Unit 2 Managing a business People in business
Unit 2: Managing a business People in business Chapter 19 Improving organisational structures
Unit 2: Managing a business People in business Organisational structure and hierarchy: key terms organisational structure: the relationship between different people and functions in an organisation — both vertically, from shop-floor workers through supervisors and managers to directors, and horizontally, between different functions and people at the same level. organisation chart: a diagram showing the lines of authority and layers of hierarchy in an organisational hierarchy: the vertical division of authority and accountability in an organisation. levels of hierarchy: the number of different supervisory and management levels between the shop-floor and the chief executive within an organisation
Unit 2: Managing a business People in business Traditional organisation structure A traditional structure which divides the organisation up into four functional areas — production, human resource management, marketing, finance — each with a number of layers of hierarchy
Unit 2: Managing a business People in business Span of control and levels of hierarchy span of control: the number of subordinates a manager is required to supervise directly. • If a manager has many subordinates answerable to him or her, the span of control is said to be wide. • If a manager has relatively few subordinates answerable to him or her, the span of control is said to be narrow. • Normally, the greater the degree of similarity in what a group of workers do, the wider the span of control can be. • Traditionally, organisations tended to have very tall hierarchical structures, i. e. many layers of management, each with a narrow span of control. • More recently, hierarchies have become flatter, meaning that the number of layers of management has been reduced and each manager has a wider span of control
Unit 2: Managing a business People in business Span of control and levels of hierarchy exercise In groups, compare the features of tall structures and narrow spans of control with those of flat structures and wide spans of control. Assess which is likely to be more beneficial to worker motivation and to communication, and why.
Unit 2: Managing a business People in business Drawing an organisation chart Draw the organisation chart for your school, college or workplace. Ask your tutor or supervisor further information that you might need. Consider whether it has a tall or a flat structure and whether the span of control at different levels of the hierarchy is narrow or wide. Think of these issues in relation to how the organisation is run and whether this is the most effective structure.
Unit 2: Managing a business People in business Workforce roles Work roles vary from business to business, but as a business grows they will generally include directors, managers, supervisors and/or team leaders and operatives. Organisation chart of Rockcliffe Ltd
Unit 2: Managing a business People in business Workloads and job allocations Workloads are influenced by the nature of the organisation and its management structure — a large span of control or a lack of delegation can increase workloads. Job allocations can change as the organisational structure changes, e. g. from a production manager responsible for the production of all products to the creation of production managers for each product and an overall production director.
Unit 2: Managing a business People in business Delegation (1) delegation: the process of passing authority down the hierarchy from a manager to a subordinate. responsibility: being accountable for one’s actions. authority: the ability or power to carry out a task. accountability: the extent to which a named individual is held responsible for the success or failure of a particular policy, project or piece of work. Research has shown that taking a few main factors into account can improve the success of delegation fourfold. In groups, try to identify what these factors might be.
Unit 2: Managing a business People in business Delegation (2) Check your ideas against the following list. • Delegation must be based on mutual trust between manager and subordinate. • Subordinates must be appropriately skilled, trained and informed about the particular task they will be responsible for. • Interesting and challenging tasks should be delegated as well as the more routine. • Responsibility and authority must be delegated. • The limitations of the subordinate’s authority should be made clear too. • Managers must relinquish control to ensure that subordinates feel they are trusted and that the manager has confidence in them. Working individually or in groups, and using your own experience and any resources you have available, identify a list of advantages to a business of effective delegation. Then try to think of any factors that might limit the extent to which a business might delegate. Check your ideas against lists the on the next slide.
Unit 2: Managing a business People in business Delegation (3) Advantages of delegation • It frees up time for managers to concentrate on strategic tasks. • It empowers and motivates workers. • Subordinates might have a better knowledge of local conditions and therefore might make more informed decisions. • Delegation may allow greater flexibility and a quicker response to changes. Factors limiting delegation • • • In some small firms, managers delegate very little. Customer expectations. Attitudes and approach of management. Quality of staff. Crisis situations. Confidentiality.
Unit 2: Managing a business People in business Internal and external communication: the process of exchanging information or ideas between two or more individuals or groups. internal communication: exchange of information that takes place within an organisation (e. g. at departmental meetings, in team briefing sessions and in memos to staff). external communication: exchange of information that takes place with individuals, groups and organisations outside the business (e. g. via advertising material, telephone calls to suppliers and letters to customers). Identify examples (other than those listed above) to illustrate why external communication is vital if a firm is to be successful.
