Chapter 19

1. Chapter 19 Improving organisational structures

2. Organisational structure and hierarchy: key terms • organisational structure: the relationship between different people and functions in an organisation — both vertically, from shop-floor workers through supervisors and managers to directors, and horizontally, between different functions and people at the same level. • organisation chart: a diagram showing the lines of authority and layers of hierarchy in an organisation. • organisational hierarchy: the vertical division of authority and accountability in an organisation. • levels of hierarchy: the number of different supervisory and management levels between the shop-floor and the chief executive within an organisation

3. Traditional organisation structure • A traditional structure which divides the organisation up into four functional areas — production, human resource management, marketing, finance — each with a number of layers of hierarchy

4. Span of control and levels of hierarchy • span of control: the number of subordinates a manager is required to supervise directly. • If a manager has many subordinates answerable to him or her, the span of control is said to be wide. • If a manager has relatively few subordinates answerable to him or her, the span of control is said to be narrow. • Normally, the greater the degree of similarity in what a group of workers do, the wider the span of control can be. • Traditionally, organisations tended to have very tall hierarchical structures, i.e. many layers of management, each with a narrow span of control. • More recently, hierarchies have become flatter, meaning that the number of layers of management has been reduced and each manager has a wider span of control

5. Span of control and levels of hierarchy exercise • In groups, compare the features of tall structures and narrow spans of control with those of flat structures and wide spans of control. Assess which is likely to be more beneficial to worker motivation and to communication, and why.

6. Drawing an organisation chart • Draw the organisation chart for your school, college or workplace. Ask your tutor or supervisor for further information that you might need. Consider whether it has a tall or a flat structure and whether the span of control at different levels of the hierarchy is narrow or wide. Think of these issues in relation to how the organisation is run and whether this is the most effective structure.

7. Workforce roles • Work roles vary from business to business, but as a business grows they will generally include directors, managers, supervisors and/or team leaders and operatives. • Organisation chart of Rockcliffe Ltd

8. Workloads and job allocations • Workloads are influenced by the nature of the organisation and its management structure — a large span of control or a lack of delegation can increase workloads. • Joballocations can change as the organisational structure changes, e.g. from a production manager responsible for the production of all products to the creation of production managers for each product and an overall production director.

9. Delegation (1) • delegation: the process of passing authority down the hierarchy from a manager to a subordinate. • responsibility: being accountable for one’s actions. • authority: the ability or power to carry out a task. • accountability: the extent to which a named individual is held responsible for the success or failure of a particular policy, project or piece of work. • Research has shown that taking a few main factors into account can improve the success of delegation fourfold. In groups, try to identify what these factors might be.

10. Delegation (2) • Check your ideas against the following list. • Delegation must be based on mutual trust between manager and subordinate. • Subordinates must be appropriately skilled, trained and informed about the particular task they will be responsible for. • Interesting and challenging tasks should be delegated as well as the more routine. • Responsibility and authority must be delegated. • The limitations of the subordinate’s authority should be made clear too. • Managers must relinquish control to ensure that subordinates feel they are trusted and that the manager has confidence in them. • Working individually or in groups, and using your own experience and any resources you have available, identify a list of advantages to a business of effective delegation. Then try to think of any factors that might limit the extent to which a business might delegate. Check your ideas against lists the on the next slide.

11. Delegation (3) • Advantages of delegation • It frees up time for managers to concentrate on strategic tasks. • It empowers and motivates workers. • Subordinates might have a better knowledge of local conditions and therefore might make more informed decisions. • Delegation may allow greater flexibility and a quicker response to changes. • Factors limiting delegation • In some small firms, managers delegate very little. • Customer expectations. • Attitudes and approach of management. • Quality of staff. • Crisis situations. • Confidentiality.

12. Internal and external communication • communication: the process of exchanging information or ideas between two or more individuals or groups. • internal communication: exchange of information that takes place within an organisation (e.g. at departmental meetings, in team briefing sessions and in memos to staff). • external communication: exchange of information that takes place with individuals, groups and organisations outside the business (e.g. via advertising material, telephone calls to suppliers and letters to customers). • Identify examples (other than those listed above) to illustrate why external communication is vital if a firm is to be successful.

13. Process of communication • Working in groups, use the communication process to explain how important issues have been communicated within your school or college. These could be new school policies or procedures, or other types of change or development. Try to think of examples where the process went smoothly and any where the communication was more problematic.

14. One- and two-way communication (1) • one-way communication: communication without any feedback (e.g. putting a notice on a notice board, or giving instructions in an authoritarian manner that allows no comment or questions from the listener). • In one-way communication, the communicator can never be sure whether the message has been understood and therefore whether the communication was effective. One-way communication is often associated with autocratic management styles. • two-way communication: communication with feedback (e.g. giving instructions in a manner that allows for questions to be asked or comments to be made, a discussion or a question-and-answer session). • Two-way communication ensures that any communication has been fully understood and is therefore more effective. Effective two-way communication is a vital element of democratic management, effective delegation, empowerment and teamworking.

