3.6 Decision making to improve financial performance

• Human Resources


  The organisation's employees in general, or the department responsible for their management
• Human Resource Management (HRM)

  The actual management of the employees or department
• Areas included in HRM


  • Health and safety
  • Employees rights (trade unions)
  • Hierarchy/promotion
  • Recruitment and selection
  • Legislation
  • Appraisals
  • Contracts
  • Training
  • Pay
  • Consultations
  • Motivation
• Importance of setting human resource objectives


  • It gives employees something to work towards
  • Improves efficiency
  • Focus for decision making
  • Improves coordination between departments
• Internal influences on human resource objectives and decisions


  • Corporate objectives
  • Operational strategies
  • Marketing strategies
  • Financial strategies
• External influences on human resource objectives and decisions


  • Market changes
  • Economic changes
  • Technological changes
  • Social changes
  • Political & legal changes
• Labour Productivity


  Output per period / number of employees per period
• Unit Labour Costs

  Total labour costs / total units of output
• Employee Costs as a % of Revenue

  Employee costs / sales turnover x 100
• Absenteeism


  Staff absent / total number of staff
• Labour Turnover


  Number of employees leaving during period / average number employed during period
• Labour Retention

  Number of employees for one year or more / overall workforce number x 100
• The workforce plays a very important role in the growth and expansion of the business. Because of this, analysing data for the workforce is crucial to human resource decision making and planning because the company needs to know that the workforce is working effectively and efficiently, and that they are meeting the demands of the firm in order to meet the objectives set by the business for the future.
• Categories involved in human resource objectives and planning

  • Employee engagement and involvement
  • Talent development
  • Training
  • Diversity
  • Alignment of values
  • Number, skills and location of employees
• Job Design


  The process of deciding on the content of the job in terms of its duties and responsibilities, on the methods to be used in carrying out the job, in terms of techniques, systems, and procedures, and in the relationships that should exist between the job holder and his superiors, subordinates and colleagues
• Hackman and Oldham's Job Characteristic Model

  • Skill Variety
  • Task Identity
  • Task Significance
  • Autonomy
  • Job Feedback
• Organisational influences on job design


  • Machinery
  • Money/finance
  • Existing skills
  • Nature, range, and volume of tasks for employees required to complete
  • Physical capabilities
  • The way work is organised/carried out
  • Quality standards
  • Time frame required for products to be completed
• External environment influences on job design

  • Technological developments
  • Levels of education
  • Social changes
• Employee related influences on job design

  • Autonomy
  • Range of skills
  • Feedback
  • Variety of jobs
• Authority


  The rights of permission assigned to a particular role in an organisation in order to achieve organisational objectives
• Chain of Command

  The order of authority and delegation within a business
• Delegation


  The process of passing authority down the hierarchy from a manager to a subordinate
• Centralisation / Decentralisation


  The degree to which authority is delegated within the organisation. A centralised structure has a greater degree of central control, while and decentralised structure involves a greater degree of delegated authority to the subordinates
• Span of Control


  The number of subordinates for whom a manager is directly responsible
• External influences on organisational design


  • Objectives – expansion/growth
  • Sources of finance
  • Leadership type
• Internal influences on organisational design


  • Levels of education in society
  • State of economy
  • Technological developments
• Influences on delegation, centralisation, and decentralisation


  • History and nature of the organisation
  • Size of the organisation
  • Availability of competent managers
  • Time frame of decisions
  • The importance of a decision
  • Environmental influence
• Organisational structure types


  • Functional
  • Geographical
  • Product line based
  • Customer/market based
• Decentralisation

  • The authority to make decisions lies with the head of that particular unit
  • Decisions can be made faster
  • Decisions are made closer to the scene of action, and are therefore, timely and accurate
• Importance of a decision

  • Decisions involving high risks and costs are made by the top management
  • Decisions involving routine and low-risk activities are delegated to the subordinates
• Environmental influence


  Government regulation of private business is the most important factor, which affects the extent of decentralisation
• Organisational structure types

  • Functional
  • Geographical
  • Product line based
  • Customer/market based
  • Matrix
• Human Resource Flow


  The flow of people in and out of the business
• Human Resource Flow


  • Inflow (Recruitment, selection, induction)
  • Internal flow (Evaluation, career development, promotion, training)
  • Outflow (Leaving, dismissal, redundancy, retirement)
• Motivation


  The desire and energy to be continually interested and committed to a job, role, or subject, or to make an effort to attain a particular goal
• Benefits of motivation to a business

  • Improved productivity
  • Reduced costs
  • Improved reputation
  • Improved likelihood of meeting objectives
  • Improved work ethic
  • Competitive advantage
• Taylor's motivational theory


  • Workers are mainly motivated by pay
  • Workers do not naturally enjoy work and so need close supervision and control
  • Managers should break down production into a series of small tasks
  • Workers should be given appropriate training and tools
  • Workers are paid according to the number of items they produce in a set period of time (piece-rate pay)
  • It links closely with an autocratic management style
• Mayo's motivational theory


  • Workers are not just concerned with money but could be better motivated by having their social needs met whilst at work
  • Better communication between managers and workers
  • Greater manager involvement in employees working lives
  • Working in groups or teams
  • It closely fits in with a paternalistic style of management
• Herzberg's motivational theory

  • Motivators are more concerned with the actual job itself
  • Hygiene factors are factors which 'surround the job' rather than the job itself
• Methods to improve the nature and content of the job


  • Job enlargement
  • Job enrichment
  • Empowerment