Motivation in Practice

Motivation in Practice - Introduction to Financial Incentives

Although some theorists like Herzberg believe that money is not a positive motivator (although lack of it can de-motivate), pay systems are designed to motivate employees. The scientific / Theory X approach, in particular, argues that workers respond to financial rewards. Getting employee pay right (often referred to as the remuneration package) is a crucial task for a business. Why is pay important? It is an important cost for a business (in some labor-intensive businesses, payroll costs are over 50% of total costs) People feel strongly about it. Pay helps to satisfy many needs (e.g. security, esteem needs, resources to pursue self-actualization) Pay is the subject of much important business legislation (e.g. national minimum wage; equal opportunities legislation) It helps attract reliable employees with the skills the business needs for success Pay also helps retain employees rather than them leave and perhaps join a competitor For most employees, the remuneration package is the most important part of a job and certainly the most visible part of any job offer. There are many methods of financial reward (these are covered in separate revision notes) Time-rate pay Piece-rate pay Commission Performance-related pay Bonuses Shares and options Benefits in kind (fringe benefits) Pensions

Because pay is a complex issue, there are several ways in which businesses determine how much to pay, and which methods to use: Job evaluation / content; this is usually the most important factor. What is involved in the job being paid? How does it compare with similar jobs?

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 Fairness pay needs to be perceived and be seen to match the level of work Negotiated pay rates the rate of pay may have been determined elsewhere and the business needs to ensure that it complies with these rates. Market rates another important influence particularly where there is a standard pattern of supply and demand in the relevant labor market. If a business tries to pay below the market rate then it will probably have difficulty in recruiting and retaining suitable staff Individual performance increasingly, businesses include an element of performancerelated reward in their pay structures. However, it is important to remember that pay is only one element of motivation and will work best where management also give attention to: Developing good management and supervision; Designing jobs and organizing work groups to make them as satisfying as possible; Providing feedback to staff about their performance and training and development; Making effective arrangements for communications and consultation.

Ti m e R a t e Pa y
Time rates are used when employees are paid for the amount of time they spend at work. This is the most common method of payment in the UK. The usual form of time rate is the weekly wage or monthly salary. Usually the time rate is fixed in relation to a standard working week (e.g. 35 hours per week). The employment contract for a time-rate employee will also stipulate the amount of paid leave that the employee can take each year (e.g. 5 weeks paid holiday). Time worked over this standard is known as overtime. Overtime is generally paid at a higher rate than the standard time-rate reflecting the element of sacrifice by an employee. However, many employees who are paid a monthly salary do not get paid overtime. This is usually the case for managerial positions where it is generally accepted that the hours worked need to be sufficient to fullfill the role required. The main advantages of time-rate pay are: Time rates are simple for a business to calculate and administer They are suitable for businesses that wish to employ staff to provide general roles (e.g. financial management, administration, maintenance) where employee productivity is not easy to measure It is easy to understand from an employees perspective The employee can budget personal finance with some certainty

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 Makes it easier for the employer to plan and budget for employee costs (e.g. payroll costs will be a function of overall headcount rather than estimated output) The main disadvantages of time-rate pay are: Does little to encourage greater productivity there is no incentive to achieve greater output Time-rate payroll costs have a tendency to creep upwards (e.g. due to inflation-related pay rises and employee promotion.

Commission
Commission is a payment made to employees based on the value of sales achieved. It can form all or part of a pay package. Commission is, therefore, a form of incentive pay (see also performance-related pay, bonuses). Commission, like piece-rates, is a reward for the quantity or value of work achieved. In most cases, the employee is paid a flat percentage of the value of the good or service that is sold. The rate of commission depends on the selling price and the amount of effort required in making the sale. For example, commission rates could range from 5% where the product sells easily (e.g. household goods sold door-to-door) to 30% where the effort is substantial. Advantages of Commission The main advantage of commission from an employees point-of-view is that it enables high performing sales people to earn huge amounts. The main advantage to the employer is that the payroll cost is related to the value of business achieved rather than just the amount produced. After all, businesses exist to sell goods and services for profit not just to make things (piece rates simply reward amounts produced, not sold). Disadvantages of Commission There are several drawbacks with using commission payments: Sales people may cut corners to make sales (e.g. not explain the product or service in enough detail to potential customers). This was a major problem in the recent pensions mis-selling scandal in the UK High commission earnings enjoyed by some of the sales team may be resented elsewhere in the business particularly if the sales actually depend on a team effort It is difficult to change what proves to be an over-generous commission structure without upsetting and demoralizing the sales team

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 Once commission payments have been made, the sales force may lose some motivation until they begin to focus on the next payment (which might be up to 12 months away) As a result of the above disadvantages, most businesses that use commission as an incentive payment method offer a basic pay plus a moderate commission level. In this way, if sales and profits justify the change, the commission rate can always be increased slightly. Recent research suggests that the use of commission is reducing in comparison with the growth of other incentive payment methods.

Pe n s i o n s
Pensions are a very complicated area of employee pay - but an important one: both for the employee and the employer. In your business studies examinations you are not required to have a detailed understanding of pension provision. However, it is worth having an outline knowledge of the different types of pension scheme. Types of pension scheme The main types of pension arrangements currently available are a: Flat rate pension (often referred to as an "old age pension") State earnings related pension supplement Occupational pension Personal pension Stakeholder pension

State pensions These are financed by contributions from employers and employees with a subsidy from the government via general taxation. Occupational pensions Occupational pension schemes are run by employers and have the following components: A pension based on either final salary (i.e. related to average earnings over the last two, three or five years) or on money purchase (i.e. based on flat percentage contributions) A lump sum benefit on retirement Benefits for dependants Benefits for early leavers. Some schemes are "non-contributory" which means that the employer meets the full cost. However, in most cases the employer will require the employee to make a monthly contribution to the pension scheme. Employees can also make "additional voluntary contributions" if they want to increase the amount they invest in their pension.

