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					              IGCSE Business Studies   Unit 5: People in Business




IGCSE Business Studies…




                                  …Unit 5: People in Business




                      Edited by James Slocombe   1 of 35
                              IGCSE Business Studies   Unit 5: People in Business


People in business
One of the key resources for any business is its staff. People have to be managed like any other
resource, hence the term or function, Human Resources Management (HRM). People have to
be recruited, trained, developed, nurtured, motivated and eventually retired. In this unit we will
be examining these tasks in more detail.

On completion of this unit, you should be able to:
   Explain the role of work in satisfying human needs
               - Know the types of work that exist
               - Know what unemployment is
               - Have an understanding of the job/labour market
   Understand the different methods of payment
               - Acknowledge different financial rewards
               - Understand the significance of non-financial rewards
   Explain the concept of motivation
               - Understand how motivation can be influenced by management
               - Appreciate the role of management have in motivating employees
   Explain the different management and leadership styles
               - Have an awareness of their appropriateness in different situations
   Have an awareness of different motivation theory
               - Maslow
               - Herzberg
               - Mayo
               - Taylor
               - McGregor
   Describe the role of the Human Resources Department
   Explain the recruitment process
               - Understand the importance of job descriptions and job advertisements
               - Understand the main features of employment contracts
   Identify and explain the need to train and develop staff
   Discuss the role of management
               - Understand chain of command and span of control
               - Draw, interpret and explain organisational charts
               - Comment on the central features of organisational structure
   Explain the different means of communication
               - Understand internal and external communication
               - Awareness of the barrier to effective communication
               - Understand how the barriers to communication can be overcome
               - Comment on the appropriateness of different methods of communication
   Explain the difference between dismissal and redundancy
   Describe the work of trade unions
               - Show an awareness of how trade unions can influence business behaviour


So, let’s start…




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                              IGCSE Business Studies   Unit 5: People in Business


The role of work in satisfying human needs
Why do people work? There are two simple reasons:

      Because they want to. Yes, it satisfies a natural need within us. Doing nothing is boring!
      Because they have to. Without work, and any sort of social security scheme, we would
       have no money and would go without as basic needs to survive.

These reasons are indeed simple, but they are also very different. Most people want to work;
we do not like being idle for very long. We might not want or need to be paid, but we need to
feel useful and employed in some way. Others, the majority, have to work to earn a living. Lucky
people do the job they enjoy doing! We think of professional sports people here like David
Beckham (football) or Serena Williams (tennis).

          For most people work is simply a means to an end. In other words: you work to live


Types of work
People can work for themselves, or they can work for somebody else. Thus we get two
classifications:

       Self employed
       People who work for themselves. They may own their own business, big or small. They
       may be sole traders or managing directors. They may work from home, or in a big office
       block. Self employment has its advantages and its disadvantages. You are your own
       boss, yes, but you also have a high risk element. It's all down to you! If you are self
       employed you will pay yourself a sum of money each week, but you will also get a part of
       the profits. Local builders are often self-employed.

                               Employed
                               You work for somebody else, or for a company, school,
                               university or other form of organisation. If you are employed you
                               will receive a fee, a salary or a wage.
                                           Fee Earning: You are not employed as such. You
                                              come in for a particular task, do it, get paid a sum
                                              of money, and then go elsewhere.
                                           Salary Earning: You are employed. You have a
                                              contract and are paid an annual sum. This is
                                              usually paid in equal monthly instalments. There
                                              can be some flexibility in the hours you work.
                                           Wage Earning: You are paid by the hour. You will
                                              be paid each week for the actual number of hours
                                              worked.

                               Jobs can also differ over their life or duration. Work can be on
                               the basis of full-time, part-time, permanent or contract
                               employment. What do these terms mean?

       Full-time
       As it sounds. You work full days, full weeks etc. You may be permanent or temporary,
       however. Look below to see what that means.

       Part-time

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                               IGCSE Business Studies   Unit 5: People in Business


       You now only work for part of a day, or week as the case may be and becoming a more
       important type of employment. Very common in retail where the demand for workers
       varies considerably within each day. Also very popular with certain types of people,
       especially parents with children at school. Pay will usually be proportional or 'pro rata', to
       full time pay. You may be permanent or temporary, however.

             Permanent: You have the job on an open ended basis. Well, not quite, as there
              are conditions. You must do it satisfactorily, and the need for the job must
              continue. If it does not, then you could expect compensation. Permanent jobs will
              usually carry a pension.
             Contract: (Also known as temporary) You are employed for a set period of time, or
              for the duration of a particular task. Seasonal work such as fruit picking, working in
              seaside hotels, and Christmas casuals come into this category. You have security
              for the contract period only. No pension rights go with these jobs.

Today there are three other ways that work can be divided into. These are day work, shift work,
and flexible working.

       Day work
       It is as it seems. You work during the day only. Hours will usually be in the range 0800 to
       1800, but 7 or 8 hours only will be worked.

       Shift work
       Some businesses have to operate for longer periods. Even supermarkets today are open
       24 hours per day. Other examples are hospitals, many factories, transport companies
       and TV stations. This requires shift working. People work for 8 hours, but there are two,
       three of even four teams, or shifts of workers. Shift patterns are usually 0600 to 1400,
       1400 to 2200 and 2200 to 0600. The latter is the unpopular night shift.

Shifts, or rather crews, may rotate each week. This may mean that all workers will eventually
work all shifts. Shift working will usually receive an extra payment, or shift allowance, to reflect
                                               the unsocial nature of shift works.

                                                Remote operations such as oil drilling rigs may well
                                                work 12 hour shifts, with only three crews. Two will
                                                be on the rig, and one on leave. They may well then
                                                work two weeks at work and then two weeks on
                                                leave.

                                             Flexible working (Also known as flexitime)
                                             This is sometimes worked in offices. You have to do
                                             a set numbers of hours per month, but you chose
                                             when to do them - more or less. There will be limits,
                                             say 0630 to 2000, between which you can work.
       There is also 'core time'. This is a period where you must be in the workplace each day.
       The firm sets this, or rather the senior employees and directors of the company. An
       example may be 1100 to 1500 hours. You count your hours, and may use extra hours
       worked to take time off.

Unemployment
If you are neither self employed or employed, then you are unemployed. This category usually
applies to people in the age range 16 to 65. Below 16 you would be expected to be in full time

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                                IGCSE Business Studies   Unit 5: People in Business


education. Over 65 you might be expected to have retired, (although the retirement age is due
to increase to 67 in 2007).

           Unemployment is the condition of involuntarily not having a job, often referred to as
           being "out of work"


Job market/Labour market
So we know why people want and need to work. Why are there jobs for people to do? There is
clearly a demand for jobs, so where does the supply come from? Do you see a job market
coming on?

Firms employ people because they want help in doing a task. The demand for workers is
derived from the demand for a product or service they cannot meet on their own.

Firms do not employ people because they know
they need the work.

If a person is employed then the job done by that
person does not belong to that worker. He or she
can do it, under certain circumstances, for as long
as the employer wants. There may be special
conditions applied to a closure of a job, but it is the
employer's job, not the worker's. This can cause
clashes in the workplace.

