Business - 3.6

A-level Business AQA HR

role of human resources

responsible for labour within the organisation

human resource management

the strategic process of making the most efficient use of an organisation’s employees e.g. planning the workforce, recruitment and selection, training, appraisal, monitoring performance and motivating/rewarding employees

labour productivity as a HR objective

relates to the quantity of products that an employee should produce, on average, over a specific amount of time

it is more common in manufacturing or construction where measuring output is straightforward

advantage of labour productivity as a HR objective

can reduce costs because the fixed costs are spread out over a greater output (therefore reducing average unit costs)

numbers and location of the workforce as an objective of HR

a business might grow, move overseas, replace employees with technology or introduce new products which means that the business will require a slightly different workforce (as must have sufficient employees to meet demand but not too many that are unnecessarily paying employees)

important for seasonal businesses + they may use flexible contracts e.g. zero hour

employee engagement

when employees of the business are committed to achieving the businesses mission, goals and objectives

CIPD three dimensions for employee engagement

1. intellectual engagement = thinking hard about the job and how to do it better

2. affective engagement = feeling positively about doing a good job

3. social engagement = actively taking opportunities to discuss work related improvements with others at work

employee involvement

enables employees to contribute to the continuous improvement of the business and is sometimes referred to as the ‘employee voice’

involves:

1. considering employees’ ideas and opinions by encouraging two way communications, regular meetings or suggestion schemes etc.

2. employee representatives so ‘employee voice’ is heard during decisions

employee engagement and involvement as a HR objective

showing higher employee engagement and involvement = more motivated = work harder = higher labour productivity = lower average costs per unit = better overall performance

more common for democratic managers/cultures

training as a HR objective

improving the work related skills and knowledge of employees can be an effective way of improving employee performance AND attract them most talented and motivated employees

what can training be used for? (x5)

1. add basic knowledge and skills to new employees to enable them to quickly contribute effectively to the organisation (induction training)

2. exposed to the latest concepts and techniques in order for them to continually develop their skills in the areas where they work

3. develop new skills and competencies to enable employees to progress to different levels in the organisation

4. can prepare staff to undertake different tasks which adds flexibility (creates multi-skilled staff)

5. highly trained staff are more likely to have greater job satisfaction as likely to be fully equipped to meet corporate objectives

talent development as a HR objective

focuses on fulfilling the potential of employees who have the ability to shape the business’s future performance (as some believe that the future success of an organisation depends upon the ability of the business to retain, develop and manage talented employees)

diversity

recognising the differences between individual employees as well as the differences that might exist between different groups of employees including gender, race, ethnicity and disability, religion, sexuality, class and age

2010 Equalities Act

offered protection to employees against direct and indirect discrimination, harassment and victimisation

diversity as a HR objective

advantages of a diverse workforce

1. ensure that the business draws upon all the talent available when recruiting

2. the business will promote the best and most able employees regardless of personal characteristics ensuring the business is in the best position to recruit and retain talented individuals

3. may allow the business to fully understand the needs of customers who themselves are diverse

4. may acquire a reputation for operating an effective diversity and equality policy → more likely to be viewed as an attractive employer so more likely to attract highly talented and skilled employees

alignment of values as a HR objective

all functions of the business should work towards a common goal of fulfilling the corporate objectives:

1. the values of the organisation must be clearly set out and communicated to all staff

2. important that all staff believe their actions can directly influence the business

3. all staff must be motivated and fully engaged and suitable methods of motivation must be used

benefits of setting HR objectives (x3)

1. helps to ensure that all staff are working towards the same goal (SMART objectives ensure they are clear)

2. objectives provide a yardstick by which to judge success or failure

3. measurable and timed objectives will allow managers and individuals to establish the reasons for success and failure (aids benchmarking)

disadvantages of setting HR objectives (x5)

1. only as good as the information they are based upon as the external environment could change rapidly and as a result the business may not meet its anticipated growth/objectives

2. some HR objectives may conflict with others e.g. training may undermine an objective relating to increased labour productivity

