Business Studies Section 2

[Type the document title]
IGCSE Business Studies ( 0450 )
Summary
Section 2: People in business
Motsem Abu Zahra

0788586401
Amman- Jordan
0
Section 2: People in business
What is Motivation
Motivation is the reason behind a specific behavior particularly human
behavior. Reasons for motivation may vary such as basic needs, an object,
goal, state of being or ideal. Motivation for behaving in a certain way could
also be due to morality.
Geen (1995) defines motivation as the

initiation, direction, intensity and persistence of human behavior.
Twyla Dell writes of motivating employees,
"The heart of motivation is to give people what they really want most
from work. The more you are able to provide what they want, the more
you should expect what you really want, namely: productivity, quality,
and service.
People differ in wants or needs. The theories of motivation, in part, aim to
explain the reason behind these wants and needs. Most theories are based
on the needs of the person and the idea that satisfying this need is
important before the person can focus on other needs.
IGCSE Business Studies 0450 Summary Motasem Abu Zahra 0788586401 Amman-Jordan
1 https://www.facebook.com/IGCSE-Business-Studies-760235514181577/
Importance of motivation in a business environment
A positive motivation philosophy and practice should improve productivity,
quality, and service. Motivation helps people:
 Easier for business to achieve its set goals and targets

 improves efficiency and productivity
 Reduces wastage
 lower level of staff turnover which leads to lower recruitment and
training costs
 Lower rate of absenteeism
 Better quality of products which improves the business image in the
long run
Motivation Theories
F.W. Taylor 'Scientific Management'
 People work for personal gain.

 If they are paid more they will work more effectively.
 Break down workers job into simple processes and calculate how
much output they should produce in one day.
 If they achieve the target they will be given more money.
Maslow’s Hierarchy of needs

Human beings has five types of needs
 Physiological needs or basic needs which relates to food, shelter,

warmth and sleep
 Security needs or Safety needs i.e. to protect against danger and
poverty
 Social needs is having friendship, a sense of belonging
 Esteem needs involves having status and recognition, achievement
and independence
 Self-actualisation involves succeeding to your full potential
Herzberg’s motivation-hygiene theory

Frederick Herzberg, contributed to human relations and motivation two
theories of motivation as follows:
 Hygiene Theory
 Motivation
Herzbergs' first component in his approach to motivation theory involves

what are known as the hygiene factors and includes the work and
organizational environment. These hygiene factors include:
 The organization
 Its policies and its administration
 The kind of supervision (leadership and management, including
perceptions) which people receive while on the job
 Working conditions
 Interpersonal relations
 Salary
 Status
 Job security
These factors do not lead to higher levels of motivation but without them
there is dissatisfaction.
The second component in Herzbergs' motivation theory involves what

people actually do on the job and should be engineered into the jobs
employees do in order to develop intrinsic motivation with the workforce.
The motivators are
 Achievement
 Recognition
 Growth / advancement
 Interest in the job
These factors result from internal instincts in employees, yielding

motivation rather than movement.
Both these approaches (hygiene and motivation) must be done
simultaneously. Treat people as best you can so they have a minimum of
dissatisfaction. Use people so they get achievement, recognition for
achievement, interest, and responsibility and they can grow and advance in
their work.
Therefore, the hygiene and motivation factors can be listed as follows:

Hygiene
 Company policies and administration

 Supervision
 Working conditions and interpersonal relations
 Salary, status and security
Motivators
 Achievement
 Recognition for achievement
 Interest in the task
 Responsibility for enlarged task
 Growth and advancement to higher level tasks
McGregor’s Theory X and Theory Y

Douglas McGregor found out that there are broadly two types of managers.
One who believes in Theory X and the other who believes in Theory Y.
Theory x ('authoritarian management' style)
 The average person dislikes work and will avoid it he/she can.
 Therefore most people must be forced with the threat of punishment
to work towards organisational objectives.
 The average person prefers to be directed; to avoid responsibility; is
relatively unambitious, and wants security above all else.
Theory y ('participative management' style)
 Effort in work is as natural as work and play.

 People will apply self-control and self-direction in the pursuit of
organisational objectives, without external control or the threat of
punishment.
 Commitment to objectives is a function of rewards associated with
their achievement.
 People usually accept and often seek responsibility.
 The capacity to use a high degree of imagination, ingenuity and
creativity in solving organisational problems is widely, not narrowly,
distributed in the population.
 In industry the intellectual potential of the average person is only
partly utilised.
Financial motivators
Pay
Pay can be given in two ways
Wages
Often paid every week, sometimes in cash or sometimes into a bank
account. It is a common way of remuneration for manual workers those
who work in factories and warehouse. It can be calculated in two ways:
 Piece Rate: this is where the workers are paid depending on the
quantity of products made. The more they make the more they get
paid. This system of wages is followed where the output can be
counted.
 Time Rate: This payment by the hour. The longer you work the more
you get paid. This system of wages is followed where the output
cannot be measured.
Salaries
Salaries are paid monthly. It is common for office and administrative staff.
Additional methods of financial motivation:

