People in business

A business is only as good as its people. This chapter covers how businesses motivate, organise, recruit, train and communicate with their workforce.

2.1 Motivating employees

Why a well-motivated workforce matters

Motivation is the desire to work hard. People work for money, but also for security, satisfaction, status, friendship and achievement.

Benefits of a well-motivated workforce:

• higher labour productivity (more output per worker)
• lower absenteeism (fewer days missed)
• lower labour turnover (fewer staff leaving, so lower recruitment and training costs)
• better quality and customer service

Theories of motivation

Maslow's hierarchy of needs (a pyramid, from bottom to top):

Lower needs must be met before people are motivated by higher ones.

Taylor (scientific management): workers are motivated mainly by money. Break work into simple tasks, supervise closely and pay by output (piece rate). Limitation: ignores other needs; work may be boring.

Herzberg (two-factor theory):

• Hygiene factors (pay, conditions, security, company policy): if poor they cause dissatisfaction, but improving them does not by itself motivate.
• Motivators (achievement, recognition, responsibility, interesting work, promotion): these actually motivate.

Methods of motivation

2.2 Organisation and management

Organisation charts

An organisation chart shows the structure of a business: who is in charge of whom.

• Levels of hierarchy: the layers of management from top to bottom.
• Span of control: the number of workers a manager is directly responsible for.
• Chain of command: the route through which instructions pass from the top down (and messages up).

Tall structure: many levels, narrow span of control: close supervision and clear promotion path, but slow communication and high costs. Short (flat) structure: few levels, wide span: faster communication and lower cost, but managers may be overloaded and there are fewer promotion steps.

Roles: directors decide the business's direction and policy; managers plan, organise and control departments; supervisors oversee day-to-day work; other employees carry out tasks. They are linked: directors set objectives, managers turn them into plans, supervisors direct the staff.

The role of management

Fayol's functions: planning, organising, coordinating, commanding and controlling.

Delegation means passing authority and tasks to a subordinate. It frees managers for important work, develops and motivates staff and speeds decisions. Limitation: the manager may lose control and, if the worker is not capable, mistakes occur. There is a balance between trust and control.

Leadership styles

Autocratic: quick decisions but demotivating. Democratic: good motivation but slower. Laissez-faire: creative, but can lack direction.

Trade unions

A trade union is an organisation of workers that protects their interests: negotiating pay and conditions with the employer (collective bargaining) and supporting members in disputes.

• Benefits to employees: stronger bargaining power, support, safer conditions.
• Effects on employers: may bring higher wages and costs, possible strikes, but better communication and happier workers.

2.3 Recruitment, selection and training of employees

Recruitment and selection

• Recruitment: attracting a pool of applicants. Selection: choosing the best.
• Internal recruitment: filling the job with an existing employee (cheaper, quicker, motivating; but no new ideas, and leaves another vacancy). External recruitment: from outside the business (wider choice, new ideas, but costly and slower).

Stages:

1. Identify the vacancy and write the job description (the tasks) and person specification (the skills and qualities).
2. Advertise (website, newspaper, recruitment agency, job centre).
3. Applicants send a CV and application form; shortlist.
4. Interview (and perhaps tests or references).
5. Select and appoint, with a contract.

Recommend and justify who to employ: compare candidates' skills, qualifications and experience with the job, and consider cost.

Training

Importance: improves skills and productivity, raises quality, motivates, helps staff adapt to new technology; for employees it brings promotion and security. Cost and the risk that trained staff leave are drawbacks.

Reducing the workforce

• Dismissal: an employer ends a contract because of the employee's behaviour or poor performance (stealing, constant lateness).
• Redundancy: a job no longer exists, through no fault of the employee.

Why downsizing may be necessary: automation (machines replace workers), reduced demand, closing a branch, a merger, or the need to cut costs.

Which to make redundant: consider skills needed, performance, length of service, and the cost of redundancy payments, as well as the law.

Legal controls over employment

Laws protect employees and affect employers: employment contracts, unfair dismissal, discrimination (by sex, race, religion or disability), health and safety, minimum wage. Employees are protected and safer; employers face higher costs and more administration, but legal compliance can improve motivation and reputation.

2.4 Internal and external communication

Why effective communication matters

Communication is the passing of information between people. Internal is within the business (managers to staff); external is with customers, suppliers and others. Effective communication gives clear instructions and avoids mistakes, improves motivation, speeds decisions and builds customer relationships.

Methods

Recommend and justify: match the method to the message, audience, cost and urgency (a confidential matter suits face-to-face; a message to 500 staff suits email).

Barriers to communication

How they arise: jargon, language differences, too long a chain of command (messages get distorted or lost), poor listening, noise or distance, faulty equipment, information overload, lack of trust.

Problems of ineffective communication: mistakes, wasted time and money, demotivated staff, lost customers.

How to reduce or remove barriers: use simple, clear language, shorten the chain of command, use feedback to check understanding, train staff, invest in better IT, and choose the right method.