Work is the way that we, as people, satisfy our
need.

We now have some understanding of why people
work - to satisfy their personal needs - we now go
on to see how employment is dealt with.




                                        Edited by James Slocombe   5 of 35
                              IGCSE Business Studies   Unit 5: People in Business


Methods of payment
There are a variety of methods of paying employees. These include:
    Salary - the basic form of payment based on a reward for a year's work, but usually paid
      monthly instalments.
    Wages - the basic form of payment based on the number of hours or weeks that a
      person works.
    Overtime - payment for work over and above the normal hours of work, which is often
      paid at a higher rate.

There are also other forms of financial motivation that are not considered as part of a person's
normal pay package, but may be performance-related in some way. These might include:
    Piece-rate - this is a system of pay where people are paid 'per-unit' they produce. It is
      much less common these days as it may cause employees to focus on quantity and not
      quality.
    Share ownership - many firms now offer their employees the opportunity to own shares in
      the firm. This helps them feel 'ownership' and 'involvement' and should help motivate
      them.
    Bonuses - many staff will be paid bonuses. These may be related to the overall
      performance of the firm or perhaps may be specific to individual employee performance
      (e.g. sales staff may get a bonus based on how many they sell).

Methods of financial rewards
There are many different methods of payment that a business can choose from and they need
to choose carefully as remuneration is an important aspect of motivation. Most produce a
system that suits their particular business but
whichever they do select will be designed to
motivate the workforce. Let's look at some of
the methods that are popular with modern
business.

The most common pay schemes used are:
    A flat rate - which is a fixed weekly or
     monthly rate for a specific job. It's easy to
     run but seldom really motivates
     individuals.
    Piece rate - which is payment by output.
     This encourages effort but we have to
     watch the quality of individual workers.
    Time rate - which is based on a given rate of pay per period of time. Any time worked
     above this is paid at a higher rate, or overtime.
    Bonus - this is an extra incentive to encourage employees, especially during a busy
     period of for a one-off job.
    Commission - which is paid as a percentage of the value of sales made by an individual
     sales person.
    Profit-related - which allows individual employees to receive a share of profits. This acts
     both as an incentive and also allows management some flexibility when setting basic
     rates of pay

Time-rate ('flat rate') schemes
This method involves the employee receiving a basic rate of pay per time period that they work
(e.g. $5 per hour, $50 per day, $400 per week). The pay is not related to output or productivity.


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                               IGCSE Business Studies   Unit 5: People in Business


If the employee works more than the agreed number of hours per week they will normally be
eligible for overtime payments e.g. $7.50 per hour instead of $5 per hour (time and a half).

Piece-rate schemes
This method involves the employee receiving an amount of
money per unit or per 'piece' that they produce. Therefore
their pay is directly linked to their productivity level. Care
has to be taken to make sure that employees do not reduce
the quality of their output in order to boost the quantity they
produce. Frustrations and tensions can also be caused if
workers are slowed down by production stoppages, or
problems elsewhere in the production line.

Commission
This is a common method of payment for employees who
sell a finished result e.g. a shop assistant or telesales. The employee receives a percentage of
the value of the goods that they sell in a period of time. Sales representatives will often receive
a proportion of their pay in this way.

Performance-related pay (PRP)
This is a method of giving individuals more money based on their personal performance. They
are often related to the employee achieving a number of targets over the year. This is common
with managerial and professional workers.

Profit sharing
This system of financial inducement involves each employee receiving a share of the profits of
the business each year. So, the better the company performs the more the individual
employees should earn (often subject to a maximum amount per employee).

       Such a scheme aims to increase the levels of effort, motivation and productivity of each
       employee, since their annual pay-award will be related to the profitability of the business.
       Alas, a firm can also record a loss and then employees may suffer from both lost
       earnings and a feeling that the company is performing badly.

Share ownership
A common form of payment in many Plc's is what is known as a 'share option'. This involves
each employee receiving a part of each month's salary in the form of shares, normally at less
than current market price.

       This forms what is really a savings-plan for the employee. They can sell their shares after
       an agreed period of time. Employees should feel a desire to work harder and so boost
       profits. As a result the price of their shares may rise and they will receive higher
       dividends. However, it should be noted that shares move for many other reasons and so
       this connection can be tenuous. Share options are a common form of remuneration /
       incentive for senior managers and directors.

To the various schemes mentioned above some firms add such perks as private health
schemes, pension schemes, subsidised meals, discounts on holidays and travel, cheap
mortgages and loans, company cars and discounts when buying the company's products.

           The total package of pay plus fringe benefits is known as the remuneration package


                                       Edited by James Slocombe   7 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Non financial rewards
Non-financial rewards can be as valuable to employees are financial. They have the added
advantage of being motivational too. These include:

      Job enrichment - the process of giving a person more responsibility for the work they are
       carrying out. This will often mean the 'vertical' extension of their role to give them further
       responsibilities for more areas. For example, as well as carrying out a task they may also
       be given responsibility for the planning, quality control and other areas. It is argued that
       job enrichment will increase worker satisfaction.
      Team working - teams are groups of
       workers who work together to produce
       goods and services. Team-based
       production has been used very
       effectively by many companies to raise
       the quality and efficiency of production.
      Quality circles - small groups of workers
       who get together to look at all issues
       relating to the quality of production of the
       good or service. The circle aim to solve
       any production problems that may have
       a negative impact on quality.
      Job enlargement - the process of giving
       an employee more work of a similar
       nature to do. It will often mean them carrying out a larger proportion of the production
       process for the product and is often argued to be a way to increase the job satisfaction of
       workers.
      Job rotation - the process of changing the roles or tasks that employees carry out from
       time to time. This is often done to help avoid dissatisfaction among workers who may
       become demotivated by carrying out one task for too long a period of time.




                                       Edited by James Slocombe   8 of 35
                               IGCSE Business Studies   Unit 5: People in Business


The concept of motivation
People work for other people and get paid for it. Managers and employers have to know how to
get the most out of their employees. This is where a sound knowledge of the theory and
practice of motivation comes in.

As we have seen previously, people work for one of two reasons:
    Because they want to; or,
    Because they have to

Most people have to work to get enough money to live. Most people also end up working for
somebody else. This is probably not the best basis for work, so managers and employees have
to know about management and motivation. It is sometimes hard to separate one from the
other, as some believe strongly that it is the role of the manager to motivate their employees.

The performance of workers will depend on a combination of two major factors:
    Their managers and their style of leadership.
    The motivational methods they apply.

Management and Leadership styles
At school we work in groups (we call them classes) and have a manager (the class teacher).
The managers are part of a team (the staff) and the whole company (yes, the school is really a
company) has a managing director (the headteacher). Many students will be able to recognise
that different teachers treat students in different ways. Some students like to work for, others we
do not. The same picture is found in the world of business.