Commission: It is often paid to sales staff. The certain percentage of
commission is paid to sales person who exceed a certain level of sales. It
motivates the sales staff to sell more.
Profit Sharing: Employees receive a share of the profits in addition to their

basic salary.
Bonus: Extra amount is paid to workers once a year or at intervals during

the year as an appreciation of their hard work.
Performance related pay: Employee pay is linked to their performance in
work. An Appraisal is carried out for the employee and they get paid
according to their appraisal.
Share ownership: As a gesture of appreciation for the hard work of the
employees a business might offer stock options to its employees. This
motivates them to worker even harder because they are also the owners of
the company.
Fringe benfits
Fringe benefits are accurately named, as they are meant to be additional
compensation for work performed or for services rendered. They are
intended to be viewed differently than a base salary or regular wages, but
like money are designed to provide incentive for the worker. Examples of
fringe benefits include:
 Free Children education

 Discount on firms products
 Health care facilities
 Company vehicle
 Free accommodation
 Expense for clothing and food
 Leave travel allowance
 Pension facilities
Non-financial Motivators
Job rotation
Where workers switch from one job to another. So a worker is doing
different jobs on different times. Usually these jobs are of the same type
and do not involve any extra responsibility or skills. The idea is to give
variety to the worker.
Job enlargement
It involves increasing the scope of a job or broadening the task assigned to
the worker. More variety in the job carried out by the worker leads to more
job satisfaction.
Job enrichment
Where employees are given greater depth to their range of tasks rather
than simply a wider variety of tasks of a similar level. They take part in
decision making and problem solving. They help set targets and accept
responsibility for the organisation and the quality of their own work.
Team working
This is where a group of workers is given responsibility for a particular
process, product or development. The group is free to decide the way the
job is done and how to organise the job. Each worker is involved in
decision making and is responsible for the results. This creates a sense of
purpose and commitment to the job at hand thus leading to greater job
satisfaction.
Organisational Structure
Organisational structure is defined as the
relatively enduring allocation of work roles and administrative
mechanisms that creates a pattern of interrelated work activities and
allows the organisation to conduct, co-ordinate and control its work
activities
To put it in simple words Organisational structure refers to the levels of
management and division of responsibilities within an organisation.
In an organization of any size or complexity, employees' responsibilities
typically are defined by what they do, who they report to, and for managers,
who reports to them. Over time these definitions are assigned to positions
in the organization rather than to specific individuals. The relationships
among these positions are illustrated graphically in an organizational chart.
Types of Organisation Structure
Line Organisation
It is perhaps the oldest and the simples organisational structure. In this kind
of structure every manager exercise a direct authority over his subordinate
who in turn directly reports to their superiors.
 There is a hierarchical arrangement of authority.

 Each department is self contained and works independently of other
departments.
 Lines of authority are vertical i.e. from top to bottom.
 There are no staff specialists.
Advantages
 Simple to establish and operate

 Promotes prompt decision making.
 Easy to control as the managers have direct control over their
subordinates.
 Communication is fast and easy as there is only vertical flow of
communication.
Disadvantages
 Lack of specialisation
 Managers might get overloaded with too many things to do.
 Failure of one manager to take proper decisions might affect the
whole organisation.
However, line structures are suitable for
 small businesses where there are few subordinates

 organisations where there is largely of routine nature and methods of
operations are simple.
Functional Organisation
The organisation is divided into a number of functional areas. This
organisation has grouping of activities in accordance with the functions of
an organisation such as production, marketing, finance, human resource
and so on.
The specialist in charge of a functional department has the authority over
all other employees for his function.
Advantages
 Is logical and reflection of functions

 Follows principle of occupation specialisation
 Simplifies training
 Better control as the manger in charge of each functional department
is usually an specialist.
Disadvantages
 Overspecialisation and narrow viewpoints of key personnel can limit

the organisation growth.
 Reduced coordination between functions.
 Conflicts between different functions could be detrimental for the
organisation as a whole.
 Difficult for general managers to coordinate different departments.
However, it is much suitable for large organisations where there is ample

scope for specialisation. Once harmony and proper coordination among
different functions is achieved, it could lead to sure success for an
organisation.
Line and Staff Organisation

It is a combination of line and functional structures. In this organisation a
structure, the authority flows in a vertical line and get the help of staff
specialist who are in advisory. When the line executives need advice,
information about any specific area, these staff specialists are consulted.
For example Chief accountant has command authority over accountants
and clerks in the accounts departments but he has only advisory
relationship with other departments like production or sales.
Advantages
Line managers are provided by expert advice by these specialists.
Staff managers provide specialist advice which can improve quality of
decisions in various departments.
Disadvantages
Line managers and staff managers might have conflicts on particular
issues.
Line and staff managers might not be clear as to what the actual area of
operations is and what is expected of them. Co-ordination may be a
problem.
Staff personnel are not accountable for the results and thus may not take
tasks seriously.
However, Line and staff organisation is very suitable for large organisation.
Project Organisation
The project structure consists of a number of horizontal organisational units
to complete projects of a long duration. A team of specialists from different
areas is created for each project. Usually this team is managed by the
project manager. The project staff is separate from and independent of the
functional departments.
Advantages
 Special attention can be provided to meet the complex demand of the

