CAIE AS Level Business (9609) PDF

ZNOTES.ORG UPDATED TO 2020-22 SYLLABUS CAIE AS LEVEL BUSINESS (9609) SUMMARIZED NOTES ON THE THEORY SYLLABUS CAIE AS LEVEL BUSINESS (9609) 1.4. Scarcity 1. Enterprise It occ...

ZNOTES.ORG UPDATED TO 2020-22 SYLLABUS CAIE AS LEVEL BUSINESS (9609) SUMMARIZED NOTES ON THE THEORY SYLLABUS CAIE AS LEVEL BUSINESS (9609) 1.4. Scarcity 1. Enterprise It occurs as there are limited resources and unlimited wants. 1.1. Purpose of Business Activity Due to the existence of scarcity, people are forced to make a choice Businesses aim to add value to raw materials and semi- Opportunity cost is the next best alternative forgone finished goods in order to satisfy needs and wants. This helps raise living standards of the economy as businesses 1.5. Entrepreneur will employ people for production. The role of an entrepreneur Produce a business idea Invest their own capital Accept responsibility of running and managing the business Accept the risks of failure 1.2. Factors of production Characteristics of an entrepreneur 1. Land - all natural resources used in production 1. Innovation Return for land is “rent” 2. Commitment 2. Labour - both manual and skilled work 3. Self-motivation Return for labour is “salary” or “wages” 4. Multiskilled 3. Capital - finance that is needed to set up and run the 5. Leadership skills business as well as man made goods used in 6. Communication skills production (ex. machinery). These are known as 7. Self-confidence capital goods. 8. Ability to bounce back Return for capital is “interest” 4. Enterprise - the driving force that arranges all other factors of productions and takes the risk of the new 1.6. Challenges faced by entrepreneurs business venture Identifying successful business opportunities: Return for enterprise is “profit” Entrepreneurs need to find markets which have enough demand in order to be profitable 1.3. Added value People get their ideas from: Own skills Added value = selling price - cost price Previous employment Added value is not the same as profit Small-budget market research Sourcing finance: How to increase added value Entrepreneurs face financial issues due to: Lack of own finance 1. Increase selling price by providing higher quality Lack of awareness of grants and subsidies goods (higher quality raw materials), increasing Lack of trading records in order to receive loans advertising, changing packaging, making small from bank improvements in the product. A poor business plan 2. Decrease cost price by reducing wastage through lean Determining a location: production methods, find cheap supplies, reduce An entrepreneur will have to decide the best location quality of the product, increase efficiency by training keeping in mind costs, potential target market, status workers and using advanced technology. of area, etc. Competition Building a customer base: For a firm to survive it must build customer loyalty and brand image. Businesses can do this by: Offering pre and after sales services Providing discounts and other sales promotions WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Providing goods that meet specific needs (which a 1.9. Impact of enterprise on an large firm will be reluctant to do) economy 1.7. Why do new businesses fail? Employment creation Economic growth Lack of record keeping Firm’s survival and growth Lack of cash and working capital: Working capital is the capital needed to run the day- Innovation and technological change to-day business Exports Personal development Ways to avoid working capital shortage: Increased social cohesion Make a cash flow forecast Inject more capital into the business Establish good relations with bank 1.10. Social enterprise Use effective credit control with customers Poor management skills: Features: Essential skills to avoid management problems: Leadership skills Directly produce goods and services Cash handling and cash management skills Have social aims and ethical ways of producing them Planning and coordinating skills Need to make a surplus Decision-making skills Communication skills Objectives: Marketing, promotion and selling skills Changes in business environment: Social A few changes include: Economical New competitors Environmental Legal changes Together known as triple bottom line Economic changes Technological changes 2. Business Structure Why may businesses fail in early stages? Internal problems – 2.1. Classification of business activity Weak business idea Lack of managerial skills 1. Primary sector – extracting natural resources. E.g. Lack of suitable employees fishing, mining Lack of sufficient finance 2. Secondary sector – manufacturing sector. E.g. car Lack of entrepreneurial skills manufacturing, clothes-making Poor initial research 3. Tertiary sector – service sector. E.g. banking, Over ambitious ideas transportation Poor decisions External problems – 2.2. Changes in business activity Anticipated customers did not materialize Changes in business environment affected customer’s The importance of each sector changes as the economy spending patterns develops. The importance of each sector is measured by Unexpected competition employment levels or output levels. 1. Industrialisation is when the importance of secondary 1.8. Types of entrepreneurial sector rises. This occurs in developing countries like businesses India and China 1. Primary sector – extracting materials like fishing and Advantages Disadvantages coal mining Causes a huge movement It increases the GDP if the 2. Secondary sector – manufacturing sector like craft from rural to urban areas, manufacturing country, helping raise living causing social and housing 3. Tertiary sector – service sector like hairdressing standards. problems. WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Advantages Disadvantages Advantages Disadvantages Imports of raw materials will Ability to choose working It increases the employment May face intense competition increase, increasing import times opportunities available costs. Easy to establish relations Manufacturing industries with employees and Unable to specialise Increases exports and growth is usually occurred customers reduces imports. due to growth of MNCs Freedom of making own Lack of continuity Firms will be more profitable, decisions increasing tax revenue Insufficient skills Manufacturing sector goods have more value than primary sector goods. 