[BUSINESS] Unit 2 - People in business

Business studies IGCSE

Motivation

The factors that influence the behaviour of employees toward achieving set business goals

Factors that influence motivation at work (9)

• Variety of tasks

• Money

• Job security

• Fringe benefits

• Training (learning new skills = personal development for employees = increased chance of promotion)

• Status

• Responsibility (trusted to make decisions)

• Clean & safe workplace

• Friendship/social life

Benefits of a well-motivated workforce (5)

• Improved productivity (increased labour productivity = reduced average costs)

• Low rate of absenteeism (employees enjoy work, less likely to take unreasonable leave)

• Low rate of labour turnover (motivated employees less likely to leave business = reduced recruitment costs)

• Better quality goods/services (employees want to work efficiently)

• Competitive (reduction in average costs = lower selling price)

—> helps the business reach its objectives

Maslows hierarchy of needs (order)

(From top to bottom)

• Self actualisation (reaching ones potential)

• Esteem needs (respect, recognition for work)

• Social needs (friendship, acceptance, belonging)

• Safety needs (health, safety, job security)

• Physical needs (basic survival needs / water, food, shelter)

[ once a need has been satisfied it is no longer a motivator ]

Advantages of Maslow’s hierarchy

• Important to managers because it is possible for an individual to satisfy some/all of their needs at work

• Work needs to be organised so individuals are able to satisfy their needs so motivation is improved

• Increases business efficiency —> producing better quality goods for customers —> increasing competitiveness —> reducing costs —> improving profitability

Disadvantages of Maslows hierarchy

• Difficult to identify how much of each need has been met & which level level each is on

• Money may also satisfy esteem needs

• Not everyone has these same needs

• Self-actualisation is seldom achieved. Unlikely work will satisfy this need

• If jobs are not challenging enough, employees are demotivated

Taylors economic man theory

Theory that humans are motivated only by money

—> Aims to reduce inefficiency by finding fastest method of doing each task and training all employees to do so.

(Example: employees in flow production specialise in performing one task)

Economic man theory effects on employees

• To get employees to increase their efforts they need to be rewarded with more money

• Includes the piece-rate method - paying employees for each unit produced

• If employees are money-motivated, they will work harder, because the more units they produce, the more they will be paid.

Herzbergs two factor theory

Divided into hygiene factors and motivators.

Managers can use one or more motivators to increase motivation of employees. However, these motivators will not work unless there is an acceptable level of hygiene factors

Employees unmotivated, not satisfied

(hygiene factors) —→

Employees not unsatisfied but not motivated

(motivators) —→

Employees satisfied and motivated

Hygiene factors (two factor theory)

What needs to be present in the workplace to prevent job dissatisfaction.

• Clean & safe working conditions

• Friendly relationships with others

• Salary/wage

• Supervision / suitable leadership style

• Company policy (rules & procedures)

Motivators (two factor theory)

Factors that influence a person to increase their efforts.

• Varied work

• Responsibility and trust

• Advancement (promotion)

• Achievement

• Recognition of achievement

Hourly wage rate as a financial method of motivation

• Employees get paid fixed amt. per hour worked

• Paid only for the no. of hours they are at work

• Employee pay is not directly linked to how much they produce

Salary as a financial method of motivation

• Fixed annual payment paid monthly

• Best for employees whose work effort is not linked to production (supervisors, managers)

• Employees do not receive more pay if they need longer hours to finish a task

• Salary not linked to employee effort

Piece rate as a financial method of motivation

• Pay based on no. of units of output employees produce

• Employees are paid for no. of items produced by them

• Quality of goods may be poor , employees are rushing to increase pay

Commission as a financial method of motivation

• Pay based on value of sale made by staff (only for sales staff)

• Pay is linked to value of good sold - employees try harder to get a sale

• Employees are uncertain how much they will earn. They are not sure they will earn enough to cover for basic needs.