project.
 It allows maximum use of specialist knowledge thus chances of
failure are very less.
 Project staff works as a team towards common goal which results in
high motivation level for its members.
Disadvantages
As the project staff consists of personnel from diverse fields, it might be
quite challenging for the project manager to coordinate among them.
Matrix Organisation
 Matrix organisation combines two structures – functional

departmentation and project structure.
 Functional department is a permanent feature of the matrix structure
and retains authority for overall operation of the functional units.
 Project teams are created whenever specific projects require a high
degree of technical skill and other resources for a temporary period.
 Project team form the horizontal chain and functional departments
create a vertical chain of command.
 Members of a particular team are drawn from the functional
departments and are placed under the direction of a project manager
who has the overall responsibility of a particular project.
Advantage
 Is oriented towards end results.

 Professional identification is maintained
 Pinpoints product-profit responsibility
Disadvantages
 Conflict in organisation authority exists.

 Possibility of disunity of command exists
 Requires manager effective in human relations
Matrix organisations is used in industries with highly complex product

systems for example, aerospace industry where project teams are created
for specific space or weapon systems.
What is Delegation?
Delegation is the assignment of authority and responsibility to another
person (normally from a manager to a subordinate) to carry out specific
activities. However the person who delegated the work remains
accountable for the outcome of the delegated work. Delegation empowers
a subordinate to make decisions.
What makes an effective delegation?

To enable someone else to do the job for you, you must ensure that:
 Objectives must be clearly defined.

 Authority and responsibility of each subordinate must be clearly
defined.
 Subordinates show be rewarded suitably as a positive incentive for
accepting responsibility.
 Workers should be given adequate training for carrying out the task
delegated.
 Two way communication between the manager and the subordinate.
Benefits for the manager
 can concentrate on more important job and improve their productivity.

The manager gets the opportunity to handle aspects of the job that no
one else can do. These activities might include project planning,
monitoring team members, and handling personnel problems as they
arise.
 Delegation ensures that specialist people are doing the job which
reduces the chances of mistakes by the manager.
 Manager can also gauge the efficiency of the subordinates.
Benefits for the subordinates
 It motivates the subordinates as they feel more trusted.

 Through delegation subordinates can be trained to handle
responsibilities and future growth.
 Increases team member involvement. Proper delegation encourages
team members to understand and influence the work the department
does.
For the organisation
 Quick decisions can be taken as the authority to take decisions lies

near the point of action.
 Delegation improves a healthy relationship among the manager and
the subordinate and thus fewer conflicts.
Functions of the manager

There are basically four management concepts that allow any organization
to handle the tactical, planned and set decisions. The four basic functions
of the management are just to have a controlled plan over the preventive
measure.
These Functions can be summarized below:
Planning
Planning is the first tool of the four functions in the management process.
The difference between a successful and unsuccessful manager lies within
the planning procedure. Planning is the logical thinking through goals and
making the decision as to what needs to be accomplished in order to reach
the organizations’ objectives. Managers use this process to plan for the
future, like a blueprint to foresee problems, decide on the actions to evade
difficult issues and to beat the competition.
Organising
The second function of the management is getting prepared, getting
organized. Management must organize all its resources well before in hand
to put into practice the course of action to decide that has been planned in
the base function. Through this process, management will now determine
the inside directorial configuration; establish and maintain relationships,
and also assign required resources.
Directing
It involves the implementation of plans by mobilising individuals and group
efforst through motivation, communication, leadership and supervision.
Directing may be defined as the process of activating the efforts of
employees towards the achievement of organisational objectives.
Controlling
It is the process of regulating the ongoing activities of the organisation to
ensure that they are in conformity with the established plans and produce
the desired results. Through the controlling function, management can
keep the organisation o its chosen track. It involves:
 Establishing standards of performance

 Measuring current performance
 Comparing actual results with the established standards
 Detecting deviations from the standards
 Taking corrective actions for significant deviations.
Functions of various departments

Every organisation is made up of different department. Each department
contributes to the running of the business. The most common departments
are:
 Production
 Marketing & Sales
 Finance
 Human resource
 and in some cases, Information Technology departments
Production Department
The production department is responsible for converting inputs into outputs
through the stages of production processes. The Production Manager is
responsible for making sure that raw materials are provided and made into
finished goods effectively. He or she must make sure that work is carried
out smoothly, and must supervise procedures for making work more
efficient and more enjoyable.
There are five production sub-functions
 Production and planning.
They will set the standards and targets at each stage of the production
process. The quantity and quality of products coming off a production line
will be closely monitored.
 Purchasing department
This department will provide the materials, components and equipment

required. An essential part of this responsibility is to ensure that stocks
arrive on time and are of good quality
 The stores department
The stores department are responsible for stocking all the necessary tools,
, raw materials and equipment required to service the manufacturing
process.
 The design and technical support department
They are responsible for the design and testing of new product processes
and product types, together with the development of prototypes through to
the final product.
 The works department
This department is concerned with the manufacture of products. This will

include the maintenance of the production line and other necessary repairs.
The works department may also have responsibility for quality control and
inspection.
Human resource Department

