Section 2: People in

business
Chapter 6
Why People Work?
The main reason why most people work is because they need to earn money to buy food
and the basic necessities for life. But some work is voluntary and does not yield any money.
Motivation is the reason why employees want to work hard and work effectively for the
business.

Why work?

 Money to pay for necessities and some luxuries.

 Security to know that your job and pay are safe, (you’re not likely to lose your job.
 Affiliation (Social needs) to feel part of a group or organization, meeting people,
making friends at work.
 Self-importance (Esteem Needs) to feel important.
 Job Satisfaction to gain the enjoyment derived from feeling that you have done a
good job.

Benefits of a well-motivated workforce

A well-motivated workforce gives benefits to a business, including:

 high output per worker – which helps to keep costs low and increase profits
 willingness to accept change
 two-way communication with management, e.g. suggestions for improving quality
 low labour turnover – a loyal workforce
 low rates of absenteeism
 low rates of strike action.

1|Page
 Motivation Theories
 F. W. Taylor: Taylor based his ideas on the assumption that workers were motivated
by personal gains, mainly money and that increasing pay would increase productivity
(amount of output produced). Therefore he proposed the piece-rate system, whereby
workers get paid for the number of output they produce. So in order, to gain more money,
workers would produce more. He also suggested a scientific management in
production organisation, to break down labour (essentially division of labour) to maximise
output
However, this theory is not entirely true. There are various other motivators in the modern
workplace, some even more important than money. The piece rate system is not very
practical in situations where output cannot be measured (service industries) and also will
lead to (high) output that doesn’t guarantee high quality.

 Maslow’s Hierarchy: Abraham Maslow’s hierarchy of needs shows

that employees are motivated by each level of the hierarchy going from bottom to top.
Mangers can identify which level their workers are on and then take the necessary action to
advance them onto the next level.

One limitation of this theory is that it doesn’t apply to every worker. For some employees,
for example, social needs aren’t important but they would be motivated by recognition and
appreciation for their work from seniors.

 Herzberg’s Two-Factor Theory: Frederick Herzberg’s two-factor theory,

wherein he states that people have two sets of needs:
Basic animal needs called ‘hygiene factors’:

2|Page
  status
 security
 work conditions
 company policies and administration
 relationship with superiors
 relationship with subordinates
 salary

Needs that allow the human being to grow psychologically, called the ‘motivators’:

 achievement
 recognition
 personal growth/development
 promotion
 work itself
According to Herzberg, the hygiene factors need to be satisfied, if not they will act as de-
motivators to the workers. However hygiene factors don’t act as motivators as their effect
quickly wear off. Motivators will truly motivate workers to work more effectively.

Motivating Factors
Financial Motivators
 Wages: often paid weekly. They can be calculated in two ways:
 Time-Rate: pay based on the number of hours worked. Although output may
increase, it doesn’t mean that workers will work sincerely use the time to produce
more- they may simply waste time on very few output since their pay is based only
on how long they work. The productive and unproductive worker will get paid the
same amount, irrespective of their output.
 Piece-Rate: pay based on the no. of output produced. Same as time-rate, this
doesn’t ensure that quality output is produced. Thus, efficient workers may feel
demotivated as they’re getting the same pay as inefficient workers, despite their
efficiency.
 Salary: paid monthly or annually.
 A salary is calculated as an amount of money per year for the job performed by the
worker. It is divided into 12 monthly amounts. This means it’s easy to calculate salary
costs for the business.
 Commission: paid to salesperson, based on a percentage of sales they’ve made. The higher
the sales, the more the pay. Although this will encourage salespersons to sell more products
and increase profits, it can be very stressful for them because no sales made, means no pay
at all.
 Bonus: additional amount paid to workers for good work
 Performance-related pay: paid based on performance. An appraisal (assessing the
effectiveness of an employee by senior management through interviews, observations,

3|Page
 comments from colleagues etc.) is used to measure this performance and a pay is given
based on this.
 Profit-sharing: a scheme whereby a proportion of the company’s profits is distributed to
workers. Workers will be motivated to work better so that a higher profit is made.
 Share ownership: shares in the firm are given to employees so that they can become part
owners of the company. This will increase employees’ loyalty to the company, as they feel a
sense of belonging.

