Section 2 Notes: People in Business

Motivating Employees

Motivation

• Motivation: factors that influence the workers' behaviour towards achieving business
goals.

• Factors that influence motivation at work:

o Money

o Job Security

o Training

o Promotion

o Status

o Responsibilities

o Work environment

Benefits of a Well-Motivated Workforce

• Improved productivity

• Low rate of absenteeism (Workers’ non-attendance at work without a good reason)

• Low rate of labour turnover (The rate at which workers leave the business)

• Better quality goods and services

• Improved labour productivity (A measure of the efficiency of workers by calculating the

output per worker)

Key Motivational Theories

F.W. Taylor - Scientific Management Theory

• It aims to reduce inefficiency in the workplace by finding the quickest method of

performing tasks and training all workers to use this method.

• The theory of economic man: the theory that humans are only motivated by money, in
which Taylor believed that money was the only motivational factor.

• The piece rate method of paying production came from his research.

• Disadvantages:

o His ideas were too simplistic

o If employees are unfulfilled with their work, productivity won’t be gained, no

matter how high the wage.

o If employees’ output can’t be measured, practical problems arise.

Abraham Maslow: Concept of Human Needs - Maslow’s Hierarchy

 Advantages Disadvantages

It is possible for managers to satisfy It is difficult to identify how much of the needs have been
some or all of their needs met or which level each worker is on

Easy to set goals and objectives It doesn’t include money as a need

Not all needs are included.

Self-actualization is rarely, if ever, achieved.

Fredrick Herzberg - Two-Factor Theory

• Hygiene Factors: The factors that must be present in the workplace to prevent job
dissatisfaction.

o Working Conditions: Things that show how clean and safe the workplace is and
what facilities are provided

o Relationship with others: Good working relationships with workers and

managers, and treated fairly with respect.

o Salary and wages

o Supervisions: Leadership style and how closely works are supervised

o Company policy and administration: rules and procedures that control and
affect the workplace.

• Hygiene Factors must be present to prevent job dissatisfaction

• Job dissatisfaction: How unhappy and discontent a person is with their job.

• Motivators (Factors that influence a person to increase their effort):

 o The work itself: Variety of jobs and challenging tasks through job enrichment.

o Responsibility: Giving workers responsibility for tasks they perform.

o Advancement: Opportunity for promotion

o Achievement: They feel like they have reached a challenging goal.

o Recognition of Achievements: Recognised by the people for their

achievements

Methods of Motivation

Financial Rewards: cash and non-cash rewards paid to workers motivate them to increase
their efforts.

• Time rate: payment to workers based on a fixed amount every hour worked.

Advantages Disadvantages

Business only pays workers for the number of hours Pay is not linked to how much they
worked produce

• Salary: fixed annual payment to specific grades and types of staff, not based on hours
worked or output, usually divided into 12 equal monthly payments.

Advantages Disadvantages

Salary is not linked to effort or the They do not receive more payment if they have to work long
amount produced hours to complete the task.

• Piece Rate: Payment to workers based on the number of units produced.

Advantages Disadvantages

Workers are only paid for the number of Quality of goods may vary because of the need to produce
items produced more goods to increase pay

• Commission: Paying sales staff based on the value of items they sell. It is often paid in
addition to a basic wage or salary to retail employees and others involved in sales.

Advantages Disadvantages

Pay is linked to the value of goods sold Workers are never sure of how much they will earn

• Bonus scheme: an additional reward paid to workers for achieving the target set by
managers. Method of performance-related pay.
 Advantages Disadvantages

Linked to a performance target If the target is unrealistic, it can be demotivating

• Fringe benefits: non-cash rewards used to recruit and retain workers and recognise
certain employees' status. (e.g. Car, insurance, health care)

Advantages Disadvantages

Helping recruitment and retaliation of workers Linked to status, not performance

• Profit sharing: an additional payment to workers based on the business's profit.

Advantages Disadvantages

Linked to the performance of Profit to employees may reduce dividends to shareholders or the
the business amount reinvested in the business.

Non-financial rewards and methods: These are methods used to motivate workers that do not
involve giving any financial rewards.

• Job Rotation: increasing variety in the workplace by allowing workers to switch from one
task to another.

• Job satisfaction: how content and happy a person is with their job

• Job Enlargement: increasing or widening tasks to increase the variety of workers.

