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People in business - Organisational structures and measuring performance


Mathew Lister

on 2 February 2014

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Transcript of People in business - Organisational structures and measuring performance

photo (cc) Malte Sörensen @ flickr
People in Business
The issues that managers face in relation to managing the human element of a business
Improving Organisational

- Key elements of organisational structures
- Workforce roles
- How organisational structure affects business performance
Measuring the effectiveness
of the workforce
- Methods of measuring workforce performance
People in Business
- levels of hierarchy/spans of control
- work loads/jobs allocations
- delegation
- communication flows

End of lesson Activity
Organisational structure
is the way the jobs, responsibilities and power within a business are organised. When presented as a diagram.
Candidates should be able to calculate and interpret measures such as labour productivity and labour turnover
Developing an Effective Workforce
Recruitment, Selection, Training
- the recruitment process
- internal and external recruitment
- selecting the best employees
- how recruitment and selection can improve a workforce
- methods of training
types of recruitment and the recruitment process should include the stages from identifying a vacancy to receipt of applications
candidates should understand benefits and drawbacks of internal and external recruitment and training
methods of selection include: interviews, assessment centres and tests. candidates should also be familiar with person specifications and job descriptions
methods of training should include: on-the-job, off-the-job and induction
Developing & Retaining an
Effective workforce motivating employees
- Using financial methods to motivate employees
- Improving job design
- Empowering employees
- Working teams
- Theories of motivation
Specific theories of motivation will not be examined.
Candidates should use any relevant theories to support their arguments to consider influences on motivation.
Methods of improving job design should include: enrichment and enlargement.
Candidates should understand the links between the organisational structure and the motivational techniques available to managers
Sharing ideas
Business environment
Shared business goals
Market trends
- Must be a 2 way communication line between seniors and subordinates
- Ideas need to be shared up and down the chain of command
- Changes in the market, new competitors etc must be communicated to the correct area
- All layers of the business structure must be working towards common goals
- Tactical decision making must be communicated to the relevant department, are or individual to act on
- Market research, customer satisfaction, after sales services etc... must have a communication pathway to ensure the correct departments can act to improve the business
Staff costs are usually between 25 per cent and 50 per cent of a firm's total costs. So firms try to measure the performance of their people objectively (i.e. in a unbiased way)

Employee retention and employee performance MUST be measured
Labour Productivity
Labour Turnover
output per period
number of employees per period
number of staff leaving / year

average number of staff employed / year
Labour productivity is often seen as the single most important measure of how well a firm's workers are doing. It compares the number of workers with the output that they are making and is expressed through the formula
for example, if a window cleaner employs 10 people and in a day will normally clean the windows 150 houses, then the productivity is:
= 15 houses per worker per day
This is a measure of the rate of change of a firm's workforce. It is measured by the ratio:
so a firm which has seen five people leave out of its staff of 50 has a labour turnover of:
100 = 10%
Causes of Labour Turnover
Consequences of
high Labour turnover
If the rate of labour turnover is increasing, it may be a sign of distraction within the workforce. if so, the possible causes could be either internal to the firm or external
Internal causes;
- Poor recruitment
- Ineffective motivation
- Wage levels are lower
External causes;
- More local vacancies arising
- Better transport links
A high rate of labour turnover can have both negative and positive effects on a firm
- Cost of recruitment of replacement
- Cost of retraining replacements
- Time taken for recruits to settle and adopt the firms


- New workers bring new ideas and enthusiasm
- Workers with specific skills can be employeed
- New ways of solving problems can be seen to workers with different perspectives
Types of structures
There are lots of hierarchical structures, but we need to know 4 of them.

The process by which a job vacancy is identified and potential employees are notified.

Good recruitment has the right number of people with the right skills to do the job.
The process
1. Job description
2. Person Specification
3. Job description
4. Advertise
5. Process Aplications
6. Shortlist
7. Interview
8. Appoint
Why Vacancies?
- Promotion
- Expansion
- Natural wastage

- Internal audit - current skills dont match business needs

- Changing demand
- Changing technologies / techniques
- Employment trends
most common method
Psychometric Training
assessing the personality of the applicants will they fit in?
Aptitude Testing
assessing the skills of applicants
In-Tray exercise
activity based around what the applicants will be doing e.g. writing a letter to a disgruntled customer
looking for a different skills as well as the ideas of the candidate
Internal Recruitment
- Quick and cheap

- Greater variety

- motivate employees

- Avoids the need for new workers to be inducted

- Employees skills and attitude to work are already known

- Candidates understand the businesses objectives
- Another vacancy will be created

- Stagnation of idea generation

- Can cause resentment
External Recruitment
- Larger choice of candidates

- New ideas & perspectives

- Experiences of other businesses

- Expensive & time consuming

- Induction training will be needed

- Employees may not understand the business

- Time lag

Improving the workforce
Recruitment should be used to improve the workforce...
The business must ask the following:
- What quantity of labour is needed and what skills should they have?
- What is the labour turnover for the business?
- Is the cost of labour increasing or not?
- Are current training programs leading to increased productivity?
- Will tech changes lead to change in the requirements of the work force?