• Labour turnover may increase. Company therefore needs to spend time & money on recruiting new employees

Bonus scheme as a financial method of motivation

• Performance related pay

• Additional payment for achieving target set by managers

• Realistic targets motivate employees to work harder

• Linked to performance targets - increased productivity = reduced average costs

• If targets are unrealistic, employees become demotivated

Fringe benefits as a financial method of motivation

• Discounts of company products, company cars, insurance (different types linking to status)

• Help in recruitment, retention of employees

• Linked to status not performance

Profit sharing as a financial method of motivation

• Additional payment to all staff based on profits of the business

• Linked to performance of the business

• Any profit given to employees may reduce dividends to shareholders/reinvestment money

Job rotation as a method of non-financial methods of motivation

• Increasing variety in the workplace by allowing employees to switch from one task to another

• Prevents boredom

• Employees become multi-skilled

• Flexible workforce

Job enlargement as a method of non-financial methods of motivation

• Increasing or widening task to increase variety for employees

• Jobs become more interesting

• Reduced boredom

Job enrichment as a method of non-financial methods of motivation

• Developed from herzbergs research

• Work organised so employees use their full abilities

• Become more involved in decisions

• Employees feel valued - increasing satisfaction and efficiency

Quality circles as a method of non-financial methods of motivation

• Groups of employees regularly meeting to discuss work-related problems

• Come up with solutions and improvements

Teamworking as a method of non-financial methods of motivation

Groups and teams given responsibility for whole task

Delegation as a method of non-financial methods of motivation

Managers pass authority for tasks to lower-level employees

How does the cost to the business influence choice of a motivation method?

• Can the business afford it?

• Will the benefit of motivating employees outweigh increased costs?

• Ex. using job redesign —> reduced absenteeism —> improved productivity —> less recruitment costs

• If this cost saving is greater than implementation cost, it is a success

How does employee types influence choice of a motivation method?

• Some methods of motivation can only be used for certain kinds of employees

• Ex. piece rate is only suitable for production employees

How do employee personalities influence choice of a motivation method?

• A method that works for one employee may not work for the others

• Ex. Some employees may be motivated by higher pay for longer working hours, and some may be happy with lower pay and more leisure time.

Chain of command

The route by which authority is passed down through an organization.

As a business grows, it employs more, it becomes hard for the CEO to have control over all employees. Each person in the chain of command is directly responsible to the person above them, and for the people directly below them.

Levels of hierarchy

The no. of levels in an organisation structure

Span of control

The number of subordinates reporting to each supervisor/manager. It can be described as ‘wide’ or ‘narrow’ based on how many subordinates a person is responsible for.

Subordinate

An employee who is below another employee in the organizations hierarchy.

Factors affecting the size of a span of control (5)

• The difficulty of tasks - easy, repetitive tasks = wide span of control. complex tasks = narrow.

• Experience & skill of employee - experienced = less supervision/control

• Size of the business - span of control narrower in big businesses as more managers and directors are employed.

• Levels of hierarchy - tall organisation structure = narrower spans

• Management style - if the style requires more control

Importance of organisational structure

Everyone needs to know their roles & responsibilities to help business operate efficiently

Features directors of each dpt, managers working under them and individual staff.

Features of a tall organisational structure

• Many levels of hierarchy

• All levels (except bottom) are layers of management

• Span of control for each manager is narrow

• Long chain of command, decision making will be slow as they must pass through several layers of management

Features of a flat organisational structure

• Few levels of hierarchy

• Chain of command is very short, quick communication

• Few managers, wide span of control.

Delayering

Reducing size of hierarchy by removing one or more levels (often middle management) to save costs.

Advantages of delayering (4)

• Reduces costs

• Reduces chain of command, quicker communication

• Wider span of control —> increased opportunity for delegation —> motivate employees with trust —> improves employee skill

• Senior managers in closer touch with what is happening

Disadvantages of delayering (4)

• Increased workload for managers who remain - tasks may be incomplete or quality of decisions is not as good.

• Business may have to make redundancy payments. One-off increase in costs.

• Remaining employees may fear redundancy

• Wider span of control may reduce effective management of subordinates

Centralised organisation

One where all the important decisions are made and held by head office/senior managers at the top. They are then passed down to lower levels through chain of command.

Advantages of a centralised organisation (5)

• Decision making is quick

• Decisions taken for benefit of whole business

• Greater use of specialist staff improves decision making

• Often used by international franchises

• Able to maintain control and consistency

Disadvantages of a centralised organization (3)

• Slower communication

• Unable to respond quickly to changes in local markets

• May reduce employee motivation

Decentralised organisation

Where decision making powers are passed down the organisation to lower levels.

