2.1 Introduction to human resource management 

Human resource management is how an organisation manages its human resources; includes recruitment and retention, setting compensation and benefits, and specifying job responsibilities.

Demographic changes are shifts in demographic factors, such as birth rates, death rates, education levels, religion, ethnicity, age, etc. 

Labour mobility is the ability of workers to move occupationally or geographically (within countries or internationally) i.e. how easily workers can change their place or type of work.

The internal and external factors that influence HR planning

External factors

• Technological change

• Government regulations

• Demographic change

• Social trends

• The state of the economy

• Changes in education

• Labour mobility

• Immigration

• Changes such as flexi-time, remote working, or gig-economy contracts can also influence how people work

Immigration is the international movement of people into countries where they are not citizens. People who are temporarily in a foreign country, like tourists or students, are not considered to be immigrants; rather immigrants are those who seek permanent residency in the new country. 

Flexi-time is a flexible work schedule that allows workers to adjust starting and finishing times of their work day, giving them flexibility to meet other demands (such as childcare requirements). 

Gig economy is an economy where many positions are temporary and organisations hire independent workers to short-term commitments. 

Internal factors

• Changes in business organisation

• Changes in labour relations

• Changes in business strategy

• Changes in business finance 

Changes in work patterns, practices, and preferences 

Some of the factors changing the work environment include: 

• Privatisation and the move away from public-sector to private-sector employment. 

• Increased migration of potential employees in a country or region and across the globe.

• Increasing participation of females in the workforce. 

• Changing educational opportunities. 

• Increasing urbanisation and the consequent rise in stress levels

• An ageing population and increasing average age of the workforce

Changes in work practices

Work practices in decline 

• Full-time work 

• Permanent contracts 

Work practices on the increase

• Part-time work: when employees work less than the full-time weekly maximum hours. 

• Temporary work: when work that is on a fixed-term contract, usually of a temporary nature (for example, to cover maternity leave). The employee would normally sign up to an agency who finds them work. 

• Freelancing: when someone who is self-employed works for several different employers at the same time.

• Teleworking: work taking place from home or a telecommunication centre. Usually, the employee would have a core number of hours they have to work at the office, and the remainder would be from home. 

• Homeworking: when an employee works from home. Usually, the employee would have a core number of hours they have to work at the office, and the remainder would be from home. 

• Flexi-time: work involving a set number of hours of an employee’s own choosing. Usually, the employee would have a core number of hours they have to work at the office; the rest is up to the employee. 

• Casual Fridays: when an employee is allowed to wear less formal dress on a Friday so that it is easier to go away at the weekend. 

• Three-day weekend: instead of working, say, five eight-hour days, the employee works four ten-hour days and so has a three-day weekend. 

• The gig economy: where organisations hire independent workers for short-term commitments. Some people laud the gig economy for its flexibility for both employers and employees, while others criticise it as it typically means workers are not receiving most of the benefits of full-time employment, such as sick leave or paid vacation.

Changes in work preferences 

• Career breaks “sabbatical”

• Job share 

• Downshifting 

• Study leave

The impact of innovation, ethical considerations, and cultural differences

Innovation

A business committed to being innovative must have a greater strategic focus on HR than any other business function. Innovations come from people. The business will not be successfully innovative unless it recruits and retains the right people. Developing a supportive and stimulating business environment—a vital part of HR planning—will help the creative process. 

Ethical Considerations

HR processes are based on relationships, which are reflected in the way that the business treats its employees. Today most stakeholders rightly insist that businesses should treat their employees ethically. The internet enables people to send and receive information. Social network sites, in particular, can be places where employees can tell others how they have been treated. As a result, businesses must be careful to act in an ethical manner—or at least to create that appearance 

Ethical issues in the HR plan:

• Performance appraisal

• Right to privacy

• Lay-offs and/or redundancies

• Restructuring

• Employment

• Discrimination

• Health and safety

• Salaries and financial remuneration

Cultural differences 

The citizens of many countries are becoming increasingly diverse as children of migrant workers grow up as citizens and their parents’ adopted country. Businesses that adopt their HR plan to suit a more varied cultural workforce are more likely to be successful with the diverse workforce, especially if their markets are as diverse as their workforce. 

Some of the factors that might affect the cultural expectations of a business’s employees:

• Power distance 

• Individualism 

• Masculinity 

• Uncertainty avoidance 

• Long-term orientation 

• Humour 

• Personal space 

• Body language 

• Dress 

The concept of “power distance" was developed by Geert Hofstede to indicate the acceptance by society of inequality. Power distance refers to the extent to which people in a particular society or organisation accept that power is not distributed equally. Inequality is a fact, not a problem, and all members of the culture accept this fact. 