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Personal pensions Employees may decide to take out a personal pension instead of joining their companys scheme and if so they will receive a contribution, linked to earnings, from the Government to their personal pension scheme. In addition they can transfer from one personal pension to another or into an occupational scheme. Stakeholder pensions Introduced in 2001, these are a form of personal pension available to almost everyone employees, non-earners, people already in company schemes and the self-employed. Tax relief is available on contributions. A business that employs five or more people who earn over the lower earnings limit is obliged to offer employees access to a stakeholder pension scheme if they do not already offer pension provision. Industrial relations implications of pensions Many companies recognize the need to negotiate or consult about pensions as part of the overall pay package, including, more specifically: Conditions of entitlement Size of pensions Attitude towards those taking personal pensions Size of employer contribution Use of pension fund surpluses The involvement, if any, of employees as trustees

Shares and Share Options

Offering employees shares in a business is an increasingly popular part of pay packages particularly for businesses whose shares are traded on a stock exchange. Offering shares is a more complicated kind of reward than paying employees cash. However, it can be much more effective in linking the objectives of the business (e.g. profit maximization) and the objectives of employees (e.g. make a large gain on the value of shares held). This payment method also encourages employees to commit to the business in the longer-term. There are various schemes available which companies can use to offer shares as part of the remuneration package: Employee Share Ownership Plans (ESOPs) ESOPs involve setting up a trust into which a company offers shares in the business. In the UK, a company using an ESOP can give employees shares worth up to 3,000 each year. The gains made on these shares are free of tax (capital gains tax) as long as they are held in trust for more than five years.

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Share Option Schemes These are popular ways of incentivising senior management and key employees. Under a share option scheme, selected employees are given the right to buy shares at their current price, at a later date. If the shares increase in value in the meantime, employees will make an immediate profit when the exercise their options. In the UK, employees may hold options on shares worth up to 30,000. The option can be exercised after three years but not later than ten years. Again, there is no tax paid on any gains made by exercising these options. Sharesave Schemes Sharesave schemes are made available to all employees who must be able to participate in the scheme on equal terms. All scheme members get the right but not the obligation to buy a number of shares (normally at a lower price than their current price) after three, five or seven years. In the meantime, employee members save a regular amount to pay for the shares. If the shares rise in value, employees have a profit when they buy the shares. No income tax is paid on any gains made on these shares.

Case Study
Case Study - Sharesave Schemes
Profit-share and sharesave schemes have provided good returns for the staff of retailers and other large groups. In 2002, Tesco paid out 50 million to just over 100,000 of its workers after holding 38 millionworth of shares on their behalf for three years in its profit-share scheme. Since 1999, when the shares were placed in trust for the employees, Tesco's share price had risen by more than 30 per cent, from 188p to 258p when the scheme matured. Employees were able to keep the shares or cash them in. Staff can join Tesco's profit-share scheme after two years' service. The number of shares allocated to each employee depends on the number of hours they work each week. During 2002, Tesco, which has 195,000 staff, distributed more than 200 million through sharesave and bonus schemes. In February 2002, two Save As You Earn share schemes matured and released 116 million to 37,000 staff who had been saving into the schemes for either three or five years. Savers who had started the scheme three years before could buy Tesco shares at the 1998 option price of 1.36, while savers in the five-year scheme could buy at 83p per share. The shares they bought at these prices were actually worth about 2.35 each. Those who had saved the maximum 250 per month saw an investment over five years turn into a maturity value of 49,000, a return of almost three times what they put in.

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Savers who put away as little as 10 per month saw the value of their investment soar from 600 to 1,953 once the savings had been used to buy shares at the end of the five-year term. By contrast, if these employees had saved the same 10 per month into a savings account paying the building society average of 4.8 per cent gross per year, each would have 695.96 before tax after five years. Terry Leahy, chief executive of Tesco, said: "The popularity of SAYE has increased dramatically in 21 years as staff recognize the value of the benefit. The most recent three and five-year schemes to be offered to Tesco staff in October 2001 attracted more than 63,000 applications. This equates to over one in four staff - more than 66 times the 1981 figure when 942 employees signed up for the scheme." Most large companies operate share-save schemes for their staff. Under government rules, employees can save between 5 and 250 per month into a scheme, which can run for three, five or seven years with an option to buy shares in the company at a price determined at the outset. This price is often the market price at outset, but companies have the right to discount the market price by up to 20 per cent - which Tesco did. Contributions are paid into a bank or building society account nominated by the employer and interest is paid at a rate set universally by the Treasury. This year, the rates were 3.67 per cent gross per annum for three-year schemes, 3.99 per cent for five-year schemes, and 4.07 per cent for seven-year schemes. Staff make 36 payments into the three-year scheme, and 60 payments into the five and sevenyear schemes. Their savings are left in the deposit account for an extra two years under the seven-year scheme. At the end of the period, the employee has the right to choose whether to buy the shares at the pre-determined option price with the savings they have made; or, if the current market price has dipped below the price at outset, to take the savings in cash, free of tax, instead. Source: Extracted from articles in the Daily Telegraph, Independent and Guardian.

National Minimum Wage

Many businesses in the UK, including large numbers of small businesses, are affected by the national minimum wage. It is worth understanding how this works since it may be relevant in a business studies case study exam. Who the Minimum Wage Applies To The national minimum wage in the UK is currently 4.20 for workers aged over 21 and 3.60 for 18 to 21 year olds. These rates will rise to 4.50 and 3.80 respectively from October 2003; with a further proposed rise to 4.85 and 4.10 from October 2004. There is also a minimum training wage for new employees over 21 of 3.60 an hour, but this wage applies only to workers doing accredited training and for a maximum of 6 months. A worker's hourly rate of pay may include such payments as bonuses and performance-related pay.

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There is no national minimum wage for workers aged under 18. Other exemptions from the minimum wage are the self-employed, volunteers, apprentices, members of the armed services, and people working as part of a family. What Employers Have to Do Employers have to keep records that show that they are paying the national minimum wage, although it is up to an employer what form these records take. Employees have a right to see their pay records and legal rights to the national minimum wage. The Inland Revenue enforces the legislation, and employers can be taken to an employment tribunal or to court if they fail to pay the minimum wage. There are financial penalties for failure to comply with national minimum wage legislation. Employers found not to be paying at least the minimum wage may be served an enforcement notice ordering them to make minimum wage payments and refund any underpayment. If this notice is ignored employers may face a penalty notice and a fine of 7.40 per worker for each day

Job Rotation
What is Job Rotation? Job rotation involves the movement of employees through a range of jobs in order to increase interest and motivation. Job rotation can improve multi-skilling but also involves the need for greater training. In a sense, job rotation is similar to job enlargement. This approach widens the activities of a worker by switching him or her around a range of work. For example, an administrative employee might spend part of the week looking after the reception area of a business, dealing with customers and enquiries. Some time might then be spent manning the company telephone switchboard and then inputting data onto a database. Job rotation may offer the advantage of making it easier to cover for absent colleagues, but it may also reduce' productivity as workers are initially unfamiliar with a new task. Why is Job Rotation Important? Job rotation is seen as a possible solution to two significant challenges faced by business: (1) Skills shortages and skills gaps, and (2) Employee motivation Skills shortages occur when there is a lack of skilled individuals in the workforce.

