1.4 Managing People

Human resource management –

Human resource management –

Managing the people withing a business in order to achieve corporate objectives. This involves tasks such as recruiting and training employees as well as designing performance management systems

Staff as an asset -

When businesses view employees as a valuable resource to be invested in and ideally retained long-term. 

Staff as a cost -

When businesses view employees as an expense to be minimised

Pros and cons for staff as an asset

Advantages	Disadvantages
•More skilled employees > easier to adapt to market change  •Higher levels of staff retention > reduce recruitment and training costs in the long run  •A more motivated workforce > higher labour productivity  •Reputation for being a good employer > easier to attract good people.	Higher labour costs > impact on pricing or profit margins   Risk that the business invests in staff who then go to work for rivals.

Staff as a cost

Advantages	Disadvantages
•Easy to adapt the size & composition of the workforce in response to business needs – important in dynamic market  •May lead to lower labour costs – especially in the short run – important if competing on price  •Employees can be tightly controlled and supervised > important if relatively unskilled	•Demotivated staff > higher labour turnover/absenteeism /low productivity.  •Poor reputation as an employer > harder to attract new staff, important in a tight labour market.

Labour productivity –

measures output per worker per time period 

Labour productivity formula

= output per time period 

       number of employee

Labour turnover –

measures the % of workers that leave in a given time period

Labour turnover formula

= number of staff leaving x 100 

Average number of staff 

Labour retention -

Measures a firm’s ability to keep its workforce normally for more than one year 

Labour retention formula =

No of employees serving for more than 1 year x100

                      Average number of staff 

Absenteeism -

Usually measures the % of days lost to absence 

Absenteeism formula =  

Number of days lost to absence x 100

   Total potential working days 

Why does Labour productivity matter>

The more productive the workers, the fewer workers needed to make goods/provide services, therefore the lower the cost per unit. This gives businesses scope to lower prices or increase profit margins.   

how to improve it

It depends why it is low, which managers would need to investigate.  But options include: 

Improved recruitment process, training, better equipment, financial and non-financial motivators

Why does Labour turnover matter

• High labour turnover is expensive, e.g. it will require more recruitment and the training of replacement staff. 

• Lots of vacancies/new staff puts increased pressure on the remaining staff 

• Lack of staff/lots of inexperienced staff may reduce production / productivity/ quality

  how to improve it

• Improved recruitment and selection – employees are more likely to leave if they are in a job that they are not suited to. 

• Improve terms and conditions - employees are more likely to leave if other businesses offer better pay/other rewards/ working conditions 

• Change the organisational structure – try to build in opportunities for promotion so that employees don't have to move on to move up 

 

 

Why does absenteeism matter?

Why does it matter? 

• Increased costs. E.g. may need to pay for cover. 

• Increased pressure on other staff > morale? 

• Impact business performance, e.g. delayed deliveries 

 

How to improve it.... 

Again, it depends! Managers would need to look into why it is high.  

Approaches might include: 

• Improved health and safety at work practices.  

• Introducing/expanding flexible working 

• Implementing an employee wellness programme, e.g. offering counselling.  

• Improved job design to increase motivation 

 

 

Flexible workforce –

Using permanent employees that carry out core tasks and peripheral workers that provide numerical and/or functional flexibility to allow a business to respond to changes in demand.

Numerical flexibility –

The ability to flex the size of the workforce up or down e.g. using temporary or past-time workers. 

Functional Flexibility -

The ability to vary the tasks that a workforce can do, e.g. by multi-skilling or outsourcing.  

Multiskilling –

Employees’ skills are enhanced so that they are able to carry out a range of different jobs

Outsourcing – 

contracting out certain business functions to another business. Commonly outsourced tasks include cleaning, catering and IT. 

Part-time work –

Employing staff on contracts that are typically less than 30 hours per week.  This can help the business to cut costs, only paying a part-time wage if only part-time work is required.  Sometimes part-timers are asked to do extra work during busy times, further increasing flexibility. 