2.6. Partnership It is a business owned by a group of individuals 2. De-industrialisation occurs when the importance of secondary sector declines. It occurs in developed Advantages Disadvantages countries like USA, UK. Each partner may specialise in Unlimited liability As a country develops, the average income per person different areas increases. Rising incomes lead to increasing living Shared decision-making Profits are shared standards as consumers will be able to spend more on Additional finance (capital) injected Risk of conflicts services than goods, showing demand for services rises by each owner more quickly than physical goods Losses are shared No continuity As the world industrialises, more and more Fewer legal formalities manufacturing businesses enter the market, increasing the competition and causing prices to fall. This makes it easier for developed countries to buy these goods rather 2.7. Limited companies than producing it themselves. Features: 2.3. Public and Private Sector Limited liability – each shareholder will only lose the 1. Public sector – firms controlled and managed by the amount invested if the business/idea fails government/local authority. Legal personality – the company has a separate legal 2. Private sector – firms controlled and managed by identity from its owners/shareholders individuals. Continuity – even after the death of a shareholder, there is no need for dissolution. 2.4. Types of Economies Private limited companies 1. Free market economy – only private sector and no It is a business owned by shareholders who are friends government intervention. and family 2. Mixed economy – both private and public sectors. Governments and individuals make decisions Advantages Disadvantages together. Governments usually offer essentials like Limited liability High legal formalities health care and education. Separate legal identity Can’t sell shares to public 3. Command economy – economies that have only the Continuity Difficult to sell shares public sector. Have to send accounts to Original owner will be able to companies’ house – less 2.5. Sole trader retain control secrecy These are businesses owned by one person Ability to raise capital from The one person owns and controls the business. sale of shares It has no formal legal structure as business and owner Higher status are considered one and the same. Public limited company Advantages Disadvantages Easy to set up and manage Limited finance (capital) These are businesses which have legal rights to sell Owner has complete control Unlimited liability shares to the public. WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Advantages Disadvantages Errors or mistakes Limited liability High legal formalities Business failure of one partner, risk the whole project. Separate legal identity Cost of hiring specialists High fluctuation in share 2.9. Franchise Continuity prices A business which uses the name, logo, trading methods Easy to buy and sell shares Less secrecy of an existing successful business Access to substantial capital They have a legal agreement to do so sources due to the right to High risks of takeover issue prospectus (flatation) To the franchisor Directors influenced by short Advantages Disadvantages term objectives of major Poor management of one Guaranteed income from investors business, affecting reputation franchisee of all Legal formalities in setting up a company Easy, risk-free way of Potential management issues expansion 1. Memorandum of association – name, address, contact Easy to manage Difficult to monitor number, maximum share capital, declared aims Still have some control 2. Articles of association – name of director, procedures to be followed To the franchisee These documents must be submitted to the ‘registrar of Advantages Disadvantages companies Lower risks as business is Proportion of revenue sent to established franchisor 2.8. Other forms of business Advice, training, supplies and Rigid business model already advertising obtained by organisation made franchiser Cooperatives Potential loss of large Economies of scale investment These are organisations owned by their members Access to experts Expensive initial fee Features: Franchiser won't open All members contribute to running and managing another outlet in the same All members have a say in important matters area Equally shared profits Advantages – Buying in bulk 2.10. Public-sector enterprises – public Working together to solve problems corporations Good motivation Disadvantages – Known as public corporation Poor management skills In the public sector Capital and finance shortage Profit is not their main aim Slow decision making Advantages Disadvantages Holding companies Managed with social High chances of inefficiencies objectives rather than profit A business which owns and controls many different Still operate, even if making a Subsidies may encourage companies, but is not unified as one loss inefficiency Joint ventures Finance raised from Government may interfere in government business decisions When 2 or more businesses agree to join for one project Reasons: Shared costs and risks 3. Size of Business Different companies’ different strengths Together more powerful 3.1. Different methods of measuring size Risks: Conflicts 1. Number of employees WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) 1. The size is measured upon the basis on Will have lower costs as no diseconomies of scale number of workers employed. 