3. may not have sufficient resources or large enough HR budget to achieve objectives

4. if objectives are ‘imposed’ rather than agreed, employees may not feel that they have ‘ownership’ and may not be committed

5. may be too ambitious or unrealistic

hard HRM

employees regarded as simply being a resource to be used and therefore they must be monitored, used efficiently and their costs controlled

• likely to be authoritarian or autocratic and likely to involve centralised control

• based on the ability to do the job, usually hierarchical as delegation is one of the most important aspects

benefits of hard HRM (x6)

1. decisions are made quickly

2. tight control and management of costs

3. instructions and targets are given by management which are clear

4. focus is on output and productivity

5. may work well in repetitive jobs where lapses of concentration can occur

6. good in a crisis situation

problems of hard HRM (x5)

1. staff may feel neglected

2. the business does not exploit the full potential of staff

3. staff are not involved in decision making so may be less committed to goals and targets

4. little opportunity for development and staff training is often minimal

5. quality of decision making may not be compromised as staff are not consulted

soft HRM

employees seen as an important resource and must be developed

• suits more democratic styles of management since authority is passed down the organisation and staff involvement in decision making is key

• employees often have a platform for advancement, the manager works with the team and it is very people orientated meaning HR is a big asset

benefits of soft HRM (x3)

1. all staff are involved in decision making so may be better

2. staff may feel empowered in their role

3. staff turnover and absenteeism might be low and this is linked to greater employee satisfaction

problems of soft HRM (x3)

1. may not be suitable for all employees as may take advantage of less control

2. may be unsuitable in crisis situations when quick action is required

3. decision making will take time which could be costly

equation for labour productivity

output per period (units) / number of employees at work

what does labour productivity depend on (x5)

1. number and quality of capital equipment

2. degree of motivation of employees

3. nature of the product and the type of production techniques used

4. skills of the workforce

5. capacity utilisation (high = incentives such as overtime for labour to work harder and vice versa)

what does labour productivity depend on (x3)

1. the market as not all business sectors experience the same trend in productivity

2. wage rates (may be able to be competitive with low labour productivity if wage rates are low)

3. may not necessarily always bring benefits as competitors labour productivity may have risen at a faster rate

strategies to increase labour productivity (x5)

1. recruitment and selection of suitably skilled and trained employees

2. provision of training to enhance skills of existing employees

3. appropriate remuneration and non-financial benefits to improve motivation and effort

4. improved working practices which result in greater involvement

5. improved technology and capital equipment

calculation for unit labour costs

total labour costs / total units of output

unit labour costs

negative relationship between unit labour costs and productivity since as labour productivity increases, average unit labour costs are divided amongst a greater output

factors to consider when interpreting unit labour costs (x3)

1. lower labour costs are preferred, especially if below competitors

2. short term factors can have an impact on unit labour costs e.g. training of employees

3. other costs also need to be considered when seeing if the business will be price competitive

strategies to reduce labour costs per unit (x3)

1. during the recent credit crunch, a number of firms negotiated pay reductions in order to retain staff which reduced labour unit costs

2. replacing workers with machines (more efficient as 24/7 working)

3. outsource production to other firms

calculation for employee costs as a % of revenue

employee costs / revenue x 100

influences of employee costs as a % of a revenue

1. higher levels of labour productivity will result in more products made and therefore sold, increasing revenue

2. an increase in wage rates or salaries will increase employee costs and so if sales revenue does not increase in the same proportion, then it will increase

3. non-wage employment costs such as expensive company pension schemes can drive up labour costs without necessarily increasing revenue

4. low capacity utilisation results in labour not being used efficiently to produce output and this is generally caused by low demand for the product, meaning it will increase

labour turnover calculation

number of employees leaving / total number of employees x 100

problems of high labour turnover (x5)

1. high recruitment and selection costs to replace staff who leave (administrative and management costs incurred in advertising positions, conducting interviews etc.)