• Job Enrichment: organising work so workers are encouraged to use their full ability. This
increases job satisfaction.

• Job redesign: increasing the variety or difficulty of tasks to discuss more exciting and
challenging work for workers.

• Quality circles: a group of workers who meet regularly lower down in the organisation.

• Team working: organising production so that groups of workers complete the whole unit
of work.

• Delegation: passing responsibility for performing a task to workers lower down in the
organisation.

Benefits of decrease in labour turnover:

• There is no need to hire new employees, decreasing recruitment costs, training costs,
and retaining skilled employees. This improves productivity.

Organisation and Management

• Organisational Structure: levels of management and division of responsibilities within

a company.
 • Organisational Charts: refers to diagrams that outline the internal management
structure.

• Hierarchy refers to the levels of management in any organisation.

• Levels of Hierarchy: refers to management/supervisors/other employees who are given

a similar level of responsibility in an organisation.

• Example of Organisational Chart:

• Benefits:

o The chart shows how everybody is linked in the organisation, which allows
employees to be aware of their communication channel (chain of command).

o Everyone can see what they are accountable for, which they have authority over,
and who to take orders from.

o Everyone is in a department, thus giving a sense of belonging

• Chain of Command: The structure in an organisation allows instructions to be passed

down from senior management to subordinates.

• The Span of Control: The number of subordinates working directly under a manager.

• Subordinate: an employee below another employee in the organisation’s hierarchy.

Two Types of Organisational structures of a business:

• Tall Structure: the longer the chain of command is, the ‘taller‘ the organisational
structure and the ‘narrower‘ the span of control.
 • Flat Structure: when a chain of command is short, the organisation will have a ‘wider’
span of control, thus making it a ‘flat‘ structure.

• Advantages of Short Chain of Command:

o Communication and decision-making are quicker.

o Fewer management levels to build connections with by the top management.

o The span of control will be wider, encouraging managers to delegate more and
allowing workers to feel trusted.

• Advantages of a long chain of command:

o As decisions get passed down, it is checked by multiple people, thus reducing

error and preventing bad decisions from happening

o Lesser subordinates means management can focus more on their designated

workers.

• Factors affecting the size of the span of control:

o Difficulty of the task

o The experience and skill of workers

o The size of the business

o the level of hierarchy

o Management style

• Delayering: reducing the size of the hierarchy by removing one or more levels, often the
middle management.

Advantages Disadvantages

Reduces cost Increased workload on managers, thus decreasing

the quality of work and its completion.

Communication and decision-making are quicker Have to make redundancy payments to employees
due to reduced chain of command. who lost their job
Advantages Disadvantages

Increases the opportunity for delegation, which Reduction in job security

helps in motivation

Senior managers are in close touch with what is Reduce effective management of subordinates
going on in the business

• Delegation: Giving a subordinate the authority to perform particular tasks.

Advantages Disadvantages

Application of job enrichment, leading Some managers are reluctant to delegate, as they will be held
to job satisfaction accountable for any errors

A form of training for junior managers Managers lose some control over subordinates

Achieving the Esteem needs (Maslow’s

hierarchy)

• Centralised Organisation: one where all the important decision-making power is held
at the head office/the centre and then passed down to lower levels.

Advantages Disadvantages

Decision-making is often quicker Slower communication

Decisions are taken for the benefit of the whole Unable to respond quickly to changes in the local
business market

Greater use of specialist staff improves decision- May reduce motivation

making

• Decentralised Organisation:

Advantages Disadvantages

Decisions are made based on local Decisions taken might not be in the interest of the business
needs.

It can be used to train junior managers. Poor decisions might be made often due to lack of experience
and skills
 Advantages Disadvantages

Delegation helps improve worker

motivation.

Role and Function of Management

• Directors: are senior managers who lead a particular department or division of a

business. Responsibilities:

o Setting strategy (long-term plans)

o Reviewing the performance of managers.

o Provide leadership

o Making sure resources are available

• Line Managers: manage employees and are responsible for the team development and
performance.

• Supervisors: are junior managers who supervise and are responsible for the employees
below them in the organisational structure.

• Staff Managers: are specialists who provide support information. And assistance to line
managers.

