Business SL IB 2-5

appraisal

formal assessment of employee’s performance

types of appraisal (4)

formativeplanned, ongoing process where appraisal evidence is used by employeessummativewritten description of employee’s performance360-degree feedbackcollecting evidence of employee’s performance by colleagues, peers, etc.self-apprasialemployee appraises themselves on pre-determined criteria

dismissal

termination of worker’s employment

redundancies

no longer afford to employ staff or job ceases to exist

delegation

passing on control to others

span of control

number of people who are accountable to manager

bureaucracy

execution of tasks governed by rules of organization

decentralization

decision-making is shared

centralization

decision-making is made by small number of people

pros of centralization (4)

rapid decision-making

better control over organization

cons of centralization (2)

added pressure for senior staff

demotivating for employees

cons of decentralization (2)

inefficient

greater chance of mistake

project-based organization

human resources are organized around projects

pros of project-based organization (3)

efficientmotivationalproductive

cons of project-based organization (3)

isolationdiscontinuityconflicting interest

Handy’s Shamrock organization

believes the staff is the most important resource with focus on 3 main groups; core staff, peripheral; outsourced

functions of management (5)

planningcommandingcontrollingcoordinatingorganizing

management vs leadership

managementart of getting things done through people9-5leaderinspires others to get things done24/7

types of leadership styles (5)

autocraticleader makes all decisions without helpdemocraticinvolve employees in decision-makingpaternalistictreats employees as family acting in their best interestlaissez-faireemployees make own decisionsituationalusing right leadership style depending on situation

Taylor’s Motivation Theory

people are only motivated by money, involves differentiated piecework where employees are paid standard level of output and receive more money if they exceed

Maslow

hierarchy of needs, the assumption that people must be satisfied in this order; physical needs, safety, social, self-esteem, self-actualization

Hertzberg

hygiene factors and motivators affect level of motivation

job enlargement

workers have variety in what they do

job enrichment

more challenging tasks to exploit workers potential

job empowerment

delegating decision-making to works

Adam’s Equity Theory

input to output ratio has to be seen fair in relation to others

Pink

financial motivators no longer work, instead the three innate factors are autonomy, mastery and purpose

piece rate

rewards productive workers by paying workers for each item they sell

profit-related pay

linking pay to level of firm’s profit (typically as a bonus)

performance-related pay

reward employees who meet certain goals

employee share ownership scheme

giving shares in company or at a discount

job rotation

workers perform different tasks at same complexity in a systematic way

trade/labour union

organization of working people working to improve pay/working conditions

Termination

When contract period ends or employee decides to leave

Human Resource Management

The strategic approach to the effective management of an organization’s workers so that they help the business achieve its objectives and gain a competitive advantage.

Human Resource Planning

Analyzing and forecasting the number of workers and the skills of those workers that will be required by the organization to achieve its objectives Forecasting the number of employees required.Forecasting the skills required.

Labor Turnover

measures the rate at which employees are leaving an organization

disad high labor turnover

- expensive to recruit selecting and train - Poor output + customer service due to vacancies - difficult to establish loyal and regular customers - difficulty to establish corporate culture

adv high labor turnover

low skilled and less productive staff may be replaced with more skilled workers - new ideas + practices are brought into company - useful if they want to reduce staff

occupational mobility of labor

Extent to which workers are willing/able to move to different jobs requiring different skills In developed economies labor is relatively inmobile In emerging economies labor mobility tends to be high

Geografical mobility of labor

extent to which workers are willing and able to move geographical region to take up new jobs High geographical mobility can lead to overcrowding and poor living conditions in towns and cities

Recruitment

The process of identifying the need for a new employee, defining the job to be filled and the type of a person needed to fill it, attracting suitable candidates for the job and selecting the best one.

Job description

A detailed list of the key points about the job to be filled, stating all the key tasks and responsibilities of it.Includes: job titledetails of tasks to be performedresponsibilities involvedplace in hierarchical structureworking conditionshow the job will be assed and performance measured

Person specification

a detailed list of the qualities, skills and qualifications that a successful applicant will need to have

adv internal recruitment

applicants may already be well-known to the applicant teamapplicant will already know the organization and its internal methodsno induction trainingculture of the organization will be understood by applicantgives internal staff a career structure and a chance to progressstaff will not have to get used to a new style of management approach if vacancy is in a senior post

adv external recruitment

will bring new ideas and practiceswider choice of potential applicantsavoids resentment felt by existing staffstandard of applicants may be higher than if limited by internal staff