According to Hofstede, employees from a society with a high level of power distance would not expect to be consulted and included in decision making. They are more accepting of authority. Employees from countries with a low score would expect the opposite. 

Training people to work in diverse workforces can reduce potential misunderstanding and friction that can emerge from cultural differences. Such training can also help businesses to take advantage of one of the most important benefits of a diverse workforce: increased innovation and creativity. Innovation occurs when people see a problem and solve it. When people from different backgrounds are gathered together to solve problems, the diversity of perspectives increases the likelihood that a successful and novel solution will be found. 

Reasons for resistance to change in the workplace

• Discomfort 

• Fear

• Insufficient reward

• Lack of job skills 

• Loss of control

• Mistrust

• Poor communication

• Poor timing

• Prior experience

• Social support

HR strategies to reduce the impact of change and resistance to it

Organisations and managers can reduce the impact of change through various steps. The first is simply assessing the potential impact of the change, assessing employees’ possible reactions to it, and determining the degree to which managers can control the change process. Thereafter, the

management team should take the following steps:

• Develop a vision for the change process and the desired outcomes. If necessary, the business may have to realign its largest aims and vision for the organisation.

• Forecast and allocate the necessary resources to implement the change.

• Involve employees in the change process from the outset so they are not surprised and so they do not feel powerless.

• Regularly communicate to all appropriate stakeholders how the change process is unfolding. Managers should not be afraid to report problems or implementation dips. Pretending that problems in the process are not occurring when they clearly are will weaken employees’ confidence. On the other hand, managers should report successes in the change process to inspire confidence.

• Train employees in advance of those changes that affect them directly, which should allow them to see the benefits of change immediately. If employees are not properly trained, the fears of lack of competence will be heightened.

• Routinely communicate the benefits of the changes.

• Be aware of the stress that change can cause and support employees as much as possible before, during, and after change.

2.2 Organisational Structure

The organisational chart depicts the reporting relationships within an organisation. All levels of the organisation are depicted and the chart shows who reports to who down to the least senior level of employees in the organisation.

Hierarchy is a system organising or ranking people according to power or importance. 

Chain of command is the official hierarchy in an organisation. The chain of command indicates who reports to which manager and which manager has authority over specific employees.

Line managers are people who have the authority to make decisions and who bear responsibility for the outcomes of those decisions.

Staff manager is someone with the authority to communicate a decision made by the CEO without the responsibility for that decision. The Personal Assistant (PA) to the CEO and secretarial and administrative staff are all types of staff managers.

Span of control is the number of people reporting a specific manager. A wide span of control means many people reporting to the manager; a narrow span of control means a small number of people reporting to the manager.

Delegation means assigning authority or responsibility over specific tasks from one person, a manager, to someone lower on the organisational chart. The manager remains accountable for the successful completion of the delegated tasks

Bureaucracy refers to any organisation with multiple layers of authority. Because bureaucracies often have complex approval processes, decision-making is typically slower than in small organisations.

Centralization is when personnel at the main or central office of the business have the authority for decision-making. Personnel not in the central office implement the decisions made by it. Centralization can also occur at one location, when senior management retain all key decision-making functions for themselves and delegate little or no decision-making authority other others/ 

Decentralisation is the opposite of centralization; decision-making authority is delegated out to offices from the main or central office. Managers in regional or outlying offices have authority for making many types of tactical and operational decisions. 

Delayering is the process of removing levels (layers) of hierarchy in an organisation. The aim of delayering is usually to improve an organisation’s efficiency by making it less bureaucratic.

Matrix structure typically exists in contexts where projects and project completion require involvement from people with different expertise from different areas of the organisation (such as HR, marketing, operations, etc). In a matrix structure, people work in teams and report to these people with different expertise. Thus, they report to more than one person when doing their job.

Types of organisation chart 

Tall or vertical organisation structure 

A tall organisational structure is the traditional organisational form of a business and it is common in well-established businesses. It has the following features:

• Many levels of hierarchy

• Narrow spans of control

• Centralised decision-making

• Long chains of command

• Autocratic leadership

• Limited delegation

Flat or horizontal organisational structure

A flat organisational structure is a modification of the more traditional structure, and has become popular with businesses set up since the 1960s or with those attempting to reinvent themselves. Flat organisations have the following features:

• Few levels of hierarchy

• Wider spans of control

• Decentralised decision-making

• Shorter (though more diffuse) chains of command

• Democratic leadership

• Increased delegation

Organisational structure by hierarchy

Another way to show an organisational structure is by showing hierarchy. Individuals at the top have more authority than those below them.