• The functions of managers include:

o Planning – Planning is about where the business is now and where it wants to
be. Once it has been decided, management must set clear objectives and an
action plan.

o Organising – Management will have to decide the best way of completing

important tasks at the lowest possible cost to the business.

o Communicating - Control and supervision of subordinates also aim to motivate

workers to achieve the planned objectives.

o Coordinating - Making sure that all the different parts of the business are
working together to achieve the business’s goals and corporate objectives.

o Controlling – involves checking to make sure that the plan is working and if it
would be completed in time and the required standard, and if not, then
correcting it

• Extra functions managers do:

o Understand the people who work for them

o Set a good example

o Delegate tasks

o Treat subordinates fairly

 o communicate effectively

Leadership Styles

• Leadership Styles: are the different approaches to dealing with people and making
decisions when in a position of authority.

• There are three leadership styles:

• Autocratic Leadership: where the manager expects to be in charge of the business and
to have their orders followed. Characteristics:

o A leader does all the decision-making

o Don’t take input from others.

o Highly structured working environment

Advantages Disadvantages

Quick decision-making There is no opportunity for employee input into key decisions, which can
process be demotivating

• Democratic Leadership: gets other employees involved in the decision-making.

Characteristic:

o Motivation is higher

o Creativity and engagement with workers are encouraged.

 o Workers and employees are involved in decision-making.

Advantages Disadvantages

Better Decisions could result from consulting with Unpopular decisions could not effectively
employees using their ideas and experiences. be made using this style

• Laissez-Faire Leadership: makes the broad objectives known to employees, but then
they are left to make decisions and organise their work. Characteristics:

o Workers and employees are expected to make the decisions.

o The leader will only give guidance.

o The leader only takes charge when necessary.

Advantages Disadvantages

Encourage employees to show It is unlikely to be appropriate in organisations with a consistent

creativity and responsibility and clear decision-making structure.

Trade Unions

• Trade Unions: A group of employees who have joined to protect their interests.

The Role of Trade Unions:

• Negotiating with employers to improve pay and working conditions.

• Resolving conflict by negotiating a solution on behalf of its members

• Providing legal support and advice.

• Providing services for members including holiday scheme, pension scheme, insurance
scheme, etc.
 Advantages Disadvantages

Strength in numbers when negotiating with It costs money to be a member

employer

Improved conditions of employment. Workers may be required to take industrial actions even if
they disagree.

Improved environment where people work. Trade unions can organise strikes against employers if
they don’t receive the pay levels and work conditions they
deserve.

Improved benefits for members not working Wages are likely higher - adding to business costs - when
because of sickness, retirement, or many employees are trade union members.
redundancy.

Work of Human Resource Department

• Recruitment and Selection:

o Recruitment: is the process of identifying that the business needs to employ

someone up to the point at which applications have arrived.

o Employee Selection: is the process of evaluating candidates for a specific job

and selecting an individual based on the organisation's needs.

• Wages and Salaries:

o These must attract and retain the right people and be sufficiently high to
motivate employees.

• Industrial Relations:

o There must be effective communication between representatives of

management and the workforce. This may be to resolve grievances and disputes
and put forward ideas and suggestions for improvements.

• Training Programs:

o It involves assessing and fulfilling the training needs of employees. This should
also be linked to the plan.

• Health and Safety:

o The business must ensure that it complies with all the laws on health and safety.

• Redundancy and Dismissal:

o This involves releasing employees, either because the business changes in

some way or because the employee is not satisfactory. The business must
comply with all the redundancy, dismissal and disciplinary laws.
Recruitment Process

1. Analyse the exact nature of the job and duties to be undertaken.

o Job analysis: it identifies and records the responsibilities and tasks relating to a
job

2. Job description: a document that outlines the tasks and responsibilities that will need
to be carried out as part of the specific job – so that applicants know what the job
involves and so they know if they are suitable to apply for the job

Usual Requirements:

o The level of educational qualification

o Special skills, knowledge, or a particular attitude

o Personal Characteristics

3. Design a job specification:

o Job Specification: outlines the responsibilities and duties to be carried out by

someone employed to do a specific job. Several functions of a job specification:

▪ This information should be given to applicants so they know exactly what

the job entails.

▪ Allows a job specification to be drawn up to see if they are skilled.

