates with employers for

- improved pay and working conditions
- improved pension and retirement arrangements
- greater job satisfaction and better job security

Seeks to influence others

- as a pressure group influencing employers and governments on legislation and other
- - regarding improved social objectives, such as full employment and better social

Union benefits

Membership of a trade union brings a number of benefits to its members

Improved Protection Representation

Working Against With
Conditions exploitation employers

UNION Legal and

Insurance MEMBERSHIP advice
Improvements Training and
In pay Education services

Many employers recognise the benefits that unions bring, and gain themselves from only
having to negotiate with a single body. Some industries had union membership agreements
requiring all employees to join a union – a ‘closed shop’ agreement – but the 1988
Employment Act made it unlawful to dismiss an employee who refuses to join a union.
(Employers are now free to also recruit workers who are not union members.)
Pay Bargaining

Trade unions are most closely associated with negotiating with the employers of a
business on behalf of their members over the issue of pay. This is known as the ‘pay-
bargaining process’, and it is an example of collective bargaining.

The first stage in this process is for each side (the employer and the trade union) to
decide on its objectives. As well as deciding the amount of a pay rise, both the trade union
and the employer will also need to decide how the money will be distributed amongst the
members of the trade union (i.e. will the pay rise be a ‘blanket’ coverage giving every
employee a fixed percentage rise, or will different groups of workers receive different
percentage pay rises?). Further to this point, will the pay rise be awarded in a lump sum
per employee, or will it be staggered over time?

The second stage involves both sides (the trade union and the employer) presenting their
arguments at a ‘pay-talk’ discussion. A trade union will put in a ‘pay claim’, which will be
based on one or more of the following points:

1. An increase in the cost of living (i.e. inflation) requires that workers have a pay rise in
order to maintain their purchasing power.

2. An increase in labour productivity rates will mean more sales revenue and profits for
the business, this extra profit should be shared with the workers by giving them higher
rates of pay.

3. A pay rise is required in order to recruit and retain the ‘best’ workers that the business
can find.

4. If workers are using new machinery and working practices, then they need to be
compensated for this extra work by being given a pay rise.

The employer will put forward a ‘pay offer’, which they believe will reflect the current
trends in the labour market (i.e. the rates of pay which are being offered by rival
businesses), as well as maintaining the competitiveness of the business (i.e. not increasing
their costs by a large percentage).

The third and final stage involves a negotiation process between the trade union and the
employer. In order for this to be a success, both sides will be required to compromise and
be prepared to accept less than their original objectives.

It must be remembered that there are many other issues that a trade union will negotiate
for its members other than pay rises (e.g. length of the working week, working conditions,
and proposed redundancies).

Advisory Conciliation and Arbitration Service (A.C.A.S.)

The Advisory Conciliation and Arbitration Service was set up by the government in 1975
as an independent body that helps to settle industrial disputes and claims of unfair
dismissal by employees. As the name suggests, there are three main services that are
offered by ACAS, advice, conciliation and arbitration.

A.C.A.S. representatives can be invited into a business by the two feuding parties
(employers and trade unions) in order to offer their advice to both parties on the
industrial unrest and the ‘best’ way to proceed in order to settle the unrest.

Conciliation is an attempt to get the two sides in an industrial dispute to resolve their
differences. A conciliator listens to the arguments of both sides, and then tries to
encourage the trade union and the employer to negotiate and compromise so that they can
reach a solution that is acceptable to both parties.
Arbitration is the process of resolving an industrial dispute by using an independent
person to decide the appropriate outcome. The arbitrator will look at the arguments put
forward by both parties, and then he will arrive at a decision. The decision can be legally
binding on both parties if this was agreed prior to the arbitrator’s decision.

Pendulum arbitration is a type of arbitration in which the arbitrator will decide completely
in favour of one party or the other, with no compromise or negotiation being allowed. It is
likely, therefore, that both parties (the employers and the trade union) will make their
demands more conservative and realistic than if the arbitrator was allowed to choose an
outcome which was somewhere between the two.
In the news…Royal Mail Strike – End in sight
The executive of the CWU (Communication Workers Union) agreed on 22nd October to
back a deal with the Royal Mail. The offer includes a 6.9% pay increase over 18 months
and is being put to a ballot of CWU members. If the members accept the offer, it will bring
to a close the first national postal dispute for over a decade and an end to the series of
strikes this autumn which has cost the Royal Mail ‘tens of millions’ of pounds and provoked
anger among small businesses (The Guardian, 23rd October 2007).

The dispute arose from issues of pay, pension reform and changes to working practices,
which were central to Royal Mail’s plans to modernise its operations and make it
competitive with other postal operators and other communications media (The Times, 4th
October 2007). The CWU had believed it coul d lead to the loss of up to 40,000 jobs (The
Times, 30th January 2006).

