Human Resource Management

Recruitment

• Advertising
• Job Description
• Person Specification
• The process by which a job vacancy is identified and potential employees are notified.
• The nature of the recruitment process is regulated and subject to employment law.
• Main forms of recruitment through advertising in newspapers, magazines, trade papers and internal vacancy lists.
• Job description – outline of the role of the job holder
• Person specification – outline of the skills and qualities required of the post holder
• Applicants may demonstrate their suitability through application form, letter or curriculum vitae (CV)

Selection

• Short Listing
• Interview
• Presentations
• In-Tray Exercises
• Psychometric Testing
• Aptitude Testing
• The process of assessing candidates and appointing a post holder
• Applicants short listed – most suitable candidates selected
• Selection process – varies according to organisation
• Interview – most common method
• Psychometric testing – 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 applicant will be doing, e.g. writing a letter to a disgruntled customer
• Presentation – looking for different skills as well as the ideas of the candidate

Employment Legislation

• Equal Opportunities
• Discrimination
• Union Recognition
• Contracts
• Health and Safety
• EU Directivies
• Increasingly important aspect of the HRM role
• Wide range of areas for attention
• Adds to the cost of the business
• Even in a small business, the legislation relating to employees is important – chemicals used in a hairdressing salon for example have to be carefully stored and handled to protect employees.
  

Discrimination

• Crucial aspects of employment legislation:
  –Race
  –Gender
  –Disability
• Disability is no longer an issue for employers to ignore, they must take reasonable steps to accommodate and recruit disabled workers.
  Copyright: Mela, http://www.sxc.hu

Discipline

• Grievance Procedures
• Dismissal
• External Agencies - ACAS, Tribunals, EU
• Firms cannot just ‘sack’ workers
• Wide range of procedures and stepsbin dealing with workplace conflict
  –Informal meetings
  –Formal meetings
  –Verbal warnings
  –Written warnings
  –Grievance procedures
  –Working with external agencies

Development

• Opportunities
• Promotion
• Personal Development
• Continuing Professional Development (CPD)
• Developing the employee can be regarded as investing in a valuable asset
  –A source of motivation
  –A source of helping the employee fulfil potential +

Training

• New skills
• New systems
• Improve efficiency
• Similar to development:
  –Provides new skills for the employee
  –Keeps the employee up to date with changes in the field
  –Aims to improve efficiency
  –Can be external or ‘in-house’

Rewards Systems

• Pay
• Benefits
• The system of pay and benefits used by the firm to reward workers
• Money not the only method
• Fringe benefits
• Flexibility at work
• Holidays, etc.

Trade Unions

• Role
• Necessity of consultation
• Importance of building relationships with employee representatives
• Role of Trade Unions has changed
• Importance of consultation and negotiation and working with trade unions
• Contributes to smooth change management and leadership

Productivity

• Output per worker per period of time
• Measuring Performance

1. How to value the workers contribution
2. Difficulty in measuring some types of output – especially in the service industry
3. Appraisal
   –Meant to be non-judgmental
   –Involves the worker and a nominated appraiser
   –Agreeing strengths, weaknesses and ways forward to help both employee and organisation
   
   
   
   

Finance and Accounts, 8 May 2007

Finance and Accounts

1. Key Terms
2. Break Even
3. Purpose of Accounts
4. Profit and Loss Account - Flow
5. Balance Sheet - Snapshot

Key Terms

1. Costs
2. Revenue
3. Profit/Loss

Costs

Fixed – are not influenced by the amount produced but can change in the long run e.g., insurance costs, administration, rent, some types of labour costs (salaries), some types of energy costs, equipment and machinery, buildings, advertising and promotion costs

Variable – vary directly with the amount produced, e.g., raw material costs, some direct labour costs, some direct energy costs

• 
  Total Costs (TC) = Fixed Costs (FC) + Variable Costs (VC)
• 
  Average Costs = TC/Output (Q) - AC (unit costs) show the amount it costs to produce one unit of output on average
• Marginal Costs (MC) – the cost of producing one extra or one fewer units of production
  -MC = TCn – TCn-1