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Skills gaps occur when there is a lack of skills in a companys existing workforce which may still be found in the labor force as a whole. According to the Treasury and DfES, both skills shortages and gaps are major problems acting as major barriers to economic growth and the reduction in long-term unemployment in the UK.

S t r u c t u r i n g T h e Pa y Pa c ka g e
With so many methods of pay available, how should a business decide to structure the pay package it offers to employees, and what rate of pay should it use? Start with the Market Rate The starting point is usually to find out what the market rate is. Paying the market rate involves careful job evaluation (it helps to know what is being compared to what!). Factors that help determine the market rate for a job include: Whether the skills that are required are widely available The overall level of unemployment in the employment catchment area Whether the job requires specialized (or even highly specialized) skills There are several ways in which a business can obtain data on market rates: Local employment agencies Job centre Job adverts in national newspapers of specialist publications (e.g. professional journals) Commission (or contribute towards) a specific salary survey in the industry

More or Less? The next question is should the business pay MORE or LESS than the market rate? Factors to consider here include: Does the business need above-average employees (e.g. salesmen with an industry reputation for being strong performers) Does the business need trained employees or is it prepared to invest in training beginners? Are the skills wanted by the business needed urgently (in which case the business would probably want to pay more) Do factors affecting the mobility of labor need to be addressed e.g. are there transport problems that need to be solved (e.g. pay for a rail season ticket) or relocation allowances to be offered to encourage new employees to move home? Structure The third important question is how to structure the remuneration package. Should employees be paid on the basis of time spent working (e.g. time-rates) or the amount they produce (e.g. piece rates) or some other measure of performance?

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 Should the remuneration package be a combination of approaches (e.g. some basic pay per month + a commission-related incentive)? What kind of remuneration package is used by competitors - this may provide a useful guide as to how to structure the package (and it may also influence what employees expect) In deciding the answers to these questions, a business should try to construct a pay structure that is simple (to help employees understand it), logical and fair

P i e c e R a t e Pa y
Piece-rate pay gives a payment for each item produced it is therefore the easiest way for a business to ensure that employees are paid for the amount of work they do. Piece-rate pay is also sometimes referred to as a payment by results system. Piece-rate pay encourages effort, but, it is argued, often at the expense of quality. From the employees perspective, there are some problems. What happens if production machinery breaks down? What happens if there is a problem with the delivery of raw materials that slows production? These factors are outside of the employees control but could potentially affect their pay. The answer to these problems is that piece-rate pay systems tend, in reality, to have two elements: A basic pay element this is fixed (time-based) An output-related element (piece-rate). Often the piece-rate element is only triggered by the business exceeding a target output in a defined period of time Case study: Piece-rate pay in practice in the UK Home-based workers In the UK many thousands of people engage in what is known as home-based work. This refers to work: In the home, or near the home in premises that are not those of an employer For a cash income (i.e. not unpaid household work) Whilst there are many successful business people and well-paid professionals working from home, the use of piece-rate pay is focused is on those at the other end of the scale homebased workers, mainly women, who earn only a subsistence level income. Subsistence level home-based workers fall into two broad categories: Those who work for an employer, intermediary or subcontractor for a piece-rate, who are not responsible for designing or marketing the product, but simply contribute their labour. These workers are often called subcontracted or dependent home-workers Workers who design and market their own products, but who cannot be considered to be running small businesses - known as own-account workers.

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The majority of home-based workers are women who do home based work in order to combine earning cash with other responsibilities, such as child-care and household management. Many earn well below the local minimum wage or average earnings. Most dependent workers work informally, without a proper employment contract. They are rarely organized or supported by formal trade unions. Home-based work is found in most sectors of the economy, both modern and traditional industries. Good examples include: Production of garments and shoes Assembly of electronic, plastic and metal components Many kinds of packing work Weaving and dyeing of textiles in the traditional sectors Handicraft work Sewing and knitting garments Assembling toys Data-processing

It used to be thought that home-based work was an old-fashioned form of employment that would die out with the rise of modern industry. However, over the last 20 years much largescale industry has reorganized its production, subcontracting work to smaller companies, often in other countries. At the end of the chain there are often informal workshops and home-based workers. Subcontracted homework is a form of production which allows companies to reduce their costs by: Outsourcing production to lower-paid workers, usually without formal contracts, employment and social protection or even a regular supply of work Passing on some of the costs of heating, lighting and storage to the workers themselves Avoiding responsibility for health and safety for these workers Using home-based workers as a source of flexible labor Some of the problems faced by home-based workers include: Irregular work and therefore irregular income Earnings well below average No economic or social security for sickness, maternity or old age Long working hours Potential health problems caused by repetitive processes and inadequate health and safety

Pe r f o r m a n c e R e l a t e d Pa y
Performance-related pay is a financial reward to employees whose work is: Considered to have reached a required standard, and/or Is above average

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Performance related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved. Like piece-rates and commission, performance related pay is a form of incentive pay. Whilst the detail of performance-related schemes varies from business to business, there are several common features: Individual performance is reviewed regularly (usually once per year) against agreed objectives or performance standards. This is the performance appraisal. At the end of the appraisal, employees are categorized into performance groups which determine what the reward will be (if any) The method of reward will vary, but traditionally it involves a cash bonus and/or increase in wage rate or salary. Performance-related pay has grown widely in recent years particularly in the public sector. This is part of a movement towards rewarding individual performance which reflects individual circumstances. According the Equal Opportunities Commission, a well-designed performance-related pay scheme would have the following elements: Objective setting Communication and understanding of objectives Consideration of performance against objectives Translation of evaluation into performance rating A link between ratings and the determination of pay A separate appeals procedure

Disadvantages of Performance Related Pay There are several problems with performance-related pay: There may be disputes about how performance is measured and whether an employee has done enough to be rewarded Rewarding employees individually does very little to encourage teamwork It may encourage unhealthy rivalry between managers There is much doubt about whether performance-related pay actually does anything to motivate employees. This may be because the performance element is usually only a small percentage of total pay

P e r f o r m a n c e R e l a t e d P a y - Te a c h e r s
In a controversial move in the UK education sector, the Department for Education has insisted that teachers' pay must be linked to performance as part of its plans to modernize public sector services - including workplace reform.

