3.2.1 People management

3.2.1 People management

Taught in Spring and revisited after Easter: the second assessment covers the topics not tested in the first.

Topic 28: Human resource data

Key ideas

• What to measure:
  • employee engagement: e.g. staff surveys;
  • representation: e.g. union or forum membership;
  • diversity: e.g. gender and ethnicity at different levels;
  • wellbeing: e.g. absence and stress indicators;
  • KPIs for employees in their roles, e.g. sales targets, calls handled, customer ratings.
• Calculations:
  • Productivity = output ÷ employees.
  • Sales per employee = sales ÷ employees.
  • Employee turnover = staff leaving ÷ staff employed × 100.
  • Employee costs as % of revenue = employee costs ÷ revenue × 100.

Worked example

40 employees produced 24,000 units and generated £600k of sales. 6 staff left. Employee costs were £180k.

• Productivity = 600 units per employee.
• Sales per employee = £15,000.
• Employee turnover = 6 ÷ 40 × 100 = 15%.
• Employee costs = 30% of revenue.
• Interpretation: 15% turnover may be high or low depending on the sector (hospitality is typically much higher than professional services). High turnover raises recruitment and training costs and loses skills. If employee costs rise from 30% to 35% of revenue without a matching productivity gain, margins will be squeezed.

Causes of high turnover:

• poor pay;
• poor management;
• lack of progression;
• low morale;
• better local opportunities.

Benefits of some turnover:

• new ideas;
• lower pay costs, as new starters may earn less.

Self-test

Q1: A firm with 250 staff had 45 leavers. Calculate the turnover rate. A: 45 ÷ 250 × 100 = 18%.

Q2: Productivity rises from 500 to 550 units per worker. Calculate the % change. A: (550 − 500) ÷ 500 × 100 = +10%.

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Topic 29: Organisational design

Key ideas

• Span of control: the number of subordinates directly responsible to a manager.
• Levels of hierarchy: the number of layers of management.
• Tall and flat structures:

	Tall (many levels, narrow spans)	Flat (few levels, wide spans)
✅	Close supervision; clear promotion routes	Faster communication; lower management costs; empowerment
❌	Slow communication and decisions; high costs; less autonomy	Managers can be overstretched; fewer promotion steps; staff need to be self-motivated

• Centralisation and decentralisation:
  • Centralisation: decisions made at the top or head office. It gives consistency, control and economies of scale in purchasing, but it is slower and less responsive to local needs.
  • Decentralisation: authority delegated to branches or lower levels. It is responsive, motivating and develops managers, but there is less consistency, risk of poor decisions, and duplication.
• Restructuring:
  • Delayering removes layers of management. ✅ It cuts costs, speeds communication and empowers staff. ❌ Redundancy costs, loss of experience, increased workload and stress, and lower morale among survivors.
  • Re-centralisation can restore control and consistency.

Self-test

Q1: Explain one benefit of delayering. A: Removing management layers reduces salary costs and shortens the chain of command, so decisions and communication are faster and front-line staff may feel more empowered.

Q2: Why might a retail chain decentralise pricing and stock decisions? A: Local managers understand local customers and competition, so they can respond faster and more accurately to local demand.

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Topic 30: Leadership

Key ideas

• Leadership styles (AQA list):
  • Autocratic: the leader makes decisions alone, with one-way communication.
    • It suits crises, unskilled staff and time pressure.
    • It can demotivate skilled staff.
  • Democratic: the leader consults staff and involves them in decisions.
    • It builds motivation, ideas and commitment.
    • It is slower and needs skilled, engaged staff.
  • Transformational: an inspirational leader with a vision who encourages change and innovation and develops followers. (The concept was developed by James MacGregor Burns (1978) and Bernard Bass.)
    • It is useful during change.
    • It depends heavily on one person.
• Influences on leadership style:
  • the leader's personality;
  • the skills and experience of staff;
  • the task and time available;
  • the culture;
  • the size of the business;
  • whether there is a crisis.
• Impact of leadership on individual, team and business performance: motivation, productivity, staff turnover, innovation and culture.