Organisational structure by function

An organisational structure can be presented by function – indicating what employees do. Employees are grouped by department. They will then be organised by seniority.

Organisational structure by product

Another typical way of presenting an organisational structure is by what the business produces.

Organisational structure by region

A further typical way of presenting an organisational structure is according to where the business operations are.

Changes in organisational structures 

As well as the standard types of organisational structure described above, some businesses have attempted to adapt their structure to take account of changes in the business environment. Two examples of this are:

• Project-based organisation

• Shamrock organisation

Project-based organisations are an organisational form, often similar to/known as a matrix structure, that organises work into projects.Thus, project-based organisations create temporary systems for carrying out different projects.

Shamrock organisations are an organisational structure based upon the work of human resources expert Charles Handy, who modelled the structure on the shamrock (a clover-like plant). A shamrock organisation has three types of employees: the full-time professional core, a flexible labour force, and a contractual (outsourced) group

• The first leaf of the shamrock represents the core managers, technicians and employees essential to the business.

• The second leaf Handy calls the “contractual fringe”, because non-core activities are subcontracted out to specialist businesses.

• The third leaf consists of a flexible workforce made up of part-time, temporary, and seasonal workers.

2.3 Leadership and Management

Management is the ongoing process of planning, decision-making, organising, leading, motivating and controlling the financial, human, physical, and information resources of a business or organisation, with the aim of efficiently and effectively reaching the goals of the business or organisation.

Leadership is a process of motivating a group or team of people to work towards the goals of a business organisation. Unlike management, which is generally considered a science, much of leadership is an “art”: an intangible ability to inspire, lead, coerce, or charm through charisma and other affective and intellectual qualities.

The difference between scientific and intuitive thinking/management 

One simple categorization divides managers into those who use deliberative thinking processes, also known as “scientific thinking”, and others who follow their intuition. 

Management versus leadership 

A manager is task-orientated (that is, a manager is focused on getting tasks accomplished in a timely manner rather than on leading people). A leader’s role is more emotional, since a great leader will have the ability to inspire people to follow them voluntarily. A leader spends a great deal of time and energy building relationships and is therefore relationship-orientated. 

Leadership styles 

Autocratic leadership occurs when the leader concentrates all or most decision-making in their own hands. Autocratic leaders typically do not seek input from others and are confident in their own decision-making. This style of leadership is most likely to be used when subordinates are

unskilled, not trusted, and their ideas are not valued. It is also more likely in an organisation that focuses on results and has to make urgent decisions that depend highly on the manager. Many in the military rely on an autocratic style, which is often accompanied by very detailed instructions and close supervision. In some situations, subordinates may expect, and like, to be told what to do. A benefit of autocratic leadership is that lines of authority are clear, and decisions can be made quickly. What the leader communicates is what is to be followed. Employees come to depend on the guidance but also to execute instructions precisely. The major negative aspect of an autocratic leadership style is that employees tend not to develop the ability to manage on their own or to make decisions. And rarely, in any business, can the leader make all the decisions.

Paternalistic leadership occurs when the head of an organisation treats employees like they are part of their family. A paternalistic leader is typically warm and protective of employees but also expects loyalty and obedience. Paternalistic leaders are like parents. They provide employees with a sense of safety. The employees come to believe that, no matter what, the business will stand by them. As a result, paternalistic leaders often get total loyalty and even blind trust from employees. A positive aspect of paternalistic leadership is that employees take great pride in the organisation and do whatever is necessary to make it successful. They take some (figurative) “ownership” of the business, in part because they do not want to let the leader down. However, paternalistic leaders place great importance on loyalty, which may mean that they do not have a fully objective, critical eye when evaluating employees’ performance. Thus, paternalistic leaders may come across as having favourites or favouring certain employees. In addition, knowing that they are part of a “family”, employees may at times take advantage of the leader and the leader’s loyalty to them.

Democratic leadership occurs when the leader regularly seeks input from employees and involves them in decision-making. Employees like being involved in the decision-making process, especially when the decisions have a major impact on them. The democratic leader can produce results since many employees like the trust, cooperation, and sense of belonging that go with it. Employees feel as though they have a voice. The democratic leadership style may not always work out. It is likely to be most effective when used with skilled, free-thinking, and experienced subordinates who enjoy the relationships and chaos that can result from belonging to a highly effective team. However, the democratic process may slow down decision-making and may prove too costly. The style also requires a positive “chemistry” in the team. If this characteristic is absent, no amount of democracy can make the style work.