The role of Human resource department is in charge of recruiting, training,
and the dismissal of employees in an organisation.
 Recruitment and selection

 Training programmes
Training programs are held by the HRD to improve the employees skills, as
well as to motivate them.
There are three main types of training :
 Induction training
 On-the- job training
 Off-the-job training
 Manpower Planning
The HR department needs to think ahead and establish

the number and skills of the workforce required by the business in the
future. Failure to do this could lead to too few or too many staff or staff with
inappropriate needs.
 Dismissal and Redundancy (retrenchment)
Dismissal is where a worker is told to leave their job due to unsatisfactory

work or behaviour.
Redundancy is when the business needs to reduce the number of
employees either because it is closing down a branch or needs to reduce
costs due to falling profits. It may also be due to technological
improvements, and the workers are no longer needed.
Marketing department
These are the main section of the market departments:
 Sales department is responsible for the sales and distribution of the

products to the different regions.
 Research & Department is responsible for market research and
testing new products to make sure that they are suitable to be sold.
 Promotion department decides on the type of promotion method for
the products, arranges advertisements and the advertising media
used.
 Distribution department transports the products to the market.
Finance Department
 Book keeping procedures

Keeping records of the purchases and sales made by a business as
well as capital spending.
 Preparing Final Accounts
Profit and loss account and Balance Sheets
 Providing management information
Managers require ongoing financial information to enable them to
make better decisions.
 Management of wages
The wages section of the finance department will be responsible for
calculating the wages and salaries of employees and organising the
collection of income tax and national insurance for the Inland
Revenue.
 Raising Finance
The finance department will also be responsible for the technical
details of how a business raises finance e.g. through loans, and the
repayment of interest on that finance. In addition it will supervise the
payment of dividends to shareholders.
Functions of Human Resource Department
A typical Human Resource Department is carries out the following functions:
Manpower Planning
It involves the planning for the future and finding out how many employees will
be needed in the future by the business and what types of skills should they
possess.
It depends on the following factors

 The number of people leaving the job
 The projected growth in sales of the business
 Technological changes
 Productivity level of the workers
Job analysis and Job description

HR Department is also involved in designing the Job analysis and Job description
for the prospective vacancies.
A job analysis is the process used to collect information about the duties,
responsibilities, necessary skills, outcomes, and work environment of a particular
job.
Job descriptions are written statements that describe the:
 duties,
 responsibilities,
 most important contributions and outcomes needed from a position,
 required qualifications of candidates, and
 reporting relationship and co-workers of a particular job.
Determining wages and salaries

HR Department is also involved in conducting market surveys and determining the
wages and salaries for different position in an organization. These decision may
be taken in consultation with top management and the Finance department.
Recruitment and Selection

One of the most important jobs HR department is to recruit the best people for
the organization. This is of crucial importance as the success of any organization
depend on the quality of its workforce.
Performance Apprasial
Once the employees are recruited , the HR Department has to review their
performance on a regular basis through proper performance appraisals.
Performance appraisal is the process of obtaining, analyzing and recording
information about the relative worth of an employee. The focus of the
performance appraisal is measuring and improving the actual performance of the
employee and also the future potential of the employee. Its aim is to measure
what an employee does.
On the basis of performance appraisal the HR Department will set up an action
plan for each employee. If the employees needs any training then he provided
that.
Training and Development

HR department is constantly keeping a watch over the employees of the
organisation. In order to improve the efficiency level of the employees they have
go undergo regular trainings and development programmes. All trainings and
development needs are carried out by this department. Training might include on
the job or off the job training.
Employee welfare and motivation

Happy employees mean a healthy organization. HR Department conducts various
employee welfare activities which might include employees get together, annual
staff parties etc. HR department also reviews organizational policies and its
impact on the motivation of the employees.
Addressing employees grievances

HR department is the link between the workers and the management. Employees
grievances related work environment are usually entertained and resolved by the
HR Department.
Labour management relations
For the smooth operation of any organization, it is crucial to have good labour
management relations. HR department has to ensure that these relations are
cordial. In case of any labour-management conflict the HR Department will play a
vital role in bringing both management parties to the negotiation table and
resolving the issue.
Implementing organizational policies

HR Department has to coordinate with line manager and see that the
organizational policies are being implemented in a proper manner. Disciplinary
action can be initiated against employees who are not following organizational
rules and regulations. All these actions are conceived and implemented by the HR
department.
Dismissal and redundancy

HR Department has to take firm actions against employees who are not following
the organizational code of conduct, rules and regulations. This can result in the
dismissal of the employee.
Sometimes, an organization may no more require the services of an employee.
The employee may be made redundant. HR Department has to see that
organizational and government regulations are being followed in this process.
Recruitment and Selection Process

