Business Management IB Notes

Business Management IB Notes: Topic 2: Human Resource Management: What is human resource management?  The human resource management function of a business involves all activities involved in managing the workforce  The roles of HR include attracting, selecting, training, assessing,...

Business Management IB Notes: Topic 2: Human Resource Management: What is human resource management?  The human resource management function of a business involves all activities involved in managing the workforce  The roles of HR include attracting, selecting, training, assessing, motivating, rewarding and retaining employees  The main goal is to give the business a competitive advantage by ensuring the workforce is as efficient and productive as possible What is human resource planning?  HR planning (or workforce planning) is the method used by a business to forecast how many and what type of employees are needed now and in the future Workforce planning: 1. Determine the organisations strategic goal 2. Assess current employees 3. Analyse demand for employees 4. Analyse supply for employees 5. Compare the demand and supply data 6. Develop and implement workforce plan Different internal factors affecting workforce planning:  Size  Strategy  Structure  Finance  Motivation  Culture External Factors Impacting HR Planning: 1. Demographic change 2. Immigration 3. Labour Mobility - geographical - occupational - the more mobile workers are higher supply of labour tends to be - old people are less mobile - 4. Flexi-time - a working schedule which allows employees to choose when to start and end their workday, and/or how long to take their break for, within agreed limits set by management - through hr - 9-5 was the standard before - now technology has advanced - especially during covid - teleworking- electrotonically anywhere- home-working 5. Gig economy - short-term working hours - choose their own hours, very flexible, freedom, better work life balance, own boss, limited progression, no job security, no benefits, Change refers to the modification or transformation in the way business is conducted as a response to internal factors or external influences. Change arises when factors that influence the operations of an organisation do not stay the same. It can often be disruptive and unsettling, so the process must be managed carefully.  Examples: new product management, innovation, market development, product redesign, outsourcing, the product life cycle, organisational  restructuring, relocation, external growth, crisis management, a new school uniform Why people resist change in their work:  Self-interest  Low tolerance  Misinformation and/or misunderstandings  Different interpretation of circumstances Change management is the process of planning and implementing changes in an organisation. Motter and Schlesinger devised 6 methods: 1. Education and communication - This approach to change management aims to inform and educate staff about the change beforehand 2. Participation and involvement - This approach links with several motivation theorists, such as Fedrick Herzberg, who argue that employee involvement in decision making can motivate and improve morale amongst the workforce 3. Facilitation and support - This approach to change management is about providing authentic support so that people have the skills and resources they need to cope with change 4. Negotiation and agreement - This is the 'carrot' approach whereby managers use bargaining incentives to remove or limit resistance to change 5. Manipulation and co-option - This approach involves bringing a representative of those resisting change into the change process 6. Explicit and implicit coercion - This is the 'stick' approach to dealing with resistance to change and is typically used as a last resort An organisational structure is the interrelationships and hierarchical arrangements within a business An organisational chart is a diagrammatic representation, showing roles, responsibilities and accountability Key terminology:  Delegation: occurs when a line manager entrusts and empowers a subordinate with authority to successfully complete a particular task, project and role  Span of control: refers to how many workers are directly accountable to a particular line manager  Levels of hierarchy: refers to the number of layers of formal authority.  Chain of command: refers to the formal lines of authority in an organisation  Bureaucracy: refers to administrative systems within an organisation  Centralisation: refers to the situation in organisations where decision- making is predominantly made by a small group of senior managers at the top of the organizational hierarchy  Decentralisation: refers to the situation in organisations where decision- making authority is delegated throughout, rather from a central authoritative group  Delayering: occurs when an organisation removes one or more layers in its hierarchical structure  Matrix Structure: is a flexible organizational structure based on the specific needs of a particular business to meet the changing needs of the organization o Who uses it - larger, multi-project business  o Characteristics:  Grid-like reporting structure, dual leadership  There are both functional teams and divisional or project teams Flat/Horizontal Structure:  Who uses it - typically used by small businesses. Not really