Unit 2: Managing a business People in business Process of communication Working in groups, use the communication process to explain how important issues have been communicated within your school or college. These could be new school policies or procedures, or other types of change or development. Try to think of examples where the process went smoothly and any where the communication was more problematic.
Unit 2: Managing a business People in business One- and two-way communication (1) one-way communication: communication without any feedback (e. g. putting a notice on a notice board, or giving instructions in an authoritarian manner that allows no comment or questions from the listener). In one-way communication, the communicator can never be sure whether the message has been understood and therefore whether the communication was effective. One-way communication is often associated with autocratic management styles. two-way communication: communication with feedback (e. g. giving instructions in a manner that allows for questions to be asked or comments to be made, a discussion or a question-andanswer session). Two-way communication ensures that any communication has been fully understood and is therefore more effective. Effective two-way communication is a vital element of democratic management, effective delegation, empowerment and teamworking.
Unit 2: Managing a business People in business One- and two-way communication (2) Working in groups, try to identify examples of one- and two-way communication that you have experienced in school, college or the workplace. Think about whether this was the best form of communication and, if not, how it could have been improved.
Unit 2: Managing a business People in business Communication channels (1) communication channel: the route through which communication occurs. open channels of communication: where any staff member is welcome to see, read or hear the discussions and conclusions. closed channels of communication: where access to the information is restricted to a named few. formal channels of communication: communication channels established and approved by senior management, within which any form of communication is regarded as formal (e. g. meetings of departmental heads, personnel department meetings and production team briefing sessions). informal channels of communication: means of passing information outside the official channels, often developed by employees themselves (e. g. ‘the grapevine’ and gossip).
Unit 2: Managing a business People in business Communication channels (2) ‘Informal communication channels can both help and hinder formal communications and for this reason the grapevine is usually recognised by management as extremely important. ’ ‘Large amounts of informal communication suggests that formal communication channels are not operating effectively’. Discuss the issues involved in each of these statements and decide which you agree with.
Unit 2: Managing a business People in business Vertical and lateral communication vertical communication: when information is passed up and down the chain of command. • Downwards communication is also known as top-down communication. • Upwards communication is also known as bottom-up communication. Identify reasons why upwards communication might benefit a business. lateral communication: when people at the same level within an organisation pass information to each other. Focusing on the marketing, production and finance departments of a firm, why might lateral communication between staff in these departments be vital for the efficient running of a business?
Unit 2: Managing a business People in business Improving organisational structures Working in groups, using the resources that are available to you (e. g. textbooks, internet) and reflecting on the work you have done on organisational structures so far, investigate: • the main factors that influence the structure of an organisation • how organisational structures can affect business performance Share your ideas with the rest of the class.
Unit 2: Managing a business People in business Chapter 20 Measuring the effectiveness of the workforce
Unit 2: Managing a business People in business Labour productivity (1) labour productivity: a measure of the output per worker in a given time period. labour productivity = output period number of employees period Calculate labour productivity per month and the labour cost per unit per month where output in a given month is 20, 000 units and 40 people are employed at a cost of £ 1, 000 per worker.
Unit 2: Managing a business People in business Labour productivity (1) labour productivity: a measure of the output per worker in a given time period. labour productivity = output period number of employees period Calculate labour productivity per month and the labour cost per unit per month where output in a given month is 20, 000 units and 40 people are employed at a cost of £ 1, 000 per worker. Answers Labour productivity per month = 20, 000/40 = 500 units Labour cost per unit per month = £ 40, 000/20, 000 = £ 2
Unit 2: Managing a business People in business Labour productivity (2) Labour productivity may be increased by: • • recruiting suitably skilled and trained employees providing training to enhance skills and attitudes of existing employees providing pay and non-financial benefits that improve motivation improving working practices, technology and capital equipment What is likely to be the effect of an increase in labour productivity on unit labour costs? The following calculations should illustrate these effects. Starting with the information on the previous slide, improved machinery is introduced, the number of employees remains the same and output increases to 30, 000. What is labour productivity and labour cost per unit now?