The recruitment process starts with a vacancy arising.
Job analysis and description
Once a vacancy arises the human resource manager will first identify and
record the responsibilities and tasks which are related to the job. After
analysing the responsibilities and tasks they are noted down which
becomes the Job description for the job. It includes:
 A job title
 Department of the business in which the new employee would work
 Details of the tasks to be performed
 Responsibilities involved
 Place in the hierarchical structure
 Methods of assessing the performance
Job Specification
On the basis of Job description, a job specification is made. It is a
document which outlines the requirements, qualifications and qualities,
skills and knowledge required for the job. It is also known as person
specification.
Job Advertisement
After completing the person specification (job specification) the vacancy is
advertised. It can be advertised internally (on the company notice board or
newsletter) or may be advertised externally in a newspaper or magazine.
The advertisement will usually contain the elements of a person
specification with additional information like the name and profile of the
company, date and time of interview, address of the company and the
contact person etc.
Applications received and shortlisted

Once a job is advertised, there might be hundreds of application received.
All of the applications received might not be suitable for the job. Thus a
short listing of the applications will be done. The applications most near to
the job specification will be called for interview and those who do not qualify
the criteria will be rejected.
Interview
The shortlisted candidates will be called for an interview to verify their
qualifications, personal qualities and aptitude for the job. It may involve a
face to face discussion between the interviewer and interviewee. The firm
may also conduct skill test, aptitude tests or personality test if it deems fit
so.
Selecting the suitable candidate

The candidate who scores the maximum in the interview will be selected for
the job and given an appointment letter.
Manpower Planning
It involves the planning for the future and finding out how many employees
will be needed in the future by the business and what types of skills should
they possess.
It depends on the following factors
 The number of people leaving the job

 The projected growth in sales of the business
 Technological changes
 Productivity level of the workers
Difference between a part time employee and full time employee?

There are three main parameters on which we can differentiate between a
full time employee and a part time employee. These are:
Number of hours worked

A part time employee usually works less number of hours than a full time
employee. Tradtionally it is 40 hours a week, but it might vary from
company to company.
Benefits
In many organizations, part time worker is not eligible for benefits such as
health insurance, paid time off (PTO), paid vacation days, and sick leave.
Some organizations enable part time employees to collect a pro-rated set
of benefits. In other organizations, part time status makes an employee
ineligible for any benefits. Full time employees are usually eligible for most
of the benefits as per the company policy.
Work Schedules
Part Time employees have a more flexible work schedule as compared a
full time employee
Benefits of Part time workers
Less overhead cost

In many organizations, part time employees is not eligible for benefits such
as health insurance, paid time off (PTO), paid vacation days, and sick
leave.Some organizations enable part time employees to collect a pro-
rated set of benefits. In other organizations, part time status makes an
employee ineligible for any benefits.
Ability to attract desirable workforce

There might be many people who are good at their work but do not want to
work full time. For example, many new mothers want to go back to work,
but they don't want to go back full time or have to pay too much for a nanny
or day-care service. Part-time work may also attract retirees who have a
wealth of knowledge and would be great mentors to younger staff
members.
Flexible workforce
It’s a great way to develop your business as a flexible workforce allows you
to respond to changes in demand, whether that is through hours, services
or reputation.
Limitations of Part time workers
Inconsistent productivity
Part-time workers, especially those that work more temporarily or
seasonally, usually have less knowledge and familiarity with the company
because they work less
Part-time workers won't be on site as often as your full-time staff, it might

take them longer to get used to your company's culture or become familiar
with the programs used regularly. This may increase their training time or
reduce productivity while they're getting up to speed.
Lack of loyalty
Part-time workers usually have less commitment because they spend less
time at the company and find it easier to leave because of the lack of full-
time income and benefits. Thus, losing part-timers to other jobs is more
common.
Because there are both pros and cons to hiring part-time employees, a
business should carefully evaluate its needs before hiring part-time
workers. Part-time workers may help offset your health insurance costs, but
they may also not be able to offer the loyalty and time commitment to the
business.
What is training?
Training involves improving the skills, knowledge and attitudes of
employees so as to become more efficient and productive.
Objectives of Training
 Improve the efficiency of workforce

 Make workers multi-skilled and flexible
 Introducing a new process or new machinery
 Reduce wastage of material and time
 Adapt to change
Types of Training
Induction Training
It involves introducing a new employee to its work environment. Usually, it
includes
 introduction to colleagues,
 explaining the firm’s activities,
 procedures followed in the organisation,
 explaining the organisational structure,
 place of working etc.
On the Job training
A worker gets training by watching a more experienced worker doing the
job. It is common for unskilled and semi-skilled jobs. Thus the worker gets
trained while he is performing his regular duties.
Off the job training

This is when a worker goes away from the place of work to attend a special
course. The training can be in the form of a seminar, workshop or a college
course. Off the job training is usually conducted for managerial level
employees.
Types of Industrial Actions
 Strike: when employees refuse to work