What is leadership, and what do we mean by leadership style? First some important definitions:

           Leadership
           Leadership is the process by which a person influences, motivates and controls the
           behaviour of others towards a specific set of objectives

           Leadership style
           Leadership style is the way that leadership is exercised

A good leader will get the best out of the workers, but a bad leader will get back very little. The
best combination will depend on the manager AND the workers. Remember, one group has to
interact with the other. First, the leadership styles.

The main styles of leadership are autocratic, democratic and laissez-faire. You may well
recognise these as characteristics of your teachers!

       Autocratic leadership
       Autocratic leadership is a form of leadership where the leader makes decisions and sets
       objectives independently of the others in the firm without involving them in the decision
       making process. This style of leadership can often lead to dissatisfaction as employees
       do not feel involved in the process of decision-making.

       Democratic leadership
       Democratic leadership is a style of leadership where a leader encourages others to be
       involved in the decision making process. It is felt that this style of leadership will help to


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                               IGCSE Business Studies   Unit 5: People in Business


       motivate employees as they will feel more involved in the decision-making process,
       though this style does require leaders who are skilled at communication.

       Laissez-faire leadership
       Laissez-faire leadership is a style of leadership where people
       are left to make decisions and carry out their tasks much more
       independently than under other leadership styles. Employees
       are given a greater degree of freedom in their roles.

Motivation methods
What do we know from our own experience? We like to be consulted,
but we need to be managed. We will do almost anything for the 'right'
person. This 'right person' motivates us. So, what is motivation and
how does it work?

We naturally think that money will motivate us, but will it always? You
have a horrible job cleaning out smelly and dangerous sewers. You
hate it! Will a doubling of your money make it any better? Not really!

Money can be a motivator, but there are also other, non-financial motivators as we have seen
already.

The art of getting people to work well and consistently is a difficult one to get right. We are all
the result of genes, ethics, values and other factors that make us difficult to predict. Directing
the actions of others is not a simple process.

You will need to be able to relate the theories of several motivational theorists that have tried to
suggest ways in which we can motivate others. There are two basic types of motivation theory.
They are firstly content theories, which involve what actually motivates people. This involves a
study of the needs of people and how these are met. Such needs can either be extrinsic (pay)
or intrinsic (praise or something that notifies recognition).




                                      Edited by James Slocombe   10 of 35
                              IGCSE Business Studies   Unit 5: People in Business


                                        Motivation theories

Abraham Maslow
Maslow produced a triangle of NEEDS. He identified five different levels of needs, which tend to
be represented (as in figure 1 below) as a triangle with the most basic needs at the base and
the highest level at the tip of the triangle.




The first level is physiological needs, which centre on the BASIC needs of a wage and decent
working conditions. Next level up comes security needs, which relate to security in work, a
pension, benefits and a safe working environment. Next comes love and belonging or social
needs, which really mean the opportunity to gain a sense of belonging, say through working in
teams, or being invited to participate in social events. Then it's esteem needs and the need to
feel positive about oneself. This often is achieved via good feedback on performance and
seeing this linked to promotion. Finally, there are self-actualisation needs, which are the
satisfaction of achieving one's innermost desires. This might be resolved by seeking new
challenges, or being given new problems to resolve within an organisation.

          Self actualisation is the desire to realise one’s full potential or to maximise
          one’s capabilities


To progress to the next level of needs, the employee has to achieve the level they are currently
on.

Herzberg
Frederick Herzberg is the next motivation theorist to look at. His work was done in 1966 and he
felt that motivation is influenced by TWO groups of factors.

      Hygiene factors
      Hygiene factors were identified by Frederick Herzberg as factors that can lead to workers
      being dissatisfied. He argued that to improve worker's motivation, firms needed to
      improve these hygiene factors. Hygiene factors may include pay and conditions,
      company policy or the way people are treated at work.


                                     Edited by James Slocombe   11 of 35
                              IGCSE Business Studies   Unit 5: People in Business


      Motivators
      Motivators are factors, which help employees to gain job satisfaction, such as recognition
      of the job they are doing. An increase in motivators is required to improve job
      satisfaction.

As we can see from the two definitions above the first group of factors are hygiene factors,
which focus on salary, security, working conditions and general company policy towards
employees. Such conditions might remove dissatisfaction but they will not necessarily improve
staff morale and motivation. The second group of factors is known as motivators and centre on
recognition, responsibility, the nature of the work (e.g. health professionals) and opportunities
for promotion. It is by improving these that motivation is increased.




Mayo
Mayo suggested that (a) money and working conditions are the primary motivators for most
workers (b) that people work best in groups (c) that recognition and feeling part of a secure
group are also major motivators (d) that informal groups have a strong influence over individual
performance and attitudes and (e) that the social needs and values of groups should be
recognised and considered by those in supervisory roles.

Taylor
Taylor was thought be many to be the 'father' of modern management. He took on the earlier
ideas of some economists that money is the most important motivator. He developed work-
study and methods of doing things that maximised efficiency. In doing so he is charged with
creating scientific management. Specialisation and repetitive work practices would in his opinion
maximise output and efficiency. Most of his ideas are now thought to be rather outdated.

McGregor Theory X and Theory Y
In 1960 Douglas McGregor published the 'Human side of enterprise'. In this work he attempted
to apply the implications of the work of Maslow, Taylor and Mayo to what businesses do. He
identified two theories to try to explain what motivates people to work. He argued that people
are either Theory X workers or Theory Y workers.

      Theory X
      Theory X workers are essentially lazy and work just for money. If this is the case then
      they need to be strictly controlled (using a more dictatorial or autocratic style of
      leadership). Theory X workers are considered to be:
          Lazy and dislike work
          Motivated mainly by money
          Selfish - their own needs are more important than those of the organisation
          In need of close control by management


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                             IGCSE Business Studies   Unit 5: People in Business


      Theory Y
      Theory Y workers are a complete contrast to this. They are more motivated by the higher
      level needs on Maslow's hierarchy. They essentially enjoy work and are committed and
      enjoy responsibility. Theory Y workers are considered to be:
          Well motivated and enjoy work
          Able to take responsibility and organise themselves
          Creative in the right working environment
          Independent and flexible

We now see how leadership styles and motivation are closely linked. We now understand how
some very satisfactory results are possible, but also how some deep traps are around. Probably
the most basic thing to remember is that people like and need to be recognised, talked to,
praised and rewarded. The reward, beyond a point, may not be money, though.




                                    Edited by James Slocombe   13 of 35
                              IGCSE Business Studies   Unit 5: People in Business


Manpower
We now move on to look at issues related to manpower and the management of human
resources in the business.

Human resources
Here we will look at the role and purpose of the human resources department (HR dept. or the
'personnel department' as it used to be known). A word of warning, though, this department is
there for the benefit of the company NOT the employees!

          Human Resource Management
          HRM: includes recruitment and selection of appropriate staff and management of the
          employment relationship, which includes contracts, collective bargaining, reward
          systems, motivation and employee involvement, and considers the strategic and
          operational view of human resource requirements.