2. Problems- a firm may be capital intensive, Government assistance for small businesses making this method insubstantial. 2. Revenue Governments may provide assistance to small businesses 1. Used to compare businesses of same industry in the form of: 2. Depends on the total value of sales made. Reduced rate of tax 3. Problem – less effective when comparing high- Loan guarantee scheme value and low-value firms. Information, advice, support 3. Capital employed Aid designed to overcome specific problems like: 1. Depends on the total value of long-term Lack of specialist management expertise finance available in the business Problems raising finance 2. Problem – can’t be used to compare firms in Marketing a limited product range different industries Finding cost-effective premises 4. Market capitalisation 1. Market capitalisation = current share price * 3.4. Small and large businesses total number of shares issued 2. Limited to public limited companies Advantages 3. Problem – share prices change on a daily basis Small Business Large Business making the comparison unstable Managed and controlled by 5. Market share Ability to employ specialists owners 1. Market share = total sales of business/total Flexible - adapt quickly to Can conduct through market sales in industry * 100 2. Problem – if the total market is small, results changes in demand research will not be accurate Personal contact with Diversified risks employees and customers 3.2. Measuring business size Offer personal service Ability to sell at lower prices Economies of scale Best form of measurement Disadvantages No ‘best’ measure Small Business Large Business To choose which method to use, we need to known if we Limited access to finance Diseconomies of scale are interested in absolute size or comparative size. Divorce between ownership Absolute size – test using at least 2 criteria and make Not diversifies, high risks and management comparison Few economies of scale Conflicts Problems while measuring businesses: Poor communication, slow Unable to afford specialists decision making There are many different methods to measure business Difficult to manage and control size and each method gives us different answers. There is no internationally agreed definition on the size of a business. 3.5. Family business These are businesses which are owned and managed by 3.3. Small and micro-businesses at-least 2 family members. Significance of small and micro-businesses Strengths Weaknesses Success/continuity problem - Benefits of encouraging development of small and micro- Commitment - family owners there might be failure within businesses: will show more dedication the family causing the failure Many jobs created as small businesses won’t have funds towards their work of the entire business. to buy capital equipment Often run by dynamic entrepreneurs. Provides greater Knowledge continuity - Informality - there may be variety families ensure they pass on many inefficiencies and Will create competition for large businesses. Discourage the business knowledge to internal conflicts as personal monopoly the next generation allowing and professional life is not May provide specialist goods or necessities experienced and skilled separate Helps them grow and become large managers. WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Strengths Weaknesses 4.3. SMART criteria Reliability and pride - as the family business will have Every business objective must meet the SMART criteria Nepotism may lead to their name and reputation, S – SPECIFC: the aim must focus on what the business inefficient management they try to improve quality at does and must directly relate to the business’s all times. activities. Traditional - they are M – MEASUREABLE: every aim must have quantitative reluctant to change values to prove targets are being met effectively. (inflexibility) A – Achievable: aims which are impossible to achieve in a time period must not be set. Such aims will Conflicts - Family problems may affect business demotivate the employees. R – realistic and relevant: aims should be realistic management according to the resources available and must be relevant to the people carrying it out. 3.6. Business growth T – time-specific: there must be time limits to the objectives established. Reasons for growth – 4.4. Benefits of objectives 1. Increased profits 2. Increased market share They provide a sense of direction 3. Economies of scale Helps improve focus of individual employees and 4. Lower risks departments 5. Increased power and status Provides a framework for decision making 6. Ability to be more competitive Acts as a motivation tool 7. Increase value of business Acts as a means of assess performance, progress and 8. Easy to access new target groups and markets identify training needs Helps plan for future in terms of resources required Internal growth It is expansion by expanding the existing operations 4.5. Hierarchy of objectives It is cheap Avoids takeover problems This shows the balance and dependencies between the Takes long time for results different stages of setting aims and objectives. Limited extent of growth May not receive the desired outcome Ways for internal growth: - Enter new markets Increased marketing activities Increase investment Use newer techniques to produce more efficiently 4. Business Objectives Aims are the long-term goals of a business. They act as a framework for a business to create further objectives and set a purpose of the business. 