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In its 2003 submission to the School Teachers Review Body, the Department for Education said teachers could not expect an above-inflation pay increase in 2004. The department is also considering giving individual schools more power to set pay rates for their staff. A spokesman for the department said: " The government is strongly of the view that the priority for this year is not a general increase in pay above the rate of inflation but instead action to promote workforce reform and tackle workload issues." In 2002, the government introduced a performance-related bonus scheme in order to boost teachers' pay and help retain staff. Experienced teachers can apply for a one-off bonus of 2,000. Currently, almost all teachers who apply for the performance pay get it. They can only apply after they have taught for six years. Study suggests performance related pay is inappropriate for teachers However, a recent study has suggested that there is no evidence that paying teachers performance bonuses leads to better exam results or attracts more recruits to the profession. Researchers from the Institute of Education in London found little evidence to suggest the payments had improved results or attracted more people into teaching. The study argued that it is difficult to determine the impact of any one teacher on a pupil's progress. " A pupil may have private tuition, help at home, or any number of external influences. So we may never know objectively whether performance-related pay has positive effects on pupil learning outcomes said Professor Dalton, a co-author of the study. The researchers even argue that bonus payments could be counter-productive because teachers were used to working together instead of competing with each other. The researchers say it is a "difficult if not impossible task" to devise a performance-related pay system for teachers that makes them work harder and more productively, does not need expensive monitoring, encourages teamwork and discourages teaching to the test. Other countries, including the USA, have paid teachers performance bonuses but the study suggests they provide little convincing evidence for or against performance-related pay. Professor Dolton said: "Market theories do not necessarily work in the public sector. A bricklayer may lay more bricks if paid a bonus, but this does not apply to teachers, who are highly motivated professionals already working to maximum capacity." Source: Adapted from articles in the Daily Telegraph and Independent, 2002

Pa y - T h e L e g a l R e q u i r e m e n t s
The law affects many aspects of pay. Employers need to be aware of these requirements. Unfortunately, they change often.

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You do not need to have a detailed understanding of each piece of legislation. However, it is helpful to have a working knowledge of the main legal areas, which are as follows: Employers must: Pay employees in accordance with their contract of employment. The contract will cover areas such as time to be worked, amount of paid holidays, arrangements for pay reviews etc. The employment contract is the crucial legal document between an employer and employee Pay men and women equally for doing like work or work of equal value - in other words, not discriminate between men and women Ensure they meet the requirements of the Minimum Wage Act 1998 and pay at least the National Minimum Wage to eligible employees Not make deductions from wages without prior written agreement unless required or authorized by the employees contracts or by law (e.g. Income tax and National Insurance contributions) Give employees itemized pay statements showing: the gross amount of wages or salary; the amount and purpose of any variable or fixed deductions; net wages or salary payable; and, where the net amount is paid in different ways, the amount and method of each part payment Pay as appropriate, various statutory pay entitlements e.g. statutory sick pay; statutory maternity pay; redundancy pay. Various laws set out minimum payments for these entitlements

Job Enlargement
What is Job Enlargement? Job enlargement (sometimes also referred to as horizontal loading) involves the addition of extra, similar, tasks to a job. In job enlargement, the job itself remains essentially unchanged. However, by widening the range of tasks that need to be performed, hopefully the employee will experience less repetition and monotony that are common on production lines which rely upon the division of labor. With job enlargement, the employee rarely needs to acquire new skills to carry out the additional task, and the motivational benefits of job enrichment are not usually experienced. One important negative aspect is that job enlargement is sometimes viewed by employees as a requirement to carry out more work for the same amount of pay.

Workforce Planning - Job Sharing

Job sharing involves dividing a single full-time job between two people who share the responsibility, pay and benefits. Jobs can be shared between two people on a:

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- Daily basis, with one sharer working mornings and the other afternoons - Weekly basis, with sharers working half a week each Another method is for sharers to work alternate weeks. When deciding how to split a job, several factors should be considered: The flexibility of the job sharers The need for any overlap (e.g. an hour to "hand-over" the current issues of the job) Travel costs (for example, if these are significant, the use alternate week sharing may reduce costs through the purchase of weekly tickets) Advantages of job sharing Job sharing has several advantages: Job sharing allows businesses to recruit skilled, experienced workers who may not be available for or willing to do full-time work It allows one position to be filled by two people with different but complementary experience It provides some continuity if one sharer leaves or is absent Disadvantages of job sharing Job sharing involves some additional administrative and training costs and extra time spent on supervision and communication Where job sharers have managerial responsibilities staff may find it difficult or confusing to work for two people Some job sharers may feel that they are achieving proportionately more than a full-time employee and that they are being inadequately paid

E m p l o y i n g Te m p o r a r y W o r k e r s
What is a temporary worker? A temporary worker is someone employed for a limited period whose job is usually expected by both sides to last for only a short time. Temporary workers may be employed directly by the employer or by private agencies. Agencies will recruit, select and sometimes train temporary workers and hire them out to employers.

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Temporary workers are sometimes employed on fixed term contracts. A fixed term contract is a contract of employment for a definite period, set in advance. Employment ends when the contract expires and no notice need be given by the employer. Employment contracts may also be agreed which end on the completion of a particular task rather than on a specific date. What are the legal aspects of temporary working? UK employment law makes no distinction between permanent and temporary employees. To qualify for various employment rights, however, employees must have served a minimum period of continuous employment with their employer. Most temporary workers will have insufficient service. However, some employment rights such as the right not to be discriminated against on the grounds of race, sex or disability have no minimum service qualifications. Employees on fixed term contracts have the right to be paid the same rate as similar permanent employees working for the same employer and in general terms should not be treated less favorably than permanent employees. This means that employees on fixed term contracts will have broadly the same rights to statutory redundancy payments, written reasons for dismissal and the right not to be unfairly dismissed as permanent employees. Advantages of Temporary Working - Temporary workers can provide greater flexibility because the number employed can vary to take account of changes in demand for the product or service - Temporary workers can also provide cover for permanent staff on holiday, maternity leave or sick leave - Temporary employees can provide specialist skills to carry out specific projects - Some businesses use temporary fixed term contracts as a screening device for potential recruits to the permanent workforce Disadvantages of Temporary Working - Some employers find that temporary workers lack motivation and commitment - Businesses which use agency temps depend on the screening and testing methods used by the agency - Agency workers can sometimes receive higher pay than their permanent counterparts, which can cause resentment amongst employees and trade unions. Making a Success of Using Temporary Workers There are several things a business should do if it is to make temporary working a successful part of its workforce planning: - Avoid using temporary contracts when the job is in reality permanent - Consider the likely cost of using temporary workers compared to permanent workers

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- Consult with managers to determine their views on the possible effects of employing temporary workers - Agree proposals to use temporary workers with recognized trade unions - Where temporary workers are recruited through an employment agency, contact several agencies to compare the services they provide, including their screening and testing methods - Provide temporary workers or the employment agency with job descriptions and information on company benefits, rules and regulation - Give temporary workers a written statement of their main terms and conditions of employment.