suitable for very large companies Tall/ Vertical Structure:  Who uses it: typically used by large and complex organisation By product:  Who uses it: ideal for business that sell many products By function:  Who uses it: potentially businesses with smaller product range By region:  Who uses it: used by businesses with operations in different regions. Larger businesses. Changes in the organisational structure:  Some organisations use flexible structures that are constantly adapting to the internal needs of the organisation, or responding to external forces Project-based structure: Shamrock Structure: Practice Questions: (a) Span of control refers to how many workers are directly accountable to a particular line manager. (b) Management includes:  Senior management o Highest ranking, oversee long term plans and strategies o Responsible for the results of the business  Middle management: o Establish departmental goals and strategies o Responsible for the staff in their department  Supervisory/Junior management: o Monitor the regular and routine day-to-day tasks Key functions of management:  A managers function in an organisation, or their roles and responsibilities, can be identified using the research of French economist Henri Fayol. In his investigation of the management of labour and production, Fayol identified five key functions of management: 1. Coordinating - approaches the task 2. Controlling - the performance and actions of employees 3. Planning - to meet targets and strategies 4. Organising - resources to achieve plans 5. Commanding - subordinates Leadership:  Leadership is about influencing other people to achieve a vision of a goal. Effective leadership is crucial for employee moral and motivation. They can be: o An official/formal leader with authority o An informal leader without an official role but a natural ability to influence others Management and Leadership styles:  Autocratic - is one who authoritative, so centralises decision-making without consulting others or listening to their points of view. Such a leader believes in formal chains of command, where consultation with subordinates in decision-making is non-existent. Autocrats rely on their own ideas, experiences and instincts when making decisions.  Paternalistic - This refers to a leadership style where the manager or leader makes decisions on behalf of his/her team in the belief that these are in the best interest of the workers. A paternalistic leader sees employees as family members, making decisions they believe are in the best interest of the workforce (or family).   Democratic - A democratic leader is one who is willing to delegate authority and consult subordinates in decision-making. This leadership style is characterised by inclusiveness, where all employees are encouraged to share their views and ideas in the decision-making process.  Laissez-faire -  Situational - A leader who is willing and able to change leadership style according to the circumstances being faced uses what is called a situational leadership style Extrinsic Motivation:  Is the behaviour that is driven by satisfaction external to one's self (salary, recognition, approval) Intrinsic Motivation:  Is the behaviour that is driven by satisfaction internal to one's self. It comes from inside you. An employee works at a job for the satisfaction it brings, for the joy of it. Motivation Theories:  Motivation theories have resulted from the highly researched areas of 'why people work'  Many motivation theories focus on the role of managers, co-workers, working environment and the way things are being done in an organisation as motivational factors. Frederick Winslow Taylor: - can be linked to henry ford  Taylor developed his theory as a consultant in a manufacturing plant. He noticed many inefficiencies and through observations and testing recommended in the following: o Hierarchical Structure o Workers should specialise in a small task o Efficient workers receive financial incentives  Taylors scientific management theory purports that to achieve higher productivity, a higher financial reward should be given to more productive workers.  This can be achieved through a differentiated piece rate to motivate workers Abraham Maslow:  Maslow's Hierarchy of Needs purports that only when one level of needs is met is it possible for the next level to be addressed o Level 1: Lower order/deficiency needs - physiological, safety, and social (love and belonging). These needs must be met to prevent dissatisfaction or unhappiness o Level 2: Higher order/growth needs - esteem and self-actualisation. Meeting these needs help to provide a person with a genuine sense of being complete, contented and overjoyed Frederick Herzberg:   Professor Herzberg, a psychologist, argued that in order to create any motivation in the workplace, it was essential to first remove factors that cause dissatisfaction  To boost morale and motivation though, growth factors are necessary. Unlike Taylor, Herzberg suggested that motivation does not come from extrinsic factors, but from higher order, psychological growth. Theories Advantages: Disadvantages : Taylor: Scientific management does Qualitative factors that affect the not only encourage people to level of employee motivation are work. Taylor introduced rest ignored breaks in order for his workers Subsequent theorists (such as to recover from