2. high induction and training costs as must ensure new employees quickly become familiar with practices and learn the necessary skills to carry out the job effectively

3. need to redesign jobs to jeep them as simple as possible so it is easier to replace staff who leave

4. reduced productivity due to disruption caused by skilled staff leaving and new, usually untrained, staff joining (loss of production or sales especially if key knowledge/skills difficult to replace)

5. low morale amongst existing staff as a result of the constant change of work colleagues

retention rate calculation

number of employees with one or more years’ service / total number of employees x 100

causes of high labour turnover and low retention rates (x8)

1. ineffective leadership and management techniques

2. poor communication

3. wages and salaries are lower than those being paid by other similar firms

4. poor selection and recruitment procedures

5. boring and unchallenging jobs which lack career development opportunities

6. poor working conditions and unpopular working practices

7. low morale and motivation

8. if the economy is improving, there may be more attractive employment opportunities elsewhere

how to reduce labour turnover and increase retention rates

1. monitoring and benchmarking to other businesses, departments, time, roles etc.

2. must ensure the procedures of recruitment and selection are effective in order to reduce labour turnover in the future

3. use exit interviews to identify problem areas like the job itself, supervision and management, pay and conditions and training and career prospects etc.

4. make new employees feel included through induction and training

5. provide opportunities to long0term employees as they have huge amounts of skills and knowledge relating to the business

human resource planning

used to access the current and future capacity of a business’s workforce and sets out the actions necessary to meet the business’s future human resource needs

stages of human resource planning (x5)

1. consider the overall corporate objectives as it must contribute to the achievement of these

2. take a strategic view of employees which may include looking at how technology might compliment or replace workers

3. make a judgement about the size and type of workforce the organisation will require in the future

4. desired future workforce is then compared with that available at the time

5. business decides upon policies required e.g. recruitment, training, redundancy etc.

examples of internal information on the business’s current workforce (x5)

1. the number of employees that the business currently has and their skills

2. data relating to labour productivity for the existing workforce

3. current and forecast labour costs

4. the age profile of employees which help the business to forecast future changes due to retirement etc.

5. business’s overall corporate objectives

examples of external information affecting workforce planning (x6)

1. expected rate of unemployment for those with skills required

2. forecast wage rates

3. expected demand for products

4. likely prices at which the business can expect to sell its products

5. availability and cost of technology which could be used in production

6. economic forecasts and trends

organisational design

the process of shaping an organisations structure so that it meets the organisations purpose and helps deliver its objectives, enabling a business to bring together its departments and the employees of the organisation

organisational structure

represents the formal lines of authority and power and the relationship between different people and functions within a business

vertical communication

communication passing up and down the organisation

horizontal communication

communication across the organisation

flat structures

few levels in the hierarchy

tall structures

many layers in the hierarchy (UK businesses commonly use this with long chains of command)

delayering

taking out the layer of middle managers

advantages of delayering (x3)

1. lower costs as fewer (expensive) managers are required

2. offers opportunities for better delegation, empowerment and motivation as authority is passed down the hierarchy

3. improved communication as messages have to pass through fewer levels

disadvantages of delayering (x3)

1. not all businesses are suited to flatter organisational structures (mass production industries with low-skilled employees may not adapt easily)

2. can have a negative impact on motivation due to job losses, especially if an excuse for redundancies

3. a period of disruption may occur as people take on new responsibilities and fulfil new roles

spans of control

the number of people who report directly to a manager (flat organisations = wider spans of control = need to delegate and trust employees to complete tasks as little time to monitor closely)

advantages of narrow spans of control (x3)

1. close supervision

2. close control

3. faster communication

disadvantages of narrow spans of control (x4)

1. superiors get involved in the work of subordinates

2. many levels of management

3. high cost

4. excessive distance between top and bottom level

advantages of wide spans of control (x3)

1. forced to delegate

2. clear policies must be made

3. subordinates must be carefully selected (often means they will be highly skilled)

disadvantages of wide spans of control (x3)

1. overloaded superiors may become decision bottlenecks

2. danger of superiors loss of control (decreasing quality)