▪ It shows if an employee is working effectively once they are employed.

o The contents of a Job specification:

▪ Condition of employment salary, hours, permission, etc.

▪ Training that will be offered

▪ Opportunities for promotion

▪ Purpose of the job

▪ Main duties/addition or occasional duties

4. Person Specification: outlines the required skills, qualifications, personal qualities,

etc., for a specific job – to ensure a suitably qualified person is appointed and that they
have the skills, etc., to do the job required.

5. Advertise the vacancy:

 o The first stage is to decide how the post will be filled.

Internal Recruitment: is when a vacancy is filled by someone who is an existing employee of

the business

Advantages Disadvantages

Quicker and cheaper than external recruitment. No new ideas or experiences come into
the business.

The reliability, ability, and potential of the person are known. Rivalry and jealousy may arise.

The person is already familiar with the organisation's The quality of internal candidates might
structure and expectations. be low.

It can be motivating for other employees to see their fellow

workers promoted.

External Recruitment: when any suitable applicant outside the business fills a vacancy

Advantages Disadvantages

A more comprehensive selection of candidates. Increased costs due to advertising.

Adding fresh perspective and ideas. Additional training

Enhancing diversity in the organisation. Adds a transitional period for all employees to adjust
to the new business
Advantages Disadvantages

Finding a specialised candidate who fits the Effects on employee morale.

requirements perfectly.

Can help the competitiveness of the business

Reduce tension between employees.

5. Send out application forms to the applicants or read curriculum resumes and
letters of application.

o Advertising job vacancies can be done in several ways:

▪ Local newspapers

▪ National newspapers

▪ Specialist magazines

▪ Online recruitment sites

▪ Recruitment agencies

▪ Centres run by the government

6. Produce a shortlist from the applications for interviews and take up references.

o Applicants must provide a referee (someone the potential employer can

contact, intending to get more information/references from).

o Interviews are the most used form of selection. Its primary purpose is to assess
in the shortest time possible:

▪ Applicant’s ability to do the job

▪ Any personal qualities that could be beneficial or not.

▪ The general character and personality of the applicant.

o Some businesses include tasks in the selection process, such as:

▪ Skill test (ability to carry out specific tasks)

▪ Aptitude test (candidate’s potential of learning a new skill).

▪ Personality test (used if a particular type of person is required).

▪ Group situation test (to show how well they work with a team).

7. Hold interviews and select tasks.

8. Select suitable applicants and offer them the job. Reply to unsuccessful
applicants.
 o The final decision can depend on several factors:

▪ Work experience

▪ Education and other qualifications

▪ Age

▪ Internal

▪ External

▪ Circumstance

Types of Workers

• Part-time Employees work for less than 35 hours a week.

o Benefits:

▪ Work hours are flexible.

▪ Easier to ask employees to work at busy times

▪ More accessible to extend business opening/operating hours by working

evenings or weekends.

▪ It fits in with looking after children or other circumstances such as

school, which means employees are willing to lower pay.

▪ Reduces business cost

▪ In some countries, it’s easier to make part-time workers redundant.

o Limitations:

▪ They are less likely to seek training, as they see the job as temporary.

▪ Takes longer to recruit.

▪ Less commitment to business.

▪ Less likely to be promoted due to lack of experience.

▪ It is more difficult to communicate outside of work.

• Full-time Employees work for more than 35 hours a week

o Benefits:

▪ Consistency of schedules and reliability

▪ Loyalty - A permanent contract means the employee is more loyal

o Limitations:

▪ A permanent contract has to be made, a long-term commitment.

▪ Full-time employees have fixed pay, regardless of the number of hours

committed to work (ex, sick leave, slow work day, emergency, etc).
Note: full-time employee benefits are the limitations of part-time and vice versa

The Importance of Training and the Methods of Training

• Importance of training:

o To introduce new processes or equipment

o Improve the efficiency of the workforce

o Provide training for unskilled workers

o Decrease the supervision needed

o Improve opportunity for internal promotion

o Decrease chances of accidents

• Aims of training:

o Increase skills

o Increase knowledge

o Improve employee’s attitudes to encourage them to accept change and raise

awareness.

• There are three types of training:

• Induction Training: an introduction given to an employee, explaining the business’s

activities, customs, and procedures and introducing them to their fellow workers.