L a b o r Tu r n o v e r
What is "labor turnover"? Labor turnover refers to the movement of employees in and out of a business. However, the term is commonly used to refer only to wastage or the number of employees leaving. High labor turnover causes problems for business. It is costly, lowers productivity and morale and tends to get worse if not dealt with. Measuring labor turnover The simplest measure involves calculating the number of leavers in a period (usually a year) as a percentage of the number employed during the same period. This is known as the "separation rate" or "crude wastage rate" and is calculated as follows: Number of leavers / average no employed x 100 For example, if a business has 150 leavers during the year and, on average, it employed 2,000 people during the year, the labor turnover figure would be 7.5% An alternative calculation of labor turnover is known as the "Stability Index" . This illustrates the extent to which the experienced workforce is being retained and is calculated as follows: Number of employees with one or more years service now / Number employed one year ago x 100 Labor turnover will vary between different groups of employees and measurement is more useful if broken down by department or section or according to such factors as length of service, age or occupation. Patterns of labor turnover The highest rate of labor turnover tends to be among those who have recently joined an business.

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Longer-serving employees are more likely to stay, mainly because they become used to the work and the business and have an established relationship with those around them. Causes of labor turnover A high level of labor turnover could be caused by many factors: Inadequate wage levels leading to employees moving to competitors Poor morale and low levels of motivation within the workforce Recruiting and selecting the wrong employees in the first place, meaning they leave to seek more suitable employment A buoyant local labor market offering more (and perhaps more attractive) opportunities to employees Costs of labor turnover High rates of labor turnover are expensive in terms of: - Additional recruitment costs - Lost production costs - Increased costs of training replacement employees - Loss of know-how and customer goodwill - Potential loss of sales (e.g. if there is high turnover amongst the sales force) - Damage that may be done to morale and productivity (an intangible cost) Benefits of labor turnover Labor turnover does not just create costs. Some level of labor turnover is important to bring new ideas, skills and enthusiasm to the labor force. A "natural" level of labor turnover can be a way in which a business can slowly reduce its workforce without having to resort to redundancies (this is often referred to as "natural wastage".

Recruitment - Introduction
What is recruitment? Recruitment is an important part of a business' human resource planning.

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In all businesses, people are a vital resource - and they need to be managed as such. The overall aim of the recruitment and selection process is to obtain the number and quality of employees that are required in order for the business to achieve its objectives. There are three main stages in recruitment: (1) Identify and define the requirements. This involves the preparation of job descriptions, job specifications and person specifications (2) Attract potential employees - there are various methods for doing this - which are described in a separate revision note (3) Select and employ the appropriate people from the job applicants It is important to appreciate that recruitment is a continuous process - because of: - Staff departures (e.g. retirements, sackings, resignations) - Changes in business requirements (e.g. new products, markets, expanded operations) - Changes in business location (a relocation often triggers the need for substantial recruitment) - Promotions Recruitment is becoming more and more important in business. In particular, this reflects the increasing need for a well-motivated and flexible workforce that requires less management supervision.

Job Description
What is a job description? A job description sets out the purpose of a job, where the job fits into the organization structure, the main accountabilities and responsibilities of the job and the key tasks to be performed. Why is a job description important? A job description has four main uses: Organization - it defines where the job is positioned in the organization structure. Who reports to who. Recruitment - it provides essential information to potential recruits (and the recruiting team) so that they can determine the right kind of person to do the job (see person specification) Legal - the job description forms an important part of the legally-binding contract of employment

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Appraisal of performance - individual objectives can be set based on the job description Contents of a Job Description The main contents of a job description are: - Job Title: this indicates the role/function that the job plays within an organization, and the level of job within that function (e.g. Finance Director would be a more senior position than Financial Accountant - although both jobs are in the "finance department") - Reporting responsibilities: who is the immediate boss of the job holder? - Subordinates; who reports directly TO the job holder? - Main purpose - who is involved in the job overall - Main tasks and accountabilities: description of the main activities to be undertaken and what the job holder is expected to achieve (e.g. in the case of the Management Accountant, this might include "Complete monthly management accounts by 10th working day of each month and prepare report on all key performance variances") - Employment conditions

Internal Recruitment
What is internal recruitment? This refers to the filling of job vacancies from within the business - where existing employees are selected rather than employing someone from outside. A business might decide that it already has the right people with the right skills to do the job, particularly if its training and development program has been effective. How is it done? Internal vacancies are usually advertised within the business via a variety of media: - Staff notice boards - Intranets - In-house magazines / newsletters (for example, Emap, a major publishing business) have a weekly staff magazine devoted solely to advertising jobs within the organization! - Staff meetings Advantages of internal recruitment

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- Gives existing employees greater opportunity to advance their careers in the business - May help to retain staff who might otherwise leave - Requires a short induction training period - Employer should know more about the internal candidate's abilities (= a reduced risk of selecting an inappropriate candidate) - Usually quicker and less expensive than recruiting from outside Disadvantages of internal recruitment - Limits the number of potential applicants for a job - External candidates might be better suited / qualified for the job - Another vacancy will be created that has to be filled - Existing staff may feel they have the automatic right to be promoted, whether or not they are competent - Business may become resistant to change; by recruiting from outside, new perspectives and attitudes are brought in

Job Advertisements
The Objective of Recruitment Advertising The objective is to (1) Attract suitable candidates, and (2) Deter unsuitable candidates What makes a good job advert? Whilst there are no hard and fast rules about the contents of a job advert, the following features are likely to be in an effective advertisement: Accurate - describes the job and its requirements accurately Short - not too long-winded; covers just the important ground Honest - does not make claims about the job or the business that will later prove false to applicants Positive - gives the potential applicant a positive feel about joining the business

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Relevant - provides details that prospective applicants need to know at the application stage (e.g. is shift-working required; are there any qualifications required) Content of a job advert Most job adverts contain: - Details of the business/organization (name, brand, location, type of business) - Outline details of the job (title, main duties) - Conditions (special factors affecting the job) - Experience / qualifications required (e.g. minimum qualifications, amount of experience) - Rewards (financial and non-financial; the financial rewards may be grouped together under a total valued "package2 - e.g. total package circa 50,000) - Application process (how should applicants apply, how to; deadlines) Choice of medium What kind of advertising medium should be chosen? The following factors are relevant: Type of job: senior management jobs merit adverts in the national newspapers and/or specialist management magazines (e.g. the Economist, Business Week). Many semi-skilled jobs need only be advertised locally to attract sufficient good quality candidates Cost of advertising: National newspapers and television cost significantly more than local newspapers etc Readership and circulation: how many relevant people does the medium reach? How frequently (e.g. weekly, monthly, annually!. Is the target audience actually only a small fraction of the total readership or Viewer ship? Frequency: how often does the business want to advertise the post?