Laissez-faire leadership occurs when the leader of an organisation gives employees considerable freedom to make decisions on their own. Laissez-faire means “to leave alone”. This management style may be appropriate when employees can be trusted to do their job because they are motivated, skilled, and educated. Universities tend to be laissez-faire, as university lecturers, researchers and professors, who are generally world experts in their field, resist being told what to do. In other professions too, individual practitioners demand considerable freedom. It may be appropriate when working with a culture based around the individual and where people can work successfully on their own. The benefit of a laissez-faire style is that many employees enjoy the freedom it provides, and it can foster creativity and innovations. However, the individual interests of the employees may diverge too far from the focus of the organisation, and the organisation can veer away from its vision and aims.

Situational leadership occurs when leaders in an organisation adapt their leadership style to the nature of the situation, task, or work and the ability and expectations of the people in the organisation. The benefit of situational leadership is that leaders match their style to the circumstances at hand. However, a leader may too frequently change styles or may change styles when the circumstances of the situation determining the switch are not clear to employees. In either of these scenarios, the leader may come across as unpredictable or arbitrary, which may demotivate employees. This style of leadership is likely to be influenced by: 

• the subordinates 

• the decision

• the leader

• the situation

Ethical considerations and cultural differences

Ethical considerations

Leaders, as opposed to managers, focus on “doing the right thing” with respect to their people, whereas managers tend to do the right thing with respect to their organisations. 

Leaders and ethical considerations

So central is ethical behaviour to leadership that many would argue that an unethical leader is not a leader at all.

Managers and ethical considerations

Managers, in contrast to leaders, see their ethical obligations more to the organisation or business than to the employees. 

Cultural differences

Cultural differences can also influence leadership and management. The most famous treatment of this concept is the work of Geert Hofstede, who over his business and academic career developed and refined his cultural dimensions theory. According to Hofstede, cultural influences relevant to business have six dimensions:

• Power distance

• Individualism

• Uncertainty avoidance

• Masculinity

• Long-term orientation

• Indulgence

Hofstede’s Cultural Dimensions (HL Only):

Hofstede’s country comparison tool allows users to compare cultures in different countries according to different socio-cultural measures.

2.4 Motivation and Demotivation

Intrinsic and extrinsic motivation 

Intrinsic motivation is the motivation which comes from the satisfaction of carrying out a particular activity (no external reward is required). 

Extrinsic motivation is the motivation that is derived from external factories (in a business context, typically money). 

Motivation theories

Frederick Winslow Taylor

“founder of scientific management”

• Taylor believed that standardisation of work methods and enforced adoption of the best ways of working were how to ensure that output would be maximised in the shortest possible time. 

• This type of motivation also focuses on breaking down complex tasks into simpler ones, standardising work processes, and providing workers with clear instructions and training to achieve maximum efficiency. 

• F.W. Taylor promoted the division of labour to improve efficiency and output as well as increase specialisation. 

• However, his main theory suggests that employees are money-driven and thus scientific management emphasises the use of incentives to motivate workers.

Abraham Maslow 

The basic needs at the bottom of the diagram are most important and an individual will suffer anxiety if they are not met. The first four levels are considered “basic needs”. Once these needs are met, they “go away” or no longer cause anxiety. The remaining needs are “growth needs”. Once these needs are initially fulfilled, they do not “go away”. In fact, the individual will strive to find new ways to satisfy these needs. These needs involve people fulfilling their potential: being the best they can be in as many areas as possible. One of the key issues for managers is that once a need is satisfied, providing more of the same will not motivate a worker. So, in Taylor’s factories, workers will have initially been motivated by the need for food, warmth, and shelter, but the failure of his factories to satisfy higher-level needs may explain why his methods often resulted in labour unrest.

Frederick Herzberg 

Herzberg developed a two-factor theory of motivation based on hygiene needs and motivational needs. Hygiene needs are those factors that provide dissatisfaction at work if they are not attended to. If these things are satisfactory, however, it is unlikely to lead to motivation. Hygiene factors are the things that are necessary for you to get started, but they do not drive you to succeed. Motivators are the things that get you working because you get some intrinsic reward from them. Herzberg’s “hygiene needs” are: 

• Company policy and administration 

• Relationship with supervisor 

• Work conditions 

• Salary 

• Company car 

• Status 

• Security 

• Relationship with subordinates 

• Personal life 

Herzberg’s research identified that true “motivators” were other completely different factors:

• Achievement 

• Recognition 

• The work itself 

• Responsibility 

• Advancement 

He argued that people have a number of needs and arranged these in order of their importance.

McClelland’s acquired needs theory (HL)

Employees have three needs: achievement, affiliation, and power. These needs influence employees’ motivation.