Non-Financial Motivators
 Job Satisfaction: the enjoyment derived from the feeling that you’ve done a good job.
Employees have different ideas about what motivates them- it could be pay, promotional
opportunities, team involvement, relationship with superiors, level of responsibility, chances
for training, the working hours, status of the job etc. Responsibility, recognition and
satisfaction are in particular very important.
So, how can companies ensure that they’re workers are satisfied with the job, other than
the motivators mentioned above?

 Job Rotation: involves workers swapping around jobs and doing each specific task for only
a limited time and then changing round again. This increases the variety in the work itself
and will also make it easier for managers to move around workers to do other jobs if
somebody is ill or absent. The tasks themselves are not made more interesting, but the
switching of tasks may avoid boredom among workers. This is very common in factories
with a huge production line where workers will move from retrieving products from the
machine to labelling the products to packing the products to putting the products into huge
cartons.
 Job Enlargement: where extra tasks of similar level of work are added to a worker’s job
description. These extra tasks will not add greater responsibility or work for the employee,
but make work more interesting. E.g.: a worker hired to stock shelves will now, as a result of
job enlargement, arrange stock on shelves, label stock, fetch stock etc.
 Job Enrichment: involves adding tasks that require more skill and responsibility to a job.
This gives employees a sense of trust from senior management and motivates them to carry
out the extra tasks effectively. Some additional training may also be given to the employee
to do so. E.g.: a receptionist employed to welcome customers will now, as a result of job
enrichment, deal with telephone enquiries, word-process letters etc.
 Team-working: a group of workers is given responsibility for a particular process, product or
development. They can decide as a team how to organize and carry out the tasks. The
workers take part in decision making and take responsibility for the process. It gives them
more control over their work and thus a sense of commitment, increasing job satisfaction.
Working as a group will also add to morale, fulfil social needs and lead to job satisfaction.
 Opportunities for training: providing training will make workers feel that their work is being
valued. Training also provides them opportunities for personal growth and development,
thereby attaining job satisfaction
 Opportunities of promotion: providing opportunities for promotion will get workers to
work more efficiently and fill them with a sense of self-actualisation and job satisfaction

4|Page
 Chapter 7

Organizational Structure

Organizational structure refers to the levels of management and division of responsibilities

within a business. They can be represented on organizational charts (left).

Advantages:
 All employees are aware of which communication channel is used to reach them with
messages
 Everyone knows their position in the business. They know who they are accountable to and
who they are accountable for
 It shows the links and relationship between the different departments
 Gives everyone a sense of belonging as they appear on the organizational chart

Chains of command and span of control

The span of control is the number of subordinates working directly under a manager in the
organizational structure. In the above figure, the managing director’s span of control is four.

5|Page
 The marketing director’s span of control is the number of marketing managers working
under him (it is not specified how many, in the figure).
The chain of command is the structure of an organization that allows instructions to be
passed on from senior managers to lower levels of management. In the above figure, there
is a short chain of command since there are only four levels of management shown.
Now, if you look closely, there is a link between the span of control and chain of
command. The wider the span of control the shorter the chain of command since more
people will appear horizontally aligned on the chart than vertically. A short span of control
often leads to long chain of command. (If you don’t understand, try visualizing it on an
organizational chart).

Advantages of a short chain of command (these are also the disadvantages of

a long chain of command):
 Communication is quicker and more accurate
 Top managers are less remote from lower employees, so employees will be more
motivated and top managers can always stay in touch with the employees
 Spans of control will be wider; this means managers have more people to control. This is
beneficial because it will encourage them to delegate responsibility (give work to
subordinates) and so the subordinates will be more motivated and feel trusted. However
there is the risk that managers may lose control over the tasks.
 Line Managers have authority over people directly below them in the organizational
structure. Traditional marketing/operations/sales managers are good examples.
 Staff Managers are specialists who provide support, information and assistance to
line managers. The IT department manager in most organisations, act as staff
managers.