exhaustion, Maslow as well as Herzberg) felt that which would otherwise reduce there is far more to motivation than productivity. money. They argue that people cannot be effectively managed in a scientific way. People are not motivated in the same way, so a prescribed method (differentiated piece rates) does not suit all individuals or organizations. Maslow: The theory is simple to For example, not everyone is understand, acknowledges motivated by job promotional human nature and is relevant opportunities even though these are in all fields. associated with esteem needs. Some people prefer to work alone, rather than in team. For most people, it is probably unrealistic for them to ever reach self-actualization. Herzberg management will be able to The fact that the theory is based on : reduce hygiene factors to a the assumption that all employees minimum if they know what have the same needs, and that it they are. specific factors places too much emphasis on job leading to job satisfaction satisfaction and not enough on relate to the job itself - gets external factors, such as economic or the most out of their social conditions. employees. new challenges + increasing level of responsibility for employees leads to increased job satisfaction. David McClelland:  McClelland, a psychologist, suggest there are only three types of needs, fostered through one's life's experiences, hence the three needs or acquired needs theory.  Motivation can be achieved by recognising which need is the dominant motivator for an individual/employee, then using the information for task- setting, giving feedback and setting goals.  o Dominant Need 1 - Achievement:  Strong desire to accomplish challenging goals  Takes calculated risks  Likes regular feedback  Often prefers to work alone o Dominant Need 2 - Affiliation:  Strong desire to belong in an group  Wants to be liked, often goes along with the crowd  Often prefers to collaborate  Doesn’t like risk or uncertainty o Dominant Need 3 - Power:  Strong desire to influence others  Likes to win arguments  Enjoys competition  Enjoys status and recognition Deci and Ryan:  Out of an interest in 'high-quality motivation', where individuals are wholeheartedly engaged in a task, psychologists Deci and Ryan collaborated to experiment and develop the self-determination theory  The theory purports that controlled motivators can not lead to high quality motivation, only autonomous motivators can  They suggest there are three factors that fulfil the psychological need for self-determination Process Theories:  Adams equity theory and Vrooms expectancy theory are examples of process theories of motivation - they studied how motivation occurs, rather than what motivates people John Stacey Adams:  Adams' equity theory suggests people are motivated by how equitable they perceive their situation o How equitable their input is to output o How equitably they are treated compared to others  The interpretation of the above factors will influence motivation levels Victor Vroom:  Vrooms' expectancy theory proposes that individuals are motivated to act in a certain way based on their expectations  People are more motivated if they believe their efforts will lead to successful performance and desirable outcomes. He expressed motivation as an equation - M = E x I x V o M = Motivation o E = Expectancy o I = Instrumentality o V = Valence Daniel Pink Drive Theory: A Labour turnover refers to the amount of people who leave an organisation. Motivated employees are more likely to be satisfied, engaged and feel a sense of purpose - they will be less likely to quit. Labour turnover is expressed as a percentage of the workforce, per time period (usually one year) To calculate the labour retention rate, simply subtract firms labour turnover rate from 100 - as business with 12% labour turnover has labour retention rate of 88% Examples: (1032+1021)/2 = 1026.5 58/1026.5 x 100 = 5.6503 100 - 5.6503 = 94.3497 (56,142 + 68,304)/2 = 62,223 3,002/62,223 x 100 = 4.8246 100 - 4.8246 = 95.1754 160+25 = 185 15/185 x 100 = 8.1081 100 - 8.1081 = 91.8919 Answer these questions: Why might a business have a high labour turnover?  They aren't hiring as fast as they are losing people Why is labour turnover an issue for a business? What problems/costs does the business face?  Quite expensive, business is struggling cause no employees Are there any reasons a business could benefit from a high labour turnover? What are they? What industries would have a higher average turnover rate? How would a business use labour turnover figures in their workforce planning? Financial Rewards:  Managers must consider financial rewards in a balanced way - payments must be sufficient enough to attract and retain staff, but not so excessive it harms the business  Remuneration refers to the overall financial package offered to an employee 7 Kinds of Renumeration:  Salaries - A salary is a type of financial payment rewarding staff a fixed annual amount of money, but paid monthly   Wages (time and piece rates) - wages are a type of financial reward payment system based on time or output. Wages are paid as time rate (hours) or piece rate (output)  Commission - commission is a type of financial payment system that rewards workers a certain percentage of the sales of each good or service that they are responsible for completing  Profit-related pay - is a type of