 Picketing: When employees stand outside the workplace and
prevent the smooth functioning of the firm. E.g. they may stop the
movement of Lorries in and out of factory.
 Work to Rule: It is when workers purposely follow all the rules in
order to delay the progress of work.
 Go slow: It is when the employees work at a very slow pace.
 Non-cooperation: It involves workers refusing to follow a new
procedure or rule.
 Overtime ban: It is when the employees refuse to work overtime or
for additional hours of work apart from their normal working hours.
How a conflict could be resolved?
Worker participation
Worker participation refers to the influence that workers had on decision-
making at management level. Representative workers of influence
achieved this through their work on the various management-employee
committees.
Advocate workers of influence used formal, individual meetings with
management to influence their thinking. Informal workers of influence give
input to management thinking in informal arenas such as articles in the
newsletter and informal discussion where they exchange information with
management.
Participation requires that management share information about the
operation of the plant, the marketplace and the needs of customers and
suppliers.
Worker participation, is defined as
a situation in which workers have obtained or been given the right to take
part in managerial decision-making
It includes management seeking worker input to decision-making and
workers offering input to managers for consideration in decision-making.
Benefits of workers participation

Worker participation, may be expected to have the following benefits
 Effect of dampening employee grievances

 Lower labour turnover
 Improved motivation levels
 Increased Productivity and efficiency
 Less conflict between management and employees and thus better
employer-employee relations
 Contribution to decision making
Ways of Participation
One view is that workers or the trade unions should, as equal partners, sit
with the management and make joint managerial decisions.The other view
is that workers should only be given an opportunity, through their
representatives, to influence managerial decisions at various levels.I
In practice, the participation of workers can take place by one or all the
methods listed below:
1. Board level participation

2. Ownership participation
3. Complete control
4. Staff or work councils
5. Joint councils and committees
6. Collective Bargaining
7. Job enlargement and enrichment
8. Suggestion schemes
9. Quality circles
10. Empowered teams
11. TQM
12. Financial participation
Employers association
Employers association are groups of employers who join together to give
benefits to their member. Businesses join together to form their own
association, and members pay an annual subscription fee in return for the
benefits they would receive.
Examples include
 National Farmers Union

 Society of British Aerospace Comapnies
 Federation of Samll Businesses
 National Federation of Builders
Advantages of joining an employers association
 They represent employers and negotiate with the trade unions on

behalf of their members.
 Provide services to members for example statistical information, and
advice or help with recruitment, training, health, safety and industrial
relations problems
 Act as pressure groups on the goovernment to try to influence their
policies.
What is a Trade Union?

Trade Union is a group of workers who join together to protect their
interests and work for better wages and working conditions. It is a type of
pressure group.
Why do workers join trade unions?

Workers might join a trade union because
 They believe that there is strength in number and they will be listened
to when they in a group.
 To negotiate a better pay, more holidays and less hours of work.
 To pressurise the employer to provide them with a healthier and safer
working environment.
 Improved benefits for retrenched workers
 To get the benefits of advice, financial support and welfare activities
carried out by Trade Unions.
 Many workers may also join a trade union because there is a closed
shop policy.
Closed Shop
It is where all employees must be a member of the same trade union.
Single Union agreement

It is an agreement between the management and workers, where the
management deals with only one trade union and no other.
Collective bargaining
It means the negotiations between one or more trade unions and one or
more employers on pay and conditions of employment.
Productivity agreement
It is an agreement between the management and workers whereby the
management agrees to increase the benefits for workers in return for an
increase in productivity.
What is Dismissal?
Dismissal means when a worker is told to leave the job because of his
behaviour is unsatisfactory or he has repeatedly failed to carry out his
duties.
What is meant by Redundancy?

Redundancy happens when a person is told to leave the job because his
skills are of no more use to the organisation. This may happen due to many
reason, for example,
 A merger between two firms results in surplus job.

 A business is losing sales and wants to cut the production level or
cost and may lay off employees
 The product is taken out of production altogether
 Maybe new machinery is introduced and it requires different skills and
qualifications to operate it.
It is also known as retrenchment.
Communication
Communication is the transfer of information from the sender to the
receiver with the information being understood by both the sender and the
receiver.
Role of Communication
Communication is needed
 To establish and disseminate goals of an organisation

 To develop plans for their achievement
 To organise human and other resources in the most effective and
efficient way
 To select, develop and appraise members of the organisation
 To lead, direct and motivate people
 To control performance.
The communication process

Sender of the message: Communication begins with the sender who has
a thought or and idea which is then encoded in a way that can be
understood by both the sender and the receiver.
Transmission of message: The information is transmitted over a channel

that links the sender with the receiver. The message may be oral, written or
visual.
Receiver of the message: The receiver has to be ready for the message
so that it can be decoded. Accurate communication can only occur when
both the sender and the receiver attach the same meaning to the message.
Noise and Feedback: We can never be sure whether or not a message

has been effectively encoded, transmitted, decoded and understood until it
is confirmed by feedback.
Centralisation and Decentralisation
Centralisation implies the concentration of authority at the top level of the
organisation while decentralisation means dispersal of authority throughout
the organisation
According to Allen
Centralisation is systematic and consistent reservation of authority at
central points within an organisation. Decentralisation applies to the
systematic delegation of authority in an organisation context.
Advantages of Decentralisation
 Decentralisation reduces the workload of top executives.