Temporary staff –

these can be either full-time or part-time but are on a fixed term contract, for example when schools hire supply teachers to cover teacher illness or maternity/paternity leave and retailers use seasonal staff at Christmas

Flexible hours –

This can involve a range of possible contracts, but examples include:  flexi-time, where employees work core hours but have some freedom over start/end times and zero hours contract where employees only work/get paid when the business actually needs them

Working from home / Mobile working – 

The ability of an employee to carry out their job from their own home rather than going into an office or workplace

CHARLES HANDY’S SHAMROCK ORGANISATION 

Pros and cons of a flexible workforce

Advantages

Disadvantages

Can reduce labour costs, e.g. by:  •only paying staff when they are needed.  •reducing training costs – the firm can “buy in” specialists when they are needed.  Improved customer service - can help the business cope effectively with surges in demand.  Can help with recruitment / retention / motivation – many workers like flexible working e.g. flexible hours /multiskilling

Can be expensive:  Hiring contractors/consultants may cost more than doing the work in house.  may reduce productivity – e.g. temporary hires may not be effective in role straight away.  Quality may deteriorate – e.g. as multiskilled workers are less specialist/permanent staff are under pressure when support temps.  Communication can deteriorate, e.g. as staff are not always working at the same time/rely on digital communication.

Multi-skilling pros and cons

Advantages	Disadvantages
• Better able to respond to surges in demand > maintain lead times > improved customer experience    • Higher labour productivity > workers can be moved around depending on demand so fewer workers are needed > reduced unit costs.    • Increased motivation > workers are less likely to be bored > likely to reduce labour turnover.    • Reduced disruption associated with absence.	Higher training costs > impact on  profit     Risk that the business invests in staff who then go to work for rivals.    Risk that workers become demotivated if they feel they are being required to do a more challenging job for the same pay.

Out sourcing pros and cons

Advantages

Disadvantages

Focus on core competencies: Outsourcing allows a company to focus on its core business activities while paying specialists to carry out non-core functions (e.g. IT, HR, accounting).     Access to expertise: Outsourcing providers are often specialists in their fields, which means the company can benefit from the expertise and experience of professionals in that specific area. This could mean better quality and can also help to overcome problems with skills shortages.    Cost savings: Outsourcing often leads to cost reductions for lots of reasons, e.g.:  Businesses can avoid paying for specialists that they don't year-round.  They can avoid tying up capital, e.g. in production facilities.  As some outsourcing is done to businesses based in lower cost locations, this can lower costs of labour-intensive tasks substantially, e.g. customer service.

Lack of control > quality concerns: In some cases, outsourced providers may not deliver the expected level of quality, leading to dissatisfied customers/damage to the brand    Increased power of suppliers: Overreliance on outsourcing partners can pose risks, especially if provider a crucial service.    Ethical concerns: where work is outsourced to unethical businesses, e.g. those with very poor working conditions. This may damage the brand or lead to dissatisfied  stakeholders, e.g. shareholders or customers    Cost: Sometimes specialist contractors are very expensive.

Employee-employer relations -

the process of discussing/negotiating and agreeing to changes in the terms of conditions of work 

Dismissal -

when an employee loses their job due to misconduct (such as theft) or because they are incapable of doing their job

Redundancy - 

when an employee loses their job because there is insufficient work for the employee to do (they will be entitled to a redundancy payment). 

Trade union -

Organisations that work to protect members’ interests and improve their terms and conditions at work. 

Works council –

An internal group of employees representing a workforce in discussions with their employers

Collective bargaining

- A method of determining conditions of work and terms of employment through negotiations between employers and employee representatives, such as trade unions.

Industrial action –

Collective activity by workers to put pressure on employers, usually over terms and conditions of employment. Examples include strikes, overtime bans and work-to-rule. 