3. requires high quality managers

delegation

the passing down of authority through the organisation (required as businesses grow as managers begin to get an unmanageable amount of work)

can improve motivation and remove workload of manager

advantages of delegation (x4)

1. can speed up and improve the quality of decision making as may be made by employees who are closer to the customers and have a better understanding of their needs

2. can reduce workloads of senior managers, allowing them to focus on key tasks and improve their performance

3. improves the skills of junior employees and prepares them for more senior roles in the organisation

4. may increase motivation as have more authority

disadvantages of delegation (x3)

1. costs of training is high as have to train employees the necessary skills

2. may be inappropriate in some organisations where leadership styles are authoritarian and managers may be unwilling (or lack skills) to pass control on

3. not a suitable strategy to adopt to manage a crisis as these situations may require rapid decisions by experienced senior managers

centralised structures

organisations that keep their decision making power firmly at the top of the organisaiton rather than delegating responsibility to employees further down the hierarchy

advantages of centralised structures (x5)

1. easier to implement common policies and practices for the whole business

2. prevents other parts of the business becoming too independent

3. easier to coordinate and control from the centre e.g. with budgets

4. quicker to decision-making and easier to show strong leadership

5. increased uniformity (same everywhere) which improves brand image

disadvantages of centralised structures (x4)

1. more bureaucratic - often extra layers to the hierarchy

2. local or junior managers are likely to be much closer to customer needs so may not bas as good customer service (non-specific)

3. lack of authority down the hierarchy may reduce manager motivation

4. customer service has no flexibility

decentralised structures

the power and authority to make decisions is delegated from the head office to managers or employees lower down the hierarchy of the organisation

advantages of decentralised structures (x5)

1. decisions made closer to the customer = better customer service as understand needs better

2. better able to respond to local circumstances

3. should improve staff motivation

4. consistent with aiming for a flatter hierarchy

5. good way of training and developing junior management

disadvantages of decentralised decision making (x5)

1. decision making is not necessarily “strategic”

2. harder to ensure consistent practices and policies at each location = weaker brand image?

3. may be some diseconomies of scale e.g. duplication of roles

4. who provides strong leadership during a crisis? (decisions take longer)

5. harder to achieve tight financial control (risk of cost overruns)

functional organisational structure

the traditional type

geographical organisational structure

where the business is organised according to the location of production

matrix structure

the business has project teams whose members are taken from across the functional areas of the organisation (e.g. each project time consists of members from operations, marketing, HR and finance)

advantages of matrix structures (x2)

1. interdependencies between functional departments are managed well

2. skill diversification and training across functions is easier

disadvantages of matrix structures (x2)

1. difficult to manage and control coordination

2. employees may face unclear roles and inconsistent job demands

when do matrix structures work best? (x4)

1. the organisation is very large

2. business environment is uncertain and unpredictable

3. high level of technological interdependence across functions exist

4. the goal is product specialisation and innovation

influences on organisational design (x7)

1. business objectives

2. size of organisation (larger = more complex = more layers)

3. nature of organisation inc. international, sector etc.

4. attitudes of senior management (autocratic = centralised = tall management and vice versa)

5. skills and experiences of workforce

6. external environment (competitiveness may require delayering)

7. stakeholders

value of changing organisational design (x5)

1. enables the business to become more competitive

2. allows the business to meet its objectives and customers’ demands

3. changes in structure can help the business to improve the performance of the workforce by creating more interesting and motivating jobs

4. can positively impact on unit labour costs, productivity and labour turnover etc.