Advantages Disadvantages

Helps new employees settle into their jobs quickly Time-consuming

Maybe a legal requirement to give health and safety Workers are being paid while no work is
training at the start being done

Workers are less likely to make mistakes Delays the start of work for the employee

• On-the-job Training: Occurs by watching a more experienced worker doing their job.

Advantages Disadvantages

The individual is given training in the workplace, so Trainers won’t be as productive because they
there is no need to send them away. are teaching employee

Ensures there is some production while training The trainer might have bad habits and pass
them on to the employee
 Advantages Disadvantages

Usually costs less than off-the-job training Not recognized training qualifications outside
the business

Training tailored to the specific needs of the business.

• Off-the-job training: Involves being trained away from the workplace, usually by
specialist trainers.

Advantages Disadvantages

A broad range of skills can be taught Costs are high

If taught in the evening, employees can work Workers are being paid but not doing any work.
during the day

Often uses expert trainers who have up-to-date Additional qualifications mean an employee's
business practices and knowledge. chances of leaving for another job are high.

Why Reducing the Size of the Workforce Might Be Necessary

• Workforce Planning: establishing the workforce the business needs for the foreseeable
future regarding the number and skills required.

• Reasons to reduce workforce:

o Automation (robots replacing human jobs)

o Falling demand for their goods or services

o Factory/shop/office closure

o The business might have relocated abroad

o Businesses are being taken over/merged, and now there are too many workers
doing the same job

• Two ways a business can reduce the number of employees:

o Dismissal: employment ends against the employee's will, usually for not
following an employment contract.

o Redundancy: when an employee is no longer needed and loses their job. It’s not
due to any aspect of their work being unsatisfactory.

• Factors that decide in redundancy:

o Workers may volunteer and are happy to be made redundant due to finding
another job.
 o Length of time employed by the business - employees might have worked long
hours and expect high payments.

o Workers who have skills that could be used in multiple departments are
retained.

o The worker's employment history- whether they are punctual, good at their job,
etc.

o Which departments need to lose, and which need to retain workers

Extra information: workers can retire (get old and want to stop working) and resign (find another
job), but it’s through the employee’s will in those two cases.

Legal Controls Over Employment issues

The most important employment issues affected by legal controls are:

• The Contract of Employment: A legal agreement between an employer and employee,

listing the rights and responsibilities of workers.

o Impact on Employers and Employees:

▪ Both know what is expected from them.

▪ Provides security of employment for employee

▪ If the employee does not meet the condition of the contract, then legal
dismissal is allowed.

▪ If an employee fails to meet the conditions of the contract, then the

employee can seek legally binding compensation.

• Unfair Dismissal: when an employer ends a worker’s employment contract for a reason
not covered by the contract.

• Industrial Tribunal: a law court (legal meeting) judges disagreements between

companies and their employees.

o Impact on Employer and Employee:

▪ The Employer must have an accurate record of a worker’s performance if

they want to claim that the employee has broken the contract before
dismissing them.

▪ Employees have employment security — as long as they fulfill their

contract or are not made redundant.

▪ Allowed employees to take their employer to an industrial tribunal if they

felt like they weren’t being treated fairly, and they could get
compensation if it were found to be true.

▪ It makes businesses less likely to mistreat employees.

• Protection against discrimination (due to unfair reasons such as gender, race, colour,
etc.).
 o Impact on Employers and Employees:

▪ Employees have to be careful when wording advertisements for a job.

▪ Applicants must be treated equally, or the business will be prosecuted

and fined.

▪ Employees must all be treated equally, regardless of gender, disability,

colour, etc.

▪ When businesses recruit and promote staff on merit alone, it helps to

increase motivation.

• Laws of health and safety at work, such as:

o Protect workers against dangerous machinery.

o Provide safety equipment and clothing.

o Maintain reasonable workplace temperatures.

o Provide hygienic conditions and washing facilities.

o Do not insist on excessively long shifts, and provide breaks.

o Impact on employers and employees:

▪ Cost to the employer of meeting the health and safety regulations.

▪ Time needs to be found to train workers in health/safety precautions.

▪ Workers feel ‘safer‘ and more motivated at work.

▪ Reduce accident rates and the cost of compensation for workers injured
at work.