Management
So, what role do manager really have in an organization? Here are their five primary roles:

 Planning: setting aims and targets for the organisations/department to achieve. It will give
the department and its employees a clear sense of purpose and direction. Managers should
also plan for resources required to achieve these targets – the number of people required,
the finance needed etc.
 Organizing: managers should then organize the resources. This will include allocating
responsibilities to employees, possibly delegating.
 Coordinating: managers should ensure that each department is coordinating with one
another to achieve the organization’s aims. This will involve effective communication
between departments and managers and decision making. For example, the sales
department will need to tell the operations dept. how much they should produce in order to
reach the target sales level. The operations dept. will in turn tell the finance dept. how much
money they need for production of those goods. They need to come together regularly and
make decisions that will help achieve each department’s aims as well as the organizations.

6|Page
 Commanding: managers need to guide, lead and supervise their employees in the tasks
they do and make sure they are keeping to their deadlines and achieving targets.
 Controlling: managers must try to assess and evaluate the performance of each of their
employees. If some employees fail to achieve their target, the manager must see why it has
occurred and what he can do to correct it- maybe some training will be required or better
equipment.

Delegation is giving a subordinate the authority to perform some tasks.

Advantages to managers:
 managers cannot do all work by themselves
 managers can measure the efficiency and effectiveness of their subordinates’ work
However, managers may be reluctant to delegate as they may lose their control over the
work.

Advantages to subordinates:
 the work becomes more interesting and rewarding- increased job satisfaction
 employees feel more important and feel trusted– increasing loyalty to firm
 Can act as a method of training and opportunities for promotions, if they do a good job.

Leadership Styles
Leadership styles refer to the different approaches used when dealing with people when in
a position of authority. There are mainly three styles you need to learn: the autocratic,
democratic and laissez-faire styles.
 Autocratic style is where the managers expect to be in charge of the business
and have their orders followed. They do all the decision-making, not involving
employees at all. Communication is thus, mainly one way- from top to bottom. This
is standard in police and armed forces organizations.
 Democratic style is where managers involve employees in the decision-
making and communication is two-way from top to bottom as well as bottom to top.
Information about future plans is openly communicated and discussed with
employees and a final decision is made by the manager.
 Laissez-faire (French phrase for ‘leave to do) style makes the broad objectives of
the business known to employees and leaves them to do their own decision-
making and organize tasks. Communication is rather difficult since a clear direction is
not given. The manger has a very limited role to play.

7|Page
 Trade Unions
A trade union is a group of workers who have joined together to ensure their interest are
protected. They negotiate with the employer (firm) for better conditions and treatment and
can threaten to take industrial action if their requests are denied. Industrial action can
include overtime ban (refusing to work overtime), go slow (working at the slowest speed as
is required by the employment contract), strike (refusing to work at all and protesting
instead) etc. Trade unions can also seek to put forward their views to the media and
influence government decisions relating to employment.

Benefits to workers of joining a trade union:

 strength in number- a sense of belonging and unity
 Improved conditions of employment, for example, better pay, holidays, hours of work etc.
 improved working conditions, for example, health and safety
 improved benefits for workers who are not working, because they’re sick, retired or made
redundant (dismissed not because of any fault of their own)
 financial support if a member thinks he/she has been unfairly dismissed or treated
 Benefits that have been negotiated for union member such as discounts on firm’s products,
provision of health services.

8|Page
 Disadvantages to workers of joining a trade union:

 costs money to be member- a membership fee will be required

 May be asked to take industrial action even if they don’t agree with the union- they may not
get paid during a strike, for example.