15. One- and two-way communication (2) • Working in groups, try to identify examples of one- and two-way communication that you have experienced in school, college or the workplace. Think about whether this was the best form of communication and, if not, how it could have been improved.

16. Communication channels (1) • communication channel: the route through which communication occurs. • open channels of communication: where any staff member is welcome to see, read or hear the discussions and conclusions. • closed channels of communication: where access to the information is restricted to a named few. • formal channels of communication: communication channels established and approved by senior management, within which any form of communication is regarded as formal (e.g. meetings of departmental heads, personnel department meetings and production team briefing sessions). • informal channels of communication: means of passing information outside the official channels, often developed by employees themselves (e.g. ‘the grapevine’ and gossip).

17. Communication channels (2) • ‘Informal communication channels can both help and hinder formal communications and for this reason the grapevine is usually recognised by management as extremely important.’ • ‘Large amounts of informal communication suggests that formal communication channels are not operating effectively’. • Discuss the issues involved in each of these statements and decide which you agree with.

18. Vertical and lateral communication • vertical communication: when information is passed up and down the chain of command. • Downwards communication is also known as top-down communication. • Upwards communication is also known as bottom-up communication. • Identify reasons why upwards communication might benefit a business. • lateral communication: when people at the same level within an organisation pass information to each other. • Focusing on the marketing, production and finance departments of a firm, why might lateral communication between staff in these departments be vital for the efficient running of a business?

19. Improving organisational structures • Working in groups, using the resources that are available to you (e.g. textbooks, internet) and reflecting on the work you have done on organisational structures so far, investigate: • the main factors that influence the structure of an organisation • how organisational structures can affect business performance • Share your ideas with the rest of the class.

20. Chapter 20 Measuring the effectiveness of the workforce

21. Labour productivity (1) • labour productivity: a measure of the output per worker in a given time period. • labour productivity = output per period number of employees per period • Calculate labour productivity per month and the labour cost per unit per month where output in a given month is 20,000 units and 40 people are employed at a cost of £1,000 per worker.

22. Labour productivity (1) • labour productivity: a measure of the output per worker in a given time period. • labour productivity = output per period number of employees per period • Calculate labour productivity per month and the labour cost per unit per month where output in a given month is 20,000 units and 40 people are employed at a cost of £1,000 per worker. Answers Labour productivity per month = 20,000/40 = 500 units Labour cost per unit per month = £40,000/20,000 = £2

23. Labour productivity (2) • Labour productivity may be increased by: • recruiting suitably skilled and trained employees • providing training to enhance skills and attitudes of existing employees • providing pay and non-financial benefits that improve motivation • improving working practices, technology and capital equipment • What is likely to be the effect of an increase in labour productivity on unit labour costs? • The following calculations should illustrate these effects. • Starting with the information on the previous slide, improved machinery is introduced, the number of employees remains the same and output increases to 30,000. What is labour productivity and labour cost per unit now?

24. Labour productivity (2) • Labour productivity may be increased by: • recruiting suitably skilled and trained employees • providing training to enhance skills and attitudes of existing employees • providing pay and non-financial benefits that improve motivation • improving working practices, technology and capital equipment • What is likely to be the effect of an increase in labour productivity on unit labour costs? • The following calculations should illustrate these effects. • Starting with the information on the previous slide, improved machinery is introduced, the number of employees remains the same and output increases to 30,000. What is labour productivity and labour cost per unit now? Answers Labour productivity per month = 30,000/40 = 750 units Labour cost per unit per month = £40,000/30,000 = £1.33

25. Labour turnover • labour turnover: the proportion of employees leaving a business over a period of time — usually a year. • labour turnover = number leaving a business over a given period × 100 average number employed over a given period • Calculate the rate of labour turnover where the average number of staff employed in a firm last year was 250 and the number of employees who left the firm last year was 10. • Working in groups, try to identify the main causes of high labour turnover and what the problems of high labour turnover might be for a firm. Compare your ideas to those on the following two slides

26. Labour turnover • labour turnover: the proportion of employees leaving a business over a period of time — usually a year. • labour turnover = number leaving a business over a given period × 100 average number employed over a given period • Calculate the rate of labour turnover where the average number of staff employed in a firm last year was 250 and the number of employees who left the firm last year was 10. • Working in groups, try to identify the main causes of high labour turnover and what the problems of high labour turnover might be for a firm. Compare your ideas to those on the following two slides Answer Rate of labour turnover = (10/250) x 100 = 4%

27. Causes of high labour turnover • Internal factors include: • ineffective leadership and management techniques • poor communications • wages and salaries that are lower than those being paid by firms offering comparable jobs in the area • poor selection procedures that tend to appoint the wrong people to the wrong jobs • boring and unchallenging jobs that lack career and developmental opportunities • poor working conditions and unpopular working practices • low morale and motivation as a result of the above issues • External factors include an increase in vacancies for more attractive jobs.