Revenue

• Total Revenue – also known as turnover, sales revenue or ‘sales’ = Price x Quantity Sold
• TR = P x Q
• Price – may be a variety of different prices for different products in the portfolio
• Quantity – could be global sales

Profit

1. Profit = TR – TC
2. Normal Profit – the minimum amount required to keep a business in a particular line of production
3. Abnormal/Supernormal Profit – the amount over and above the amount needed to keep a business in its current line of production
   

Break Even

TC=TR

1. Occurs where Total Costs = Total Revenue
   –Start-up costs – fixed costs
   –Running costs – variable costs
   –Revenue stream depends on price charged
   –‘Low’ price – need to sell more to break-even
   –‘High’ price – lower level of sales required before breaking even

Purpose of Accounts

1. Provide Information
2. Monitor Activities
3. Transparency
4. Reduce Chance of fraud

• Provide information for stakeholders – customers, shareholders, suppliers, etc.
• Provides the opportunity for the business to monitor its own activities
• Provides transparency to enable the firm to attract investment
• Reduces the chance for fraud – not 100% successful!!
  

Profit and Loss Account - Flow

1. Gross Profit
2. Net ( operating profit )
3. Profit after Tax
4. Dividend
5. Retained Profit

• Shows the flow of sales and costs over a period
• Shows the level of profit or loss made
• Shows what has been done with the profit or loss
  

• Profit and Loss Account for British Airways plc
  Source: http://www.bized.ac.uk/cgi-bin/ratios/ratiodata.pl
• Turnover – the revenue earned over the year
• Cost of Sales – the variable costs, how much it cost the firm to produce what it has sold – not to be confused with sales revenue!
• Gross Profit = turnover – cost of sales
• Operating Expenses – the fixed costs
• Operating or Net Profit = Gross profit – operating costs
• Subtract other costs and expenses incurred to get profit before tax
• Subtract interest payments to get profit on ordinary activities before tax
• Subtract tax due to get profit on ordinary activities after tax
• Final section called ‘appropriation account’ – shows where the profit/loss is going
• Dividend – the share of the profit returned to shareholders
  Retained Profit – the amount kept back for future investment, etc.

Balance Sheet - Snapshot

1. Source of Funds
2. Use of Funds

• A snapshot of the firm’s position at a point in time
• Shows what a company owns (assets) and what it owes (liabilities)
• Balance Sheet shows what assets a company has (use of funds) and where the money came from to acquire those assets (source of funds)

• Fixed Assets – assets not used up in production or lasting longer than one year – equipment, buildings, machinery, etc.
• Fixed assets can be tangible – i.e. physical items or intangible – i.e. brand name, goodwill.
• Current Assets: assets that are used up during production and which are likely to yield cash in the coming year – for example, stock will be sold and debtors owing the business money will pay up!

• Subtracted from the assets are the money the company owes to creditors – suppliers for example
• And to those who are longer term creditors – loans, mortgage on property etc
• This leaves us with ‘Net Assets’
• The funds to acquire these assets must have come from somewhere – the next section tells us where it came from.
• The funds to acquire these assets must have come from somewhere – the next section tells us where it came from.
• The total capital employed must be the same as the sum of the net assets – hence the term ‘balance’ sheet!
• A guide to the structure of the assets of a company
• Gives a guide as to the degree of working capital – the amount the company has to be able to pay its everyday debts (current assets – current liabilities)
• Shows the total value of a firm at that moment in time
  

Pricing Strategies, 17 April 2007

There are 15 types of pricing:

• Penetration Pricing
• Market Skimming
• Value Pricing
• Loss Leader
• Pyschological Pricing
• Going rate (Price Leadership)
• Tender Pricing
• Price Discrimination
• Destroyer Pricing/Predatory Pricing
• Influence of Elasticity
• Cost-Plus Pricing
• Contribution Pricing
• Target Pricing
• Marginal Cost Pricing
• Absorption/full cost pricing

Penetration Pricing(Low price- High Volume)

• involves the setting of lower, rather than higher prices in order to achieve a large, if not dominant market share.
• It creates cost control abd cost reduction.
• It discourages the entry of competitors.