9|Page
 Chapter 8
The Work of the human resources department
The Role of the H.R. (Human Resource) Department
 Recruitment and selection: attracting and selecting the best candidates for job posts
 Wages and salaries: set wages and salaries that attract and retain employees as well as
motivate them
 Industrial relations: there must be effective communication between management and
workforce to solve complaints and disputes as well as discussing ideas and suggestions
 Training programmes: give employees training to increase their productivity and efficiency
 Health and safety: all laws on health and safety conditions in the workplace should be
adhered to
 Redundancy and dismissal: the managers should dismiss any unsatisfactory/misbehaving
employees and make them redundant if they are no longer needed by the business.

Recruitment
Job Analysis, Description and Specification
Recruitment is the process from identifying that the business needs to employ someone up
to the point where applications have arrived at the business.

A vacancy arises when an employee resigns from a job or is dismissed by the management.
When a vacancy arises, a job analysis has to be prepared. A job analysis identifies and
records the tasks and responsibilities relating to the job. It will tell the managers what the
job post is for.

Then a job description is prepared that outlines the responsibilities and duties to be
carried out by someone employed to do the job. It will have information about the
conditions of employment (salary, working hours, and pension scheme), training offered,
opportunities for promotion etc. This is given to all prospective candidates so they know

10 | P a g e
 what exactly they will be required and expected to do.
Once this has been done, the H.R. department will draw up a job specification, a document
that outlines the requirements, qualifications, expertise, skills, physical/personal
characteristics etc. required by an employee to be able to take up the job.

Advertising the vacancy

Internal recruitment is when a vacancy is filled by an existing employee of the business.

Advantages:
 Saves time and money- no need for advertising and interviewing
 Person already known to business
 Person knows business’ ways of working
 Motivating for other employees to see their colleagues being promoted- urging them to
work hard
Disadvantages:
 No new skills and experience coming into the business
 Jealousy among workers

External recruitment is when a vacancy is filled by someone who is not an existing

employee and will be new to the business. External recruitment needs to be advertised,
unlike internal recruitment. This can be done in local/national newspapers, specialist
magazines and journals, job centres run by the government (where job vacancies are posted
and given to interested people; usually for unskilled or semi-skilled jobs) or
even recruitment agencies (who will recruit and send along candidates to the company
when they request it).

When advertising a job, the business needs to decide what should be included in the
advertisement, where it should be advertised, how much it will cost and whether it will be
cost-effective.

When a person is interested in a job, they should apply for it by sending it in a curriculum
vitae (CV) or resume, this will detail the person’s qualifications, experience, qualities and
skills. The business will use these to see which candidates match the job specification. It will
also include statements of why the candidate wants the job and why he/she feels they
would be suitable for the job.

Selection
Applicants who are shortlisted will be interviewed by the H.R. manager. They will also call
up the referee provided by the applicant (a referee could be the previous employer or
colleagues who can give a confidential opinion about the applicant’s reliability, honesty and
suitability for the job). Interviews will allow the manager to assess:
 the applicant’s ability to do the job
 personal qualities of the applicant
 character and personality of applicant

11 | P a g e
 In addition to interviews, firms can conduct certain tests to select the best candidate. This
could include skills tests (ability to do the job), aptitude tests (candidate’s potential to gain
additional skills), personality tests (what kind of a personality the candidate has- will it be
suitable for the job?), group situation tests (how they manage and work in teams) etc.
When a successful candidate has been selected the others must be sent a letter of rejection.

The contract of employment: a legal agreement between the employer and the
employee listing the rights and responsibilities of workers. It will include:
 the name of employer and employee
 job title
 date when employment will begin
 hours to work
 rate of pay and other benefits
 when payment is made
 holiday entitlement
 the amount of notice to be given to terminate the employment that the employer or
employee must give to end the employment etc.
Employment contracts can be part-time or full-time. Part-time employment is often
considered to be between 1 and 30-35 hours a week whereas full-time employment will
usually work 35 hours or more a week.