Self-test

Q1: When is autocratic leadership most appropriate? A: In a crisis that needs quick decisions, or where staff are inexperienced or unskilled and tasks are routine.

Q2: Name one risk of transformational leadership. A: Over-dependence on a charismatic leader. If they leave, or their vision is wrong, the organisation can lose direction.

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Topic 31: Developing people

Key ideas

• Employee appraisal: a regular, formal review of an employee's performance against targets, with feedback and goals for development.
  • Purposes:
    • identify training needs;
    • motivate;
    • inform pay or promotion decisions;
    • improve communication.
  • Problems:
    • It is time-consuming.
    • It can be seen as a box-ticking exercise.
    • Bias.
    • It is demotivating if poorly handled.
• Talent management means acquiring, managing, developing and retaining talented people.
  • Purpose: skills, innovation and competitiveness; a succession pipeline.
  • Value: lower turnover costs and better performance.
  • Challenges:
    • cost;
    • competition for talent;
    • poaching;
    • perceptions of favouritism;
    • retaining people once trained.
  • Methods:
    • graduate schemes;
    • mentoring;
    • training (on-the-job and off-the-job);
    • career pathways;
    • apprenticeships (funded through the Apprenticeship Levy for large employers).

Self-test

Q1: Give two purposes of appraisal. A: To identify training and development needs, and to set performance targets that motivate the employee (also to inform pay or promotion decisions).

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Topic 32: Teamwork

Key ideas

• Purpose and value of teams:
  • They combine skills and generate ideas.
  • They raise motivation through social needs.
  • They support flexibility (multi-skilling) and quality (e.g. quality circles).
  • They spread workload.
• Problems with teams:
  • conflict;
  • "free riders" (social loafing);
  • groupthink;
  • slower decisions.
• Hackman's model of team effectiveness. J. Richard Hackman (Harvard) set out conditions that make teams more likely to succeed, in Leading Teams (2002):

Condition	Meaning	Business example
A real team	Clear boundaries, interdependence and stable membership	A defined project team of 6 members who stay for the whole project
Compelling direction	A clear, challenging, meaningful purpose	"Launch the app by March with a 4.5★ rating"
Enabling structure	The right mix of skills, team size and norms of conduct, and well-designed tasks	Cross-functional skills; agreed ways of working
Supportive context	Rewards, information, training and resources from the organisation	Team bonuses; access to data
Expert coaching	Timely help to work together well	A manager or coach who facilitates at key points

• Using it: diagnose why a team is underperforming. Example: a team with a vague goal and no team-based rewards lacks compelling direction and a supportive context.
• Limitation: setting up the conditions takes time and resources, and the model doesn't guarantee success.

Self-test

Q1: Name Hackman's five conditions. A: A real team, compelling direction, enabling structure, supportive context, and expert coaching.

Q2: A sales team has members who keep changing and individual commission only. Which Hackman conditions are missing? A: It is not a "real team", because membership is unstable. It also lacks a supportive context, because the reward system encourages individual rather than team performance.

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Topic 33: Motivation

Key ideas

• Benefits of motivated employees:
  • higher productivity;
  • better quality;
  • lower absence and staff turnover;
  • better customer service;
  • innovation.
• Challenges of motivating employees:
  • cost;
  • different people are motivated by different things;
  • it is hard to measure;
  • in large firms, it is hard to give everyone recognition.

F. W. Taylor – scientific management

• Taylor set out his ideas in The Principles of Scientific Management (1911).
• Main points:
  • Workers are motivated mainly by money.
  • Managers should find the "one best way" through time and motion studies.
  • Tasks should be broken into simple, repetitive steps (division of labour).
  • Managers do the thinking and workers follow instructions.
  • Pay by results (piece rate), with close supervision.
• Application today: call-centre targets, fast-food processes, warehouse picking rates, standardised processes.
• Criticisms:
  • It ignores social and psychological needs.
  • It produces monotony and alienation.
  • It conflicts with empowerment and creativity.