Job Analysis
The management of a business need to determine what work needs to be done. Job analysis is a key part of this need. Job analysis concentrates on what job holders are expected to do. It provides the basis for a job description, which in turn influences decisions taken on recruitment, training, performance appraisal and reward systems. What is contained in a job analysis? A job analysis would typically contain:

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Job purpose

What is the job meant to do - and how does this related to other parts of the business? Job content Duties and responsibilities Accountabilities What results / outputs is the job holder responsible for? Performance criteria How will the job holder's performance be measured? Resource requirements E.g. equipment, location How is a job analysis carried out? Several techniques should be used to complete an effective job analysis: - Research business documents - e.g. procedures manuals - Ask relevant managers about the requirements and purpose of the job; what are the key activities; what relationships does the job have with other posts. Develop a comprehensive profile through these discussions - Interview the existing job holder (if the job already exists) -e.g. ask store managers in retail stores and build a profile from asking those who actually do the job - Observe the job holders to see what they really do The key information that needs to be collected includes: - Job title - Main duties and tasks - Targets and performance standards that the job holder is required to achieve - The amount of supervision that is normally given / freedom of decision-making in the job - Skills and/or qualifications needed for the job (including personal skills)

Pe r s o n S p e c i f i c a t i o n
What is a person specification? A person specification describes the requirements a job holder needs to be able to perform the job satisfactorily. These are likely to include: - Education and qualifications - Training and experience - Personal attributes / qualities How does this compare with a job description?

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A job description describes the job ; a person specification describes the person needed to do the job. A person specification can, therefore, form the basis for the selection of the most suitable person to fill the job. How should a person specification be created? The most common approach now used by recruiters is to use what are known as "competencies" to design the person specification. These are then classified as "essential" or "desired" to determine which are most important. Competencies might include some or all of the following: - Physical attributes (e.g. state of health, aged, speech) - Attainments (e.g. highest level of education completed, relevant market experience, ability to supervise/manage) - Aptitudes (e.g. verbal reasoning; numerical aptitude) - Interests (social activities; sporting activities) - Personal circumstances (e.g. ability to work shifts; full or part time) Person specifications have to be prepared and used with great care. In particular, it is important to ensure that the list of essential or desired competencies does not lead to unlawful discrimination against potential employees.

External Recruitment
What is external recruitment? This refers to the filling of job vacancies from outside the business (contrast with internal recruitment). Most businesses engage in external recruitment fairly frequently, particularly those that are growing strongly, or that operate in industries with high staff turnover. How is it done? There are several ways of looking for staff outside the business: Employment / recruitment agencies These businesses specialize in recruitment and selection. They often specialize in recruitment for specific sectors (e.g., finance, travel, secretarial). They usually provide a shortlist of candidates based on the people registered with the agency. They also supply temporary or interim employees. The main advantages with using an agency are the specialist skills they bring and the speed with which they normally provide candidates. They also reduce the administrative burden of

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recruitment. The cost is the high agency fees charged - often up to 30% of the first year wages of anyone employed. Headhunters / Recruitment Consultancies "Upmarket" recruitment agents who provide a more specialized approach to the recruitment of key employees and/or senior management. They tend to "approach" individuals with a good reputation rather than rely on long lists of registered applicants - often using privileged industry contacts to draw up a short list. The cost of using a headhunter or recruitment consultant is high. Job centre Government run agency - good for identifying local candidates for relatively straightforward jobs. The job centre service is free to employers and is most useful for advertising semi-skilled, clerical and manual jobs. Government Funded Training Schemes There is a variety of government funded schemes that provide potential recruits, including the New Deal and Modern Apprenticeships. The advantage of these schemes is that government funding lowers the cost of employment and the business can get to know the employee before committing for the long-term. However, relatively few employment requirements are covered by these schemes. Advertising Probably the most common method. Advertising allows the employer to reach a wider audience. The choice of advertising media (e.g. national newspaper, internet, specialist magazine etc) depends on the requirement for the advert to reach a particular audience and, crucially, the advertising budget. Advantages of external recruitment These are mainly the opposite of the disadvantages of internal recruitment. The main one being that a wider audience can be reached which increases the chance that the business will be able to recruit the skills it needs.

Tr a i n i n g - I n t r o d u c t i o n
Training and personal development is an important method for a business to improve the performance of employees. Training starts with a strategy It is important that a business provides training that is consistent with the business strategy. The main steps in developing a training strategy are to: - Identify the skills and abilities needed by employees;

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- Draw up an action plan to show how investment in training and development will help meet business goals and objectives; - Implement the plan, monitoring progress and training effectiveness Benefits of training to a business The main benefits to a business of a well-trained workforce are: - Better productivity (and, therefore, lower production / operating costs) - Higher quality - More flexibility - training helps employees develop a variety of skills. Multi-skilling is only possible if the workforce is well trained - Less supervision - lower supervision and management costs if employees can get on with their jobs. This might also improve motivation - through greater empowerment - More successful recruitment and employee retention - businesses with a good reputation for training are likely to find it easier to attract good quality staff - and then keep them - Help in achieving change - businesses with strong training systems and culture find it easier to implement change program What training cannot solve it is tempting to think that training is the solution to many if not all business problems. However, there are some things that training can rarely solve: these include: - Poor management (although management training might help!) - Poor job design - Ineffective or inefficient equipment, production organization - Recruitment If training is so important, why do some businesses invest so little in it? Ideally training should be seen as an investment in the future of the business. it takes time for the effects of training to impact business performance. Some businesses are reluctant to spend on training because: - They fear employees will be poached by competitors (who will then benefit from the training) - A desire to minimize short-term costs - They cannot make a justifiable investment case

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Off The Job

Off the job training involves employees taking training courses away from their place of work. This is often also referred to as "formal training". Off the job training courses might be run by the business' training department or by external providers. The main types of off the job training courses are: - Day release (where the employee takes time out from normal working hours to attend a local college or training centre) - Distance learning / evening classes - Revision courses (e.g. in the accountancy profession, student employees are given blocks of around 5-6 weeks off on pre-exam courses) - Block release courses - which may involve several weeks at a local college - Sandwich courses - where the employee spends a longer period of time at college (e.g. six months) before returning to work - Sponsored courses in higher education - Self-study, computer-based training (an increasingly popular option - given that attendance at external courses can involve heavy cost) Advantages of off-the-job training: - Use of specialist trainers and accommodation - Employee can focus on the training - and not be distracted by work - Opportunity to mix with employees from other businesses Disadvantages of off-the-job training: - Employee needs to be motivated to learn - May not be directly relevant to the employee's job - Costs (transport, course fees, examination fees, materials, accommodation)