• Achievement motivates some employees. They want to work on tasks where their success is determined by their mastery and hard work.

• Affiliation – the creation and maintenance of social relationships – motivates other employees. These types of employees like being part of the group. For this reason, they often do not make the best managers as they worry too much about what others think of them.

• Finally, power motivates some employees. They want to encourage, influence, or teach others. Power-motivated employees tend to think in terms of winning and losing, and they want to win or to gain power.

McClelland did not say that each employee neatly fits into one of these three categories. On the contrary, all employees have some measure of each of these needs. According to McClelland, when managers understand each employee’s needs, the managers can better create a motivational approach for each employee. 

Deci and Ryan’s self-determination theory (HL)

In their self-determination theory, Deci and Ryan argued that two types of motivation exist:

autonomous and controlled.

Autonomous motivation occurs when an individual has a full sense of volition and choice in what they are doing. Controlled motivation is when an individual is doing something in order to get a reward or avoid a punishment.

Deci and Ryan further argued that all humans have three sets of needs that relate to motivation:

• Competence: when individuals feel competent in a particular domain, they get a reward (self-satisfaction) for doing something well and develop the confidence to take on new challenges. 

• Relatedness: individuals have the need to feel connected to others—both to care for and be cared for by others. When individuals feel connected to others in the workplace, this important psychological need is met. 

• Autonomy: individuals do better when they feel that they have some sense of control over what they are doing. Whenever possible, managers should give employees control over what they do. 

When these three psychological needs are met, employees’ sense of autonomous motivation will increase. Intrinsic and extrinsic motivation do not necessarily conflict, according to Deci and Ryan. Sometimes employees internalise the extrinsic forms of motivation in a way that actually then bolsters their sense of autonomous motivation. If employees are just doing things because of controlled motivation, their sense of purpose and their motivation will be less strong than if their

motivation is autonomous. When the controlled motivations are properly set and align with the autonomous motivation that has developed, highly productive people will then internalise the extrinsic motivators and work more effectively towards the organisation’s aims.

Equity theory and expectancy theory (HL)

The theorist John Adams developed a theory called the equity theory based upon the concepts of “inputs”, “outputs”, and “equity”. His theory is that employees will be motivated when they perceive that a balance, or equity, exists between their inputs into the business and their outputs

from it.

Inputs are those affective and cognitive qualities that an employee brings to a business or organisation. Inputs include:

• Ability

• Adaptability

• Attitude

• Dedication

• Determination

• Effort

• Flexibility

• Hard work

• Knowledge

• Loyalty

• Personal sacrifice

• Skill

• Support from co-workers and colleagues

• Time

• Tolerance

• Trust in superiors

Outputs are what an employee receives from working at the organisation. Outputs can be negative and thus in some sense subtract from the positive outcomes (though Adams did not believe that inputs and outputs could be quantified). Typically, outputs are positive and include:

• Fringe benefits

• Job security

• Praise

• Recognition

• Reputation

• Responsibility

• Reward

• Sense of achievement

• Stimuli

• Thanks

When employees believe that their outputs are greater than their inputs, they will be motivated. If, however, employees are giving more (inputs) to an organisation than they receive (outputs), they will be demotivated.

Closely related to equity theory is expectancy theory, developed by Victor Vroom. Expectancy theory holds that employees are motivated when they believe that their efforts will lead to good performance, for which they will be rewarded, and that the rewards will be worthwhile (ie the rewards are desirable). Three key terms in expectancy theory are expectancy (will the effort lead

to good performance?), instrumentality (will the performance produce the expected outcomes?), and valence (are the outcomes desirable to the employee?). When all three of these elements align, employees will be motivated. 

Labour turnover (HL)

Labour turnover is the percentage of employees who leave a company during a fixed period of time, typically one year. The percentage is calculated by the ratio of the number of an organisation’s employees who leave (whether because of attrition, dismissal or resignation)

to the total number of employees during that period, A high labour turnover rate suggests that the business has labour problems. For some reason or reasons, employees do not stay for a long period of time. By itself, high labour turnover suggests that workers are dissatised by some aspect of their employment situation. This source of dissatisfaction may also affect workers who remain at the business and may lead to lower productivity. When a business has high labour turnover, it must frequently hire new labour, which can cause problems for the business. Recruitment and training can be expensive. Some labour turnover can be good for a business. A low turnover rate may indicate a stable business, but stability can lead to complacency and lack of progress. New employees tend to bring energy and new ideas, especially if they have just left college or have been retrained and/or reskilled. Sometimes, a business has employees who are less productive or who make minimal contributions to the business but otherwise provide no basis for separation (being fired or sacked). When a worker such as this leaves a business, managers may actually be happy.