Individual approach -

When workers' conditions of work and terms of employment are negotiated individually between employees and management

Pros and cons of collectivised bargaining

Advantages

Disadvantages

Can be quicker to negotiate collectively > important if change needs to be implemented quickly.  Outcomes are more likely to be accepted by employees if they feel employers have negotiated with representatives > avoid industrial action e.g. strikes  Employees may feel that they are being treated fairly, as bargaining collectively gives them more power when negotiating with a large employer.

Can lead to higher labour costs as unions push for better terms and conditions for workers.     May lead to industrial action of agreement cannot be reached.    Collective bargaining usually leads to standardised terms and conditions, e.g. nationally negotiated pay scales. This makes to pay workers differently, e.g. depending on their level of productivity, or in response to labour market conditions.

Recruitment -

Searching for and attracting potential candidates to fill job vacancies. 

Selection -

Choosing the right person for a job from a field of candidates

Internal recruitment –

Filling a job vacancy with current employees. This can involve promotion, but could also just be a change of role. 

External recruitment -

Filling a job vacancy with candidates from outside the organisation. 

Job description –

Sets out the tasks and responsibilities of a job. Information will include: job title, place in the hierarchy, duties, tasks and responsibilities. 

Person specification –

A document used within the recruitment process that describes the person required to do the job e.g. qualifications, skills and experience

Psychometric testing –

used to assess a candidate's ability and personality. Usually involves numerical and verbal reasoning tests and sometimes personality questionnaires. 

Assessment centre -

an in-depth selection method that assesses candidates' competencies and suitability for roles. Usually takes place over 1-2 days and typically involves interviews, testing, group exercises etc.

Why do businesses recruit?

• Business expansion due to increase in sales, developing new products, entering new markets etc. 

• Existing employees leave – to work with competitors, due to retirement, etc.  

• Employees are promoted creating a vacancy. 

• Workers may be required to work on a temporary basis 

• Business needs employees with new/different skills, e.g. due to change in the market.  

The recruitment process

RECRUITMENT 

1. Identify the vacancy and conduct job analysis to identify the various duties and responsibilities involved 

2. Create a job description and job/person specification 

3. Advertise the vacancy internally and/or externally to attract suitable candidates 

SELECTION 

4. Analyse the applications 

5. Draw up a shortlist of the most suitable applicants for interview 

6. Choose the most suitable candidate(s) using appropriate selection methods e.g. interview, testing, assessment centre, taking up references 

7. Appoint the successful candidate (issue and sign contracts) 

Internal versus External Recruitment

 

Advantages of internal recruitment

Advantages of external recruitment

Productivity - Recruits are familiar with the  business so likely to require less training and be operationally effective more quickly  Increase motivation/retention – e.g. increased opportunities for promotion/self-actualisation (personal fulfilment)  Lower risk - More likely to choose a suitable candidate?   Applicants are well known to the employer – easier to be sure of their skills/experience  Lower advertising costs – e.g. advertise via intranet rather than an agency

Improved business performance? An external candidate may bring fresh ideas to the business.    Reduced impact across the organisation - Avoids creating other vacancies within the business.    More suitable candidates? - Access to a wider pool of candidates – may be easier to find some with the right skills/experience .

COSTS OF RECRUITMENT AND SELECTIO

Direct costs – e.g. advertising in specialist publications/websites, paying a recruitment agency or a head-hunter. 

Indirect costs – Depending on the skills experience of the candidates/s selected on-the-job or off-the-job training may be required. At a minimum, induction training will be needed. 

Opportunity costs – Managers (sometimes senior) will need to commit time to the process, e,g,  shortlisting candidates and carrying out interviews. This takes them away from their main role.  

Costs of getting it wrong! Selecting an unsuitable candidate can be VERY costly. For example: 

• The recruit may be ineffective in their role, reducing labour productivity. 

• Selecting unsuitable employees has a knock-on effect on the team/line manager. It may increase their workload, and make it harder for them to do their job well. This can be demotivating, reducing their productivity. 

• They are more likely to leave, meaning the whole R&S process will have to be repeated. 

Training -

Increasing the knowledge and skills of employees so that they can do their jobs more effectively. 