Market Skimming(High Price-Low Volume)

• Charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market.
• e.g DVD players: DVD players in the late 1990's and early 2000's - in the late 1990's DVD players sold for $500 and $400 when they first came out, then the price dropped to less than $100 by 2001 by 2004 you can get them for $50 or $60 at many different types of stores.

Value Pricing

• usually during difficult economic conditions
• e.g. Value menus at McDonalds

Loss Leader

• selling products/services at a price that will generate little or no profit and in some cases not even cover all associated costs (marketing, overheads, direct costs, etc).
• Microsoft's Xbox video game system, which was sold at a loss of more than $100 per unit to create more potential to profit from the sale of higher-margin video games.

Pyschological Pricing

• to get a customer to respond on an emotional, rather than rational basis.
• e.g 99p not £1.01 ‘price point perspective

Going rate (Price Leadership)

• Situation in which a market leader sets the price of a product or service, and competitors feel compelled to match that price.
• e.g. Banks, petrol, electrical goods, supermarkets…

Tender Pricing

• Mostly done in secret
• Firm (or firms) submit their price for carrying out the work
• Purchaser then chooses which represents best value

Price Discrimination

• charge different prices to different groups of consumers for what is more or less the same good or service! it has become widespread in nearly every market.
• The airlines have become masters at price discrimination as a means of maximising revenue from passengers travelling on the flight networks. Other transport businesses do the same.

Destroyer Pricing/Predatory Pricing

• the practice of a firm selling a product at very low price with the intent of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors.
• difficult to prove that a drop in prices is due to predatory pricing rather than normal competition, difficult to prove due to high legal hurdles designed to protect legitimate price competition.
• Easy Jet believed that British Airways was using destroyer pricing when they introduced the new budget airline Go. Easy Jet argued that British Airways were setting Go™s pricing so low in the hope of forcing existing budget airlines out of business.

Influence of Elasticity

• Any pricing decision must be mindful of the impact of price elasticity
• The degree of price elasticity impacts on the level of sales and hence revenue
• Elasticity focuses on proportionate (percentage) changes

If price increase by 10% and demand for CDs fell by 20% then:

PED = -20/10 = -2

Cost-Plus Pricing

• a pricing method commonly used by firms.
• used primarily because it is easy to calculate and requires little information.
• you first calculate the cost of the product, then include an additional amount to represent profit.
• often used on government contracts

Contribution Pricing

• maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs, and on one’s assumptions regarding the relationship between the product’s price and the number of units that can be sold at that price.
• For example, to cover indirect costs of, say, £7000 and you further expect a profit of £3,000 (totalling £10,000) assuming that 100 of each product A, B and C are to be sold, the following contributions can be included in the selling price:

Target Pricing

• Setting price to ‘target’ a specified profit level
• Estimates of the cost and potential revenue at different prices, and thus the break-even have to be made, to determine the mark-up
• Mark-up = Profit/Cost x 100

Marginal Cost Pricing

• Marginal cost pricing is the principle that the market will, over time, cause goods to be sold at their marginal cost of production.
• In the most general criticism of the theory of marginal cost pricing, economists note that monopoly power may allow a producer to maintain prices above the marginal cost; more specifically, if a good has low elasticity of demand and supply of the product is limited, prices may be considerably higher than marginal cost.

Absorption/full cost pricing

• Full Cost Pricing – attempting to set price to cover both fixed and variable costs
• Absorption Cost Pricing – Price set to ‘absorb’ some of the fixed costs of production
  

Market Research, 27 March 2007

Market Research

To understand the difference between primary and secondary market research and to understand how primary and secondary market research may be used by a business to help inform its marketing decisions

• Primary Research
• Secondary Research
• Sampling Methods
• Purpose

Primary Research

• Questionnaries
• Focus Grooups
• Postal Survey
• Telephone Surveys
• Customer Interviews
• Test Markets
• Technology-Internet feedback
• –First hand information
  –Expensive to collect, analyse and evaluate
  –Can be highly focussed and relevant
  –Care needs to be taken with the approach and methodology to ensure accuracy
  –Types of question – Closed – limited information gained; Open – useful information but difficult to analyse
• Quantitative and Qualitative Information:
• Quantitative – based on numbers – 56% of eighteen year olds drink alcohol at least four times a week.
  Doesn’t tell you why, when, how.
• Qualitative – more detail – tells you why, when and how!