Advantages of decentralised organisation (3)

• Decisions made based on local needs

• Can be used to train junior managers

• Delegation helps to improve employee motivation

Disadvantages of a decentralised organization

• Decisions taken may not be in the interests of the whole business

• Poor decisions might be made because managers lack skills and experience.

5 roles of management

• Planning - setting objectives

• Organising - preparing resources needed to achieve goals at the lowest cost

• Commanding - supervising subordinates, motivating employees

• Coordinating - ensuring all parts are working together towards objectives

• Controlling - checking to make sure plan is completed well and on time

[Set a good example, treat subordinates fairly]

Delegation

Passing authority the organisational hierarchy to a subordinate

• Managers unable to complete all business tasks (time, skill).

• Employee given authority, resources and cooperation of other employees

Advantages of delegation (4)

• Managers have time to focus on more complex tasks

• Can motivate employees given responsibility

• Develops employee skills, increases flexibility

• Quality of work improves; lower-level employees have better skills than managers for certain tasks

Disadvantages of delegation (3)

• Managers may not trust employee to do the job

• Managers may fear loss of control

• Manager being overshadowed/outshone by employee’s work

Role of directors

• Most senior layer of management

• Setting strategy/long-term plans

• Ensuring resources available to achieve objectives

• Reviewing performance of managers

• Protecting interest of shareholders & stakeholders

Role of CEO

• Overall responsibility for day-to-day management

• Businesses success/performance

Role of managers

• In charge of a group of tasks/dpt. area

• Ensures decisions of directors are carried out

• Delegation

• Employee motivation

• Day-to-day problems

Role of supervisors

• Ensure employees carry out tasks to a good quality

Autocratic leadership

The leader makes all the decisions, instructions are then passed down to employees. An autocratic leader is more interested in the completion of work over employee welfare.

• Objectives set by the leader with no input from employees

• Decision making taken by the leader, no input from employees. Fast, and quick

• Communication - one-way, leader —> employee, no feedback

• Supervision - closely supervised by leaders

• Motivation - likely to be low

[Most suited for situations needing immediate response - ex. crisis]

Democratic leadership

All employees take part in decision alongside leaders which improves the quality of the final decision. Likely to delegate some decisions to employees.

• Objectives set by the leader, employees consulted

• Decision making - employees take part, leader takes final

• Communication - two-way, feedback encouraged

• Supervision - close not needed

• Motivation - likely to be high, employees are trusted and respected.

[Successful when staff are skilled, experienced and keen]

Laissez-faire leadership

Where most of the decisions are left to employees with little/no input from the leader.

• Objectives set by the leader

• Decision making - delegated to employees

• Communication - upwards from subordination

• Supervision - no supervision

• Motivation - high or low

[most effective for employees involved in creative tasks - research or development]

Trade unions

An organisation of employees aimed at improving pay and working conditions and providing other services (legal advice) for members.

Purpose of trade unions (4)

• Negotiating with employers to improve pay and working conditions - collective bargaining

• Resolving conflict - negotiate a solution to disagreement with employer

• Legal support and advice - legal rights as employees; if employee is being treated unfairly, legal specialist is provided

• Providing services for members - pension schemes, insurance schemes, holiday schemes

Trade unions for employees

• Employees have more power as a group than individually - power in numbers

• Support and legal advice provided to the mistreated or injured

• Protect job security; discussing with employers about major changes in the workplace

• Employees must pay membership fee

• Decision of majority of union members is binding on all members, even if they disagree

• During strike, employees lose wages which are unrecoverable - could cause personal hardship

Trade unions for employers

• Single point of contact to employees for negotiations. Simple, less time-consuming

• Improve working conditions/health and safety. —> improving motivation and reduces absenteeism and labour turnover

• May force employers to meet high wage demands—> increased business costs —> reduces competitiveness and profitability

• Strikes may force employers to meet demands; disrupting production —> loss of orders —> reduced profitability

Factors that influence choice of leadership style (4)

• Skills and experience of workers - more skilled = less supervision = democratic style better

• Time available to make a decision - autocratic = quick decision

• Task - complex, simple or creative?