The human resources department of a firm is a service department. It works with and for all the
other departments. All its work has to be done in consultation with the departments. It would be
true to say that it assists all the other departments of the business with 'people' matters. The
human resources department of a firm has a number of main tasks. These are:

                                                  Human resource planning
                                                  Here staffing needs for the next few years are
                                                  examined, and plans prepared to ensure that they
                                                  will be available. They will also do succession
                                                  planning. This is where plans are prepared in
                                                  advance to ensure that the right people are
                                                  available when senior staff retire.

                                                  Recruitment and selection
                                                  This is the department through which all
                                                  recruitment should be processed. They have to
                                                  ensure that the correct procedures are followed,
                                                  no bias or prejudice comes into play, and
                                                  everybody who is qualified and experienced for the
                                                  job has a fair chance of being selected.

      Training
      They will organise training at all levels, and even coordinate college release. They are
      unlikely to actually do the training, but will organise it fully.

      Termination
      Staff retire, leave, or are sacked. The HR department has to ensure that all the correct
      procedures are followed, and that the correct payments are made.

      Industrial relations
      The department is the interface between the firm and the unions or staff associations (the
      representatives of the workforce). It will negotiate on behalf the company.

The HR Department which is part of the firm, and works for the firm not the employees, is the
interface between the firm and workers, the workers' representatives and other stakeholders.


                                     Edited by James Slocombe   14 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Recruitment
One major function of the HR department is to recruit employees for the company. In this part
we will see how this is done. We will look at the actions of the firm and the applicant. For the
latter, this part is written assuming you are the applicant. You will learn about business studies
AND real life!

The recruitment process
Recruitment is a four part process. The
firm has first to find out who is wanted,
then attract a number of applicants, who
will then respond. Finally they will make a
selection and offer somebody the job. It
will do this in very close collaboration
with the department which needs the
employee.

The recruitment process involves a
number of stages.

Job identification
You must remember that it is a job that has to be filled. The department must find a person, the
best person, to fill that job. So, what does the job entail? The department has to examine the
job, or role, very carefully and prepare a job description. This is used to develop the job
specification and finally a person specification. What do all these entail?

       Job description
       This normally consists of:
           Job title
           Broad scope and main tasks of job
           Number and status of subordinates, if any
           to whom the job holder reports

       Job specification
       This expands on the job description in certain key areas. It covers, in particular:
           Frequency of duties
           Working environment
           Safety hazards etc.
           Performance standards

       Person specification
       This converts the job description into qualifications, personality and other attributes that a
       suitable candidate for the job would be expected to have. This will often form the first
       check list against which applicants will be judged and assessed.

These documents, which are of vital importance, will be prepared by the HR department and the
recruiting department working together. The former is responsible for the format of documents,
and any legal aspects, the latter for the content.

Application
So we now know who we are looking for. The next step is to set out the 'bait' to catch suitable
applicants, perhaps you! Let's look at this from both sides - the firm and the applicant.


                                      Edited by James Slocombe   15 of 35
                              IGCSE Business Studies   Unit 5: People in Business


       Applicant attraction
       Potential applicants for the job may be found
       internally and externally. In both cases the
       business has to advertise the vacancy.
       Advertisements can be placed on notice
       boards, put in company newsletters, or even
       in the workers pay packets. Externally, job
       advertisements will be found in the Job
       Centres, and in newspapers. Local and
       national newspapers will be used. Some of
       these specialise in certain types of job on
       specific days. This sort of advertising can be
       expensive!

       Applicant response
       So, you see the advertisement and think it is the job for you. What do you do next? You
       do as you are told! You will have to answer the advertisement in some way. Write in,
       phone in, get an application form, and/or write a full letter of application. Remember, this
       is a selling exercise. You must take the opportunity of selling yourself to the company.
       The objective of this application is not to get the job, but to be offered an interview. You
       may well be asked to send in your CV, or Curriculum Vitae.

          Curriculum Vitae
          An outline of a person's educational and professional history, usually prepared for job
          applications. Also known as a résumé.


This is your personal statement. It will tell the reader all about you. Who you are, how you were
educated, what jobs you have had, and what interests outside of work you have. It will highlight
what responsibilities you have had, and what you have achieved in your jobs.

A CV appears like a standard document, but this is only partly true. Your CV should be 'tuned' to
meet each job. Remember, again, it is a selling document. It is your advertisement, so make
sure it is a good one to ensure you get an interview.

Selection
The firm now has a mass of people who have seen the advertisement and have applied for the
job. Finding the most suitable, or best candidate is a hard task. It has to be done quickly, which
does not help. Strict procedures have to be followed. We now enter the world of Selection.

Any advertisement for a good job should lead to many applications. Selection is probably going
to follow a six step process. These steps will be:

       Stage 1: First skimming
       The objective here is to eliminate all candidates who do not meet the required
       specifications. Numbers must be reduced greatly. This is a paper process, and will
       probably be done in the HR Department without reference to the recruiting department.
       As an applicant, remember this stage and DO AS YOU ARE TOLD. If a CV was called
       for and you send a letter, you are heading for the bin!

       Stage 2: First paper selection


                                     Edited by James Slocombe   16 of 35
                             IGCSE Business Studies   Unit 5: People in Business


      The recruiting department is working to an interview short list, possibly of 6 to 10
      candidates. It is easy but very costly to over-interview, so do not call too many. This
      stage looks at the remaining, filtered candidates and a selection is made. The recruiting
      department, and the person to whom the job holder will be reporting will be involved. You
      will be aware that at this stage of the process nobody has been seen or selected, but
      many candidates will have been rejected. So far we have been looking at paper, non
      personal historical records of people, and it seems a very negative process. It has been a
      procedure based on rejection, but things change now.

We now step up the pressure and start to look
at people themselves.

Who gets selected? Those that have made an
impact, somehow. Its back to marketing again.
The application form and CV is so important.
We now start to meet real people.

      Stage 3: First interviews of short list
      A few potential employees will have
      been selected and called in for
      interview/interviews. We are now looking
      at the inter-personal skills of the
      candidates. Ideally staff from HR
      Department and the Recruiting
      Department will see the candidates. This
      should cover the potential boss, and also some of the potential colleagues. At the end of
      the procedure candidates should know if they really want the job, or not. The firm will
      also have come to some general conclusions, based on a 'wash up' session after the
      interviews when interviewers compare notes.

      What should the interviewee do? You should have prepared yourself, in advance of the
      interview. Find out about the company, and its products. Try to make a good impression.
      Arrive promptly, dress appropriately, be polite, answer questions with statements, not just
      yes/no answers. Be prepared to ask questions yourself. Remember, the interview starts
                              the minute you enter the office or factory site. You do not know
                              who might be watching you and will have to report back later!

                              So, the firm knows which one or two people they would like, and
                              you now know that you want the job. (If you don't it is polite to call
                              or write in and say so.) What happens now? This is the last fence
                              of the race, but falls can still happen. There is a final interview,
                              and it is here that we also meet the thorny issue of checking your
                              CV and any claims you might have made.