Dave Ward, the CWU's deputy general secretary, said the agreement that had been
reached reflected: ‘the fact that change in the company will only be managed with the
union and the workforce. We have made significant gains on pay and related issues and
the union's role in negotiating change in the workplace has been strengthened.’ (CWU,
22nd October 2007)

John Hutton, the secretary of state for Business and Enterprise, urged CWU members to
support their union's recommendation. He told the all-party Trade and Industry select
committee that:
‘the dispute had caused “significant” damage to business and the wider economy’,
adding that: ‘Some bulk customers may receive compensation. In relation to the Royal
Mail we will not be clear about how permanent the damage has been for some time.’ News Limited, 22nd October 2007)

Small businesses also welcomed the agreement. Nick Dines, head of communications at
the British Chambers of Commerce, said: ‘This is good news for small businesses in the
UK who have essentially been held at ransom by the CWU. The strike has shown that
although in theory the monopoly on delivery has been broken, the reality is that there is no
cost-effective alternative to Royal Mail. Management and the union must ensure that
crippling strikes like this do not happen again.’ (The Guardian, 22nd October 2007)

Study Questions

1. What effects might arise for the public and the business community as a
result of the series of strikes at Royal Mail?
2. What are the benefits to employees of being a member of a union?
3. Discuss the importance to large national companies of good industrial

4. Evaluate the effect of the series of postal strikes on a mail order business,
both short term and long term.
Disputes and Grievance Procedures

a) Collective – involving issues taken up on behalf of the employees by their trade

union representative (substantial or procedural). Usually described as

b) Individual – involving an individual employee only. These are described as


Disputes have a far greater impact on employee relations than grievances and are
concerned with disagreements between employees and their own employer and which are
wholly or mainly about matter directly affecting their terms and conditions of

Grievances are disputes between an individual employees and his/her employer. To handle
this kind of issue, organisations will establish grievance procedures as below. Such
grievances are initiated by employees.

Stages of a Typical Grievance Procedure

Employees raises grievances with immediate


If matter not settled, it is taken to the next level of

management, and the employee may be accompanied
by a friend or trade union representative

If the matter is still not resolved, it is taken to a

senior management level, and the employee may take
a representative as before

If the employee is still not satisfied he may appeal

to the Managing Director

Discipline procedures are classed as individual disputes and are designed to provide fair
treatment of ‘misbehaviour’ by employees. Discipline procedures are initiated by
Termination of Contracts

The final role of the H.R.M. department is to make the termination of the employees’
contracts of employment as smooth and efficient as possible. There are a number of
different ways in which employees can have their contracts of employment terminated,

1. Redundancy. It will be necessary at certain times (e.g. during a recession, or a decline

in the industry) for a business to ‘downsize’ its workforce (make a certain proportion of
them redundant).

This process could be done in several ways, voluntary redundancy (where workers opt for a
redundancy package), compulsory redundancy, ‘last-in-first-out’ (where the most recent
appointments are the first to be made redundant), or retention by merit (where the least
effective employees are made redundant).

2. Retirement. At the end of their working-life,

employees will wish to retire and stop offering their
services to the business. In return, they will often
receive a lump-sum payout, as well as both their state
pension and their private pension.

3. Transfers and Resignation. This occurs when an

employee leaves the business and transfers their
services to another business (the employee may apply for a more senior job at another

4. Dismissal. This is where the employee is deemed to

have broken their contract of employment, and told that
their services are no longer required by the business. Fair
dismissal can be on the grounds of sexual harassment,
racial harassment, bad timekeeping, sleeping on the job,
and destruction of business property.

However, if an employee feels that they have been unfairly

dismissed (e.g. on the grounds of pregnancy, ethnic
background, or union membership), they can apply to have
the case heard at an industrial tribunal.

This is a small court that deals with claims of unfair dismissal and discrimination from
employees against their (former) employers. If the employee is successful in claiming that
they have been unfairly dismissed, then they are eligible for re-instatement in their
previous job, as well as a financial award (to cover loss of earnings, and pain and
Employee Participation

Employee participation means many things to many people. Essentially it is about involving
non-managerial staff in the decision-making process of an organisation. It is, however, the
EXTENT of involvement in decision-making that is problematical.

Choices in Employee Participation

Consultation – Participation occurs when employees are consulted about decisions

affecting their working lives.

Job Enrichment – The employee is given more discretion to make decisions affecting his
own job.

Participative Management Style – The initiative for participation rests with open
management who employ an ‘open’ approach to managing people where plant level councils
may be set up where managers/employee representatives discuss and jointly decide a wide
range of strategic issues.

Collective Bargaining – Many people feel that collective bargaining should be extended to
include forward planning issues. The adversarial nature of the process may militate against
its use as a form of participation.