• Personality of manager - naturally autocratic/democratic

[May have to use multiple styles in different circumstances]

Internal recruitment

Filling a post with someone already employed in the business

Advantages of internal recruitment (4)

• Quick and cheap

• Applicants already know how business works

• Business already knows strengths/weaknesses of applicants

• Employees more motivated with chance of promotion

Disadvantages of internal recruitment (4)

• A better candidate may have been available outside

• Could cause conflict within workplace

• No new ideas

• Still be a vacancy to fill unless previous job made redundant

External recruitment

Filling a vacant post with somebody not already employed in the business. Rapidly growing businesses with a high labour turnover rate will use this

Advantages of external recruitment (3)

• New ideas, improve efficiency

• Wider choice of applicants (different skills, interests)

• Avoid upsetting employees with internal promotion

Disadvantages of external recruitment

• Takes longer

• More expensive; advertising, time

• Increased expenses, induction training

Job analysis

Carried out by the HR dpt with the department manager. It identifies the contents of the job (activities, skills, experience needed) and the main job requirements.

Job description

List of key points about the job. Including title, main duties, responsibilities, accountability. Used to help managers decide what the job involves and select the applicant who best matches the requirements.

Main stages in recruitment and selection of employees (9)

1. Business identifies need for new employee, carries out job analysis

2. Job description made

3. Person specification made

4. Job advertised

5. Application forms/ details sent out

6. Completed applications received

7. Shortlist selected

8. Interviews carried out

9. Right candidate selected

Advertising a job (2)

Once the job description and person specification have been produced, the business needs to advertise the vacancy.

• Place on notice board/emailed out (internal)

• Newspapers or specialist magazines/website/job websites/agencies (save time, expensive) (external)

Process of sending out application forms

• Those interested complete and return application form/send a CV

• HR dpt. and manager look through all applications, cross-reference job description and specification

• Shortlist produced to interview

• Interview could be 1-1 or a panel of interviewers

• Aptitude/skill tests might be done

Advantages of part-time employees (7)

• Attracts qualified employees requiring flexible working hours

• Offering full-timers part-time work keeps experiences staff

• Greater flexibility, if sick employee needs a cover

• Contract hours flexible to allow for seasonal changes in demand

• More productive than full-time —> less tired

• Employing 2 part-times = increased skill and experience

• Don’t need to take time off for appointments, maintains output

Disadvantages of part-time employees (3)

• Increase in induction/training costs

• Communication problems employees only present few times a week

• Customer service quality may be lacking as it is prolonged (employee not present everyday)

Full-time employees

Full time employees remove the disadvantages of part time. They are more committed to the business and do well because they want promotion

Why employees need training (9)

• Without it, staff may become de-motivated = unhappy customers

• Trained production workers are more efficient —> increased productivity —> increased quality

• Management training improves decision quality, reduce risk of costly mistakes

• Develops abilites, heightens potential. Improves motivation/morale.

• Employees less likely to leave

• Easier to recruit new employees & keep current ones

• Improves customer service, increased customer loyalty

• Health and safety training reduced accidents

• Improved business competitiveness

Induction training

A training program to help new recruits become more familiar with workplace, people, structure and responsibilities, health and safety procedures and facilities available.

Induction training advantages and disadvantages (2,2)

• Employee quickly feels ‘part’ of the business

• Settled employee likely to perform tasks more effectively

• It increases business costs.

• During period of induction training, employees not adding to output but are still getting paid

On-the-job training

Employee learns relevant skills in the workplace by watching/following an experienced employee.

On-the-job training advantages and disadvantages (3,3)

• Relatively cheap

• Employees learn the way the business wants the jobs done

• Employees are producing output whilst training

• Employees might pick up bad habits from experienced employee

• Employees make more mistakes when learning, increased waste

• Slows down production of experienced employee

Off-the-job training

Training that takes place away from workplace. Ex. training facility, university etc. Most often for a job that requires high degree of technical skill

Off-the-job training advantages and disadvantages (2,2)

• Employees learn latest methods and techniques

• Does not disrupt production of other employees

• Can be expensive

• No output produced

Reasons for terminating employment (reducing workforce size) (4)

• Resignation by employee- employee voluntarily leaves the job. (getting promotion, better pay, shorter working hours elsewhere)

• Retirement of employee - employee reaching age after which they do not need to work

• Redundancy - job no longer needed. (business shut down, trying to cut cost, automation, relocation)

• Dismissal - employee not perform tasks to standard/breaks company rules

Reasons for downsizing workforce of a business (3)

• Fall in demand for product , costly to employ when they have nothing to do

• New technology

• Relocation - not possible for employee to travel there

How to decide which employee(s) to make redundant fairly (3)

• How productive employees are - productive = better for future of business

• How often employees have been absent/late - less productive

• Age of employee

  • Last-in , first-out method - fair but doesn’t consider skill

  • Those closer to retirement should leave. Youngers carry on.