4.2. Importance of business objectives 4.6. Corporate aims An objective helps to direct, control and review any These are long terms business goals and provides the business activity. central purpose of the business. For any aim to be achieved successful, there have to be These are objectives that translate the aims into strategies in place which will guide the business to achievable targets. achieve the goal. These strategies must be reviewed constantly to know if it is effective. Advantages of corporate aims Every business’s aims and strategies change over time. WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Help develop a sense of purpose and direction for the 3. Analysts assess business business performance through return on Help check progress capital employed rather than profits They help development of successful tactics and 4. Shareholders may aim for profit strategies maximisation but other stakeholders may want to prioritise 4.7. Vision statement other issues 5. Very difficult to assess when the Vision statement is the desired future of the company maximised profit has reached It is a company’s road map indicating what the company 6. Negative impact on customers wants to become in the future. 2. Profit satisficing – 1. It means achieving enough profits to keep the owners happy Mission statement 3. Growth – 1. Growth is measured through value of Mission statement is a statement of a business’s core sales/output aims, phrased in a way to motivate employees and to 2. Benefits – stimulate interests by outside groups. 1. Lesser chances of a takeover It is a summary on how they intend to support/achieve 2. Economies of scale their vision 3. Motivated employees and managers Businesses communicate their mission statement 4. If not growing, may lose its appeal through – publishing it in their accounts, websites, to new investors. banners, advertising posters, company newsletters, etc. 3. Limitations – Benefits – 1. Too rapid expansion may lead to cash flow problems Helps inform the external stakeholders about the aims 2. Growth may be achieved due to and vision quickly lower profit margins It helps attract employees, potential investors, 3. Diseconomies of scale shareholders, etc. 4. Using retained earnings to finance Help motivate employees profits will reduce dividends Help guide and direct individual employee behaviour and 5. May lose focus and direction is conduct diversified 4. Increasing market share – Limitations – 1. It is possible for a company to grow but it’s market share to reduce, if the market is Can be easily adopted by any business of any size expanding It is not specific to a business 2. If market share is high, it indicates the They are too vague and general marketing mix of the business is successful Used as a PR activity than most of its competitors. Impossible to analyse 3. Benefits of being the market leader – 1. Retailers will be keen to maintain 4.8. Corporate objectives high profile clients, so may provide good quality and low prices These are specific to a business and provide a much 2. Higher profits, due to lower supply clearer guide for management. prices 1. Profit maximisation – 3. Effective promotional campaigns to 1. It means producing at the level of output attract customers which leads to the greatest difference 5. Survival – between total revenue and total costs. 1. Mostly an objective for start ups 2. The limitations of this corporate objective 6. Corporate social responsibility (CSR) – include: 1. This concept applies to those businesses 1. If short term profits are high, that consider the interests of society by competitors may enter jeopardizing taking responsibility for the impact of their the long-term survival decisions and activities on customers, 2. Issues of independence and employees, communities and the retaining control maybe of higher environment importance 2. Benefits – WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) 1. Helps boost morale of employees as 3. Public sector or private sector they feel more connected 1. Public sector – CSR 2. Helps attract skilled workers 2. Private sector – profits 3. Workers have higher productivity 4. The number of years the business has been operating and demand low wages 5. Economic conditions 4. Helps build reputation as 6. Ethics responsible leader, gives competitive advantage 4.12. Management by objectives (MBO) 5. May help reduce costs and improve profits as consumers will be willing A method of coordinating and motivating all staff in an to pay higher prices for sustainable organisation by dividing its overall aim into specific products targets for each department, manager and employee 6. It increases sales and builds customer loyalty o Helps attract Communicating objectives investors 7. Maximizing short-term sales revenue Benefits of communicating the aims of the business with 8. Maximising shareholder value - employees: 1. This involves increasing the share price of May achieve more the company’s stock Know how their individual goals fit into the overall plan 4.9. Relationship between mission Creating shared employee responsibility Easier for managers to stay in touch with employees’ statements, objectives, strategies and progress tactics 4.13. Ethical influences on business Aims and objectives provide basis for business strategies as they are the long-term plans for the company. objectives and decisions Strategies and tactics are derived from a company’s corporate objectives. It is a document detailing a company’s rules and guidelines on staff behaviour that must be followed Strategy provides the path a business needs to follow in It may be expensive in the short term order to achieve a organisations corporate objective Tactics are more concreate and specific smaller steps for But, in the long term: shorter time durations to achieve a strategy. Avoid legal problems Avoid bad publicity Avoid pressure groups 4.10. Objectives