A-Level Business AQA

Unit 6: Human Resources

Analysing human resource performance

_______________________________________________________________________________________________

THE NEED TO MEASURE PERFORMANCE:

The firm needs to see three things:

 Is the workforce fully motivated?

 Is the workforce as productive as it could be?
 Are the personnel policies of the business helping it to reach its goals?

Indicators are used to measure these factors. These indicators are:

 Labour productivity
 Labour turnover

_______________________________________________________________________________________________

LABOUR PRODUCTIVITY:

CALCULATING LABOUR PRODUCTIVITY:

It compares the number of workers with the output that they are making. It is expressed through the formula:

Output per period

Labour Productivity=
Number of employees per period

Higher the Workers more Lower labour costs

productivity efficient per unit.

LABOUR TURNOVER:

MEASURING LABOUR TURNOVER:

This is a measure of the rate of change of a firm’s workforce. It is measured by:

Number of staff leaving the firm per year

Labour Turnover rate= x 100
Average number of staff

FACTORS AFFECTING LABOUR TURNOVER:

INTERNAL FACTORS: EXTERNAL FACTORS:

 A poor recruitment and selection procedure,
which may appoint the wrong person to the
post.
 Ineffective motivation or leadership.
 More local vacancies arising – setting up or
expansion of other firms.
 Better transport links – making a wider
geographical area accessible for workers.

 Lower wages compared to rival firms.

LABOUR TURNOVER:

CONSEQUENCES OF HIGH TURNOVER:

POSITIVE AFFECTS: NEGATIVE AFFECTS:

 New workers can bring new ideas and
enthusiasm to the firm.
 Workers with specific skills can be employed
rather than having to train up existing workers.
 New ways of solving problems may be
identified by workers with a different
perspective. (not using a tried and tested
technique).
 The cost of recruiting replacements.
 The cost of training replacements.
 The time taken for new recruits to settle into
the business.
 The loss of productivity while the new workers
learn the new ways of working.

OVERALL: Firms tend to opt for the lowest level of staff turnover per year.

_______________________________________________________________________________________________

USING DATA FOR HR DECISION-MAKING AND PLANNING:

Productivity and Turnover data provide a firm with an insight to its performance.

For most effective comparisons, a good manager will analyse the figures to identify:

 Changes over time (this year VS. last year).

 How the firm is performing compared to rival firms.
 Performance against targets – EG: 20% improvement on last year.

_______________________________________________________________________________________________

KEY TERMS:

KEY TERM: DEFINITION:

Benchmarking Measuring yourself against the best, or sometimes against the average of businesses
within your industry.
Culture The accepted attitudes and behaviours of people within a workplace.

Labour productivity Output per person.

Labour turnover The rate at which people leave their jobs and need to be replaced.
RRR: DATA RESPONSE (CHAPTER 50):

Q1. Outline one reason why McDonald’s customers may care about the pay levels of the company’s staff. (2)

A McDonald’s customer may care about the pay levels of the staff because the company employs a large
number of young people and has a reputation for not paying the minimum wage levels.

Q2. The famous banker J.P. Morgan once said that the highest earner in a company should earn no more
than twenty times that of the lowest earner. At McDonald’s today, the differential is 1,000 times.
Explain one reason in favour and one against McDonald’s approach. (8)

The McDonald’s approach of a 1,000 times differential could be favourable to the business because it
allows them to employ a large number of staff for a low cost. This means that the workers will have job
security and will not have to face redundancies. It also means that the business’ shareholders will be kept
very satisfied and will keep investing in the business.

The McDonald’s approach of a 1,000 times differential will have a negative impact on the workers since
they are not being paid properly. This means there will be a lower morale because there is an obvious
gap between the top and the bottom. This will lead to lower levels of productivity as staff become less
motivated, and higher levels of staff turnover. Therefore, this poses increased recruitment and training
costs to the business.

Q3. Evaluate the implications for McDonald’s of the successful unionisation of its workers. (16)

A union is an organisation that workers pay to belong to which ensures their rights are being considered
at all times.

On one hand, I agree that the unionisation of its workers could have a negative impact on McDonald’s.
This means that workers will be able to strike, demand fair pay, and have support in legal action against
the firm, because they are represented by the union. This could lead to a fall in revenue and productivity
for McDonald’s because their workers are out striking and protesting instead of doing their job. This could
also lead to high costs of potential legal action. I support my chain of reasoning with the following evidence.
‘Organisers said that 2000 people had attended the rally.’ This means that there are 2,000 McDonald’s
workers out on strike instead of working. Therefore, the unionisation of the workers is going to cost
McDonald’s an increase in labour costs and a day’s worth of productivity. Although, some may argue
that McDonald’s could work with the union which will reduce the impact on the business.

On the other hand, I believe that the unionisation of its workers will not have a large implication on
McDonald’s because the franchise can choose not to recognise the union. This means that McDonald’s
doesn’t have to take action based on the union’s advice / demands if it refuses to accept the union because
the union would then be acting unlawfully. This could lead to McDonald’s having reasonable grounds to
take legal action against the union – meaning that the unionisation of the workers will inevitably fail. I
support my chain of reasoning with the following evidence. ‘Protesters …… to demand …… and the right to
unionise.’ This means that McDonald’s are not recognising the union as of yet, leading to the possibility
of the union acting unlawfully. Therefore, the unionisation of the McDonald’s workers will not have that
big an impact on McDonald’s if they choose to reject the union. However, rejecting the union will not be
in the interest of the business as they risk damaging public relations – which could lead to a fall in sales.

In conclusion, I believe that the unionisation of its workers could have a big impact on McDonald’s. I justify
this mainly because the union will be able to take action against McDonald’s if they believe that the
franchise is acting unfairly. Although this does depend on McDonald’s accepting to recognise the union,
otherwise any union action will be unlawful. However my most important point is that if McDonald’s reject
the union, they risk damaging their public relations and brand image. Therefore, it is in the franchise’s best
interests to work with the unions in order to avoid legal action and further reputational damage.
WORKBOOK A. REVISION QUESTIONS (CHAPTER 51):

Q1. Define the following terms: (4)

(a) Labour Productivity

Output per person.

(b) Labour Turnover

The rate at which people leave their jobs and need to be replaced.

Q2. Why could an increase in labour productivity help a firm to reduce its costs per unit? (3)

The higher the productivity in a given time = more production per hour.
Pay rate = per hour.
Therefore the labour costs per unit are spread across a larger number of products.

Q3. In what ways could a hotel business benefit if labour turnover rose from 2% to 15% per year? (4)

New workers could bring new ideas and enthusiasm to the firm. They could benefit from employing
new skilled workers, rather than spending money training up the existing workers. There will be a
new (perhaps better) approach to problem solving as things are seen in a different light.

Q4. Some fast-food outlets have labour turnover as high as 100% P.A. What could be the effects of this? (4)

The positive effects could involve new ideas and enthusiasm, new approaches to problem solving, and
already skilled workers.

The negative effects could include: High recruitment and training costs, time taken for recruits to settle
into the business, and a loss of productivity while new recruits adapt to the business culture.

Q5. How might a firm know if its human resource strategy was working effectively? (5)

 If there was a high level of productivity

 Low levels of labour turnover
 Your performance exceeds targets set by HR.
 Performance exceeds that of rival firms.
 Monitoring these changes over time. (EG: A year+).

_______________________________________________________________________________________________