Internal recruitment occurs when a position becomes available at an organisation, and the

organisation recruits someone who is already working there to take on the new position. 

External recruitment occurs when an organisation recruits employees who are not presently employees of the organisation.

Methods of Recruitment (HL)

There are three parts to recruitment: 

1. Identification

2. Application

3. Selection

The identification process:

• Job description

• Person specification

• Internal or external recruitment

The application process:

• Job advert

• Application form or résumé (CV)

• Internal or external agency

The selection process:

• Shortlisting 

• Testing

• Interviews

Training

Induction is the introduction of new employees to an organisation. The process aims to increase the likelihood that new people can successfully do their job.

On-the-job training involves training employees at their place of employment during their normal working hours.

Off-the-job training involves employees receiving training not at their place of employment but offsite. The employee’s company typically pays for the tuition, which is usually provided by outside parties.

Appraisal (HL) 

Appraisal occurs when the performance of the employee is reviewed. Appraisal is different from a more traditional form of employee review known as inspection. Under a system of inspection, managers review employees’ performances and make judgments based on their observations.

Communication tends to be one-way (the employee is not given the opportunity to respond) and top-down (from manager to employee). Often, in a system of inspection, the process focuses on the negative indicators of performance – what the employee has failed to do, or the frequency with which the employee did not meet targets. Under a system of appraisal, employees may respond to or even initiate discussion. Communication is two-way, and managers include constructive feedback in order to foster a positive and inclusive working environment.

Good appraisal systems tend to have certain characteristics:

• They are not directly linked to pay or promotion. 

• Appraisal systems are separate from disciplinary systems.

• Good appraisal systems require minimal paperwork.

• Appraisals provide an honest exchange of views. 

Appraisal systems may include these methods of assessment:

Formative appraisal occurs during the training or work of employees. It is ongoing, continuous, and intended to improve employees’ performance.

Summative appraisal occurs at the end of the training year or at a fixed time during a year. Summative appraisals are the formal, documented evaluation of employees. They attempt to measure employees’ performance. 

360-degree feedback occurs when an employee receives input from all categories of people e (peers, customers, their supervisor, among others) with whom the employee interacts. Because 360-degree feedback is comprehensive and expensive, usually only senior members of an organisation receive it.

Self-appraisal occurs when an employee evaluates their own performance. It can be part of formative or summative evaluation. 

Motivation in practice

Financial rewards are rewards than an employer gives to employees, typically as part of an extrinsic motivation scheme, that have a specific monetary value (pay rise, bonus, commission, employee ownership scheme, etc)

Salary is a fixed, regular compensation paid to employees on a periodic basis, usually bi-weekly or monthly. It is typically paid to white-collar workers. 

Wages (time and piece rates) are the monetary compensation paid by employers to workers either on a time basis (eg $22 per hour) or on a piece basis (eg $8 for every item completed). Blue-collar workers typically receive wages rather than a salary.

Commission is the payment to an employee when they complete a sale. The commission amount is usually a percentage of the sale value.

Performance-related pay is compensation that is based upon performance of an individual, a unit, or even an entire company. In performance-related pay schemes, management establishes measurable goals. When an individual, a unit, or the company exceeds the goals, employees receive compensation in addition to their regular wages or salary. 

Employee share-ownership schemes award employees shares in the company, permit employees to purchase shares in the company at a below-market price, or match employees’ purchases of shares (eg for every share that employees purchase, the company buys 0.5 shares for them) 

Fringe payments are forms of compensation that an employee receives other than their salary, such as life insurance coverage or use of a company car

Salary

Employees are paid a sum of money per month.

Motivation factors: the main motivator is likely to be the security of receiving a regular income.

Disadvantages: the employer is typically relying on the professionalism of the staff to provide the quality and quantity expected.

Wages (time rates) 

Employees are paid an hourly rate, or paid for a number of hours per week. It is possible that overtime rates of pay are used too. 

Motivation factors: the main motivator is likely to be the security of receiving a regular income and the opportunity to receive overtime pay. 

Disadvantages: it is possible that employees will work slowly since their pay is not based on output. If overtime rates apply then employees could benefit financially from ensuring that they extend their work to cover time beyond the usual hours of the working day

Wages (piece rates)

Employees are paid for each unit (or batch) produced. 

Motivation factors: the main motivator is likely to be the fact that increased output will bring a measurable benefit. 

Disadvantages: this might involve tedious and repetitive work, and employees may not have control over their results if they rely on others (for example to supply materials). Employees may work quickly to get as much money as possible. It may be that a system of checks will have to be put in place to ensure that quality standards have been met. There may be an emphasis on quantity rather than quality. 