      Stage 4: Final interviews
      You may well be called back for a final interview. If so, you will probably meet some old
      and some new interviewers. You will probably be tested more, but will also go over some
      old ground. Remember what you said before, and keep to it. At the end you may be
      offered the job verbally, but it is more common to be told they will 'write very soon'. Be
      patient, they may be checking your CV by taking up your references. NB. Many jobs do
      not have a second interview stage and proceed straight to reference checks.


                                    Edited by James Slocombe   17 of 35
                              IGCSE Business Studies   Unit 5: People in Business


      Stage 5 Reference checks
      First, what are references and when should they be called in? References are
      statements about the applicant provided by independent persons such as employers, or
      non-family persons who know the applicant well. They are most likely to be given in
      writing, but may be taken over the phone. (The law makes it very risky to give a bad
      reference, even if it is true.)

      Timing of references - at least the names of the referees will be asked for with the
      application. They will be taken up at different times, depending on the organisation. It is
      cost and time effective to take them up only at the 'last two, or even 'conditional offer'
      stage. (Taking up references reveals
      that the applicant is trying to leave his
      or her present firm. This is not a helpful
      thing to do if no job offer comes.)

      References are where the truth of the
      CV, and any claims you may have
      made during the interviews are tested,
      at least in theory. Many firms require
      references, particularly with reference
      to the character and performance of the
      candidate.

      You are there, almost. Last fence
      cleared and you are on the run in to the
      finishing post. What happens now?

      Stage 6 Offer letter
      The company will now send out an offer letter. This will set out carefully the terms and
      conditions of the job, including salary, hours of work etc.. There will also be a Contract of
      employment. It may still be conditional, the offer may be conditional on 'satisfactory
      references, and a medical'.

Contract of employment
Now, by law, you have to be given a contract of employment. This must state:
   Job title and starting date
   Rate and method of pay
   Hours of work, holiday entitlement and sickness benefits
   Place of work
   Disciplinary procedures
   Union agreements, if any
   Notice period that has to be given by either party to end employment
   Pension rights and contributions

This information may come in the form of a letter, or a specific contract document. It has to be
signed by both parties, and is binding on them both.

So, you have the contract letter, you sign a copy and send it back. The job is yours, subject to
that medical. You give your notice where you are now, and await your new job eagerly.




                                     Edited by James Slocombe   18 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Training
We are now going to look at training in business. We will look at why it is done, how it is done,
and who should receive it.

Once people are recruited they will need some training. They will need induction training first,
followed possibly by training for the job of work to be done. Let's call this job training. Before we
go any further, lets look at the question 'Why do firms give training?'

Training is given for two main reasons:
    to increase the efficiency of the worker, and so increase profitability in some way.
    to satisfy the law, especially in the area of Health and Safety.

Training is both good and bad for a firm. It helps
the firm operate better and more efficiently. It also
makes the employees more skilled and qualified.
This makes them more employable, however, so
many leave to get better jobs.

Induction training
What is induction training? What happened when
you joined your school for the first time? You
probably only knew a very few pupils, did not
know where to go, or what to do. So, what
happened? You probably got a taste of Induction
Training.

Induction training is given to new employees, and
is designed to:
     Introduce new employees to the company. The sooner the workers feel at home in the
       firm the better. They need to be told about the history and culture of the firm, and how
       they will fit into it. They need to be made to feel a valuable part of the business.
     Introduce new employees to the physical layout of the work area. Do you remember
       when you did not know where the toilets were? Same at work. How do you find your way
       around, and where are the key offices - toilets, canteen, personnel office, cash office
       etc.? Where can you park a car can be a vital piece of information, or perhaps where you
       cannot park. Very embarrassing if you put your car in the managing director's bay!
       Induction training enables the new worker to learn this without pressure, or possible
       embarrassment. They will have qualified, experienced guides.
     Introduce new employees to the procedures of the company. As a new worker you need
       to know times, systems etc. Will you have to sign in, for instance? Where will you find out
       what is going on? Where is the main noticeboard? The sooner everybody knows and is
       comfortable the better.
     Introduce new employees to the area and people where they will work. At last! You are
       ready to go to your workplace by now. You feel at home, it is hoped, and part of the
       company 'family'.

They will not, at this stage, be trained on how they should do their jobs. They will know all the
procedures and routines, and more importantly where the key places and offices are. This sort
of training will not directly increase the productivity of the employees, but will pave the way for
this training. It is like a farmer making a good seed bed, so that the new crops can germinate
quickly and strongly.


                                      Edited by James Slocombe   19 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Induction training is often done with groups of new employees, so that it is more cost effective. It
is usually handled by the HR department, so does not disrupt the working units. Everybody gets
the same training, and is exposed to the 'company line'. Hopefully, at the end of induction
training the new employees should believe themselves as part of the firm already. Now, to get
them productive as soon as possible.

On and off the job training
Training for work itself. This can be done on the job, or off the job.

       On the job training
       Here the new employee will be trained on the job itself. The worker will be able to
       observe, then try the processes being done, under the supervision of existing skilled
       staff. You learn by watching and doing, but any errors will impact on production. Existing
       trained staff stay working, however. Some jobs require this type of training, especially
       where simulations cannot be produced.

       Off the job training
       Training away from the work place e.g. First Aid training with St John's Ambulance.

In the real world, both types of training may be given. New workers may start 'off the job', away
                                                      at a training centre or hotel, then finish off
                                                      with a spell of 'on the job' training. New
                                                      employees will learn the basics and the
                                                      theory of the job in the safety of the training
                                                      room, then go out and do it, but closely
                                                      supervised by experienced people. Look at
                                                      the case to see how this might work in
                                                      practise.

                                                      Advantages and disadvantages of
                                                      training methods
                                                      Staff are now trained and ready to go. The
                                                      need for training does not stop here,
                                                      though. New technologies come in, people
                                                      advance and need more skills. So, training
                                                      is needed again. This is often done through
courses that employees are sent on. This can be handled on or off the job. Off the job training
can be given on site or off site. Each has its advantages and disadvantages. Read on, but
remember we are talking about a new technology or skill which is new, probably, to everybody
on site:
    On the job. Probably the cheapest option. People can be trained in groups, or all
       together. No outside costs like hotels, meals etc.. Can be slow, however, as the
       distractions of the workplace are still there.
    Off the job, but on site. A compromise, really. The trainee is away from the job, but is
       also available if necessary. Concentration can suffer.
    Off the job, and off site. Probably the best, but the most expensive. 100% concentration
       with no distractions is possible. Costly, though, and there is nobody left on site.

We now know what induction training is. We know why it is given and what is likely to be
included. We have also gone on to see the importance of ongoing work based training. The key
to efficient performance, and profit making, is having a well trained, modern work force.


                                      Edited by James Slocombe   20 of 35
                              IGCSE Business Studies   Unit 5: People in Business


The role of management
A business is made up of many people doing many different tasks. People work alone or in
teams. They have a boss, however, so people also work for people. Most people within an
organisation work for a boss, but also are responsible for the performance of people who work
for them. A strange Boss/Worker split. This can be a problem for some people.