Abraham Maslow – hierarchy of needs

• Maslow set out the hierarchy in "A Theory of Human Motivation" (1943).
• The five levels, from the bottom up:
  1. Physiological needs: pay for food and shelter, breaks, a reasonable working environment.
  2. Safety: job security, safe conditions, pensions, sick pay.
  3. Love and belonging (social): teams, social events, good relationships.
  4. Esteem: recognition, status, job titles, praise.
  5. Self-actualisation: challenging work, development, creativity, fulfilling one's potential.
• The idea: lower needs must be met before higher ones motivate, and a satisfied need no longer motivates.
• Criticisms:
  • People don't always move up in order.
  • The hierarchy is culturally specific.
  • Needs are hard to measure.
  • Self-actualisation is vague.

Frederick Herzberg – two-factor theory

• Herzberg developed the theory in The Motivation to Work (1959, with Mausner and Snyderman). It was based on interviews with engineers and accountants.
• Hygiene (maintenance) factors:
  • pay;
  • working conditions;
  • company policy;
  • supervision;
  • relationships;
  • job security.
  • If poor, they cause dissatisfaction. If good, they prevent dissatisfaction but do not motivate.
• Motivators:
  • achievement;
  • recognition;
  • the work itself;
  • responsibility;
  • advancement;
  • personal growth.
  • These create genuine motivation.
• Implications for managers:
  • Get the hygiene factors right first.
  • Then motivate through job enrichment (more challenging, complete tasks with responsibility), empowerment and recognition.
  • Pay alone won't motivate long-term.
• Criticisms:
  • The original sample was small and drawn from professional occupations.
  • People may credit themselves for successes and blame the firm for problems.
  • Pay can act as a motivator through recognition.

Comparing the theories

	Taylor	Maslow	Herzberg
View of money	The main motivator	Meets lower needs	A hygiene factor (prevents dissatisfaction)
Key method	Piece rate, supervision, standardisation	Meet needs level by level	Job enrichment, recognition
Best fit	Routine, measurable tasks	General framework	Skilled, knowledge work

Self-test

Q1: According to Herzberg, why might a pay rise not increase motivation? A: Pay is a hygiene factor. A pay rise may remove dissatisfaction, but it does not create lasting motivation, which comes from motivators such as recognition, responsibility and achievement.

Q2: Which of Maslow's levels does job security satisfy? A: Safety needs.

Q3: Give one modern example of Taylor's ideas. A: Warehouse workers with handheld scanners that set and monitor picking rates, sometimes with bonuses for exceeding targets.

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Topic 34: Methods of rewarding people

Key ideas

• Financial rewards:

Method	✅	❌
Wages (hourly)	Paid for the hours worked; easy to calculate overtime	Encourages slow working to earn overtime; no incentive for quality
Salaries (annual, paid monthly)	Security and status; easy to budget	Weak link to performance
Piece rate (per unit)	Strong incentive for output (Taylor)	Quality may suffer; unstable income
Commission (% of sales)	Motivates sales staff	Pushy selling; unstable income
Performance-related pay (based on appraisal or targets)	Links pay to performance	Subjective; can be divisive; Herzberg doubts it motivates
Shares / share options	Align employees with owners; build loyalty	Value can fall; little line of sight for junior staff
Fringe benefits (car, health insurance, discounts, gym)	Attract and retain staff	Cost; may not be valued by everyone

• Non-financial rewards:
  • delegation;
  • empowerment: giving staff the authority to make decisions;
  • job enrichment (Herzberg);
  • training and development;
  • remote, hybrid and flexible working.
  • Benefits: they can be cheaper and longer-lasting (they meet esteem and self-actualisation needs).
  • Drawbacks: they need training and trust, and not all staff want responsibility. With remote working, communication, culture and supervision are harder.