Commission 

Employees are paid by results, for example, a flat fee or a percentage for each item sold. Motivation factors: the main motivator is likely to be the fact that employees will be rewarded by results. 

Disadvantages: employees may not have control over results (and thus income). For example, during a recession, sales commissions will fall in many industries. Employees may be tempted to sell products that are not in the best interests of the customer or business and this could create problems for the organisation.

Profit-related pay

The amount an employee receives is linked to the amount of profit the business makes.

Motivation factors: sharing the financial rewards of a business may encourage a sense of belonging and a desire to contribute to its success.

Disadvantages: productivity may be a consequence of the profitability of the business rather than the cause. If profits fall then employees could experience a demoralising loss through no fault of their own.

Performance-related pay (PRP) 

PRP is usually a bonus paid in addition to the employee’s ordinary compensation. 

Motivation factors: The assumption is that employees will be motivated by the opportunity to make extra money by performing better than the targets. 

Disadvantages: as long as the tasks are repetitive and involve physical skills, PRP can enhance performance. However, when cognitive tasks are involved, PRP may actually reduce productivity. In addition, PRP can cause divisions in a business if the evaluation of employees’ performance is based on subjective factors. 

Employee share-ownership schemes 

Motivation factors: when offered as a bonus, employee share schemes can motivate in the same ways that other types of bonuses do. Even when an employee share-ownership scheme is simply a savings plan, a benefit is that employees become partial owners of the business, which is thought to provide an incentive for employees to work harder (as they now have a “stake” in the business). 

Disadvantages: when offered as a bonus, the basis for awarding the bonus must be clear and, ideally, measurable to avoid accusations of “favouritism” in granting them. Also, if employees have all their savings in a company match plan, both their salaries and their savings are tied to the viability of the business. 

Fringe payments (perks) 

Motivation factors: employees like fringe benefits as they often have substantial value. While employees may have to declare some fringe benefits for tax purposes, many do not have to be declared. This provides the employee with an additional benefit: the business paying for fringe benefits on a pre-tax basis is much cheaper than employees paying for these items with after-tax salary. Thus, the business is able to give more value to employees than if it paid them the equivalent amount in additional salary.

Disadvantages: if fringe benefits are not given equally to all employees or on a clear, fair basis, division among the staff can result. In addition, employees can come to expect certain fringe benefits and may become angry if some perks are taken away. 

Examples of non-financial rewards

Non-financial rewards are rewards that an employer gives to employees, typically as part of an extrinsic motivation scheme, that do not have precise monetary value but which employees nonetheless value, such as a better job title or some type of recognition (“employee of the month”).

Job enrichment is when an employee is given additional tasks that are challenging and usually done by managers.These extra tasks lead to professional growth and improve motivation.

Motivation factors: employees typically prefer to have responsibilities that are challenging. Employees who are more satisfied are typically more motivated to work hard. 

Disadvantages: job enrichment cannot be applied in all situations, either because of the type of work involved or because of the calibre of the workers

Job rotation occurs when employees rotate positions in an organisation. 

Motivation factors: job rotation benets companies as it gives them employees who have a better sense of the business as a whole. For employees, rotation provides additional training and the acquisition of new skills and knowledge, which can lead to new opportunities with the

business (or with other organisations).

Disadvantages: job rotation means employees go through periodic productivity dips as they begin in a new division and must go through a training phase before they fully understand the new position.

Job enlargement occurs when additional tasks associated with a job are added to the job description. Differs from job enrichment in that the additional tasks do not generally require additional skill or are more difficult. 

Motivation factors: in general, employees prefer some variation in the tasks they must do.

Disadvantages: if job enlargement is nothing more than giving employees additional duties, it may increase employee dissatisfaction.

Empowerment

Empowerment involves giving individuals access to resources and information to do their jobs and giving them the power to make decisions. In an employment context, empowerment means giving employees considerable control over how their jobs should be done.

Motivation factors: empowered employees generally believe that they can be instrumental in changing things and find this rewarding.

Disadvantages: businesses run some risk that the empowered employees will not be able to manage the responsibility they have been given. Employees may make decisions that are not fully productive or that cost the business unnecessarily.

Purpose or opportunity to make a difference 

Purpose or the opportunity to make a difference in the world refers to the ability of businesses or other organisations to connect employees to the aims of the organisation other than profit. Non-profit organisations have this advantage, as they typically exist to meet some social or environmental need. Many for-profit businesses today, however, have also adopted other-than-profit aims into their objectives. 