Thus we find in a business:

      A range of departments doing different things
      Examples would be production, marketing, quality control, research and development,
      personnel, accounts and administration. These tend to go across a firm, from side to
      side.

      A range of people also doing different things
      We now go up and down in a department. directors, senior managers, managers, section
      leaders, supervisors and finally (last but not least) workers.

What do managers do?
All organisations, including businesses, have managers. They may not be called managers
because different titles can be used – leader, director, headteacher and so on. Whatever their
title, the task of all managers are very similar, no matter what the organisation. If you are a
student in a school or college or if you are in full employment, the managers of your
organisation will, at some time, have to fulfil the following tasks:

      Planning
      Planning for the future of the organisation involves setting aims and targets. These aims
      or targets will give the organisation a sense of direction or purpose. There will be a
      common feeling in the organisation of having something to work towards. It is a poor
      manager who does not plan for the future at all. In addition to these aims and manager
      must also planned for the resources which will be needed.

      Organising
      A manager cannot do everything. Tasks must be delegated to others in the organisation.
      These people must have the resources to be able to do these tasks successfully. It is
      therefore the manager’s responsibility
      to organise people and resources
      effectively.

      Coordinating
      Coordinating means ‘bringing
      together’. Any manager may be very
      good at planning and organizing but
      many fail ed to ‘bring people in the
      organisation together’. This is a real
      danger with the functional form of
      organisation. Different departments
      can be working away in their own
      specialist area without making contact
      with people from other departments.
      For example there is no point in the
      marketing department planning the
      launch of a new product unless they

                                     Edited by James Slocombe   21 of 35
                                   IGCSE Business Studies    Unit 5: People in Business


      have worked with, or coordinated with, the production department. A good manager will
      therefore make sure that all departments in the organisation work together to achieve the
      plans originally set by the manager.

      Commanding
      Many people this is all managers do! In fact, the task of management is more concerned
      with guiding, leading and supervising people than just telling them what to do - although
      this may be important to. Manages have to make sure that all supervisors and workers
      are keeping to targets and deadlines. Instructions and guidance must be provided by
      managers and it is also their responsibility to make sure that tasks are carried out by
      people below them in the organisation.

      Controlling
      This is a never-ending task of management. Managers must try to measure and evaluate
      the work of all individuals and groups to make sure that they are on target. There is little
      point in planning and organising if manages then fail to check that the original aims are
      being met. If it seems that certain groups are failing to do what is expected of them
      managers may have to take corrective action.

This diagram will help you digest a mangers task:

                                                                              Command            Control and
          Plan for            Organise and            Coordinate              and guide          assess work of
         the future             delegate             departments               others            departments




                                                       Tasks

                                          Effective Managers

                                                     Qualities

       Intelligence      Self-               Determination      Initiative           Good           Enthusiastic
                      confidence                                                  communicator



We now need to look at the span of control and the chain of command within an organisation.

            Span of control
            The number of persons a manager has control over. It is generally accepted that a
            manager can control about 7 people effectively. Less then this, and there is not enough
            to do. More than this, and control will suffer because the manager may be overloaded.


            Chain of command
            The path that communication takes from the top to the bottom of an organisation. The
            shorter the path the better.

Look at the organisation chart for a company which is reproduced below:


                                          Edited by James Slocombe     22 of 35
                              IGCSE Business Studies   Unit 5: People in Business




Organisation charts
An organisation chart is a diagram which shows all the POSITIONS (JOBS) within a firm, and
how they relate, or link with one another. It does NOT show the position of people as such, just
the job or function of the person. People can come and go, but the need for a job to be done
may continue.

Roles and relationships shown on charts
We know that people work for firms, and we understand that some people own them. We have
come across the terms worker, manager, and director. We may also have come across the
terms 'line' and 'staff'. For those of us who have not come across these terms before, they refer
to what the person does.

       Line
       person or job (position) directly engaged in producing the firms good or service. Will be in
       a 'product' based department such as production, marketing and selling.

       Staff
       Person or job in support of production. Will be in a support department such as accounts,
       personnel and medical.

At the top of a chart we find the owners and/or the directors. At the bottom, or base of the chart
we find the workers. In between we find the managers. You can see this in the chart below:




                                     Edited by James Slocombe   23 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Organisation chart - Senior manager, managers, supervisors and workers
It is useful to think of an organisation chart as a sort of ladder, or a series of ladders along side
of each other. Some ladders are longer than others. Where the ladder is longer, there is a
longer chain of command. You can see this in the chart below:




The ladder of organisation
The higher up the ladder your job is, the more senior it is likely to be. (Remember, again and
again, that organisation charts show JOBS not PEOPLE.) Jobs on the same level, or the same
rungs on their ladders, are at the same level.

So, we now know what an organisation chart is and what it shows. We know what the chain of
command is, and also the span of control. We can state and understand the problems with
chains of command which are too long, and spans of control which are too wide. We also now
see how the different roles and relationships fit into an organisation chart.




                                      Edited by James Slocombe   24 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Communication
We will now examine the communication process, how it works, how it fails, and what we can
do about it.

The communication process
A business has to be able to communicate with its customers and suppliers if it is to operate
efficiently. It is even more important that it communicates effectively with its workers, its internal
stakeholders. A knowledge and understanding of the communication process is essential to the
efficient operation and management of a firm.

Communication cycle
Communication can be looked at as a scientific process. It is made up of parts, or stages, in a
closed loop, or cycle. You have to send a message, know that it is received and understood,
and then you must be supplied with the desired result, an answer or a conformation of receipt.
Any failure in this loop will lead to ineffective communication. So, the important parts of this
communication loop:
    The sender. All communication starts here, with the sender. The sender must know
       exactly the message that is to be sent. If this stage is unclear, the rest of the stages can
       only get worse.
    The message. This must be in the correct form and language for the recipient. It is no
       good if the sender understands it, but the language is too complicated for the receiver.
       The message must be designed with the receiver in mind.
    The recipient. A message has to go somewhere. This is the person or place where the
       message is targeted. The sender must be clear where this is.
    The reaction. Messages are sent for a reason. The recipient has to respond to the
       message correctly. The sender needs to know this, so there must be a response.
    The feedback. The response must be confirmed, the sender must be sent a reply. This
       will confirm the receipt of the message, and confirm the response to it.

This is illustrated in the diagram below




                                      Edited by James Slocombe   25 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Types of communication
We have formal and informal communication.

       Formal communication
       Information in a business passes along formal channels of communication. Channels
       which are recognised and approved by business and by employee
       representatives such as trade unions called formal channels of
       communication. There are two main types:
            Vertical communication is communication up and down the business.
             For instance, a clerical assistant in an insurance company might ask a
             supervisor for authorisation to pay a claim. A chief executive might
             send a note to a member of the personnel department asking for a
             venue to be booked for a meeting of the board of directors.
            Horizontal communication occurs when workers at the same level in a
             business communicate with each other. For instance, one telesales
             worker might leave a note for another about problems
             with the equipment they are using.