Unit 2: Managing a business People in business Labour productivity (2) Labour productivity may be increased by: • • recruiting suitably skilled and trained employees providing training to enhance skills and attitudes of existing employees providing pay and non-financial benefits that improve motivation improving working practices, technology and capital equipment What is likely to be the effect of an increase in labour productivity on unit labour costs? The following calculations should illustrate these effects. Starting with the information on the previous slide, improved machinery is introduced, the number of employees remains the same and output increases to 30, 000. What is labour productivity and labour cost per unit now? Answers Labour productivity per month = 30, 000/40 = 750 units Labour cost per unit per month = £ 40, 000/30, 000 = £ 1. 33
Unit 2: Managing a business People in business Labour turnover labour turnover: the proportion of employees leaving a business over a period of time — usually a year. labour turnover = number leaving a business over a given period × 100 average number employed over a given period Calculate the rate of labour turnover where the average number of staff employed in a firm last year was 250 and the number of employees who left the firm last year was 10. Working in groups, try to identify the main causes of high labour turnover and what the problems of high labour turnover might be for a firm. Compare your ideas to those on the following two slides
Unit 2: Managing a business People in business Labour turnover labour turnover: the proportion of employees leaving a business over a period of time — usually a year. labour turnover = number leaving a business over a given period × 100 average number employed over a given period Calculate the rate of labour turnover where the average number of staff employed in a firm last year was 250 and the number of employees who left the firm last year was 10. Working in groups, try to identify the main causes of high labour turnover and what the problems of high labour turnover might be for a firm. Compare your ideas to those on the following two slides Answer Rate of labour turnover = (10/250) x 100 = 4%
Unit 2: Managing a business People in business Causes of high labour turnover Internal factors include: • ineffective leadership and management techniques • poor communications • wages and salaries that are lower than those being paid by firms offering comparable jobs in the area • poor selection procedures that tend to appoint the wrong people to the wrong jobs • boring and unchallenging jobs that lack career and developmental opportunities • poor working conditions and unpopular working practices • low morale and motivation as a result of the above issues External factors include an increase in vacancies for more attractive jobs.
Unit 2: Managing a business People in business Problems of high labour turnover • • high recruitment and selection costs to replace staff who leave high induction and training costs reduced productivity due to the disruption caused by skilled staff leaving low morale among existing workers due to constantly changing staff Use the internet to find data about differences in labour turnover: • between the private and public sector • within the private sector, between industries that have the lowest and the highest rates • between professionals and less skilled workers • between different regions Discuss the possible reasons for the differences identified.
Unit 2: Managing a business People in business How to reduce labour turnover Working in groups, assume you are management consultants brought into a firm to advise it on how to reduce labour turnover. Identify three key strategies you would suggest and share them with the rest of the class. Compare your strategies with the following list. • • • monitoring and benchmarking exit interviews recruitment and selection induction and training reducing turnover of long-term workers As a class, discuss the following issues • Can labour turnover ever be avoided? • Can labour turnover ever be a good thing for a firm?
Unit 2: Managing a business People in business Absenteeism (1) absenteeism: the proportion of employees not at work on a given day. average daily absentee rate = number of staff absent on 1 day total number of staff × 100 What is the average daily absentee rate if 21 people out of a workforce of 300 are absent on a given day? If a firm has an average daily absentee rate of 5% and a workforce of 300, what is the typical number of people absent per day? average annual absentee rate = total number of days lost due to absence during the year × 100 total number of days that could be worked x no of employees
Unit 2: Managing a business People in business Absenteeism (1) absenteeism: the proportion of employees not at work on a given day. average daily absentee rate = number of staff absent on 1 day total number of staff × 100 What is the average daily absentee rate if 21 people out of a workforce of 300 are absent on a given day? If a firm has an average daily absentee rate of 5% and a workforce of 300, what is the typical number of people absent per day? average annual absentee rate = total number of days lost due to absence during the year × 100 total number of days that could be worked x no of employees Answers Average daily absentee rate = (21/300) x 100 = 7%. Typical number of people absent per day = (X/300) x 100 = 5%, so X = (5/100) x 300 = 15
Unit 2: Managing a business People in business Absenteeism (2) What is the average annual absentee rate if the total number of days that could be worked is 250 (5 days × 50 weeks), the total number of employees is 80 and the number of days lost due to absence is 600?
Unit 2: Managing a business People in business Absenteeism (2) What is the average annual absentee rate if the total number of days that could be worked is 250 (5 days × 50 weeks), the total number of employees is 80 and the number of days lost due to absence is 600? Answer Average annual absente rate = [600/(250 x 80)] x 100 = [600/20, 000] x 100 = 3%.
Unit 2: Managing a business People in business Causes of absenteeism In groups, try to identify what you think are likely to be the main causes of absenteeism. Think about them in two categories: unavoidable and avoidable. Explore what the impact of high rates of absenteeism is likely to be for business. To help you in this, consider that in 2007 the average cost of absence for a firm was £ 659 per employee per year and there were about 29 million people in employment.