5. delayering can reduce wage costs and empower remaining workers through job enrichment, delegation and empowerment

human resource planning uses

assessing the current and future needs of the business and takes action to ensure the business will have sufficient staff to cover future needs (untapped skills etc. through a skills audit)

job descriptions

contain details of the tasks, duties and employment conditions associated with the job

person specification

sets out the qualifications and qualities of the person

advantages of internal recruitment (x3)

1. cheaper to advertise

2. less time consuming

3. will already know the candidates and their skills

disadvantages of internal recruitment (x4)

1. lack of new ideas/fresh skills

2. will need to find a new candidate for the role left after the promotion

3. negatively affecting morale and commitment of those not promoted

advantages of external recruitment (x2)

1. wider audience for the job

2. increases the chance that the business will be able to recruit the skills needed

disadvantages of external recruitment (x3)

1. more training may be necessary

2. more expensive to advertise

3. takes longer to complete the selection and recruitment process

methods of external recruitment

local, regional and national newspapers, local job centres, websites, specialist magazines or use specialist recruitment agencies that carry out the initial interviews and produce a shortlist (they receive a % of the annual salary of the person who has been recruited)

methods of selection (x7)

1. interviews

2. personalise or aptitude tests such as psychometric testing

3. role plays

4. presentation

5. group tasks

6. assessment centres where recruitment is carried out away from the workplace and usually occurs over a day (including a series of tests, interviews and group activities)

7. references

importance of effective recruitment and selection (x2)

1. ineffective selection can cause increased labour turnover which in turn leads to additional costs in terms of further advertising, interviewing and training (+ impacting productivity and employee motivation)

2. effective recruitment and selection could lead to lower labour turnover, lower costs, improved productivity and more highly motivated employees

training

a process by which someone acquires skills and knowledge which can help the employee to develop but also assist the business in achieving its own aims and objectives (essential when skills required differ from those currently employed)

potential reasons for training (x6)

1. the development or introduction of new products or services

2. the introduction of new technology e.g. computers and robots on the production line

3. restructuring of the firm e.g. job enlargement as a consequence of delayering

4. changes to procedures including changes to customer service

5. when there is high labour turnover

6. changes in legislation

induction training

required to help new employees settle in quickly and includes familiarising them with the layout of the organisation, health and safety issues, the management hierarchy and the main policies (reduce labour turnover, improve retention and motivation and can contribute to the organisation quickly)

on the job training

take place within the organisation where new employees are taught during their first shift

advantages of on the job training (x4)

1. generally most cost-effective

2. employees are actually productivity

3. opportunity to learn whilst doing

4. training alongside real colleagues

disadvantages of on the job training (x4)

1. quality depends on the ability of trainer and time available

2. bad habits may be passed on

3. learning environment may not be conductive

4. potential disruption to production

off the job training

involves all forms of employee education apart from that carried on in the immediate workplace (may be internal e.g. a conference room or external like a training centre)

advantages of off the job training (x3)

1. a wider range of skills or qualifications can be obtained

2. can learn from outside specialists or experts

3. employees can be more confident when starting the job

disadvantages of off the job training (x4)

1. more expensive e.g. transport and accommodation

2. lost working time and potential output from employee

3. new employees may still need induction training

4. employees now have new skills/qualifications and may leave for better jobs

redundancy

when an employee is dismissed because a job no longer exists (usually involves extensive consultation with recognised trade unions or elected employee representatives)

unfair dismissal

employees must not be unfairly selected for redundancy

employees may be entitled to redundancy pay + can become demotivated

criteria for selection for redundancies (x6)

1. length of service

2. attendance

3. disciplinary

4. skills and qualifications

5. work experience

6. performance records

ways of avoiding redundancy (x6)

1. natural wastage and recruitment freezes meaning whenever an employee leaves, they are not replaced

2. stopping or reducing overtime

3. pay freezes

4. pay cuts

5. asking people to volunteer for early retirement

6. short term working

redeployment

offered when jobs are being made redundant but there are vacancies elsewhere in the organisation e.g. in multi-product firms, the demand for one product line may fall whilst one increases

may also be due to personal reasons including medical conditions etc.

advantages of redeployment (x4)

1. maintains job security for employees whose current jobs are at risk

2. improves morale of the workforce

3. retains valuable skills, knowledge and experience

4. reduces the costs and time associated with external recruitment

employee engagement

where an employee is fully absorbed by and enthusiastic about their work so takes positive actions to meet the organisations goals