Secondary Research

• Internal Sources:
  -Company Accounts
  -Internal Reports and Analysis
  -Stock Analysis
  -Retail data - till data, etc.
• External Sources:
  -Government Statistics
  -EU - Euro Stat
  -Household Expenditure Survey
  -Magazine surveys
  -Other firms’ research
  -Research documents – publications, journals, etc.
  -Web sites: commercial & non-commercial

Sampling Methods

• Random Samples – equal chance of anyone being picked
  –May select those not in the target group – indiscriminate
  –Sample sizes may need to be large to be representative
  –Can be very expensive
• Stratified or Segment Random Sampling
  –Samples on the basis of a representative strata or segment
  –Still random but more focussed
  –May give more relevant information
  –May be more cost effective
• Quota Sampling
  –Again – by segment
  –Not randomly selected
  –Specific number on each segment are interviewed etc
  –May not be fully representative
  –Cheaper method
• Cluster Sampling
  –Primarily based on geographical areas or ‘clusters’ that can be seen as being representative of the whole population
• Multi-Stage Sampling
  –Sample selected from multi stage sub-groups
• Snowball Sampling
  –Samples developed from contacts of existing customers – ‘word of mouth’ type approach!

Purpose

• Size of market
• Market Trends
• Forecasting
• Planning
• Evaluation of Strategies/Promotion
• Assessing Marketing Mix
• Identifying market segments
• Identifying consumer needs
• Identifying Competition
• Identifying Opportunities/gaps in the market
• Reduce Risk

Advantages of Market Research

• Helps focus attention on objectives
• Aids forecasting, planning and strategic development
• May help to reduce risk of new product development
• Communicates image, vision, etc.
• Globalisation makes market information valuable

Disadvantages of Market Research

• Information only as good as the methodology used
• Can be inaccurate or unreliable
• Results may not be what the business wants to hear!
• May stifle initiative and ‘gut feeling’
• Always a problem that we may never know enough to be sure!
  
  
  
  
  

Market Analysis, 20 march 2007

Market Analysis




Market Position

• Market Niche – small part of an existing market
• Market Leader – maintain dominant position in the market?
• Market Follower – Follow the lead of the market leader – pricing, product development etc
• Market Challenger – Seek to adopt strategies to challenge market leader’s position

Market Objectives

• National Growth
• International Growth
• Ethical Objectives
• Market Share
• Consumer Focus
• Product Focus
• Image
• Social Responsibility
• Revenue Maximisation
• Shareholder Value
• Overcome Competitors
• Will involve/determine some or all of the following:
  –Market Penetration
  –New Product Development
  –Branding
  –Diversification
  –SWOT Analysis

Market Segments

• Age
• Religion
• Gender
• Income Level
• Lifestyle
• Ethnic Grouping
• Geographical region
• Family Circumstances
• Behaviouristics
• Social Class: Institute of Practitioners in Advertising (IPA) Grouping
  –A – Higher managerial, professional and administrative
  –B – Middle management, professional and administrative
  –C1 – Supervisory, clerical and junior management
  –C2 – Skilled Manual Workers
  –D – Semi and unskilled manual workers
  –E – Pensioners, casual workers, unemployed

Which Segment?

• Mass Markets: high volume, low margin goods – confectionary, cars, clothing, food stuffs
• Multiple Segments: appealing to wider range of groups – e.g. 4x4 vehicles – town, country, gender, lifestyle, social class?
• Single Segment: often a specialised product, e.g. machinery, exclusive goods

Market Structure

• Highly Competitive?
• Imperfect Competition?
• Oligopoly?
• Duopoly?
• Monopoly?
• Nature of the market structure determines marketing strategy:
  –Pricing strategy
  –Branding?
  –Product Differentiation?
  –Market Penetration?
  –Direct Selling?
  
