BUSINESS UNIT 3

Laura Powell
FUNCTIONAL OBJECTIVES
• Corporate objectives - the •
AND STRATEGIES
Functional objectives - the goals
goals or targets of the whole or targets of each functional areas
organisation usually based on of a business, usually based on its
its mission or aims. corporate objectives.

The purpose of corporate Functional objectives must:

objectives include:

• Focus on corporate objectives

• Informs decision making

• Provides strategic direction • Provide strategic direction within

each function
• Forms the overall guiding
principles of the business
• Impact upon other functional
• Guides functional objectives objectives

• Must be co-ordinated
 Corporate Objectives

Finance Marketing HR Operations

UNDERSTANDING FINANCIAL OBJECTIVES
Financial Objectives - the monetary targets a business wants to achieve in a
given time period.

Cash flow targets - objectives designed to achieve a specific net cash

balance at the end of a trading period.

Examples of cash flow targets:

•Creating a more even spread of sales revenue

•Reducing the bank overdraft

•Spreading costs evenly

•Setting contingency fund levels

•Raising certain levels of cash at a particular time.

UNDERSTANDING FINANCIAL OBJECTIVES
Cost minimisation - objectives focused on actions that can be taken
to minimise fixed and variable costs.

• Tactical changes - cheaper source of raw materials

• Strategic changes - relocate production abroad

Reasons for setting financial objectives:

• Act as a focus

• Provides a point to measure performance

• Improve efficiency

• Gives co-ordination
Internal influences External influences
Corporate and functional
Competitors
objectives
- leader or follower
- achieving corporate objectives
- - relative power of competition
- Influenced by other functional
- Actions and reactions
objectives.
Characteristics of the firm
- capital or labour intensive Consumers
- Established - loyalty
- Low cost or highly - Changing tastes
differentiated
Economic conditions
Relationship between owners -star ability
and directors -growth or decline
-power of individual shareholders -optimistic or pessimistic.
External environment
- political social and
technological change
USING FINANCIAL DATA TO MEASURE
PERFORMANCE
Balance sheet- a document that describes the financial position of a
company at a given point in time. It compares the businesses assets with
their liabilities.

Elements of a balance sheet:

- Assets

- Liabilities

- Capital

Purposes of a balance sheet:

- recognising the scale of a business

- Calculating net assets

- Understanding the nature of a firm

USING FINANCIAL DATA TO MEASURE
PERFORMANCE
Income statement - a document that summarises a
businesses trading activities and expenses to show
whether the business has made a profit or a loss.

When analysing an income statement its important to

understand:

-Profit Utilisation (How the profit after tax is used)

-Profit Quality (The sustainability of the profit figure)

Structure of an income statement:

-Revenue and cost of sales

-Expenses (Overheads)

-Finance income and expenses

-Tax paid on the profits made.Formulae:

Gross profit = revenue - cost of sales

Operating profit = gross profit- expenses

Earnings per share= Profit for the

year__ Number of
 Interpreting Published
Accounts
Ratio Analysis- A comparison of two or more pieces of data
taken from the financial records of a business.

Ratios are used to measure these financial indicators:

-Profitability

-Liquidity

-Financial Efficiency

-Gearing

-Shareholder’s Returns.
Profitability
The efficiency of a business in generating
profits.

Return on capital employed:

Operating profit x 100

Total Equity + non-current liabilities

Analysis can include comparing against other

investments (E.g interest rates) and assessing branch
performance to help with strategic decisions.
Liquidity
A measure of a firms ability to meet short
term debts.

Current Ratio =Current assets : Current

Liabilities

Acid Test = Liquid Assets (Current assets- inventories) : Current

Liabilities

Analysis can include threats to the survival and in

relation to cash flow targets.
 Financial Efficiency

A measure of how the internal management are utilising and controlling

the business’ financial assets. (How efficiently assets are
being utilised to generate
Asset Turnover = Revenue revenue) Net
Assets
(Measures how frequently a
business turns over it’s stock)
Inventory Turnover = Cost of sales
Average inventories held
A measure of how long it
Payables (Creditors) days = Payables takes on average for the
x 365
business to pay for supplies.
Cost of sales

Receivables (Debtors) days =receivables x 365

A measure of how long it
revenue takes on averages to
Gearing
A measure of the debt to equity ratio within a
business.

Gearing = non-current liabilities x100

Total equity + non-current liabilities

Lines of analysis:

-You have to pay interest on loans even if profits are low.

-Low gearing may be a sign of missed opportunities\A high

gearing is of greater risk if interest rates are likely to increase.
 Shareholders ratios
Measures of the value of returns made to the shareholders.

Dividend per share = Total Dividends

(The return paid to
Number of ordinary shares
shareholders from
profit as a reward
Lines of analysis:
for their investment)
-Money paid in dividends reduces retained profit
-Will be influenced by financial objectives
-Works as an incentive to the board of directors to maximise profits.