       Informal communication
       Here we are in the area of the grapevine. We are looking at gossip, chatter and even
       whispers. No official sender, no records, and no feedback, usually. This is a very
       powerful form of communication, especially when formal communications are poor, or
       there are other problems in the business. News travels fast this way, and it can be used
       by a firm to its advantage. Start a rumour, see how it plays, then deny or confirm it as
       appropriate. Good ploy!

We have verbal, written and visual methods of communication.

       Verbal
       Words - face to face or by machine. We are in amongst talk, meetings, phones, and even
       the old Tannoy in the factory.

       Written
       Words again, but now not face to face (You may be given a letter, and have to sign for it).
       Letters, fax, text messages, memos and notices are common means of written
       communication.

       Visual
       Pictures, warning notices and the like. Their big advantage is that people do not have to
       be able to read to be capable of understanding the message.

Combine all of this and we get quite a complicated
communication process, and a whole series of decision
points. Make the wrong decision at any one of these and the
chances of getting communication problems will increase
considerably. An illustration is the story of the army officer in
the field finding his troop in trouble, sends a runner to HQ
with a message to 'send reinforcements'. Eventually
somebody turns up and gives the officer a letter. In it was
some money - three (shillings) and four pence (Old Money)
with a note saying 'I don't know what you want this for'.
Reinforcements had become three and four pence as the

                                      Edited by James Slocombe   26 of 35
                              IGCSE Business Studies   Unit 5: People in Business


message was passed from mouth to mouth. An example of poor, inefficient and ineffective
communication.

Look at the process below. This shows all the stages and decisions that a message may go
through. The sender has a lot of thinking and decision making to do. Do we do it, or do we just
send and hope?




You do not phone a chap in a general office and tell him he is sacked! He is entitled to privacy
at a moment like this. Best way is face to face, with a letter as well.

You do not use verbal methods of communication if you want there to be a record of the
communication. You will also need a written reply to confirm that the message has been
received. (Essential if there may be some follow up action if the message is not listened to.)

You do not write to somebody to ask them the time!

The message here is to THINK before you rush into any communication. It can be very messy
clearing up after a bad communication. Remember, we are dealing with people who have
feelings and emotions.

Communication Problems
We must look here at two different means of delivery of communication, written and spoken.
They have very different problem areas and pitfalls.

Written communications
Having seen what we have just seen, is it any surprise that there are communication problems!
What are the problems with communication? There can be many. Problems and barriers can
arise with the sender, the message itself, the way it is transmitted (the medium of transmission)
as well as the receiver. At this stage it seems a miracle that any communication works at all!
Let's look at each of these problem areas in turn.



                                     Edited by James Slocombe   27 of 35
                              IGCSE Business Studies   Unit 5: People in Business


      The sender. Has the sender a clear understanding of what is to be communicated? Has
       the sender prepared properly, and really thought through the message?
      The message. Is it clear? Is the language suitable and understandable for the person
       who is to receive it?
      The medium. Has the correct medium been chosen? If the message is complex and hard
       to grasp, then spoken communication would be useless.
      The receiver. Do we listen? Are we getting the message we want to receive rather than
       the one it is? Have we confirmed receipt of the message?

Have you come across the following saying:

          There are none so deaf as those who do not want to hear!


Remember, also, we can have problems in all four areas at once. What a potential mess! There
is yet another problem area, and that is distance.

      Distance. This can be physical and intellectual. Distance can also mean time, though the
       use of e-mail and the internet is reducing this problem. (It is also causing others,
       especially unnecessary communication.)

All this means that communication must be well thought out and planned. Bad communication
can be worse that no communication at all!

Spoken communication
This is an art in itself. As students you have to be able to communicate with your teachers, and,
more importantly, they have to be able to communicate with you. As we all know, some
teachers are better at this than others.

If you have to speak at a meeting, or deliver a lecture or lesson, your training should have told
you to:
     Be well prepared/briefed. You should have an introduction, then the body of the session,
       and end with a conclusion. Nowadays a
       lecture or lesson even may be
       summarised on PowerPoint, acting as a
       prompt for you, and a focus for your
       audience. (Yes, a class of students is an
       audience. A classroom is a bit of theatre
       really!)
     Know your audience. Most important.
       Pitch your presentation at the target
       audience. Do not go over their heads, or
       talk down to them. Get the level right.
     Know your material. Vital. At a business
       meeting you will quickly be found out if
       you don't. Don't forget your audience, and
       get the level right.
     Not speak too quickly. People have to
       have time to listen and take in what is
       said. Allow for the taking of notes as well.
     Keep to the point. Well, usually fine. If the


                                     Edited by James Slocombe   28 of 35
                               IGCSE Business Studies   Unit 5: People in Business


       topic is hard, and you are very good, then carefully controlled 'asides' can be good
       tension breakers. They also act to cut down boredom and increase attention.
      Repeat certain important facts. Yes. Again it gives time, and a break in many ways. You
       take stock, and stress the key points so far.
      Make the conclusion an opportunity to recall the essentials. The army used to work on a
       three point plan - tell the recruits what they were to be told - tell them - remind them what
       they have been told. A good basis, so do it here. Now summarise the lecture, really and
       stress the key points again.

Any failure in this process is likely to lead to a failure in communication. It will be seen in this
context through an increase in talking within the hall or classroom, signs of boredom, and even
people falling asleep. The message will not get across, and the lecturer will soon get a bad
reputation. The problems will have been down to not doing some or all of the above. Not good
in any context!




                                      Edited by James Slocombe   29 of 35
                               IGCSE Business Studies   Unit 5: People in Business


Dismissal and redundancy
There may be occasions when a business needs to reduce the number of employees. This can
be done in one of two ways:
    Dismissal
    Redundancy

           Dismissal
           This is where a worker is told to leave their job because their work or behaviour is
           unsatisfactory.

For example, an employee who was constantly late for work and to despite being given
warnings continued to be late would probably be dismissed. An employee who was caught
stealing or who wasn't able to do a job to a satisfactory standard would be dismissed.

           Redundancy
           This is when an employee is no longer needed and so loses their job. It is not due to any
           aspect of their work being unsatisfactory.

There may be occasions when a business needs to reduce the number of employees either
because it is closing down a branch or factory or because it is experiencing a fall in sales and
profits and so needs to save money by getting rid of some of its employees.

Another possible reason maybe that a business has managed or been taken over and some
jobs have become surplus to requirements in the newly combined business. Also, if a company
has introduced new machinery that does the job of several workers, those workers may no
longer be needed. A number of employees will therefore no longer be needed through no fault
of their own.

Protection against unfair dismissal
Once in work, employees need protection from being dismissed unfairly. Obviously if the worker
has stolen from the employer or is always late for work then dismissal would be reasonable.

The following examples of dismissal are unfair:
    for joining a trade union
    for becoming pregnant
    when the warnings are given the full dismissal

In the United Kingdom, if a worker feels that they have been dismissed unfairly then they can
take their case to an industrial tribunal. This will hear both sides of the argument and many give
the worker compensation if it believes the dismissal was unfair. Industrial tribunals are similar to
courts of law, and they can also be used to hear disputes between workers and employers on
sex and race discrimination and redundancy.