Unit 2: Managing a business People in business Strategies to reduce absenteeism • • • introducing more flexible working practices ensuring that jobs are interesting and challenging improving working conditions and thus reducing dissatisfaction improving relations between employers and employees introducing attendance bonuses as an incentive to attend regularly Working in groups and using the internet and any other resources you have available, try to establish how effective these strategies have been when introduced by firms. Share your findings with the class.
Unit 2: Managing a business People in business Health and safety absenteeism rate of absenteeism due to health and safety reasons = number of working days lost per year due to health and safety reasons × 100 total number of possible working days per year What is the rate of absenteeism due to health and safety reasons, if over a period of a year there are 250 actual working days and the number of days lost due to health and safety reasons is 5? What are the possible consequences of excessive absenteeism due to health and safety reasons, and how might such absenteeism be reduced?
Unit 2: Managing a business People in business Health and safety absenteeism rate of absenteeism due to health and safety reasons = number of working days lost per year due to health and safety reasons × 100 total number of possible working days per year What is the rate of absenteeism due to health and safety reasons, if over a period of a year there are 250 actual working days and the number of days lost due to health and safety reasons is 5? What are the possible consequences of excessive absenteeism due to health and safety reasons, and how might such absenteeism be reduced? Answer Rate of absenteeism due to health and safety reasons = (5/250) x 100 = 2%.
Unit 2: Managing a business People in business Measuring the effectiveness of the workforce Working in groups, take one of the measures of workforce effectiveness already covered (labour productivity, labour turnover, absenteeism due to health and safety reasons). Research the current trends in national data for this measure. Evaluate the likely impact on business of the trends you identify. Suggest possible strategies to reduce any negative impact. Share your findings with the rest of the class.
Unit 2: Managing a business People in business Chapter 21 Developing an effective workforce: recruitment, selection and training
Unit 2: Managing a business People in business Recruitment and selection Study a range of job descriptions and person specifications to ensure that you understand their content and their purpose: for example, access exemplar copies from textbooks or the internet, or those related to parttime jobs you might hold. A summary of the recruitment and selection process
Unit 2: Managing a business People in business Internal and external recruitment internal recruitment: filling a job vacancy by selecting someone from within the organisation. external recruitment: filling a job vacancy by advertising outside the firm. Advantages of internal recruitment • • • The employee’s abilities are known already. Internal promotional opportunities are motivating for the workforce. The recruitment and selection process is quicker. A shorter induction period is required. It is less expensive. It reduces the risk of employing the wrong person. Given these advantages, why might a firm choose to recruit people from outside the firm? Try to identify the advantages of external recruitment.
Unit 2: Managing a business People in business Advertising media Working in groups, try to identify as many different advertising media or methods of recruitment as possible, which might be used to attract the most suitable internal or external candidates. Analyse under which circumstances it might be most appropriate to use the media or methods you identify. Share your ideas with the rest of the class. Of those methods identified, which do you think are used by the majority of organisations?
Unit 2: Managing a business People in business Application forms and CVs • An application form provides information in a standard format. This allows a business to collect information from job applicants in a systematic way, and to assess objectively a candidate’s suitability for a job, therefore making it easier to shortlist candidates for interview. • CVs include similar information (details of the individual, their qualifications, their experience and why they are suitable for the job), but give candidates the opportunity to sell themselves in their own way. They do not have the restrictions of fitting information into boxes like an application form. A CV is usually accompanied by a letter of application. Both application forms and CVs can increasingly be submitted online.
Unit 2: Managing a business People in business Interviews and other methods of assessment Interviews are the traditional and still the most popular method of selection, but they are not necessarily the most effective in indicating how well an individual will perform in a job. This is because interviewers tend to be swayed by appearance and personality, and are often overly influenced by first impressions. Other selection techniques include: • aptitude and attainment tests • psychometric or personality tests • assessment centres Working in groups, research any one of the four methods of selection noted above: interview; aptitude and attainment tests; psychometric or personality tests; and assessment centres. Establish what they are, in which situations they are most appropriate to use and what their advantages and disadvantages are. Share your findings with the rest of the class.
Unit 2: Managing a business People in business Factors affecting methods of recruitment and selection Having studied the various aspects of recruitment and selection, try to identify the factors that are likely to affect the methods of recruitment and selection used by a business. Check your ideas against the following list: • the level of the job within the organisation • the size of the organisation • the resources available to fund the process • the cost of any particular method • the supply of labour • the culture of the firm Analyse the possible consequences for a business of adopting an effective recruitment and selection method.