I n v e s t o r s I n Pe o p l e

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Investors in People is a national training Standard that aims to provide a best practice for the
training and development of employees so that they can achieve business goals. The IIP Standard was developed in the early 1990's by leading business, personnel, professional and employee organizations such as the Confederation of British Industry (CBI), Trades Union Congress (TUC) and the Institute of Personnel and Development (IPD). The Standard provides a framework for improving business performance and competitiveness, through a planned approach to: (1) Setting and communicating business objectives, and (2) Developing people to meet these objectives. The intended result is to motivate employees to achieve their potential and to do what their organization needs them to do. The training process under IIP is "cyclical" and tries to encourage a culture of continuous improvement. The Investors in People Standard is based on four key principles: Commitment - to invest in people to achieve business goals Planning - how skills, individuals and teams are to be developed to achieve these goals Action - to develop and use necessary skills in a well defined and continuing program directly tied to business objectives Evaluating outcomes of training and development for individuals' progress towards goals, the value achieved and future needs. How a business can achieve the IIP Accreditation Before an organization can gain IIP accreditation, it needs to complete several steps: Understanding the Standard and its strategic implications for the business Undertaking a review against the Standard to identify any gaps in current training practice Making the commitment to meet the Standard and communicating that commitment to all employees Planning and taking action, to bring about change Bringing together the evidence for assessment against the Standard Achievement or recognition as an Investor in People Working to keep the culture of continuous improvement alive.

On The Job
As the name implies, on the job training involves employees training at their place or work. The most common methods of on the job training are: - Demonstration / instruction; showing the trainee how to do the job

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- Coaching - a more intensive method of training that involves a close working relationship between an experienced employee and the trainee - Job rotation - where the trainee is given several jobs in succession, to gain experience of a wide range of activities (e.g. a graduate management trainee might spend periods in several different departments) - Projects - employees join a project team - which gives them exposure to other parts of the business and allow them to take part in new activities. Most successful project teams are "multi-disciplinary" Advantages of on the job training - Generally more cost effective - Less disruptive to the business - i.e. employees are not away from work - Training an employee in their own working environment, with equipment they are familiar with and people they know can help they gain direct experience to a standard approved by the employer - Employees may find that they have more confidence if they are supervised and guided as they feel they are doing the job right - Employees may feel more at ease being taught or supervised by people they know rather than complete strangers at an external training course - Managers or supervisors can assess improvement and progress over a period of time and this makes it easier to identify a problem intervene and resolve problems quickly - On the job training is also productive, as the employee is still working as they are learning - As training progresses and the employee begins to feel more confident, this confidence would allow them to work at a higher standard and ultimately be more productive - Training "on-the-job" provides an opportunity to get to know staff they might not normally talk to Disadvantages of on the job training - Teaching or coaching is a specialist skill in itself; unless the trainer has the skills and knowledge to train, this would mean that the training will not be done to a sufficient standard - The trainer may not be given the time to spend with the employee to teach them properly, which would mean substandard training has been achieved and learning has only been half done - The trainer may posses bad habits and pass these on to the trainee

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Tr a i n i n g - I n t r o d u c t i o n Tr a i n i n g
What is induction training? Induction training is training given to new employees. The purpose of the induction period (which may be a few hours or a few days) is to help a new employee settle down quickly into the job by becoming familiar with the people, the surroundings, the job and the business. It is important to give a new employee a good impression on the first day of work. However, the induction program should not end there. It is also important to have a systematic induction program, spread out over several days, to cover all the ground in the shortest effective time. Devising an effective induction training program The induction program should be drawn up in consultation with all those involved. Depending on the size and complexity of the business this may include: Senior management (including directors) Supervisors or line managers Personnel officers Health and Safety managers Employee or trade union representatives What induction training involves Usually induction involves the new employee meeting and listening to different people talk about aspects of the business. Other methods include written information, audio visual aids and group discussion. The following items should be covered in an effective induction program: Introduction to the business/department and its personnel/management structure Layout of the buildings (factory / offices) Terms and conditions of employment (explaining the contract of employment) Relevant personnel policies, such as training, promotion and health and safety Business rules and procedures Arrangements for employee involvement and communication

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 Welfare and employee benefits or facilities

Government Assistance
There are various resources available from the UK government to help businesses train their employees. The Learning and Skills Council funds and plans training for over 16-year-olds in England they are responsible for: Work-based training and young people Workforce development Adult and community learning Information, advice and guidance for adults Education business links

There are two main ways in which UK businesses can get help with training employees: Modern Apprenticeships and National Training Awards are designed by National Training Organizations to meet the special skills needed in different employment sectors and offer employers direct access to high caliber young people training towards National Vocational Qualifications (NVQ) levels 2 and 3 respectively. These schemes cover traditional skills sectors such as engineering and construction as well as business administration, retail, banking and information technology. Modern Apprenticeships offer people aged over 16 the chance of paid employed linked with the opportunity to train for jobs at craft, technician and management level. National Training Organizations ceased to be recognized by the UK government in 2002, although most still operate. The Sector Skills Development Agency (SSDA) now operates, running a network of Sector Skills Councils (SSC's). Sector Skills Councils are developed by employers in industry or business sectors of economic or strategic significance and involve trade unions and professional bodies. The key goals of SSCs are to: Reduce skills gaps and shortages and anticipate future needs, through leverage on the supply side, and help employers and individuals to make informed career and personal development choices Improve productivity, business and public services performance through specific strategic actions based on analysis of sectoral priorities Increase opportunities to develop and improve the productivity of everyone in the sectors workforce, including action to address equal opportunities Improve learning supply, including the development of apprenticeships, higher education and of national occupational standards.