financial reward system which remunerates workers a certain percentage of the annual profits that the business earns  Performance-related pay (PRP) - is a type of financial payment system used to pay employees a bonus for reaching or exceeding a set target  Employee share ownership schemes - a type of financial reward payment system that involves giving workers shares in the company they work for  Fringe payments - are financial benefits of a job in excess of the basic pay (wage or salary) Non-financial rewards:  Managers must also consider non-monetary incentives to attract, retain and motivate staff 6 Kinds of Non-financial Rewards:  Job enrichment - enhancing the experiences of workers, giving workers a wide range of challenging tasks and more responsibility at work o Advantages: Gives employees additional challenges to enhance their self-worth and esteem Encourages employees to be more proactive and productive o Disadvantages: Employees may feel pressured by taking on additional roles and responsibility There may be disputes about appropriate remuneration  Job rotation - is an operational management technique and form of non- financial motivation that involves workers switching between jobs for a period of time o Advantages: Can help reduce boredom and monotony from overspecialisation o Disadvantages: Increased burden as workers need to learn and take on additional roles  Job enlargement - takes place when more tasks or activities are added to a workers job description o Advantages:  Can help to prevent boredom with repetitive tasks o Disadvantages: Can reduce productivity as workers may be less efficient at completing a whole task  Empowerment - is the delegation of decision-making power to workers, thereby helping boost their morale o Advantages:  Encourages independent decision making  Purpose/the opportunity to make a difference - is an intrinsic, non financial type of motivation because people believe they do genuinely meaningful work.  Teamwork - refers to the combined efforts of a group of workers to achieve of an organizational goal The Recruitment Process: 1. Job analysis - the process of examining what a particular job involves. The analysis enables the HR department to determine the roles, tasks, duties, responsibilities and skills required to do the job 2. Job description - The job description is a succinct document containing particulars of a job. The job description enables potential candidates to know what is required form them 3. Person specification - official and concise document that contains details of the attributes and qualities of the ideal person for a particular job 4. Job evaluation - this is an assessment and review of the value of a job in relation to other jobs in the organisation, so that the remuneration and other rewards can be determined in an objective transparent and fair manner 5. Job advertisement - Job adverts are formal communications after job analysis announcing the vacant post. They are produced and released after completing the previous four steps in the recruitment process 6. Shortlisting - After the job advert goes out, candidates apply for the vacant post, using any combination of an application form, covering letter of application and curriculum vitae. 7. Interviews - Once shortlisted candidates are determined, they are invited for a job interview 8. Selection - once all candidates for the vacant post have been interviewed, the panel of interviewers can select the most suitable person to offer the job 9. Background checks and references - Before making a job offer the recruiters need to make final background checks 10.Job offer - Finally, once all checks and references are confirmed, the most outstanding candidate is formally offered the job Internal and External Recruitment:  The recruitment process is a major and vital aspect of human resource management and workforce planning. Hiring the right employees, with the right aptitudes and attitudes, is essential for the organisation to be competitive and to meet its goals  Hiring the wrong workers might mean they are likely to underperform or dislike the workplace, so leave the business organisation soon after being recruited  HR managers can use internal recruitment and/or external recruitment to hire the staff the business needs  Internal recruitment: involves hiring people who already work at the firm to fill a vacant post o Advantages  Less uncertainty  Saves money  Improves motivation o Disadvantage   Still have to go through the recruitment process for the post that is now vacant  No new ideas  Potential conflict  External recruitment: means hiring people from outside the organisation to fill vacant posts o Advantages:  Larger pool of workers to choose from  New ideas  Fresh mindsets o Disadvantage:  Time consuming  More expensive  Demotivating Types of Training:  Training is the process of instructing, teaching and mentoring employees about how to perform certain tasks in their job. It also enables workers to develop their level of skills and expertise in order to develop to competence in the workplace and to meet the needs of the organisation o Induction - intended for new employees in order to help them acclimatise with people, policies and processes of the organisation. o On-the-job training - takes place within the organisation so employee are performing work tasks o Off-the-job training - led