A-levels Business Studies - Unit 3, Notes

Unit 3: PEOPLE IN ORGANIZATIONS 13: Motivation in Theory • • • •

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The people in a business, or the workforce is one the most important resources any organization has. Productivity: The rate of output compared to the units of Input. Labor Productivity: The output of a worker during a given period of time. Factors that have improved labor productivity; ○ Better machinery ○ Better Training ○ Improved motivation levels ○ More effective management F.W. Taylor and SCEINTIFIC MANAGEMENT; Taylor theory gives the following steps to improve productivity: ○ Select workers to perform a task ○ Observe them and note key elements of the task ○ Record the time taken ○ Identify the quickest method ○ Train all workers to follow that method ○ Supervise them keeping time and making sure that the task is being carried out within the allocated time ○ Pay in basis of result Method Study- Observe and then establish the best method of doing a job. Elton Mayo and the Human Relations Theory (HAWTHORN EFFECT); management and workforce communication. The results of were: ○ Financial incentives have little or no effect on productivity ○ When management consult the workforce and take their interests into consideration then motivation is improved ○ Working in teams can improve productivity ○ When some control is handed over to the workers, it is very motivating for the employees ○ Informal leaders in group should be supported, as they can help to achieve targets Maslow’s HIERARCHY OF HUMAN NEEDS; Maslow suggested that the different levels of employees have different needs. And in order to motivate them they have to be identified and fulfilled; ○ Level 1: Physical Needs; Income to be high enough to meet the essential needs ○ Level 2: Safety Needs; Job security and health and personal safety concerns are taken care of ○ Level 3: Social Needs; Working in teams and groups, feeling part of the firm

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○ Level 4: Esteem Needs; Recognition for the work done, status etc. ○ Level 5: self-actualization: Aiming to reach one’s full potential. Herzberg and THE TWO FACTOR THEORY: he concluded the factors of satisfaction and dissatisfaction of employees. ○ Employees are satisfied by;  Achievement  Recognition  The work itself [how interesting it is and how well suited the worker is]  Responsibility  Advancement ○ Employees are dissatisfied by;  Company policies  Administration  Supervision  Salary  Relations with other workers  Working conditions McGregor’s THEORY X and THEORY Y (Chapter 15) ○ There are two approaches to management;  Theory X: the management believes that the workers are not interested in the work and lack initiative.  Theory Y: the management treats the workers as they enjoy their work and that they are creative and that they will do a good job if given the responsibility of a task. ○ In this theory it has been identified that there are not two kinds of workers but the workers will act accordingly to the theory adopted.

14: Motivation in Practice •

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Financial Rewards: ○ Hourly or Time wage rate ○ Piece Rate ○ Salary ○ Commission ○ Performance related pay ○ Profit Sharing ○ Fringe Benefits Non-Financial Methods of Motivation ○ Job Rotation ○ Job Enlargement; an attempt to increase the scope of a job. ○ Job Enrichment ○ Team Working

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Quality Circles; voluntary group of workers who meet regularly to discus and to try and improve the quality. These are informal meetings and these workers might be paid a bonus it they succeed in improving the quality. Target Setting Delegation and Empowerment

15: Management Roles and Leadership Styles • •

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Mangers get things done – not by doing all the work themselves but by working with and through other people. The Role of Management; ○ Setting Objectives and Planning. ○ Organizing Resources to meet the set objectives ○ Communicating with and motivating staff ○ Coordinating activities ○ Measuring and Controlling the Performance Leadership Styles: ○ Autocratic: Decisions are made centrally. ○ Democratic: Opinions of the workforce are taken in consideration in making decisions ○ Paternalistic: Mangers make decisions that they think are good for the staff ○ Laissez-Faire: Mangers hand down nearly all the authority t the workers Informal Leadership: ○ There are always people who have respect of the people and they are in a position to influence and motivate the others. ○ These people are said to be in a position of informal leadership. ○ If these people are given the task of seeing a job through then, they will have the whole workforce behind them with high levels of motivation, not only for the staff but also for these informal leaders. ○ This will improve the management-worker relations and is a better option than nominating a person to be in-charge.

16: The Structure of Organizations • •

The structure of an organization is very important as it defines who is answerable to whom and where the authority lies. Types of Organizational Structure: ○ Hierarchical; this is the traditional structure. There are levels of authority and there are people in every level, usually less in higher levels and more in lower levels. ○ Matrix; this type of structure cuts across the departmental lines of a hierarchal structure. It creates project teams with people from every department.  Advantages: • Good communication between departments • The focus will not be on only one department • Cross of ideas between specialist people

Disadvantages • There may be some differences between the workers due to the cutting of the hierarchal lines • This approach goes again the bureaucratic control and senior managers may resist this approach. • This can cause a conflict of departmental conflicts Principles of Organizational Structure ○ Levels of Hierarchy: each level represents rank of staff. ○ Chain of Command: This is the route through which the authority is passed down an organization. ○ Span of control: this refers to the number of subordinates reporting directly to a manger ○ Delegation: It means passing down the authority to perform tasks and to take decisions from the mangers to the workers ○ Empowerment: this approach not only hands the responsibility of the work down but gives full liberty on how the work is done tot eh worker ○ Centralization and Decentralization: These two principles are linked to delegation. If delegation is being practiced then a decentralized system is in practice and if not then it is a centralized system. ○ The greater the number of levels of hierarchy, the longer the chain of command. This can cause problems in;  Efficient communication  Smaller spans of control will lead to a limited scope for delegation  Motivation levels of junior staff will be low as they will feel detached  Business costs will increase as ‘middle managers’ are expensive to employ. ○ De-layering: To overcome the problems associated with tall organizational structures, companies will look to de-layer; get rid of the unnecessary layers present in a hierarchal structure. This may also be done to reduce cost to survive an economic recession. ○ Accountability, Authority and Responsibility: This is essential to understand specially if delegation is being practiced. Delegation gives the authority to subordinates to perform certain task. However, if these tasks are not done properly then, the manager is accountable, as the task was ultimately his responsibility. ○ Line and Staff relationships  Line managers: mangers that are handed authority over others as the lie at a higher position.  Staff Managers: they are experts and are employed to give advice and they do not have the authority that a line manager 