Development -

Creating opportunities for employees to acquire a broader set of skills to prepare them for future roles. 

Induction training –

Initial training for people starting a job. Typically includes an introduction to the business/role and a health & safety briefing. 

On-the-job training –

Where an employee is trained by a more experienced employee while doing their job in the normal working environment

Off-the-job training -

Taking people away from their normal workplace to learn new information or skills, e.g. when apprentice goes to College 1 day per week

Why invest in training?

• To provide higher quality products and services – especially important if the business is competing via differentiation. 

• Improved labour productivity – reducing unit costs – especially important if the business is competing via cost. 

• Increased workforce flexibility – e.g. by multiskilling employees – especially important if demand is variable or the market is dynamic. 

• Improved worker motivation – as employees feel valued, more confident in their job and may enjoy it more, especially if it is more varied/challenging. 

• Less need for supervision – especially important in a flat hierarchy where managers have a large span of control. 

Pros and cons of induction training

Advantages

Disadvantages

Faster Integration: helps new employees integrate into the workplace quickly, reducing the time it takes for them to become fully productive.  Cultural Integration: New employees gain insights into the company culture, values etc. This helps them to "fit in".  Reduced Turnover: can positively impact employee retention by ensuring that new hires feel supported and valued from the beginning.  Reduced risk of accident/injury: Employees should be trained in dangers/risks of their role before starting

Cost: expensive to set up (creating materials etc) and whilst training employees are not producing  Information overload – would this information be absorbed better if introduced gradually?  Generic Content: Some induction programmes offer generic content that might not be tailored to specific job roles. This can lead to a lack of  engagement for certain employees.

Pros and cons of on the job training

Advantages

Disadvantages

Effective - directly relevant to the job  Low-cost – it is usually quicker than off-the-job and done by a more experienced employee, rather than a specialist trainer  Productivity - the worker is actually productive whilst   training, as opposed to having a day out on a course.  Culture – as well as passing on basic skills, employees can get a sense of "how things are done around here" helping them to integrate

Quality of the training may depend on the skills of the trainer.  Training in a pressured work environment may mean some key processes/skills may be missed.  Limited exposure to different perspectives or industry best practices – perhaps missing an opportunity for improvement.

Pros and cons of Off the job training

Advantages	Disadvantages
More effective – trainers are usually experts  More thorough - trainees can cover a planned curriculum away from the workplace where they can concentrate  Exposure to industry best practices – perhaps leading to improved business practice.  Networking opportunities – sometimes training takes place with professionals from other organisations, allowing the sharing of experience.	Cost – it is usually more expensive as requires a specialist trainer, travel and sometimes accommodation.  Productivity - the employee will need time off work.  Relevance – sometimes off-the-job training is off-the-shelf (non-customisable, so may not be totally suitable.

Private sector

Individuals own profits goes to individual

Public sector

Owned by the government, nonprofit, but any go to the government

Nationalisation

Moving a company from private to public sector and privatisation is the opposite

Business survival

It’s new, when a competitor enter the market, are there changes and external environment

Hard approach will include

Minimum wage, temporary training, lack of job, security, minimum investment, bad communication

Soft approach will include

Competitive structure, effective, recruitment, process, permanent processes, effective communication, lots of responsibility

Consultation strategies

Seeking opinions from employees before making decisions, which increases the feeling of worth

Pros and cons of a flexible workforce for firm

Pros, helps with recruitment, reduce labour costs, cope quickly with changes in demand

Cons, May actually increase cost, communication can deteriorate, potential loss of customers

Pros and cons for flexible working to a worker

Pros,improve worker morale, reduce costs of commuting, improved job, prospects, longer, careers

Cons can lead to increased workload, can reduce job security, lack of worker interaction, reduces effectiveness

Advantages and disadvantages of collective bargaining

Pros, negotiations, reduces favouritism, cheaper and quicker to run

Con, can be lengthy and expensive, unions may not actively represent all members, failure to agree, may result in industrial action