By comparing this to the current workforce and its skills the required employments will be identified..... These lead to accurate JDs & Specs that meet the needs of the business.
Induction Training
This is a programme aimed at introducting a new employee to a job.
it is used to
- Familiarise the worker with their job
- Make the employee as efficient as possible
- Encourage new workers to be committed to the organisation
What happens during induction training?
Induction training would typically include:
Information on important business policies and procedures - health and safety
Familiarising the new employee with the place of work
Details of employment and duties
An introduction to some of their work colleagues
On-the-job Training
An employee receives training whilst remaining in the workplace. Demonstrations, Insets, coaching, job rotation, team projects...
Off-the-job Training
On-the-job Training
Invest or not to invest?!
F.W. Taylor
He started the discussion of motivation. He was an American and has had a massive influence over the C20 world.

He saw it as managements task to decide exactly how every task should be completed. Then to devise the tools needed to enable the worker to achieve the task as efficiently as possible.

This methods is evident today in McDonalds throughout the world
F.W. Taylor
- He believed that people work only for one reason.. MONEY! (economic man)
- The manager should seek to maximise efficiency
- A manager could best motivate a worker by offering an incentive (Carrot) or a threat (Stick)
- Taylor can be seen as a manipulator and a bully
- He argued that his methods were in the best interests of workers
Elton Mayo
Heavily influenced by Taylor. He worked at the Hawthrone plant of western electric company in Chicago. He proved that there was more to motivation and efficiency than purely economic motives.
Experiments at Hawthrone :-
1. The Hawthrone Experiments
2. Relay Assembly Test
The consequences of Mayo's work were huge - this movement became known as the
Human Relations School
of management.
Businesses responded to this work to improve their profitability and success. Personnel departments grew hugely as a result
Self - Actualisation
Once a need is met we automatically need/want more so we aim to move up the Maslow Hierarchy
Measuring workforce effectiveness Evaluation
Performance ratios such as labour turnover raise questions - they do not supply answers. Follow-up staff surveys or discussions may be needed to discover the underlying problems. Figures such as thee give the firm an indication of what issues need addressing if the firm is to improve its position in the future, but this must be taken within the context of the business as a whole. A high labour turnover figure may have been the result of a deliberate policy to bring in younger members of staff who may be more adaptable to a changing situation at the factory
Measures of personnel effectiveness are merely indicators for a firm to see where it may be facing problems. The measures may indicate poor performance, or reflect the short-term effect of a change in business strategy.
It must be remembered that these figures are all looking to the past. They tell the firm what has happened to its workforce. Although this has a strong element of objectivity, it is not as valuable as an indication of how the indicators may look in the future
Key Terms!
the accepted attitudes and behaviours of people within a workplace
Labour Productivity
output per person
Labour Turnover
the rate at which people leave their jobs and need to be replaced
Starter task...
How many different Job roles?
What kind of structure is this?
Try to draw a structure using the roles as your titles... what would the business be?!
Organisational Chart
Allocation of jobs is needed to ensure effciency
As a business grows the need to make roles & responsibilities clear becomes more important
To ensure this is possible businesses use a variety of
organisational charts
to model their business
Organisational Charts
- Responsibility & authority locations
- Job titles & roles
- Lines of responsibility & accountability
- Lines of communication
Developing a structure
As a business grows it will change its structure regularly. The owner will become less hands on and decision making powers will be passed on... The way it develops must take into account:

- Business environment
- Employee skills
- Culture of the organisation
Internet task..
1. Identify and describe 4 different business structures

2. Using the internet compare 2 businesses structure in the real world

3. Explain how they operate in relation to the 3 factors and analyse how they might develop in the future
Levels of hierarchy
Span of control
Work load and job allocation
- No. of layers within an organisation
- All positions are clearly shown in relation to each other
- Formal approach
- More layers = longer chain of command
What diffculties can this cause?

- As businesses grow - work load increases
- More people are employed to share jobs
- When designing a structure, work load must be considered when allocation jobs
What could be an issue if this doesnt happen?

- As businesses grow and more employees are taken on to share the workload
- Tasks and responsibilities have to be delegated to sub-ordinates
- This can create major issues - Why?