 It improves job satisfaction and morale of lower level managers by
satisfying their needs for independence, participation and status.
 Decision making is quicker.
 It facilitates growth and diversification. As each product division is
given sufficient autonomy for innovation and creativity.
 It gives opportunity to subordinates to exercise their own judgment.
They develop managerial skills which will be useful to the
organisation in the longer run.
 Decentralisation requires wider span of control and fewer levels of
organisation. It speeds up communication.
 Decentralisation increases the administrative expenses and each
division or department has to be sufficient in terms of physical
facilities and trained personnel.
 As each department or division enjoys substantial autonomy it might
lead to co-ordination problems.
 There might be lack of uniformity and inconsistent procedures as
each department might have the authority to formulate its own
policies and procedures.
Disadvantages of Decentralisation
 Decentralisation increases the administrative expenses and each

division or department has to be sufficient in terms of physical
facilities and trained personnel.
 As each department or division enjoys substantial autonomy it might
lead to co-ordination problems.
 There might be lack of uniformity and inconsistent procedures as
each department might have the authority to formulate its own
policies and procedures.
Advantages of Centralisation
 Effective utilisation of talents of the top management.

 It reduces co-ordination problems as a unifying force integrates all
operations.
 It allows the development of a strong co-ordinates top management
team.
 There is uniformity of policies and plans across the organisation.
 Centralisation organisations are best suited where resources and
information has to move swiftly, especially in emergencies.
 Duplication of functions and facilities is minimised which in turn
reduces costs.
 Due to the fact that all decisions are made at the top it might result in
delays in decision-making and communication.
 Centralised power and authority might be abused.
 Doesn’t give an opportunity to lower level managers/supervisors to
develop their managerial skills.
 Centralised organisation faces the problem of lower motivation levels
among workforce.
 The success of organisation depends on the competence of top
executives which might be quite risky.
Disadvantages of Centralisation
 Due to the fact that all decisions are made at the top it might result in
delays in decision-making and communication.
 Centralised power and authority might be abused.
 Doesn’t give an opportunity to lower level managers/supervisors to
develop their managerial skills.
 Centralised organisation faces the problem of lower motivation levels
among workforce.
 The success of organisation depends on the competence of top
executives which might be quite risky.
What is a Leadership Style?

The motivation level of the workers is very much affected by the Leadership
style followed in an organisation. There are broadly three types
of leadership styles.
Types of Leadership Styles
Autocratic
In this style the manager believes in taking the decisions on its
own without consulting or communicating with their subordinates. They set
the objectives, give instructions to workers to achieve those objectives
and supervise closely to see whether their instructions are implemented.
There is one way communication from the boss to the subordinates only.
These types of managers can be categories as Theory X managers.
Motivation level for workers is usually low as they feel alienated from the
decision making process.
Democratic
Democratic managers trust their employees. They take decision based
on the feedback and comments of their subordinates. They believe
in delegation and encourage their subordinates to take
decisions. Communication is usually two ways where the employees
can give in their comments and suggestions. Organizations following
democratic style usually have high motivation level among their staff.
Laissez-faire
Managers who believe in Laissez-faire style of management give their
employees broad objectives and give them full liberty to make their
decision regarding how the work will be done. Communication may be a
problem as the manager may not be closely monitoring the progress of the
employee. It may be de-motivating sometimes as the workers may lack
direction and guidance from their superiors.
Types of Communication
Written Communication
It includes letters, memos, reports, notices, faxes and e-mails.
Advantages
 Provides records and references

 Message can be carefully drafted and directed to large audience
through mass mailing
 It promotes uniformity in policy and procedures.
Disadvantages
 It may create mountains of papers.

 May be poorly expressed by ineffective writers.
 May provide no immediate feedback.
 It may long time to receive and properly understood.
Oral Communication
Oral communication includes one to one conversations, interviews,
appraisal sessions, group meetings or team briefings.
Advantages
 It allows two way communication and feedback.

 It encourages motivation.
 It is fast and feedback can be received instantly.
 The message can be reinforced with the proper use of body
language.
Disadvantages
 Body language of both the sender and receiver may have a negative
impact.
 It may be unsuitable for information which is technical in nature.
Visual Communication
Visual communication usually includes diagrams, pictures, charts and
pictorial representation of the message.
Advantages
 Easy to understand and retain the information.

 May be more interesting than simple written communication.
Disadvantages
 It is not always clear and the may be misinterpreted by the receiver.
Flow of communication
In an organization, communication flows in various directions:
Downward communication: Downward communication flows from people

at higher level to those at lower levels in the organization hierarchy. This
kind of communication exists especially in organizations with an
authoritarian leadership style. Examples of written downwards
communication are memo, letters, handbooks, policy statements and
procedures.
Upward communication: This communication travels from subordinates

to superiors and continues up the organizational hierarchy. This type of
communication is found in participative and democratic organizational
environments. Typical means of upward communication are suggestion
systems, appeal and grievance procedures, complaint systems, counseling
sessions, grapevine, group meetings, morale questionnaires and the exit
interview.
Crosswise communication: It includes the horizontal flow of information
between people on the same or similar organisational levels and diagonal
flow between persons at different levels who have no direct reporting
relationships. This kind of communication is used to speed information flow,
to improve understanding and to coordinate efforts for the achievement of
organisational objectives. It may include oral communication ranging from
informal meetings , or more formal conferences and board meetings.
Written forms include company newspapers or magazine and bulletin
boards.
Barriers to Effective Communication