Unit 2: Managing a business People in business Training involves employees being taught new skills or improving existing skills. Working in groups, identify the main reasons why a business might need to provide training for its employees (both new and existing). Share your ideas with the rest of the class. Check them against the following list: • the development and introduction of new products • restructuring of the firm • the development and introduction of new technology • changes to procedure, including improvements to customer service • high labour turnover • low morale • changes in legislation Continue working in groups to research the main benefits of training to a firm. Share your findings with the class.
Unit 2: Managing a business People in business Induction training induction training: education for new employees, which usually involves learning about the way the business works rather than about the particular job that the individual will do. An effective induction programme is likely to: • reduce labour turnover • improve employees’ understanding of both the corporate culture and the situation in which the organisation is placed • mean that employees contribute to the organisation more quickly • increase motivation Many of you have employment — either part time during term time or full time during the holidays. Share your experiences of the induction training you were given and how effective you found it in helping you to settle in.
Unit 2: Managing a business People in business On-the-job and off-the-job training on-the-job training: where an employee learns a job by seeing how it is carried out by an experienced employee. off-the-job training: all forms of employee education apart from that at the immediate workplace. Working in groups, research the types of on-the-job and off-the-job training that might take place and identify the advantages and disadvantages of both types of training. Share your findings with the rest of the class. How might the effectiveness of the following training opportunities be evaluated? • a course on using a computer package or a particular piece of machinery • a management training course • a customer care course How might the overall effectiveness of training in a business be evaluated?
Unit 2: Managing a business People in business Chapter 22 Developing and retaining an effective workforce: motivating employees
Unit 2: Managing a business People in business Theories of motivation: the causes of people’s actions — why people behave as they do. motivation theory: the study of factors that influence the behaviour of people in the workplace. • scientific management and F. W. Taylor • the human relations school and Elton Mayo • Abraham Maslow’s hierarchy of human needs • Frederick Herzberg’s motivation and maintenance Working in groups, select one of the above theories of motivation. Research theory and what it says about how workers are motivated. Summarise your findings on one side of A 4. Present your findings to the rest of the class and respond to any questions. Provide each member of the class with the summary of your findings.
Unit 2: Managing a business People in business Using financial methods to motivate employees The range of financial methods used to motivate employees includes: • • • time rates piece rates performance-related pay schemes profit-sharing schemes share ownership and share options schemes fringe benefits Use your textbooks or other resources available to research the precise meaning of each of these methods and to identify the main advantages and disadvantages of each.
Unit 2: Managing a business People in business Money as a motivator can lead to problems for both individuals and organisations: • Rewards fluctuate with the performance of the company and this can cause uncertainty in financial planning if employees come to depend upon rewards. • If financial incentives are high and based on quantity, quality may be sacrificed, with serious long-term consequences for organisations. • If rewards are based on individual performance, it can cause conflict between employees. Money is obviously important, but most evidence suggests that it is not a major motivator in the long term. Discuss why this is likely to be the case.
Unit 2: Managing a business People in business Non-financial methods of motivating employees job enlargement: increasing the scope of a job, either by job enrichment or by job rotation. job enrichment: jobs are expanded vertically (known as vertical extension) by giving the worker more responsibility job rotation: jobs are expanded horizontally (known as horizontal extension) by giving the worker more tasks, but at the same level of responsibility. Working in groups, research the above non-financial methods of motivating employees, identifying the features of each method and their advantages and disadvantages for business and for employees.
Unit 2: Managing a business People in business Empowering employees empowerment: giving employees the means by which they can exercise power over their working lives. Empowerment can be achieved through informal systems or through the more formal system of autonomous work groups. It involves: • recognising that workers are capable of doing more • making workers feel trusted and confident to carry out jobs and make decisions without supervision • recognising workers’ achievements • creating an environment where workers wish to contribute and to be involved What are the likely benefits for a firm of empowering its workers? What are the possible drawbacks?
Unit 2: Managing a business People in business Working in teams teamworking: a system where production is organised into large units of work and a group of employees work together in order to meet shared objectives. Working in groups, identify the benefits of working in teams for the individual involved and for the business. Share your ideas with the rest of the class.
Unit 2: Managing a business People in business Motivation and work Working in groups and reflecting on your study of motivation, discuss the following questions: • Will increased job satisfaction always lead to increased productivity? • Is it only factors at work that motivate individuals in a work context? Summarise your ideas on each question and share them with the rest of the class.
Unit 2: Managing a business People in business Organisational structure and motivation Organisational structure can have a significant influence on the motivational techniques available to managers and on the level of motivation of employees. Working in groups, taking each of the following aspects of organisational structure, try to determine how each might influence motivation. Share your ideas with the rest of the class. • levels of hierarchy and spans of control • lines of accountability • delegation and empowerment • communication
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