  

Quantitative and Qualitative Factors in Decision Making, 13 March 2007

Quantitative Factors

• Provide a numerical basis for decision making – reduces decisions to looking at a monetary value placed on different choices, e.g.
  –Forecasted sales figures for the next 3 years
  –The cost of a series of redundancies against the longer term financial benefits to the firm of this process
• But: such data provides only part of the story
• Other factors need to be taken into account, particularly the effects of decisions on stakeholder groups and their response to such decisions, e.g.
  –The takeover of Manchester United by Malcolm Glazer might make financial sense but the reaction of the supporters might make the move unworkable

Decision Trees: The Process

Decision Trees: The Process

Qualitative Factors

• Qualitative factors look to take account of these other issues that may influence the outcome of a decision
• Can be wide ranging and especially need to consider the impact on human resources and their response to decisions

SWOT

• A decisions (for example, investment in a new production plant) could be considered not only in financial terms but also to apply other techniques of decision making to look at wider issues:
• A SWOT analysis might be part of this:
  –Strengths
  –Weaknesses
  –Opportunities
  –Threats

PEST

• Might also need to factor in other external issues that might influence the decision making process which can be summarised as:
  –Political
  –Economic
  –Social
  –Technological
• Political could be in its widest sense, e.g. the internal politics of a firm as well as the national and international political effect
• The decision to site a series of wind turbines in a coastal area might be justified on financial grounds but:
• –Does government policy support such planning developments?
• –What is the reaction of the local community?
• –Are there social impacts – e.g. noise pollution, damage to eco-systems, etc?
• Such factors may make the difference between success and failure

Human Resources Management

• Impact on a firm’s human resources is essential to consider, in particular the effects on:
  –Motivation
  –Morale
  –Recruitment and Retention
  –May be difficulty to assess and measure
  –May need to distinguish between short term effects and long term

Decision Making

• Eventual decision may rest on the balance between the perceived effects of quantitative and qualitative.
• If the long term effect on the workforce for example was to reduce productivity or increase absence because of the impact on motivation and morale, the fact that a decision makes financial sense may be shelved!
• Qualitative by its nature, therefore, is very subjective.
  

Business Organisation, 27 February 2007

Business Functions

• Human Resources
• Sales and Marketing
• Research and Development
• Production/Operations
• Customer Service
• Finance and Accounts
• Administration and IT

Human Resources

• Recruitment and retention
  –Job descriptions
  –Person Specifications
• Dismissal
• Redundancy
• Motivation
• Professional development and training
• Health and safety and conditions at work
• Liaison with trade unions

Sales and Marketing

• Market research
• Promotion strategies
• Pricing strategies
• Sales strategies
• The sales team
• Product – advice on new product development, product improvement, extension strategies, target markets

Research and Development

• New product development
• Product improvements
• Competitive advantage
• Value added
• Product testing
• Efficiency gains
• Cost savings

Production/Operations

• Acquiring resources
• Planning output – labour, capital, land
• Monitoring costs
• Projections on future output
• Production methods
• Efficiency

Customer Service

• Monitoring distribution
• After-sales service
• Handling consumer enquiries
• Offering advice to consumers
• Dealing with customer complaints
• Publicity and public relations

Finance and Accounts

• Cash flow
  –Monitoring income/revenue
  –Monitoring expenditure
• Preparing accounts
• Raising finance
• Links with all other functional areas

Administration and IT

• Managing estates – cleaning, health and safety, maintenance, security
• Reception
• Clerical work – reporting, recording, record keeping, communication
• Overview of quality control
• Use of IT systems

Organisation Charts

Hierarchical Structure

Pyramidal Structure

Centralised/ Entrepreneurial

Matrix Structure

• Changes to business structures
• Linked to new thinking on leadership and management
• Less hierarchical
• Emphasis on communication and collaboration between sections

Business Ownership: The Private Sector, 20 February 2007

Business Activity

Business activity for Private Sector owned, financed and controled by private individuals.

• Sole Traders
• Partnerships
• Private Limited Companies
• Public Limited Companies
• Co-operatives
• Franchises
• Charities

Business Ownership

• Sole Trader: Owned financed and controlled by one individual but can employ other staff.
• Common in local building firms, small shops, restaurants, butchers etc.