and decision making May receive grants and subsidies May attract skilled workers and investors Stages in decision making framework: 1. Set objectives Advantages and disadvantages of targets 2. Assess the problem/situation 3. Gather data about the problem and find possible solutions 4. Consider all solutions and decisions 5. Make a strategic decision 6. Plan and implement the strategy 7. Review its success against original objectives 4.11. Factors that determine the corporate objectives of a business 5. Stakeholders in a business Stakeholders: People or groups of people that are 1. Corporate culture affected by, and therefore have an interest in the 1. It is the code of behaviour and attitudes that activities of a business. influence decision making Stakeholder concept: The view that businesses and their 2. Size and legal form of the business managers have responsibilities to a wide range of groups- 1. Small businesses – profit satisficing not just their shareholders 2. Public limited companies – growth, increase The roles, rights and responsibilities of stakeholders: stock value WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Roles Rights Responsibilities Roles Rights Responsibilities Receive goods Provide agreed Purchase Provide finance and services Repaid on finance on goods and Honesty in different that meet local agreed dates agreed date services Lender forms laws and time Offered Paid finance Customers replacements, charges Provide repairs, etc- as Not stealing revenue legally obligated 5.2. Corporate social responsibility – an Not make false evaluation claims It is the concept that accepts that businesses should Supply goods consider the interests on the society in their activities and in time and Supply goods On-time decisions, beyond the legal obligations that they have condition Suppliers and services payment CSR distracts businesses from their key role of using already scare resources to their maximum and produce goods decided and services Fair treatment CSR is a form of WINDOW DRESSING Provide If it is found that CSR is used as a PR activity, it will Treated within manual and lead to bad word of mouth minimum legal Honesty other labour CSR maybe expensive in the short run, but will help limits services the business raise profits in the future Employment As it will lead to better reputation, lower regulations, Meet contract chances of subsidies and grants, customer loyalty, etc. employment payment and contract treatment Employees Cooperate with 6. Management and Join a trade union management for reasonable Leadership requests Observe Ethical 6.1. Functions of management – what code of managers are responsible for conduct. Provide local Consulted 1. Setting objectives and planning services and about major Cooperate 1. Future planning and creating departmental Local infrastructure changes and individual objectives for each employee Community Meet 2. Organising resources to meet objectives They will Not have lives ensure clear division of work and delegate tasks to reasonable badly affected keep everyone motivated requests 3. Directing and motivating staff Laws- restrain Businesses to Treat 1. Guiding, leading and overseeing people to business meet businesses ensure corporate objectives are met activity requirements equally 4. Coordinating activities Law and order- 1. Encourage teamwork between departments Prevent unfair allow activity to and division to lower duplications competition take place 5. Controlling and measuring performance against Gov. Good trading targets links 1. Make sure targets are being met and if they Achieve internationally- are not, find solutions like training workers, economic allow buying better equipment stability international trade 6.2. Management roles According to Henry Mintzberg’s the nature of managerial work, there are 10 different roles of management. WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) These 10 can be classified into 3 main groups: Supervisors – Interpersonal roles – dealing with people Appointed by management Informational roles – receiver, sender of information Not a decision-making role Decisional roles – make decisions and allocate Responsible for working towards pre-set goals resources Workers’ representatives – Elected by the workforce Interpersonal roles They discuss areas of common concern with managers 1. Figurehead – symbolic leader of the company 2. Leader – motivating subordinates, selecting and 6.5. Leadership styles training workers 3. Liaison – linking managers of one department with Autocratic Democratic Paternalistic Laissez-faire others Believes that Informational roles manager is in a better Promotes 4. Monitor – collecting data about the operations Decision- position than active It means, let 5. Disseminator – sending information about internal making at the the workers participation of them do it and external factors to relevant people centre to know workers 6. Spokesperson – communicating information about what’s best the business for the business. Decisional roles Leaves the Some decision- 7. Entrepreneur – look out for new opportunities consultation, making on 8. Disturbance handler – flexible in responding to Leader takes all Two-way but end workforce changes decisions communication decision after the 9. Resource allocator – deciding on the spending of the based on broad business’s resources managers objectives 10. Negotiator – representing the organisation at all are set negotiations No true Little Very little Full staff participation 6.3. Leadership information input from involvement in decision- given to staff management making It involves setting a clear direction and vision for the Workers company Close Depends on maybe The best managers are also leaders High level of supervision of the level of dissatisfied Qualities – delegation workforce involvement and Desire to succeed demotivated Self-confidence Creative and innovative Workers may Multitalented not Worker Incisive mind One-way appreciate feedback is communication lack of taken structure and 6.4. Important leadership positions in guidance business Faster decision Better final making \n Directors – decision \n Lack of Good for They are the senior managers elected by Better feedback unskilled shareholders motivation workers Responsible for delegation, assist in recruitment, May meeting objectives within their department Time demotivate Managers - consuming \n workers \n No Responsible for people, resources and decision Not helpful staff input who making during have hands on Have authority over people below them emergencies experience Direct, motivate, discipline WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) 6.6. McGregor’s theory X and theory Y 7.1. What is motivation? Douglas McGregor devised a theory on what factors It is the desire of workers to do a job quickly and efficiently. determine the best leadership They are the external and internal factors that stimulate He found that the management attitude is the most people to take actions to meet a specific aim. important factor He identified 2 distinct approaches Theory X and theory Y managers Importance of motivation Theory X – Help a business achieve its goals Theory X managers believed that workers are lazy, Help remain as cost-effective as possible (lower accidents dislike work, will avoid responsibility, not creative and wastage) They need to be managed and controlled with close Helps maintain low labour turnover and absenteeism supervision rates This encourages autocratic leadership Impact the productivity and competitiveness of the Theory Y – business Theory Y managers believed that workers enjoy work, Well-motivated staff will be ready to accept responsibility are creative, ready to accept responsibility and will make suggestions to improve customer service This led to democratic leadership style and satisfaction. He suggested that theory X and Y are MANAGEMENT OPIONIONS not types of workers. He believed how managers thought will led to workers 7.2. F.W. Taylor – scientific becoming like that description management/theory of an economic man 6.7. Factors affecting the leadership style His main purpose was to reduce inefficiencies His approach included 7 steps: Training and experience of workforce Select group of workers Amount of time available for discussion Observe them perform tasks Attitude of management Record time taken Culture of firm Identify the quickest method Importance of issues Train all employees in that method In general, democratic is considered the best Supervise them Pay them accordingly 6.8. Informal leadership He believed that people are only motivated by money He believed piece rate method of payment should be These are people who have no formal authority but are used where worker’s output is directly linked to their still respected in the firm wage rates They have the ability to lead due to their personality, He believed that autocratic leadership style should be experience, knowledge. used Informal leaders help achieve the aims of a business Workers should be closely supervised and no discussion Informal leaders are a key role of motivation or feedback should be taken One-way communication Theory X manager ideology is adopted 6.9. Emotional intelligence Problems of this method – Not everyone is motivated by money It is the ability of managers to understand their own Quantity over quality is encouraged – not acceptable in emotions as well as others the long run Daniel Goleman – 4 EI competencies In modern times, due to advanced education and Self-awareness – knowing our own feeling, having self- training, worker participation should be encouraged and confidence and realistic views in our abilities will help the business in the long run Self-management – recover quickly from stress and show self-control Social awareness – sensing others feelings 7.3. Abraham Maslow – Hierarchy of Social skills – handling emotions in relationships well. human needs 7. Motivation He categorised employee needs into 5 levels. Every employee starts at the lowest level WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Motivators – Achievement, recognition, work itself, responsibility, advancement These factors MOTIVATE employees 7.5. David McClelland – Motivational needs theory He identified 3 types of motivational needs in his book – The achieving society 1. Achievement motivation – 1. Have realistic goals 2. Seek opportunities of job enrichment and advancement 3. Have result driven attitudes 2. Authority motivation – 1. Desire to control others 2. Need to be influential, effective, make an impact Physical needs – food, shelter, water, rest 3. Strong leadership instincts Safety needs – job security, health and safety 3. Affiliation motivation – Social needs – trust, friendship, teamwork, acceptance 1. Need for friendly relations Esteem needs – respect, status, recognition, achievement 2. Teamwork and interaction with others Self-actualisation – reach one’s full potential, challenging 3. Be liked and popular and creative work Regression is possible – once one need is satisfied, Achievement motivated people are the ones who give the greater quantity of the same need will not motivate business the best results. people Limitations- Everyone has different needs 7.6. Vroom – expectancy theory Difficult and impractical to identify for each worker Individuals will choose to behave in ways they believe will and have separate measures for each lead to the best outcome and rewards Self-actualisation is never permanently achieved People can be motivated if they believe: There is a positive link between performance and effort 