Advantages to employer of part-time employment (disadvantages of full-time employment

to employer):

 more flexible hours of work

 easier to ask employees just to work at busy times
 easier to extend business opening/operating hours by working evenings or at weekends
 works lesser hours so employee is willing to accept lower pay
 Less expensive than employing and paying full-time workers.

Disadvantages to employer of part-time employment (advantages of full-time employment

to employers):

 less likely to be trained because the workers see the job as temporary
 takes longer to recruit two part-time workers than one full-time worker
 can be less committed to the business/ more likely to leave and go get another job
 less likely to be promoted because they will not have gained the skills and experience as full-
time employees
 More difficult to communicate with part-time workers when they are not in work- all work
at different times.

Training
12 | P a g e
 Training is important to a business as it will improve the worker’s skills and knowledge and
help the business be more efficient and productive, especially when new processes and
products are introduced. It will improve the workers’ chances at getting promoted and raise
their morale.
The three types of training are:

 Induction training: an introduction given to a new employee, explaining the firm’s

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

 Helps new employees to settle into their job quickly

 May be a legal requirement to give health and safety training before the start of
work
 Less likely to make mistakes

Disadvantages:

 Time-consuming
 Wages still have to be paid during training, even though they aren’t working
 Delays the state of the employee starting the job

 On-the-job training: occurs by watching a more experienced worker doing the job
Advantages:

 It ensures there is some production from worker whilst they are training
 It usually costs less than off-the-job training
 It is training to the specific needs of the business

Disadvantages:

 The trainer will lose some production time as they are taking some time to teach the
new employee
 The trainer may have bad habits that can be passed onto the trainee
 It may not necessarily be recognised training qualifications outside the business

 Off-the-job training: involves being trained away from the workplace, usually by
specialist trainers
Advantages:

 A broad range of skills can be taught using these techniques

 Employees may be taught a variety of skills and they may become multi-skilled that
can allow them to do various jobs in the company when the need arises.

Disadvantages:

13 | P a g e
  Costs are high
 It means wages are paid but no work is being done by the worker
 The additional qualifications means it is easier for the employee to leave and find
another job

Workforce Planning
Workforce planning: the establishing of the workforce needed by the business for the
foreseeable future in terms of the number and skills of employees required.
They may have to downsize (reduce the no. of employees) the workforce because of:

 Introduction of automation
 Falling demand for their products
 Factory/shop/office closure
 Relocating factory abroad
 A business has merged or been taken over and some jobs are no longer needed

They can downsize the workforce in two ways:

 Dismissal: where a worker is told to leave their job because their work or behaviour is
unsatisfactory.
 Redundancy: when an employee is no longer needed and so loses their work, through not
due to any fault of theirs. They may be given some money as compensation for the
redundancy.
Worker could also resign (they are leaving because they have found another job) and retire
(they are getting old and want to stop working).

Legal Controls over Employment Issues

There are a lot of government laws that affect equal employment opportunities. These laws
require businesses to treat their employees equally in the workplace and when being
recruited and selected- there should be no discrimination based on age, gender, religion,
race etc.

Employees are protected:

 against unfair discrimination

 Health and safety at work (protection from dangerous machinery, safety clothing and
equipment, hygiene conditions, medical aid.)
 against unfair dismissal
 Wage protection (through the contract of employment since it will have listed the pay and
conditions). Many countries have a legal minimum wage– the minimum wage an employer

14 | P a g e
has to pay its employee. This avoids employers from exploiting its employees, and
encourages more people to find work, but since costs are rising for the business, they may
make many workers redundant- unemployment will rise.

An industrial tribunal is a legal meeting which considers workers’ complaints of unfair

dismissal or discrimination at work. This will hear both sides of the case and may give the
worker compensation if the dismissal was unfair.

Chapter 9

15 | P a g e
Effective Communication
Communication is the transferring of a message from the sender to the receiver, who
understands the message. A message is the information or the instructions being passed by
the sender to the receiver.