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has, but they are specialists so they help in working the company. Factors affecting organizational Structures ○ Business Size: A small business has little or no use of an organizational structure. But as the business grows, there are a lot more things to take care of and it is good practice to make a formal organizational structure. ○ Style of Management:  A manager running a business by theory X would most probably have small spans of controls in the organization, resulting in a tall structure.  Whereas a manger who works by theory Y, will prefer the matrix structure thus reducing a lot of the levels of hierarchy. ○ Economic recessions may cause firms to downsize by de-layering. This will lead to levels of hierarchy being removed altogether. ○ Adopting new technology can also work towards some jobs being made redundant and so levels of hierarchy disappearing.

17: Communication •

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Importance of Effective Communication: ○ Better Staff Motivation ○ More and Better Ideas will be Generated ○ Higher Seed of Decision ○ Speed of Reaction to Changing Conditions ○ Correct Communication will result in the desired Reaction from the Receivers ○ Better Coordination Communication Media ○ Oral ○ Written ○ Electronic ○ Visual Barriers to Effective Communication ○ Failure in One of the Stages of Communication  The wrong medium might have been chosen  The message was not clear enough  The message was full of jargon and so was not understood  Too much information being presented  The channel of communication might be too long – down a long chain of command ○ Poor Attitudes of the Sender or the Receiver  If either one of the two do not trust the other

Low levels of motivation Intermediaries Proper effort is not made to get the message across by the sender ○ Physical Reasons  Noisy environments  Geographical distances Reducing communication barriers ○ Clear message ○ Short communication channel ○ Feedback to be made a necessary part of the communication ○ Establish trust between the sender and the receiver ○ Overcome physical conditions Types of Communication ○ Formal Communication Networks  The Chain Network   

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The Vertical Network

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The Wheel Network

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The Circle

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The Integrated or Connected Network

Informal Communication: These communication networks are known as ‘grapevines’. There are productive uses of this system, for one it help to maintain good motivation levels. They are the result of the workers talking to each other or mailing one another. It can often lead to rumors and exaggerations. Can sometimes be counterproductive.

18: Human Resource Management •

The purpose and the role of the human resource management department is to recruit and to train people and utilize the people in an organization in the most productive manner.

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The most important job of the HR Department is to provide the business with a workforce of the right number and with the right skills. The Number of staff depends on: ○ Demand ○ Labor Productivity ○ Objectives of the Business [expansion or increase in consumer services etc] ○ Worker’s Rights [working hours] ○ Labor Turnover or absenteeism The Skills of Staff depend on: ○ Technology ○ Business want flexible staff that are multi-skilled Recruiting and Selecting Staff: For this the following steps need to be followed ○ The precise nature of the job needs to be defined ○ \ ○ A person specification should be drawn up ○ Devise an appropriate advertisement ○ A shortlist of applicants needs to be drawn up from the CVs received ○ Interviews conducted ○ Other tests conducted Training, Developing and Appraising Staff ○ Induction Training: For all new recruits ○ On-the job training ○ Off-the-job training Ways to measure workforce performance ○ Labor Productivity ○ Absenteeism Rate ○ Labor Turnover Methods to Improve Employee Performance ○ Appraisal ○ Training ○ Quality Circles ○ Cell Production and Autonomous Work-Groups  Here teams of employees are given multi-skilling training and a chance to take responsibility for a complete section of work.  Good alternative to Flow production. ○ Financial Motivators

19: Further HR Management

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The prime cause of conflict between the staff and the owners is that the owners will always work to reduce costs and this includes cutting on labor costs. Common causes of Management – Labor Conflicts ○ Change –relocation, new technology ○ Working Conditions – hours of work, pensions, health and safety Basic management-labor relations approaches ○ Autocratic – workers are employed for very short contracts and there is little or no job security ○ Collective bargaining – Discussions with Trade Unions about what the workers want ○ Close Coordination between labor and management in the recognition that successful competitive business will ultimately be god for the interests of both the management and the labor Trade Unions ○ Negotiations can take place at  National Level; the union negotiates with a federation (e.g. Engineering Employees federation) about the working condition wages etc for the employees that will be employed for work in that field.  Business Level; a trade union may negotiate with a business with large scale operations for the same conditions and the terms for all their operations  Plant Bargaining; individual or basic team-based bargaining Arbitration ○ Arbitration involves a central organization listening to both sides and then deciding what has to be done ○ Types of arbitration  Binding Arbitration: if both parties agree to accept what the arbitrator suggests then it is a binding arbitration. The arbitrator listens to both sides then given a solution that he thinks suitable.  Pendulum Arbitration: In this the arbitrator can only enforce the solution that is presented by the Union or the Management on the other. Staff Training ○ Advantages  Improving performance of unskilled workers  Raising the skill levels of the whole business, making workers more flexible  Develops the staff to reach their full potential  Improved efficiency and Quality ○ Disadvantages

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Financial Cost Costs of Staff tied up in training and not being available to produce fir the firm The Trained staff may leave so there is a high risk of the investment not paying off