by external specialists and takes place away from the place of work Types of appraisal:  An appraisal (or performance review or performance appraisal) is the formal procedure of assessing the performance and effectiveness of employees in relation to their job description and the organisation's business objectives  There are four types of appraisal: o Formative - take place on a regular and continual basis in order to allow workers it improve their performance and effectiveness o Summative - are conducted periodically over a period of time or at the end of a major task or project o 360-degree - provides feedback from a range of people who work with or interact with appraise, such as their line manager, co-workers, subordinates and even customers o Self-appraisal - involves individual employees reflecting on and evaluating their own performance against the pre-agreed standard and practices in the workplace Corporate Culture:  Refers to the sum of values, attitudes, beliefs, expectations and assumptions of an organisations  What is expected of, or is considered 'normal' in an organisation   A companies innate personality, as described by Deal and Kennedy (1982) - 'how things are done around here' Examples of the evidence of organisational culture includes:  Punctuality  Beliefs/values  Dress code  Acceptable behaviours  Leadership style  Physical layout 1. In what ways does the article highlight the significance of authenticity? Emphasises corporate culture must be genuinely embedded in values, leaderships and behaviour, rather then stated 2. What is a cultural carrier? a. Individual or community who actually preserves and embodies the values of a particular culture 3. In your opinion, what is more important - hiring people that fit the organisational culture or diversity? a. I believe both are equally as important 4. How does physical environment impact culture? Impacts the values and behaviours of people in the workplace Reinforce the culture a firm is trying to create 5. Define corporate culture in your own words. 6. What are the benefits of a strong culture?  More efficiency  Productivity  High financial returns Benefits of corporate culture:  A strong corporate culture can help to create unity and purpose and lessen misunderstandings and conflict. It leads to a cohesive working environment with high levels of motivation, higher labour productivity and greater staff retention.  A culture gap occurs if there is a difference between an organisation's desired culture and its actual culture. This can cause a weak culture, leading to misunderstandings, disharmony, negativity and conflict. This results in lower productivity and profitability Types of organisational culture:  The NORMS acronym can be use to remember the influences on types of organisational culture o Nature of the business: o Organisation culture: o Rewards: o Management styles: o Sanctions: Gods of Management Model:  Athena - task culture: o Commonly depicted in wars, embodied cold logic, rationality and strategy  o In an Athenian culture, teams are empowered and supported o Success organisation relies on collaboration, collegiality and cohesive o Typical of service organisations in competitive environment  Dionysus - Person Culture o Depicted as having a dual personality - very happy but quick to anger o In a Person culture, individuals are viewed as more important than the organisation itself o The business values each person as a expert, relies their skills to succeed o Less centralised o Typical of service organisation in specialist industries  Apollo - Role Culture o Represents order, clarity, reason o In an Apollonian culture, operations are underpinned by formal structure, clear rules and guidelines o More centralised o Typical of bureaucratic organisations with tall structures and long chains of demand  Zeus - Power Culture: o Characterised as wise, fair, powerful o In an Zeisian culture, an individual or small group of senior staff make all decisions and maintain absolute control o Highly Centralised o Typical of an entrepreneur leading a fast-paced organisation focused on results Cultural Clashes:  A culture class occurs when there are differences in the values and views of individuals within an organisation, causing conflict  There are three reasons for cultural clashes: o Growth o Mergers o Change in leadership Culture Clash Growth:  A cultural class is when organisations grow internally/organically, it can lead to a disconnect between staff and upper management  Growth can disrupt existing organisation cultures, causing uncertainty and resistance. This is further complicated if the organisation expands overseas. Culture Clash Mergers:  When organisations merge or are taken over, a culture clash often results.  Inorganic growth usually results in one culture being more dominant than the other, so conflict is likely to occur (at least in the short term). This is particularly the case when a hostile takeover occurs or when the two organisation are from vastly different regional cultures Cultural Clash - Change in Leadership Style:  When leadership styles change, this can cause a culture clash as views, approaches and priorities may conflict. Employees, especially the longer serving members of the workforce, can often find it difficult to adapt and conform to a different leader and the subsequent new vision for the organisation.