Internal communication is between two members of the same organisations. Example:

communication between departments, notices and circulars to workers, signboards and
labels inside factories and offices etc.

External communication is between the organisation and other organisations or

individuals. Example: orders of goods to suppliers, advertising of products, sending
customers messages about delivery, offers etc.

Effective communication involves:

 A transmitter/sender of the message
 A medium of communication e.g. letter, telephone conversation, text message
 A receiver of the message
 A feedback/response from the receiver to confirm that the message has benn
received and acknowledged.

One-way communication involves a message which does not require a feedback.

Example: signs saying ‘no smoking’ or an instruction saying ‘deliver these goods to a
customer’
Two-way communication is when the receiver gives a response to the message
received. Example: a letter from one manager to another about an important matter that
needs to be discussed. A two-way communication ensures that the person receiving the
message understands it and has acted up on it. It also makes the receiver feel more a part of
the process- could be a way of motivating employees.

- Downward communication: messages from managers to subordinates i.e. from top

to bottom of an organization structure.
- Upward communication: messages/feedback from subordinates to managers i.e.
from bottom to top of an organization structure
- Horizontal communication occurs between people on the same level of an
organization structure.

Communication Methods
Verbal methods (telephone conversation, face-to-face conversation, video conferencing,
meetings)

16 | P a g e
 Advantages:
 Quick and efficient
 There is an opportunity for immediate feedback
 Speaker can reinforce the message- change his tone, body language etc. to influence the
listeners.

Disadvantages:
 Can take long if there is feedback and therefore, discussions
 In a meeting, it cannot be guaranteed that everybody is listening or has understood the
message
 No written record of the message can be kept for later reference.

Written methods (letters, memos, text-messages, reports, e-mail, social media, faxes,
notices, signboards)

Advantages:
 There is evidence of the message for later reference.
 Can include details
 Can be copied and sent to many people, especially with e-mail
 E-mail and fax is quick and cheap

Disadvantages:
 Direct feedback may not always be possible
 Cannot ensure that message has been received and/or acknowledged
 Language could be difficult to understand.
 Long messages may cause disinterest in receivers
 No opportunity for body language to be used to reinforce messages

Visual Methods (diagrams, charts, videos, presentations, photographs, cartoons, posters)

Advantages:
 Can present information in an appealing and attractive way
 Can be used along with written material (reports with diagrams and charts)

Disadvantages:
 No feedback
 May not be understood/ interpreted properly

Factors that affect the choice of an appropriate communication

method:

17 | P a g e
 Speed: if the receiver has to get the information quickly, then a telephone call or text
message has to be sent. If speed isn’t important, a letter or e-mail will be more appropriate.
 Cost: if the company wishes to keep costs down, it may choose to use letters or face-to-face
meetings as a medium of communication. Otherwise, telephone, posters etc. will be used.
 Message details: if the message is very detailed, then written and visual methods will be
used.
 Leadership style: a democratic style would use two-way communication methods such as
verbal mediums. An autocratic one would use notices and announcements.
 The receiver: if there is only receiver, then a personal face-to-face or telephone call will be
more apt. If all the staff is to be sent a message, a notice or e-mail will be sent.
 Importance of a written record: if the message is one that needs to have a written record
like a legal document or receipts of new customer orders, then written methods will be
used.
 Importance of feedback: if feedback is important, like for a quick query, then a direct verbal
or written method will have to be used.
Formal communication is when messages are sent through established channels using
professional language. E.g. reports, emails, memos, official meetings.
Informal communication is when information is sent and received casually with the use of
everyday language. E.g. staff briefings. Managers can sometimes use the ‘grapevine’
(informal communication among employees- usually where rumours and gossips spread!) to
test out the reactions to new ideas (for example, a new shift system at a factory) before
officially deciding whether or not to make it official.

Communication Barriers
Communication barriers are factors that stop effective communication of messages.

18 | P a g e
19 | P a g e