7.4. Frederick Herzberg – Two factor Will result in a favourable reward theory Reward will help satisfy important needs Desire to satisfy the need is strong He conducted interviews and surveys to know and 3 beliefs – identify factors which give good feelings and the ones Valence – depth of the want of an employee for an that provide negative feelings extrinsic reward Job enrichment principles should be adopted Expectancy – degree to which people believe hard- Complete units of work – workers should be allowed to work will lead to their desired reward produce a recognisable part of the product/service Instrumentality – confidence of employees that they Feedback on performance – workers must be given will receive the reward they desire accurate feedback on their work. Good work must be Even if any 1 belief is missing, motivation will not occur recognised A range of tasks – workers must be given challenging and 7.7. Motivational theories – evaluation beyond their current experience tasks Team work should be encouraged and adopted They provide the starting point and a framework to He divided his results into 2 factors – defining motivational methods and issues Hygiene factors – They are often criticized due to its lack of rigour and Salary, working conditions, supervision, social follow up work relations Important to identify the most appropriate theory and They DO NOT motivate employees, but their absence identify their relevance in the business DEMOTIVATES them They just remove dissatisfaction 7.8. Motivators - Financial rewards WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Time based wage Performance- Fri Piece rate Salary Commission Bonus Profit-sharing rate related pay Ben Payment to a Payment to worker Com Annual income, worker made for for each unit Maybe too cars paid monthly Given for work Earns each hour worked produced. persuasive, In addition to insu well commitment Mode of payment Reflects the poor brand basic salary pen Professional, done/efficiently from staff for manual, clerical difficulty of the job image sche supervisory and loa and other blue and the standard management staff collared workers time. Requires Too low- regular target demotivates, too setting, In case of Time rate is high- reduces Fixed each year annual issue of Low add present, usually incentives (will be and determines the appraisals shares solves security for to n paid weekly able to meet their status of job against the problem workers pay target wage level preset of “us and sche easily) targets and them” Job evaluation paying Does not directly Encourages faster bonuses helps decide salary link to efforts put in working and efforts bands Often Reduces Security of income inadequate, Teamwork retained Low security for Requires output to and helps in cost short-term is not profits and workers be measurable and price effect \n encouraged dividends for calculation Problem of shareholders favouritism Suitable for jobs Little security for Herzberg where output is not workers theory: it only Diluted share measurable moves, not capital Helps in price Can lead to motivates determination on complacency as the basis of labor income is not Hawthorne Workers may costs. related to effort effect: sell shares individual quickly, Quality and safety focus rather reducing its issues \n Leads to Regular appraisal is than team. effect falling quality necessary standards Resistance from 7.9. Non-financial rewards workers in the event of change of Job Rotation Job Enlargement Job Enrichment work Increasing Increasing the Principle of flexibility of the scope of job organizing work Performance- Fringe workforce Commission Bonus Profit-sharing related pay Benefits Encouraged to use Giving variety of Broadening the A bonus for full ability-not just work- multi skills task, deepening staff based physical effort on the profits Reduction of direct A bonus Switch from one Includes both of the supervision, scheme to job to another- rotation and Proportion In addition to business- can Non cash allowing decision reward staff avoids monotony enrichment of the sales their be a forms of making authority for “above made wages/salary proportion of reward Based on 3 average work the salary, principles from performance” Usually happens in issue of Herzberg's theory: organizations Series of separate case of \n - Complete units shares task redundancies or of work \n - Direct shortage feedback \n - Challenging tasks WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Job Rotation Job Enlargement Job Enrichment Delegation Worker Doesn’t increase Team-working Target setting and Horizontal participation empowerment or Empowerment enlargement responsibility Involvement Adding tasks to in decisions Better ideas, Enables Delegating avoid it from on break improved feedback and control over becoming boring times, job quality comparison work but no allocations, power/authority is productivity given Improves Maslow and Provides a Doesn’t lead to productivity Herzberg’s sense of long-term job and lowers applications direction satisfaction or wastage enrichment Better Time taking – decisions, Delayering appraisal Job redesign Training Quality circles new every year perspectives Restructuring of a Improving and Not everyone job with the Originated in Can be time developing the is a team agreement of the japan- Kaizen consuming skills of employees player employee Attempt to make Voluntary groups Autocratic Conflict with Increases status managers find organizational work more of workers meet and chances of it difficult values interesting and regularly and promotion challenging discuss issues Paternalistic Adding and Employees have leadership Training costs removing certain Greater sense of first hand used – tasks can lead to belonging experience with the demotivating rewarding work problem