(Measures the
Dividend Yield = Ordinary share dividend (p) x100 return on the
Current Market Price (p) investment as a
Lines of analysis: percentage of
-Market prices fluctuates current market
price)
-Increase to the dividend payment = rise in share price
Value and Limitations of the
calculations
Value Limitation
- Provides a tool for the - Possibility that accounts
interpretation of accounts have been window
- Consider relationships dressed
between variables - Need to consider reasons
- Can compare the data behind the ratios. (eg
- Aids decision making (by ROCE could be lower
managers and investors) because of an investment
programme that year)
- Quantitative information
only
- Based only on past
performance
- External factors (economic
cycle, government
Selecting financial strategies
Internal Sources External Sources
Retained Profit Ordinary share capital
The part of a firm’s profit that
Money given by
is reinvested into the shareholders , dividends are
business. paid at directors discretion
and no fixed repayment
terms.
Sale of Assets Loan Capital
Sales of the items owned by Money received in
a business, however it may agreement with an interest
lower the firms profitability. rate. There is no loss of
Sale and Leaseback ownership, however there is
Selling an asset then paying fixed repayment terms and
a lease/rent on the item. interest is a finance cost on
Profit Centres
Individual sections of a business that are responsible for their own
costs, revenues and profits.

Reasons for profit centres:

-More focused study of a firms finances
-Benchmarking to improve efficiency
-The responsibility can help motivate
-By placing the responsibility with the person actually involved it,
may improve the efficiency in the finances.
Disadvantages of profit centres:
-Allocating costs (may be difficult)
-Demotivation (Extra pressure and stress)
-Setting targets
-Diseconomies (similar tasks being carried out by managers)
External changes (make it harder to reach targets and to assess
the efficiency)
 Cost minimisation
Marketing – changes in price in the market and may need to lower
selling prices to gain market share
Operations Management – adoption of lean production
techniques such as JIT to reduce waste and lower costs.
Human Resources – might see delayering, increased spans of
control. Outsourcing could also be used to reduce labour costs
and increasing flexibility.

Capital Expenditure – money used for the purchase of non

current assets.

Revenue Expenditure- money used for the day to day running

of a business.
Making investment decisions
Investment appraisal- a scientific approach to investment
decision making, which investigates the expected financial
consequences of an investment, in order to aid with decision
making
Payback
Calculates the length of time it takes for an investment to
pay for itself.
Step 1: calculate during which year the investment cost will
be covered.
Step 2 : Calculate how many months

A longer payback period means a greater degree of risk and

uncertainty. Firms hope for as short a payback as possible.
Payback
Advantages Disadvantages
Easy to calculate Ignores any costs that occur after
the point at which payback is
reached.

Concept is easy to understand Very hard to establish a target

payback time.
Emphasises cash flow by focusing Payback values future costs and
on time taken to return the money. revenues ant the same time as
current costs and revenues.

Emphasises the speed of return May focus too much on the short
term instead of considering the
long term consequences.
 Average Rate of Return (ARR) Calculates average
profit as a percentage of the cost of initial investment.
Average rate of return = Average annual
profit (Total net cashflow/number of years) X
Initial 100
investment

Advantages Disadvantages
Can easily be compared with The ARR is harder and more
the next best alternative eg time consuming to calculate.
IR
Shows the true profitability Considers all income and
and takes into consideration expenditure as equal in
every item of income and value.
expenditure.
 Net Present Value (NPV) calculates the total return on
an investment taking into account the time value of
money
Step 1: Multiply net cash flow by the relevant discount
factor
Step 2: Add up all the NPVs to calculate the total return
Advantages Disadvantages
on the
Only method that considers
investment. the More time consuming and difficult
time value of money. to calculate
Reduces the importance of long More difficult to understand and
term estimates and helps make may hinder in decision making
conclusions more accurate.

NPV gives a precise answer. Relies on the discount rate used

which is up to judgment.
Investment
Investment Criteria – a predetermined set of
guidelines which an investment can be judged
on.

Investment appraisal – Is used to try to

minimise risk and help inform decision making.
It considers:
-Gearing
-Opportunity cost
-Predictions
-Competitors reactions
-Corporate objectives
Qualitative factors affecting
decisions:
-The aims of an organisation
-Reliability of the data
-Risk
-Personnel
-The economy
-Image
-Subjective criteria
Marketing – will investment result in new products being
marketed?
Operations Management – might see new machinery that will
require training for the workforce.
Human Resources – employer/employee relations could be
strained if redundancies occur.
 MARKETING STRATEGIES
• Marketing aims - the broad, general goals of the
marketing function within an organisation.

• Marketing objectives - the specific, focused targets of

the marketing function within an organisation.

• Marketing strategies - long term or medium term plans

devised at senior management level and designed to
achieve the firms marketing objectives.