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Individual employees can get financial help for training with a Career Development Loan. A Career Development Loan is a deferred repayment bank loan which a person can take out to help cover the costs of vocational education or training. The loans are available to everyone aged 18 or over resident in Great Britain (England, Scotland and Wales) or intending to train in Great Britain and who, on completion of their course, will work in the UK, the European Union or the European Economic Area countries of Iceland, Liechtenstein or Norway. Non-EU nationals, who are not permanent residents of the UK may also apply for a loan after getting Home Office approval to study, train or work in the UK, but they are unlikely to qualify if there are any restrictions to their stay in the UK. A person may borrow from 300 to 8,000 to fund two years of training, or three years if the course includes work experience. During this time interest payments on the loan will be made by the Department of Education and Employment, and no repayment need be made until a month after training is completed. On completion, a repayment timetable is agreed with the bank and a fixed rate of interest charged. The loans can be used to fund any full-time, part-time or distance learning vocational course, and if the course is over two years long, or three years with work experience, the loan may be used to fund part of it. Only the vocational education or training elements of a course are eligible for assistance.

Communication - Introduction
The use of communication in business Good communications are essential within a business if it is to prosper. In any business, the communication of information is an essential part of three key business activities: (1) Management decision-making (without relevant, timely and accurate information, decisionmaking at any level becomes quite tricky!) (2) Co-ordination of departments, teams and groups - e.g. making sure that marketing, production and administration know what each other is doing, when and why (3) Motivation of individuals Examples of communication To illustrate the all-pervasive nature of communication, consider the following list of communication examples: - Exchanging ideas - Announcing investment plans

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- Producing a report with the monthly management accounts comparing actual results against budget - Giving instructions to the production and purchasing departments about the new product plans for next year - Delivering a presentation to the marketing department following the results of some quantitative, primary market research - Announcing the annual trading results and future strategy to company investors and analysts Directions of communication in a business Communication flows in three main directions in a business: (1) Vertical Communication E.g. from managers to sub-ordinates; from shop floor workers to supervisors; from the Chief Executive to all other management and employees. Vertical communication flows are mainly used for reporting information (e.g. results, plans) and obtaining feedback (e.g. an employee survey summarized for the Board of Directors (2) Horizontal Communication This is between people of the same "level" in a business - usually in the same department, but sometimes communication between departments. This is sometimes known as "peer communication". It is normally used to co-ordinate work. E.g. sales managers for different regions circulate details of potential customers to each other and allocate based on the customer location; or accounting staff in different departments share information to help prepare the annual budget on a consistent basis. (3) Diagonal Communication Less common; this involves interdepartmental communication by people at different levels. A good example would be a project team drawn from different grades and departments.

Introduction
The use of communication in business Good communications are essential within a business if it is to prosper. In any business, the communication of information is an essential part of three key business activities: (1) Management decision-making (without relevant, timely and accurate information, decisionmaking at any level becomes quite tricky!)

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(2) Co-ordination of departments, teams and groups - e.g. making sure that marketing, production and administration know what each other is doing, when and why (3) Motivation of individuals Examples of communication To illustrate the all-pervasive nature of communication, consider the following list of communication examples: - Exchanging ideas - Announcing investment plans - Producing a report with the monthly management accounts comparing actual results against budget - Giving instructions to the production and purchasing departments about the new product plans for next year - Delivering a presentation to the marketing department following the results of some quantitative, primary market research - Announcing the annual trading results and future strategy to company investors and analysts Directions of communication in a business Communication flows in three main directions in a business: (1) Vertical Communication E.g. from managers to sub-ordinates; from shop floor workers to supervisors; from the Chief Executive to all other management and employees. Vertical communication flows are mainly used for reporting information (e.g. results, plans) and obtaining feedback (e.g. an employee survey summarized for the Board of Directors (2) Horizontal Communication This is between people of the same "level" in a business - usually in the same department, but sometimes communication between departments. This is sometimes known as "peer communication". It is normally used to co-ordinate work. E.g. sales managers for different regions circulate details of potential customers to each other and allocate based on the customer location; or accounting staff in different departments share information to help prepare the annual budget on a consistent basis. (3) Diagonal Communication Less common; this involves interdepartmental communication by people at different levels. A good example would be a project team drawn from different grades and departments.

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Barriers
Inevitably, most businesses (perhaps all) suffer from failures in communication. Poor businesses suffer from persistently poor communications. Perhaps the best way to think about the way in which communication can go wrong is to think about what good communication would be like: - It would use appropriate language (e.g. no poor use of jargon; written so that the intended recipient can understand) - It would go only to who should receive it - not everyone - It would use the right medium to communicate the information - The information would get to the recipient in good time for it to be used Taking the above list, it easy to produce a list of how communications go wrong: - Information is omitted or distorted by the sender - Information is misunderstood due to the use of inappropriate jargon or lack of clarity - Information is presented using an inappropriate medium (e.g. via email rather than in a proper report, or via telephone when face-to-face is better) - Information arrives too late, or incomplete Barriers to good communication Research suggests that, amongst the many reasons why information fails to be communicated, the following are the main barriers: - Different status of the sender and the receiver (e.g. a senior manager sends a memo to a production supervisor - who is likely to pay close attention to the message. The same information, conveyed in the opposite direction might not get the attention it deserves) - Use of jargon - employees who are "specialists" may fall for the trap of using specialist language for a non-specialist audience (e.g. the IT technician who cannot tries to explain how users should log onto a network, in language that sounds foreign to most users of the network) - Selective reporting - where the reporter gives the recipient incorrect or incomplete information - Poor timing - information that is not immediately relevant (e.g. notice of some deadline that seems a long way off) is not always actioned straightaway - Conflict - where the communicator and recipient are in conflict; information tends to be ignored or distorted

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E mp l o y ee A p p ra i s a l - 36 0 De gr ee Fee d b a ck
In the revision note on appraisal and performance review we concentrated on the assessment of employees by managers. But how should management be assessed? After all, key management have a vital impact on the performance of a business and they too will have development and training needs. One increasingly popular method of managerial assessment is 360-degree feedback. 360-degree feedback is an assessment process used to improve managerial effectiveness by providing the manager with a more complete assessment of their effectiveness, and their performance and development needs. The process involves obtaining feedback from the manager's key contacts. These would normally include: The manager him/herself Subordinates (employees who work for the manager) Peers (fellow managers) Manager (senior management) Customers Suppliers

Feedback is normally obtained by using a questionnaire which asks participants to rate the individual according to observed behaviors - usually managerial or business-specific competencies. The 360-degree process will not suit all companies. You should assess how well it would fit with your current culture before launching a scheme and a pilot scheme is worth building into your program. Communicating the scheme, it's purpose and benefits to all those involved will be a key factor in reducing the participants' fears and gaining their commitment to any new scheme. Presenting the results of the appraisal to managers in a constructive way is critical to the success of the process. All feedback, positive and critical, should be presented, with the aim of highlighting and acting on areas for development. Results can be aggregated to give you some feedback on organizational strengths and weaknesses in relation to your business objectives and training strategy.

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