                                      Edited by James Slocombe   30 of 35
                              IGCSE Business Studies   Unit 5: People in Business


Trade Unions

          A trade union is a group of workers who join together in order to protect their own
          interests and to be more powerful when negotiating with their employers


Each employee who wishes to join a trade union must pay an annual fee, which contributes
towards the costs and expenses that the trade union incurs when it provides services to its
members, and supports industrial action by the workers.

Trade unions have a number of aims:
    To improve the pay of its members
    To improve the working conditions and the working practices of its members
    To support the training and the professional development of its members
    To ensure that their members’ interests are considered by the employers when any
      decision is made which will affect the workforce.

There are four main types of trade union in the UK:

       General Unions
       These are for skilled and unskilled workers performing different jobs in different industries
       (e.g. cleaners, clerical staff, transport workers).

       Industrial unions
       These are for different workers in the same industry (e.g. the National Union of Miners
       (N.U.M), covering workers at all levels in the hierarchy).

       Craft Unions
       These are fairly small unions for skilled workers, performing the same or similar work in
       different industries (e.g. musicians).

       White-collar Unions
       These are for ‘white-collar’ (or professional) workers who perform the same or similar
       tasks in different industries (e.g. teachers, scientists).

Pay Bargaining
Trade unions are most closely associated with negotiating with the employers of a business on
behalf of their members over the issue of pay. This is known as the ‘pay-bargaining process’,
and it is an example of collective bargaining.

The first stage in this process is for
each side (the employer and the
trade union) to decide on its
objectives. As well as deciding the
amount of a pay rise, both the trade
union and the employer will also
need to decide how the money will
be distributed amongst the
members of the trade union (i.e. will
the pay rise be a ‘blanket’ coverage
giving every employee a fixed
percentage rise, or will different groups of workers receive different percentage pay rises?).

                                     Edited by James Slocombe   31 of 35
                              IGCSE Business Studies   Unit 5: People in Business


Further to this point, will the pay rise be awarded in a lump sum per employee, or will it be
staggered over time?

The second stage involves both sides (the trade union and the employer) presenting their
arguments at a ‘pay-talk’ discussion. A trade union will put in a ‘pay claim’, which will be based
on one or more of the following points:
    An increase in the cost of living (i.e. inflation) requires that workers have a pay rise in
      order to maintain their purchasing power.
    An increase in labour productivity rates will mean more sales revenue and profits for the
      business, this extra profit should be shared with the workers by giving them higher rates
      of pay.
    A pay rise is required in order to recruit and retain the ‘best’ workers that the business
      can find.
    If workers are using new machinery and working practices, then they need to be
      compensated for this extra work by being given a pay rise.

The employer will put forward a ‘pay offer’, which they believe will reflect the current trends in
the labour market (i.e. the rates of pay which are being offered by rival businesses), as well as
maintaining the competitiveness of the business (i.e. not increasing their costs by a large
percentage).

The third and final stage involves a negotiation process between the trade union and the
employer. In order for this to be a success, both sides will be required to compromise and be
prepared to accept less than their original objectives.

It must be remembered that there are many other issues that a trade union will negotiate for its
members other than pay rises (e.g. length of the working week, working conditions, and
proposed redundancies).

Industrial Action
If the negotiation process collapses (whether it was negotiating for pay or for working
conditions), then there are a number of different methods of industrial action which the trade
union can propose to its members that they use in order to achieve their demands :

       Non co-operation
       Refusing to attend meetings and use new machinery or processes.

       Work to Rule or ‘Go Slow’
       Refusing to perform any tasks not in the contract of employment and keeping the output
       of products to a minimum.

       Overtime Ban
       Refusing to work any hours over and above the required weekly number of hours.

       Picketing
       Standing at the entrance to the workplace and not allowing any person or vehicle to
       cross the ‘picket line’ and enter the workplace.

       ‘Blacking’
       Refusing to deal with certain employees or suppliers because they have refused to
       participate in the industrial action.


                                     Edited by James Slocombe   32 of 35
                               IGCSE Business Studies   Unit 5: People in Business


       Strikes
       This is often the last resort for a trade union. It involves the employees stopping their
       work, leaving the workplace and refusing to return.


                                                         Whichever method of industrial action is
                                                         implemented, the trade union and the
                                                         employees are using it in an attempt to
                                                         reduce output (therefore also reducing sales
                                                         and profits) and hoping that the employer will
                                                         give-in to their demands.

                                                  Employee Participation
                                                  This refers to employees being given more
                                                  responsibilities at the workplace and being
                                                  involved in the decision-making process. The
                                                  aim of participation is to increase the levels of
                                                  motivation and job satisfaction amongst the
staff by making them feel more involved in the business.

Trade unions often try to increase the amount of worker participation in the workplace, since it
provides a sound justification for pay rises for the employees.




                                      Edited by James Slocombe   33 of 35
                            IGCSE Business Studies   Unit 5: People in Business


Key Terms
Below are some key terms from this unit. Make sure you understand the meaning of these key
terms. Most of them are in the textbook glossary on the front page of the textbook.

Self employed          Shift working                 Mayo                         Line position


Salary                 Flexible working              Taylor                       Staff position


Wage                   Leadership                    Human Resources              Directors


Fee                    Leadership style              HRM                          Workers


Unemployed             Autocratic                    Recruitment                  Managers


Full time              Democratic                    Training                     Industrial relations


Part time              Maslow                        Termination                  Job specification


Temporary              Herzberg                      Span of control              Job description


Permanent              McGregor                      Chain of command             Person specification


Job market             Laissez-faire                 Organisation chart           CV


References             Recipient                     Verbal communication Contract of
                                                                          employment

Application form       Feedback                      Visual communication         Written
                                                                                  communication

Induction training     Massage                       Dismissal                    Formal
                                                                                  communication

On the job training    Medium                        Redundancy                   Informal
                                                                                  communication

Off the job training   Reaction                      Grapevine


Sender                 Response




                                    Edited by James Slocombe   34 of 35
                                IGCSE Business Studies   Unit 5: People in Business


Notes to the student:

Most of the material required for the ‘people’ unit of your IGCSE course is contained within. Use
it as a source of information and reference guide. You will learn nothing if you simply copy from
this booklet when answering questions!



Notes to the teacher:

The material here has been written in part, collected and edited by James Slocombe to be used
in conjunction with the Cambridge IGCSE Business Studies 2008 syllabus at Canterbury
School. This is unit 5 ‘People in Organisations’ in the syllabus.

The follow syllabus reference numbers have been covered this document:
2.1.4, 2.1.6, 2.1.7, 2.1.8, 4.2.1, 4.1.2, 4.1.3, 4.1.1, 4.1.4, 4.2.2, 4.2.3, 5.2.2

The following have only been covered in part:
    5.2.2: Show an awareness of ethical considerations in business
    5.2.2: Demonstrate an understanding of the importance of health and safety
       requirements
    5.2.3: Understand how and why consumer interests are protected




                                       Edited by James Slocombe   35 of 35

				
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