Similar to Better and quicker 7.10. Financial and non-financial enrichment solutions motivation – evaluation Allows workers to gain a wider range Pay is not the only motivating factor Provides a new of skills and Managers must be flexible perspective increases chances Depends on: of promotion Leadership style Leads to job Culture of management enrichment – Attitude of managers and workers Herzberg Usually, business use a mix motivation Non-financial methods are cheaper than financial Delegation Worker Team-working Target setting and 8. Human resource participation Empowerment Actively management encouraged to It aims to recruit capable, flexible and committed people, become managing and training them and rewarding them involved in Lower labor Management Passing down accordingly. decision turnover by objectives of authority HRM has a major impact on efficiency, flexibility and making within motivation the organization 8.1. Purpose and roles of HRM Recruit and train workers to ensure maximum productivity so that all corporate objectives are met In the past, HRM was: WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) Bureaucratic and had inflexible approach 1. External – outside the organisation Focused solely on recruitment and selection rather 1. Bring new ideas than development and training 2. Wider choice of applicants Reluctant to delegate 3. Avoids jealousy and resentment Not part of the strategic management team 4. Standard of applicants maybe higher Roles of HRM include: 2. Internal – from within the organisation Workforce planning – identifying future needs in 1. Already known to the business, no need for terms of number of employees and skills required induction training Recruitment and selection – recruiting the most 2. Known to the selection team suitable employees 3. Well aware of the organisational culture, Developing employees – training, appraisal and ethical code of conduct, etc developing employees 4. Quicker, less time consuming Employment contracts – preparing employment 5. Cheaper contracts and ensure they are abided by 6. Gives workers a chance to progress, motivates Ensuring HRM operates across the business – them, Herzberg, Maslow involving managers in development and training of 7. Management style already known employees Employee morale and welfare – monitoring and 8.4. Selection process improving employee morale. Giving guidance and advice and ensuring appropriate work-life balance Shortlisting applicants Incentive systems – paying appropriately Monitoring -measuring and monitoring employee After receiving carious applications, the business will performance shortlist them according to their CV’s, references, Dismissing employees with inappropriate behaviour previous work, etc Selecting between applicants 8.2. Recruitment The shortlisted candidates are then selected through It is necessary when a business is expanding or interviews, aptitude tests, psychometric tests, trail work, employees are leaving the organisation etc They often use a 7-point plan – achievement, intelligence, Job analysis skills, interests, personal manner, physical appearance, personal circumstances It involves identifying a vacant position, understanding its roles and responsibilities. 8.5. Employment contracts Job description They are legally binding documents to ensure that all It provides a complete picture of what the job will entail, policies are fair and in accord with the current its roles, rights and responsibilities. employment laws. It helps attract the right type of people to the job It includes workers responsibilities, working hours, holiday entitlement, wages, appraisal process, etc Person specification It imposes responsibility on both employers and employees to honour the contract. It includes analysis of the type of qualities, skills and characteristics needed by any person appointed to a job. 8.6. Labour turnover It is based on the job description after assessing the complexity of the job. It is a ‘person profile’ for the job It measures the rate at which employees leave the organisation Job advertisement Number of employees leaving in 1 year/average number of employees employed * 100 It includes the requirements, personal qualities needed. It High and increasing labour turnover indicates low moral can be displayed within the organisation or outside, and employee discontent depending on the recruitment method chosen. It increases costs of recruiting, selecting training new If external, can advertise in online recruitment services, workers newspapers, magazines, government agencies, Customer service maybe compromised recruitment agencies, etc. Difficult to establish loyalty and team spirit Low skilled workers may be replaced by productive ones 8.3. Types of recruitment New ideas WWW.ZNOTES.ORG CAIE AS LEVEL BUSINESS (9609) May reduce costs if business is planning redundancy and There maybe chances of unfair dismissal allegations if the rationalisation organisation can not prove that the necessary steps have been take to avoid it. These may include verbal warnings, written warnings, 8.7. Training and development of training sessions, etc employees An employee may reach out to an employment tribunal to claim unfair dismissal It is work-related education given to employees to improve their efficient and productive Types of training – 8.10. Redundancies Induction training – Redundancy is when a worker loses their job because the It is an introduction training given to all new job is no longer necessary, through no fault to their own employees This is done when there is a fall in demand, advances in It helps the worker understand the customs, technology, business is trying to rationalise and cut costs procedure, layout of the organisation Business must ensure these announcements are made On-the-job training –