Barriers to effective communication mean the reasons for a breakdown in
communication. These breakdowns may be for arising due to
Problem with the sender
 The sender may use to technical language or may use ‘jargons’

which are difficult to understand.
 The sender may speak too quickly which makes it difficult to interpret
what he is saying.
 The sender initiates a wrong message.
 The message send by the sender may be too long and due to this the
main point to be emphasized may get lost.
 The sender may have a wrong opinion or perception of the receiver
and may not put effort to put across the message in an effective way.
Problem with the medium
 The message may be lost while transmitting.

 Using an inappropriate medium may result in the less effective
communication.
 A longer channel of communication will result in distortion of the
message and it may lose its original meaning.
 There is lots of physical disturbances in channel of communication
used.
Problem with the receiver
 The receiver might not be paying attention and thus the message
may lose its impact.
 In many cases, the sender might not be trusted by the receiver and
may not act in the intended way.
 The receiver may not have the necessary skills to understand the
message.
Problem with the feedback
 The feedback may be missing or distorted.
Steps to overcoming barriers to communication
Sender
 Message should be as brief as possible and to the point.

 Main points of the message should be highlighted.
 Language used should be understood by the recievier.
 Avoid using technical jargons.
 Use of appropriate facial expression while delivering verbal
messages.
Medium
 Select appropriate channel for communication.

 Medium used should be free from distortions such as telephone
failure etc.
 Use the shortest possible channel in order to avoid distortion.
Receiver
 Feedback should be asked from the receiver.

 Trust between the sender and reciver is an important requirement.
 Reciever should pay attention to the message received.
How to select the appropriate media?

There is no ‘best communication method’. The method of communication
may be chosen after considering the following factors:
How much does it costs?

Electronic media cost a lot and may not be afforded by an organization
whereas face to face discussion does not involve any cost.
How fast should be the communication?
Oral communication is always faster than written
communication. Moreover, with the advent of electronic media large
message can be transmitted over large geographical areas in the minimum
of time.
How much information is to be transmitted?

Written communication may be more suitable when dealing with loads of
information.
What is the importance of feedback?

In organizations where employees’ feedback is an integral part of decision
making, Oral communication may be the most important form of
communication.
Do you want a permanent record of information?

Written communication is most suitable form of communication when a
permanent record of the message has to be kept. For example, an
employee contract records the terms of employment.

Business Studies Section 2

Uploaded by

Copyright:

Available Formats

Business Studies Section 2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Studies Section 2

Uploaded by

Copyright:

Available Formats

[Type the document title]

IGCSE Business Studies ( 0450 )

Motsem Abu Zahra

Geen (1995) defines motivation as the

 Easier for business to achieve its set goals and targets

F.W. Taylor 'Scientific Management'

 People work for personal gain.

Maslow’s Hierarchy of needs

 Physiological needs or basic needs which relates to food, shelter,

Herzberg’s motivation-hygiene theory

Herzbergs' first component in his approach to motivation theory involves

The second component in Herzbergs' motivation theory involves what

These factors result from internal instincts in employees, yielding

Therefore, the hygiene and motivation factors can be listed as follows:

 Company policies and administration

McGregor’s Theory X and Theory Y

Theory x ('authoritarian management' style)

Theory y ('participative management' style)

 Effort in work is as natural as work and play.

Additional methods of financial motivation:

Profit Sharing: Employees receive a share of the profits in addition to their

Bonus: Extra amount is paid to workers once a year or at intervals during

 Free Children education

 There is a hierarchical arrangement of authority.

 Simple to establish and operate

However, line structures are suitable for

 small businesses where there are few subordinates

 Is logical and reflection of functions

 Overspecialisation and narrow viewpoints of key personnel can limit

However, it is much suitable for large organisations where there is ample

Line and Staff Organisation

 Special attention can be provided to meet the complex demand of the

 Matrix organisation combines two structures – functional

 Is oriented towards end results.

 Conflict in organisation authority exists.

Matrix organisations is used in industries with highly complex product

What makes an effective delegation?

 Objectives must be clearly defined.

Benefits for the manager

 can concentrate on more important job and improve their productivity.

Benefits for the subordinates

 It motivates the subordinates as they feel more trusted.

For the organisation

 Quick decisions can be taken as the authority to take decisions lies

Functions of the manager

These Functions can be summarized below:

 Establishing standards of performance

Functions of various departments

There are five production sub-functions

 Production and planning.

This department will provide the materials, components and equipment

 The stores department

 The design and technical support department

This department is concerned with the manufacture of products. This will

Human resource Department

 Recruitment and selection

The HR department needs to think ahead and establish

 Dismissal and Redundancy (retrenchment)

Dismissal is where a worker is told to leave their job due to unsatisfactory