Training

work-related education to increase workforce skills and efficiency

on the job training

instruction at the place of work on how a job should be carried out

induction training

introductory training program to familiarize new recruits with the systems used in the business and the layout of the business site

off the job training

all training undertaken away from the business

Cognitive training

exercises designed to improve a person's ability to understand and learn information

Behavioral skills training

designed to improve an individual's ability to communicate and interact with others both inside and outside the organizat

Capital Expenditure

Money spent to acquire items in a business that will last for more than a year and can be used over and over again

Fixed Assets

Ex. Machinery, land, equipment, and buildings. Overtime they provide income for the business

Revenue Expenditure

money spent on the day to day running of a business. Ex. Wages, insurance, rent, and raw materials. (Should make sure it does not get high)

Personal Funds

A source of finance for sole traders that comes mostly from their own personal savings

Retained Profit

Profit which remains after a business paid corporation tax to the government and dividends to shareholders

Sale of Assets

When a business sells off its unwanted/unused assets to raise funds.

Share Capital (Equity Capital)

Money raised from the sale of shares of a limited company on the stock exchange.

Loan Capital (Debit Loan)

Money sourced from financial institutions such as banks, with interest charged on the loan to be repaid.

Interest

Cost of borrowing or the reward for saving money in the bank

Overdrafts

When a lending institution allows a firm to withdraw more money than it currently has in its account

Trade Credit

An agreement between businesses that allows the buyer of the goods/services to pay the seller at a later date.

Grants

Funds usually provided by a government, foundation, trust, or other agency to businesses which does not need to be repaid.

Subsidies

Financial Assistance granted by a government, NGO, or an individual to support businesses that are in the public interest

Debt Factoring

a financial agreement where the debt factor takes on the responsibility for collecting the debt owed to the business and provides the business with a percentage of the owed debt in cash

Leasing

A source of finance that allows a firm to use an asset without having to purchase it by cash

Venture Capital

Financial capital proved by investors to high-risk, high potential start ups or small businesses.

Business Angels

Highly affluent individuals who provide financial capital to small startups in return for ownership in their business.

Cost

The total expenditure incurred by a business in order to run its operations

Revenue

Measure of the money generated from the sale of goods/services

Revenue Streams

The income an organization gets from a particular activity

Fixed Cost

Costs that do not change with the amount of goods/services sold. Ex: Rent, insurance, salaries, interest payments

Variable Costs

Costs that change with the amount of goods/services produced. Volume related since they are paid per quantity produced. Ex: Raw materials, packaging, sales commissions, advertisements

Semi-Variable Costs

Costs comprising of both fixed and variable components. They remain fixed for a given level of production and after which they become variable once that level is exceeded.

Direct Cost

Costs that can be identified with the production of specific goods or services

Indirect Costs (Overheads)

Costs that are not clearly identified with the production of specific goods/services, not directly traceable.

Contribution

Amount each unit contributes towards the fixed costs and profits

Total Contribution

Calculated when more than one unit is sold.

Contribution per unit \=

Price per unit - variable costs

Profit

The financial gain made by the business

Profit \=

TR - TC

Break-even point

When the total costs \= the total revenue. This is when the business will not make a profit or a loss.

Margin of Safety

Amount of output by which the output level exceeds the break-even level of output.

Margin of Safety \=

current output - breakeven output

Total Revenue

TR \= Price x quantity

Target Profit Output (TPO)

The level of output that is needed to earn a specified amount of profit

TPO \=

(Fixed costs + Target profit) / CPU

Profit and Loss Account

Second part of the income statement that shows the net profit before interest and tax, net profit before tax, and net profit after interest

Appropriation Account

final part of the profit/loss account that shows how the company's net profit after interest and tax is distributed

Gross Profit

profit made by a company (sales revenue - cost of goods sold)

net profit

he positive difference between a company's gross profit and its expense (gross profit - expenses)

Cost of Goods Sold (COGS)

Cost of producing or purchasing the goods that were sold during that period

Dividends

A sum of the money paid to shareholders which is decided by the board of directors

Stock

unsold goods, raw materials or work-in-progress that the company has in hand at the end of the trading period

Balance Sheet

a statement of the financial position of a business in terms of assets, liabilities and owner's equity at a particular point in time

Assets

all items of value that are owned by the firm, such as cash or buildings

Fixed Assets

Long-term assets that last in a business for more than 12 months (Ex. vehicles, buildings, and machinery)

Current Assets

Short-term assets that last in a business for up to 12 months (Ex. Cash, debtors, stock)

Liabilities

all funds owed by the company to financial and other institutions, such as banks and suppliers