Works’ Councils – This idea is based on the West German approach that confers on
employee representatives the legal right of access to information from management on a
wide range of issues and the right of joint decision-making on all personnel matters.

Board Representation – This is participation at ‘policy-making level’. Employees can elect

worker directors whose power and influence will depend on the number of such directors
on the board. In Germany, Supervisory Boards include employee representation but there
are no such members of the Management Board (Executive Board). The EC is a firm
believer in employee participation at Board level.

Quality Circle – This is a work group of 8-10 employees and supervisors who have a shared
area of responsibility. They meet regularly – typically, once a week, on company time and
on company premises – to discuss their quality problems, investigate causes of the
problems, recommend solutions, and take corrective actions. They take over responsibility
for solving quality problems, and they generate and evaluate their own feedback. But
management typically retains control over the final decision regarding implementation of
recommended solutions.

Employee Stock Ownership Plans (ESOPs) – Employee stock ownership plans are company-
established benefit plans in which employees acquire stock as part of their benefits.
Approximately 20% of Polaroid, for example, is owned by its employees. Research has
shown that ESOPs increase employee satisfaction. In addition, they frequently result in
higher performance. ESOPs have the potential to increase employee job satisfaction and
work motivation.

In all areas of the activities of the business, but especially it seems within Human
Resource Management, the business must ensure that it abides by every piece of
legislation, regardless of the stakeholder group which the legislation protects (e.g.
employees and customers). The main pieces of legislation affecting the successful
operations of the Human Resource Management department are:

1. The Employment Relations Bill, 1999 (stating that employees who have
been in employment with the same business for a period of one year have
the right not to be unfairly dismissed).

2. The Employment Rights Act, 1996 (covering unfair dismissal, redundancy

and maternity).

3. The Public Interest Disclosure Act, 1998 (covering employees who disclose
confidential information).

4. The Health & Safety at Work Act, 1974 (covering working conditions and the
provision of safety equipment and hygiene).

5. The National Minimum Wage Act, 1999 (making it illegal for employers to pay less
than £3.60 per hour to its full-time staff who are aged over 21). As of 2004 National
Minimum Wage is £4.50 for 22 years and over; and £3.80 for 18-21 year olds.

6. The Equal Pay Act, 1970 (stating that pay and working conditions must be equal for
employees of the opposite sex who are performing the same

7. The Sex Discrimination Act, 1975 (stating that it is

illegal to discriminate against an employee, or an applicant
for a job, on the grounds of their sex or their marital status).

8. The Race Relations Act, 1976 (stating that it is illegal for an

employer to discriminate against an employee, or an applicant for a job,
on the grounds of their ethnic background).

9. The Disability Discrimination Act, 1995 (stating that it is illegal for

a business with 20 or more employees to discriminate against
an employee, or an applicant for a job, on the grounds of their

Create a Poster to be displayed outside the class that details the main elements of a piece of

In addition to the poster, be able to answer how you think the law affects firms (both positive
and negative)

1 Launching a new product or service may require the organisation’s existing staff to
undergo training.

(i) Identify the objective of such a training programme for the existing staff of an
organisation. (5 marks)

(ii) How does this type of training differ from an induction training programme?
(5 marks)

2 (a) Describe how employees in a large manufacturing company might be involved

in the decision-making process.

(b) Analyse the benefits of this involvement for both the employee and the
employer. (15 marks)

3 Some employees may feel that their employer is discriminating against them because all
people doing the same job are not receiving the same pay. Explain the steps employees cant
take to have the situation remedied. (9 marks)

4 What measures might an organisation introduce to develop good working relationships with
employees and trade unions? (6 marks)

5 Describe the constraints legislation may impose on an organisation. (10 marks)

6 Errors sometimes occur in manufacturing, e.g. a supermarket is unhappy about the quality of
one batch of lasagne which has been distributed throughout the UK.
Explain the role of the Public Relations Officer in dealing with this situation.
( 5 marks)

7 (a) Name 2 laws relating to health and safety in the workplace. (2 marks)

(b) Describe the ways that health and safety laws affect most organisations.
(7 marks)

8 When recruiting staff, what is the purpose of an interview and how should it be conducted to
be as effective as possible? (10 marks)

9 In addition to an interview, some firms give applicants special tests. Identify and describe 2
such tests. (6 marks)

10 (a) Give examples of a possible key field in a staff database and explain how it might be
used. (2 marks)
(b) Explain the uses which a Human Resource department might make of a staff database.
(7 marks)

11 Quality circles are an example of industrial democracy. What are they and how might they
benefit an organisation? (6 marks)

**********TO DO –

insert appriaisal
activities for Grievance and Termination
activities for Employee Participation
include role plays, mind maps etc