Legal controls over employment issues (5)

• Contracts of employment - agreement includes names, date of commencement, salary, hours, holidays etc

• Discrimination - laws against mistreatment based on gender, race, religion, age

• Health and safety - protect employees from injury, physical discomfort

• Minimum wage - increased business cost, fair price = motivation

• Unfair dismissal - employees cannot be dismissed without valid reason. Trade union may take legal action on their behalf.

What makes communication effective?

• Message sent using correct medium of communication

• Sent/received by right person

• Receiver understands message

• Receiver provides feedback to sender to confirm they have received and understood message

Internal and external communication

Internal - employee to employee. communications may include giving/receiving information, giving instructions, discussing day-to-day activities, meetings.

External - communicating outside the business. May include selling goods/services to customers, dealing with complaints, sharing business info to stakeholders, ordering goods, press release etc

Benefits of effective communication

• Reduced risk of mistakes

• Faster decision making (if no. of people who need to receive are kept to a minimum)

• Improved motivation - aware of happenings, able to discuss and feel valued

• Quick response to market change - if response takes long, business may miss opportunities

• Improve customer relationships (customers aware of progress, new products- build loyalty)

• Improve coordination between dpts.

Features of oral communication

• Using spoken word, meetings/calls

• No permanent record, receiver may not listen or hear

• Provides opportunity for feedback

• Most appropriate when something needs to be discussed between 2 or more people

• Helps to hear others ideas and consider different options

• Sensitive feedback should be face-to-face

Features of written communication

• Feedback slower

• no personal contact

• time consuming

• Permanent record of the message so it can be double checked

Features of electronic communication

• Loses confidentiality

• Not everyone has access to equipment

• Email, Fax, text

• Faster

• Instant

• No location barriers

• Email has permanent record

• Can be sent to many receivers

• Message cannot be changed

Features of Visual communication

• Graphs, charts enhance effectiveness of presentations

• Photos/videos on website

• Can explain difficult concepts

• Simplify complex data

• Creates interest, attracts attention

• Memorable

• Some detail may be lost

Letter as written communication

• Written record

• Confidential

• Postage costs may be expensive

Memorandum as written communication

• Written record

• Only used for internal communication

Email/text as electronic communication

• Written record

• Cost of equipment

• Not confidential

Telephone as electronic communication

• Can discuss to make sure it is understood

• Equipment cost

• Not face-to-face

Meeting as oral communication

• Everyone gets same messages

• Allows for discussion and feedback

• Time consuming

• Costly

• No written record unless meeting minutes taken

• Problem with time zones if online

• Travel cost, time, location needed

Video-conference as electronic communication

• Reduce travel cost and time

• Cost of equipment

Factors influencing choice of communication method (9)

• How far away receiver is - electronic communication for long distance

• How important it is for receivers to get it at the same time - meeting is good for same message/same time

• Cost of media - letters = expensive

• If written record is needed

• Urgency - call/conversation best for urgent

• Length/complexity of message - written method best for complexity

• How many people need to get it

• If message needs discussion - calls/meetings best

• Confidentiality - letter addressed to person is most confidential

Problems of ineffective communication (6)

• Tasks incomplete - or incorrectly done. Reduces productivity, increase waste, increased average costs = reduced profitability

• Reputation damaged —> loss of customers. If customers don’t get orders on time etc.

• Employee motivation falls —> lower productivity, bad quality, absenteeism, increased labour turnover

• Risk of accidents - health procedures not communicated properly. Reduce output, pay compensation

• Poor sales if advertising and promotion is not good

• Wrong type of employee hired - if job desc. is not properly made. reduced efficiency, increase recruitment costs.