28. Problems of high labour turnover • high recruitment and selection costs to replace staff who leave • high induction and training costs • reduced productivity due to the disruption caused by skilled staff leaving • low morale among existing workers due to constantly changing staff • Use the internet to find data about differences in labour turnover: • between the private and public sector • within the private sector, between industries that have the lowest and the highest rates • between professionals and less skilled workers • between different regions • Discuss the possible reasons for the differences identified.

29. How to reduce labour turnover • Working in groups, assume you are management consultants brought into a firm to advise it on how to reduce labour turnover. Identify three key strategies you would suggest and share them with the rest of the class. Compare your strategies with the following list. • monitoring and benchmarking • exit interviews • recruitment and selection • induction and training • reducing turnover of long-term workers • As a class, discuss the following issues • Can labour turnover ever be avoided? • Can labour turnover ever be a good thing for a firm?

30. Absenteeism (1) • absenteeism: the proportion of employees not at work on a given day. • average daily absentee rate = number of staff absent on 1 day × 100 total number of staff • What is the average daily absentee rate if 21 people out of a workforce of 300 are absent on a given day? • If a firm has an average daily absentee rate of 5% and a workforce of 300, what is the typical number of people absent per day? • average annual absentee rate = total number of days lost due to absence during the year × 100 total number of days that could be worked x no of employees

31. Absenteeism (1) • absenteeism: the proportion of employees not at work on a given day. • average daily absentee rate = number of staff absent on 1 day × 100 total number of staff • What is the average daily absentee rate if 21 people out of a workforce of 300 are absent on a given day? • If a firm has an average daily absentee rate of 5% and a workforce of 300, what is the typical number of people absent per day? • average annual absentee rate = total number of days lost due to absence during the year × 100 total number of days that could be worked x no of employees Answers Average daily absentee rate = (21/300) x 100 = 7%. Typical number of people absent per day = (X/300) x 100 = 5%, so X = (5/100) x 300 = 15

32. Absenteeism (2) • What is the average annual absentee rate if the total number of days that could be worked is 250 (5 days × 50 weeks), the total number of employees is 80 and the number of days lost due to absence is 600?

33. Absenteeism (2) • What is the average annual absentee rate if the total number of days that could be worked is 250 (5 days × 50 weeks), the total number of employees is 80 and the number of days lost due to absence is 600? Answer Average annual absente rate = [600/(250 x 80)] x 100 = [600/20,000] x 100 = 3%.

34. Causes of absenteeism • In groups, try to identify what you think are likely to be the main causes of absenteeism. Think about them in two categories: unavoidable and avoidable. • Explore what the impact of high rates of absenteeism is likely to be for business. To help you in this, consider that in 2007 the average cost of absence for a firm was £659 per employee per year and there were about 29 million people in employment.

35. Strategies to reduce absenteeism • introducing more flexible working practices • ensuring that jobs are interesting and challenging • improving working conditions and thus reducing dissatisfaction • improving relations between employers and employees • introducing attendance bonuses as an incentive to attend regularly • Working in groups and using the internet and any other resources you have available, try to establish how effective these strategies have been when introduced by firms. Share your findings with the class.

36. Health and safety absenteeism • rate of absenteeism due to health and safety reasons = • number of working days lost per year due to health and safety reasons × 100total number of possible working days per year • What is the rate of absenteeism due to health and safety reasons, if over a period of a year there are 250 actual working days and the number of days lost due to health and safety reasons is 5? • What are the possible consequences of excessive absenteeism due to health and safety reasons, and how might such absenteeism be reduced?

37. Health and safety absenteeism • rate of absenteeism due to health and safety reasons = • number of working days lost per year due to health and safety reasons × 100total number of possible working days per year • What is the rate of absenteeism due to health and safety reasons, if over a period of a year there are 250 actual working days and the number of days lost due to health and safety reasons is 5? • What are the possible consequences of excessive absenteeism due to health and safety reasons, and how might such absenteeism be reduced? Answer Rate of absenteeism due to health and safety reasons = (5/250) x 100 = 2%.

38. Measuring the effectiveness of the workforce • Working in groups, take one of the measures of workforce effectiveness already covered (labour productivity, labour turnover, absenteeism, absenteeism due to health and safety reasons). • Research the current trends in national data for this measure. • Evaluate the likely impact on business of the trends you identify. • Suggest possible strategies to reduce any negative impact. • Share your findings with the rest of the class.