Self-test

Q1: Why might piece rate be unsuitable for a hospital? A: Quality and care matter more than speed and quantity. Piece rate would encourage rushing, which risks patient safety, and much of the work can't be measured in units.

Q2: Distinguish between delegation and empowerment. A: Delegation passes a task (and the authority to do it) to a subordinate. Empowerment goes further, giving employees the freedom to decide how to do their work and make decisions.

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Topic 35: Employee wellbeing

Key ideas

• Benefits of improving wellbeing:
  • lower absence and staff turnover;
  • higher productivity and engagement;
  • employer branding;
  • legal compliance (duty of care).
• Challenges:
  • cost;
  • measuring impact;
  • stigma (staff may not use support);
  • "wellbeing-washing", where initiatives don't tackle root causes such as workload.
• Methods:
  • physical and mental health support services: Employee Assistance Programmes (EAPs), counselling, mental health first aiders;
  • an inclusive work environment;
  • employee voice;
  • flexible working.

Self-test

Q1: Give two ways a business can improve employee wellbeing. A: Provide mental health support (e.g. an Employee Assistance Programme or counselling) and offer flexible working.

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Topic 36: Employer and employee relations

Key ideas

• Employee voice and representation: involving employees in decisions. Benefits:
  • better ideas;
  • commitment;
  • early warning of problems;
  • smoother change.
• Individual and collective representation:
  • Individual: an employee negotiates directly with the manager. This is flexible but gives the employee less bargaining power.
  • Collective:
    • Trade unions negotiate pay and conditions through collective bargaining. ✅ Efficient (one negotiation) and gives workers a strong voice. ❌ There is a risk of industrial action, such as strikes and overtime bans.
    • Employee forums / works councils are consultative bodies of elected staff. ✅ Cooperative. ❌ They may lack real power.
• Causes of poor relations:
  • poor communication;
  • low pay;
  • job insecurity;
  • autocratic management;
  • imposed change.
• Consequences of poor relations:
  • industrial action;
  • high turnover and absence;
  • low productivity;
  • reputational damage.
• Managing and improving relations:
  • regular communication and consultation;
  • an employee forum;
  • fair pay;
  • involvement in change;
  • ACAS conciliation and arbitration (ACAS is the UK's independent advisory, conciliation and arbitration service).

Self-test

Q1: Give one advantage of collective bargaining for an employer. A: The employer negotiates once with representatives instead of with every employee individually, which saves time and gives clear, agreed terms.

Q2: What role does ACAS play? A: It provides impartial advice, conciliation and arbitration to help employers and employees resolve disputes.

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Topic 37: Ethics in HR (A-level only)

Key ideas

• A code of conduct sets out the expected behaviour and values of staff.
  • Purpose: consistency, protecting reputation, guiding decisions.
  • Value: it depends on genuine enforcement and leadership example.
• Equality, diversity, inclusion and belonging:
  • The Equality Act 2010 protects nine characteristics:
    • age;
    • disability;
    • gender reassignment;
    • marriage and civil partnership;
    • pregnancy and maternity;
    • race;
    • religion or belief;
    • sex;
    • sexual orientation.
  • EDIB goes beyond legal compliance to culture and belonging.
• Pay gaps:
  • Gender pay gap: UK employers with 250 or more employees must publish gender pay gap data each year; this has applied since 2017.
  • Pay ratios between senior managers and other employees:
    • UK quoted companies with more than 250 UK employees must report the ratio of the CEO's pay to that of their employees; this has applied from financial years starting in 2019.
    • Very high ratios raise questions of fairness and motivation.

Self-test

Q1: What is the gender pay gap and who must report it in the UK? A: The difference between men's and women's average (mean and median) hourly pay across an organisation. Employers with 250 or more employees must publish it each year.

Assessment checkpoint: 3.2.1 People management tests (two). The second test covers topics not tested in the first.

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