Motivation factors: many individuals want to do more than merely make money. They want to know that they are making a difference in the world and are connected to purposes larger than themselves or their organisation. People tend to find these purposes intrinsically motivating. Disadvantages: if for-prot organisations overemphasise social or environmental aims, employees may lose focus on the prot-making objectives. 

Teamwork 

Teamwork involves working cooperatively with a group of people to achieve a goal. 

Motivation factors: the success of teams can be crucial to an organisation’s performance, so an organisation will strive to have high performance teams. Individuals tend to be energised by working in teams, which creates a sense of group cohesion and common purpose. 

Disadvantages: when successful, teamwork can have great yields for organisations. However, team failures can amplify dissatisfaction and, thus, weaken employees’ productivity. 

2.6 Communication

Formal communication refers to the official and formally recognized methods of communication in an organization. Traditionally, formal communication was often through paper memos and meetings. Today, formal communication occurs more commonly through group or individual emails, some type of electronic announcement system, and, for natural disaster and emergency communication, via text. 

Information communication refers to the various ways in which information is casually disseminated. A manager might “get the word out” by dropping by people’s offices or sharing information with a few key, highly connected individuals who then share the information with others in the department. Informal communication also includes gossip and rumors.

Barriers to communication are the various impediments that prevent communication from happening when and how it should. Sometimes these barriers are linguistic (people do not all speak the same language). Sometimes they are psychological (people do not “hear” the message as it was communicated). Sometimes they are structural (because organizational structure management has limited opportunities or windows to communicate). 

2.7 Industrial/employee relations 

Sources of conflict

• Change

• Different interests

• Different values

• External factors

• Insufficient resources

• Poor communication

• Poor performance

Conflict in the workplace most commonly refers to conflict between management and organized groups of workers. Disputes usually occur over pay, benets, and control over the work. 

Approaches by employees to conflict in the workplace (HL)

Collective bargaining occurs when employees of an organization work together when bargaining with management about wages and work conditions.Typically, collective bargaining occurs at organizations where the employees are unionized, and union representatives assist with the bargaining process.

Work-to-rule occurs when employees precisely follow the rules of their existing contract. In this way, they do the minimum required.They meticulously follow every single regulation, which may slow down work or decrease productivity. During work-to-rule, workers typically will not work overtime or beyond their contracted hours.

Strike action is when workers stop working because they are dissatisfied with work conditions or compensation. When workers “go on strike”, the work stoppage provides leverage against the employer to discuss pay and conditions.

Approaches by employers to conflict in the workplace (HL)

Collective bargaining

Threats of redundancies is when management threatens to eliminate employment positions if workers do not accept terms in an industrial dispute. Were those positions to be made redundant, the workers in them would lose their jobs. 

Changes of contract when agreement is reached over new contract terms in collective bargaining and negotiation. Changes are made in the existing contract between management and labor, and typically relate to pay, benets, and control over the work. 

Lockout is when, as part of the negotiating process, management locks up the company or factories, preventing workers from entering them. During a lockout, workers can no longer work and so they do not receive any pay. 

Closure refers to the permanent or temporary shutting down of a site, such as a factory, a plant, or an office. Many countries have national laws, which vary from country to country, stipulating various conditions and consequences of closure. 

Approaches to conflict resolution (HL)

Conciliation occurs when a third-party conciliator mediates between management and labor and offers ideas that may help the two sides come to an agreement. 

Arbitration occurs when a third-party arbitrator mediates between management and labor. Unlike in conciliation, the arbitrator has the authority to decide how the conflict between management and labor will be resolved. 

Employee participation and industrial democracy 

Employee participation and industrial democracy are used to describe situations where workers make decisions or share responsibility and authority in the workplace. In some countries, traditionally it is rare for workers to participate in decision-making. In other countries, however, workers are viewed differently. Though the shareholders own the company, the company (and therefore the shareholders) could not make a profit without the workers, so the workers ought to have some say. Generalizations about employee participation and industrial democracy are difficult, because circumstances vary from company to company and country to country. Employee participation and industrial democracy have a bearing on the nature of conflict resolution. In countries where a tradition exists of employee participation and industrial democracy, an assumption is that workers have a right to some voice in decision-making. In countries without such a tradition, the assumption is that the shareholders alone (through their designated agents: management) have the right to make decisions.

A no-strike agreement is a stipulation in the collective bargaining agreement that, during the lifetime of the contract, workers will not go on strike. Workers will typically agree to a no-strike stipulation in exchange for some concession made by management during the collective bargaining process. 

A single-union agreement occurs when workers agree that one union will represent the workers’ interests in the collective bargaining process.