Sole Traders: Advantages

• Easy to set up
• Personal incentive
• Flexibility
• Ability to offer personal service

Sole Traders: Disadvantages

• Unlimited liability
• Limited access to capital
• Potential for long hours
• Pressure of being solely responsible
• Lack of continuity

• Partnerships: Owned, financed and controlled by upwards of 2 partners. Terms of Partnership agreed through contract. It is common in professions as lawyers, accountants, architects, surveyors, estate agents, vets etc.

Partnerships: Advantages

• Greater access to capital
• Shared responsibility
• Greater opportunity for specialisation
• Easy to set up

Partnerships: Disadvantages

• Unlimited Liability
• All partners liable for the depts of the others
• Partnership dissolved on death of one partner
• Potential for conflict
• Decisions of one partner binding on the rest
• Limited access to capital

• Limited Companies:
  –Private Limited Company (Ltd) Owned by between 2 and 50 shareholders
  –Public Limited Company (PLC) Owned by minimum of 2 but no maximum number of shareholders
• Has a separate legal identity – the company can sue and be sued
• More complex to set up
• Minimum share capital of £50,000
• Must Register with Registrar of Companies at Companies House
  • Memorandum of Association
  Details of the nature, purpose and structure of the company
  • Articles of Association
  Details of the internal rules of the company
• Certificate of Incorporation – allows the company to trade
• Shareholders have limited liability – can only lose what they agreed to put into the company – no personal liability
• PLCs – shares traded on Stock Exchange
• LTDs – shares only bought and sold with agreement of existing shareholders

Limited Companies-Issues

• Divorce between ownership and control
• Potential for diseconomies of scale – communication, decision making etc
• Must publish accounts
• PLCs – shareholders may be large institutions – pension funds, insurance companies etc
• PLCs - Share value subject to volatility – affects company value
• PLCs – can be large, complex, possess market power

• Co-operatives: Ownership, finance and control in hands of ‘members’
• Exists for the benefit of ‘members’
  •Consumer co-ops – members buy goods in bulk, sell to members, divide profits between members
  •Worker co-operatives – workers buy the business and run it – decisions and profits shared by members
  •Producer co-operatives – producers organise distribution and sale of products themselves

• Franchises: Method of business ownership backed by established ‘brand’ name
• Owner gets to run a business with less ‘risk’
• Owner buys the right to use the established companies name, format products, logos, display units, methods etc.
• Speedy way for business to expand
• Become very popular
• Owner – (Franchisee) responsible for debts, pays a royalty to owners of the brand, keeps any remaining profit.
• Franchisee – pays a fee for the purchase of the franchise
• Common franchises – Body Shop, McDonalds, Burger King, Pizza Hut, Benetton, Toys R Us, IKEA, Kentucky Fried Chicken
  
  

Business Objectives, 13 February 2007

Business Activity & Objectives

In this topic we investigated the competing aims of businesses in the private sector and public sector.

Private Sector

Business Activity for Private Sector consists four parts named as;

• Primary Sector
• Secondary Sector
• Tertiary Sector
• Quarternary Sector

Primary Sector is an extraction of raw materials from the Earth.

Secondary Sector is a processing of raw materials into finished orsemi-finished products.

Tertiary Sector is service industries.

Quarternary Sector is about health, education, research and leisure.

Multiple Business Activity involved in primary, secondary, tertiary and quarternary sectors.

Objectives of Private Sector Business Activity

• Profit
• Survival
• Share Price
• Social Issues
• Market Power
• Sales and Sales revenue
• Efficiency
• Quality and Innovation
• Image and Reputation
• Environment

Public Sector

Business Activity for Public Sector owned, financed and controlled by the state through government or local authorities, health trusts and public corporations.

Objectives of Public Sector Business Activity

• Access & Equity
• Quality
• Affordability

Range of Busines Offered by the Public Sector

• Museums and Arts
• Paths and Parks
• Environmental Health
• Cemeteries
• University
• Street Lighting
• Licensing
• Care of the Elderly
• Social Services
• Roads
• Waste Disposal
• Schools
• Economic Development and Tourism
• Trading Standards

At the end of this topic we understood the diference between a public sector organisation and a private sector organisation, the major objectives of business activity in the public sector and the major aims of business activity in the private sector.