- However, as long as the recruitment process is effective there should be no concern for delegation

Communication flows
What potential issues could there be?
- It is vital that internal communications are as efficient as possible - What must businesses use to help this?
- Allow for specialist jobs
- Promotional opportunities
- Span of control determines workload
- Narrow - reduces workload
- More layers = slower comms
- Based around tasks or projects
- Creation of teams
- Allows for specialist skills
- Job roles likely to be much more varied
- Motivation by teamwork
- Workload can be unevenly spread across teams
- Team loyalties can develope
- Usually in small businesses
- In very competitive markets where decisions need to be made quickly to ensure market share
- Can only work in a small business
- Core founders or decision makers
- Few trusted colleagues
- Growth will mean the business will have to change its structure to ensure it can cope with the workload
- No need for formal planning, allocation of roles or structure
- Solicitors, doctors etc..
- All work towards the same goal
- Small business
- If communication needed - through whole staff meetings
- All employees at the same level
Workforce roles
There are key work force roles within any organisation. They have direct impacts on the employees and communication flows
- Directly responsible for 1 or more subordinates
- Supervisor determines the subordinates workload & type
- Management style of the supervisor determines this
- Supervisors role is to allocate jobs and ensure they are carried out
- Supervisor is accountable for their performance
Team Leaders
- They facilitate the functioning of a group of employees
- Best suits matrix structure
- Team approach can also work in a hierarchy
- They don't allocate jobs
- They ensure work load is spread, resources are available & that deadlines are met
- Oversee a specific area of the business
- Managers delegate to sub-ordinates
- These are supervisors & team leaders
- Appointed by shareholders to oversee the business
- In a large business they do not get involved in the day to day running
- In small to medium sized businesses they are very much hands on as they are completely accountable
Do this in bullet points if you like, but they must be full sentences...
Medium sized clothes retailing business

1. Construct an argument to support using supervisors rather than team leaders

2. Prepare a counter argument

3. Make a judgement about which argument is stronger in this scenario incorporating the phrase 'it depends upon'
Uk average is between 16 and 18 percent
Labour turnover details:
Companies need some movement to avoid stagnation
If this rate rises it will be of concern
Cost of Labour turnover is approx £8,200
Companies always research into why employees leave...Why?
This can be measure in 3 ways
1. Output / employee
- Sometimes this can measure each individuals output...but only on simple tasks
- otherwise use the following:
Total Value of output
Total Number of Employees
2. Labour Cost / unit of production
- Production costs is most common measure
- Labour productivity increase = reduction in labour cost / unit
_____________________ X 100
Total Labour costs
Total Output
3. UK Productivity
- Government preference to compare internationally
- UK fall behind France, Germany & US
Total UK hours worked
Total UK Output
Number of days lost as a result of an employee's deliberate or habitual absence from work
- Represents a business cost
- Possible causes must be investigated
- Costs the UK £11.6bn
- Avge is 2.9% of all costs
- BA - 15%!!!
_________________________________________________ X 100

Avge no. of staff absent on one day
Total number of staff
Important Questions for successful structures...
- used to motivate employees?
Job allocation
- how many needed to complete tasks?
Work loads
- evenly spread
Spans of control
- narrow or broad
Levels of hierarchy
- how many needed?
Communication flows
are the lines short & efficient?
Structure improving business performance
- No one structure for all needs...

Financial problems:
- Increased price competition & needs to reduce its overheads....How can the business change its structure? What could be the associated disadvantages?

Unhappy Human Resources Manager:
- Growing business has increased her work load
Adjusting the structure
- Remember that businesses are not static and their structures have to adapt to ensure they are as effective as possible. Consider the following:

- Growth of the business
- Changing Market conditions
- Change in Ownership
- Customer's needs
- Change in company culture
- Internal advertisement
- Emailed etc...
- Personal recommendation
- Word of mouth
- Advertising
- Private employment agencies
- Headhunting
- Government funded training schemes
- Job centres
Methods of selection
- Interview
- Presentations
- Work samples - individual or group
- Peer assessment
- Assessment centres
- Psychometric testing - match to the person specification

- Cost effective
- Employees are productive
- Opportunity to learn whilst doing
- Training alongside colleagues
- Quality depends on ability of the trainer
- Passing on of bad habits
- Poor learning environment
- Disruption to production
An employee receives training away from the workplace
- Wider range of skills to be obtained
- Can learn from outside specialists
- Can place more confidence into employees
- More expensive
- Lost working time & output
- Upskilling work force so they could leave!

- Better productivity
- Higher quality
- Better skills
- More flexible
- Less supervision required
- improved motivation
- Better recruitment & retention
- Easier to implement changes
Training cant solve:

- Poor management
- Poor job design
- Ineffective & inefficient equipment
- Poor product organisation
- Poor recruitment
- Produce a document that:

1. Defines motivation

2. Explains, with specific examples, how John Lewis motivates its staff

3. Explain each of the following theories:
- Frederick Taylor
- Elton Mayo
- Abraham Maslow
- Frederick Herzberg
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