39. Chapter 21 Developing an effective workforce: recruitment, selection and training

40. Recruitment and selection • Study a range of job descriptions and person specifications to ensure that you understand their content and their purpose: for example, access exemplar copies from textbooks or the internet, or those related to part-time jobs you might hold. • A summary of the recruitment and selection process

41. Internal and external recruitment • internal recruitment: filling a job vacancy by selecting someone from within the organisation. • external recruitment: filling a job vacancy by advertising outside the firm. • Advantages of internal recruitment • The employee’s abilities are known already. • Internal promotional opportunities are motivating for the workforce. • The recruitment and selection process is quicker. • A shorter induction period is required. • It is less expensive. • It reduces the risk of employing the wrong person. • Given these advantages, why might a firm choose to recruit people from outside the firm? Try to identifythe advantages of external recruitment.

42. Advertising media • Working in groups, try to identify as many different advertising media or methods of recruitment as possible, which might be used to attract the most suitable internal or external candidates. • Analyse under which circumstances it might be most appropriate to use the media or methods you identify. • Share your ideas with the rest of the class. • Of those methods identified, which do you think are used by the majority of organisations?

43. Application forms and CVs • An application form provides information in a standard format. This allows a business to collect information from job applicants in a systematic way, and to assess objectively a candidate’s suitability for a job, therefore making it easier to shortlist candidates for interview. • CVs include similar information (details of the individual, their qualifications, their experience and why they are suitable for the job), but give candidates the opportunity to sell themselves in their own way. They do not have the restrictions of fitting information into boxes like an application form. A CV is usually accompanied by a letter of application. • Both application forms and CVs can increasingly be submitted online.

44. Interviews and other methods of assessment • Interviews are the traditional and still the most popular method of selection, but they are not necessarily the most effective in indicating how well an individual will perform in a job. This is because interviewers tend to be swayed by appearance and personality, and are often overly influenced by first impressions. • Other selection techniques include: • aptitude and attainment tests • psychometric or personality tests • assessment centres • Working in groups, research any one of the four methods of selection noted above: interview; aptitude and attainment tests; psychometric or personality tests; and assessment centres. Establish what they are, in which situations they are most appropriate to use and what their advantages and disadvantages are. Share your findings with the rest of the class.

45. Factors affecting methods of recruitment and selection • Having studied the various aspects of recruitment and selection, try to identify the factors that are likely to affect the methods of recruitment and selection used by a business. • Check your ideas against the following list: • the level of the job within the organisation • the size of the organisation • the resources available to fund the process • the cost of any particular method • the supply of labour • the culture of the firm • Analyse the possible consequences for a business of adopting an effective recruitment and selection method.

46. Training • Training involves employees being taught new skills or improving existing skills. • Working in groups, identify the main reasons why a business might need to provide training for its employees (both new and existing). Share your ideas with the rest of the class. • Check them against the following list: • the development and introduction of new products • restructuring of the firm • the development and introduction of new technology • changes to procedure, including improvements to customer service • high labour turnover • low morale • changes in legislation • Continue working in groups to research the main benefits of training to a firm. Share your findings with the class.

47. Induction training • induction training: education for new employees, which usually involves learning about the way the business works rather than about the particular job that the individual will do. • An effective induction programme is likely to: • reduce labour turnover • improve employees’ understanding of both the corporate culture and the situation in which the organisation is placed • mean that employees contribute to the organisation more quickly • increase motivation • Many of you have employment — either part time during term time or full time during the holidays. Share your experiences of the induction training you were given and how effective you found it in helping you to settle in.

48. On-the-job and off-the-job training • on-the-job training: where an employee learns a job by seeing how it is carried out by an experienced employee. • off-the-job training: all forms of employee education apart from that at the immediate workplace. • Working in groups, research the types of on-the-job and off-the-job training that might take place and identify the advantages and disadvantages of both types of training. Share your findings with the rest of the class. • How might the effectiveness of the following training opportunities be evaluated? • a course on using a computer package or a particular piece of machinery • a management training course • a customer care course • How might the overall effectiveness of training in a business be evaluated?

49. Chapter 22 Developing and retaining an effective workforce: motivating employees

50. Theories of motivation • motivation: the causes of people’s actions — why people behave as they do. • motivation theory: the study of factors that influence the behaviour of people in the workplace. • scientific management and F. W. Taylor • the human relations school and Elton Mayo • Abraham Maslow’s hierarchy of human needs • Frederick Herzberg’s motivation and maintenance • Working in groups, select one of the above theories of motivation. • Research the theory and what it says about how workers are motivated. • Summarise your findings on one side of A4. • Present your findings to the rest of the class and respond to any questions. • Provide each member of the class with the summary of your findings.