• Legal minimum wage and its impact on employer and employee:

o It should prevent strong employers from exploiting unskilled workers.

o As many unskilled workers receive higher wages, it will encourage them to be

more productive.

o It will encourage people to seek work.

o Low-paid workers will earn more and have higher living standards, making them
afford to buy more.

o Increase business costs

o Some employers will not be able to afford these wage rates.

o Higher-receiving workers may ask for higher pay to keep the exact difference
between them, increasing business costs.

Internal and External Communication

 • Effective Communication is important so that the information sent in the message is
received, understood, and acted upon as it should be. Otherwise, lack of
communication can lead to severe consequences.

• There are two types of communication in businesses:

o Internal Communication: communication between employees of the same

business.

o External Communication: communication between the business and other

businesses and individuals.

• External communication has to be especially efficient because it establishes the image

and the efficiency of a business

o i.e. if a company communicates inefficiently with their suppliers, they might

receive the incorrect materials

• Effective communication involves:

1. The transmitter/sender sending a message to pass on information

2. A medium of communication – the method for sending a message (i.e. e-mail, phone,
etc.)

3. The message being sent to the receiver

4. The receiver confirms that the message has been received and responds to it
(feedback)

• There are two types of communication:

o One-way communication – where the receiver cannot reply to the message (i.e.
posters)

o Two-way communication – where the receiver can respond to the message

could be just confirmation that the message was received (e-mail)

The methods of communication include:

• Verbal Methods: The sender speaks to the receiver (i.e., through meetings, telephone,
or video conference)

Advantages Disadvantages

Information is given out quickly & an efficient way to If talking to many people, it’s hard to tell whether
communicate with many people. everyone got the message.

Opportunity for immediate feedback It is unsuitable for accurate messages and

requires a permanent record.

The speaker’s body language reinforces the message.

 • Written Methods: the sender creates e-mails, memos or letters, including the use of
Information Technology

Advantages Disadvantages

Message can be referred to in the future as “hard It might lead to too many e-mails and ‘information
evidence.” overload.’

Easy to explain complicated messages Two-way communication is difficult

It can be copied and re-sent to many people It is hard to check if the message has been received

• Visual Methods: The sender uses diagrams, charts, videos, PowerPoints

Advantages Disadvantages

If information is presented more appealingly, No feedback and needs other methods of

people will be more interested in it. communication to go with it

It can be used to make written messages Graphs and charts may be difficult for people to
clearer, to illustrate the point understand, and the message may be misunderstood

Methods of Communication

• Formal Communication: when messages are sent through established channels using
professional language.

• Informal Communication: when information is sent and received casually using

everyday language.

The Direction of Communication

• Arrow A shows downward communication: messages from managers to subordinates.

Used for instructions or statements, no feedback.

• Arrow B shows upward communication: messages or feedback can be passed from

subordinates to managers.
 • Arrow C shows horizontal communication: when people at the same level in an
organisation communicate. Ideas and info can be shared. Conflict can happen.

Demonstrate an Awareness of Communication Barriers

Communication Barriers

• Communication Barriers – Factors that stop effective communication of messages.

Communication Barriers and How Can They Be Reduced or Removed

• Problems with the sender:

o Poor attitude and body language

o Unclear message

o Message too long

o Sent to the wrong person

• Overcome by:

o The sender should ensure that the message uses language which can be
understood.

o The sender should make the message as straightforward as possible.

o The sender should ensure the message is delivered to the right person.

o The message should be brief, with the main points to be understood.

• Problems with the medium:

o Too many people pass on the message.

o The message may be lost.

o Wrong channel used

o Technical break down

• Overcome by:

o Insist on feedback; if none is given, the sender can assume the message is lost.

o The sender must select an appropriate channel to avoid problems.

o Shortest possible channel to avoid problems

o Other forms of communication should be available.

• Problems with the receiver:

o Lack of trust

o Poor attitude

o Poor listener

• Overcome by:
 o The message should be emphasised, and receivers should be asked for
feedback to ensure understanding.

o If trust is not between sender and receiver, then the sender should try to build
that trust, or perhaps another sender who is respected by the receiver could be
used.

• Problems with feedback:

o Not sent

o Unclear

o Not asked for

• Overcome by:

o Perhaps no feedback was asked, or the method of communication required no

feedback, so another technique that may allow feedback should be used.

o Direct lines of communication should be available.