• Marketing tactics - short term marketing measures

adopted to meet the needs of a short term threat or
Types of marketing objectives:

• Size

• Market positioning

• Innovation/increase in product range

• Creation of brand loyalty/goodwill

• Security/survival

Reasons for setting marketing objectives:

• To act as a focus in decision making

• To provide a point to measure against

• To improve co-ordination between departments

• To improve efficiency by examining reasons for success and failure in

Factors influencing marketing objectives

Internal External

•Corporate objectives • Market factors

• Competitors action and
•Finance
performance
•Human resources • Technological change
•Operational issues • Economic factors

•Resources available • Suppliers

• Political factors
•The nature of the product
• Legal factors
 Analysing Markets
Market Analysis – the study of market conditions in
order to determine their attractiveness to the business.

Reasons:
-Inform decision making
-Devising strategy
-Understanding the market
-Identify sales patterns
-Realistic target setting
-Keeping up to date with market changes
-Reviewing competitors actions
-Evaluation of past actions
 Moving Averages – A method of market analysis that shows whether a
trend is significant by smoothing out fluctuations in data.
-This allows for a better identification of an overall trend.
-Sufficient data is needed to give validity to the trend identified.

Extrapolation – using the previous patterns of numerical data in order

to predict values in the future.

Correlation – The identification of a relation ship between two

variables. E.g. marketing budget and sales

The use of ICT:

-Using the internet to collect consumer opinions to inform
marketing.
-Wide availability of statistical data, e.g. the census
-Loyalty cards to analyse consumer buying
-Competitor profiles and investor details to inform decisions.
Qualitative forecasting- those methods of
prediction that are based on statistical information.

Qualitative forecasting – considers reasons to

why certain actions take place.
Methods of qualitative forecasting:
-The oracle technique (asking individual experts for their views)
-Brainstorming
-Individual hunch
Low cost versus differentiation
(Michael Porter’s Strategy)
Analysis of porter’s 5 forces, it’s a basic
premise that a firm should be one thing or
another and clearly focused on their choice of
strategy. Strategic advantage

Low producer High

cost differentiated
Strategic Mass Market Cost Differentiation
target leadership
Niche Market Focused cost Focused
leadership Differentiation
Low Cost Differentiation
By pursuing a strategy of cost Having the ability to offer a
leadership a firm sets out to be product of service that stands out
the lowest cost producer in its from competition.
industry.
Price is a key element in the Firms may benefit from increased
marketing mix. sales volume and a greater scope
to charge a higher price.
Both operational and financial The product may be better than
objectives focus on cost competition and has a USP.
minimisation in these firms. Promotion may be exclusive and
promote brand loyalty.
Operation objectives will focus on
R&D and innovation.
Ansoff’s
Matrix
Entering International Markets
Methods of expanding into international markets:
-Exporting
-Setting up a base overseas
-Joint ventures
-Franchising
-Licensing
Benefits Risks
Wider Target Market and Achieving Cultural, social and language
growth differences
Boosting profitability Greater use of intermediaries
Spreading risks Legislation
Helping international Economic variables abroad
competitiveness
Global branding Political factors such as advice and
Expertise from around the world help from conflicting countries such
Developing and Implementing Marketing
Plans
Marketing plan – a statement of the
marketing activities, position and future
activities.

Components include:
-A SWOT Analysis
-A marketing budget
-Sales forecasts
-Markets Strategies
-Marketing tactics
Assessing influences on
marketing plans
Finance – The money available will impact on
the marketing budget. The marketing
department may have to justify this and it is
External Influences
likely they will look at the correlation between
previous budgets and sales. Market Factors
Competitors actions
Operations Management – The firm will need
Technological
the ability to meet demand. If the firm has a change
good record with R&D this will be incorporated
Suppliers
into the marketing plan as the products will
need to be promoted before they are launched. Political Factors
Social Factors
Human Resources –Skilled marketing Legal Factors
employees will influence the plan with Environmental
their own ideas whilst others across all Factors
the functions will be integral to the
successful implementation of these
Issues in implementing
Marketing Plans
Personnel Available Conflict within the
-Skills and expertise organisation
-Commitment towards the -Across functional areas
objectives -Within marketing

Finance Available Control

-Budget -A plan like any document
-Overspending (adverse must have flexibility
variance) -Key employees must be
-Unrealistic forecasting able to monitor and respond
to the plan
Operational ability
-Meeting deadlines Time Frame
-Matching supply to demand -Co-ordination of all activities
is crucial if the plan is to
work.
OPERATIONS STRATEGIES
Operational objectives – The targets a business sets
in order to produce goods/service in the most effective
way.

It will include the following areas:

-Meeting quality

-Cost (unit) and volume(capacity utilisation) targets

-Innovation

-Efficiency
Internal influences on operations managements objectives:
-Corporate objectives
-Finance
-Human resources
-Resources available
-The nature of the product

External influences on operations managements objectives:

-Market factors (Nature of the product)
-Competitors actions and performance
-Technological change
-Economic Factors
-Political factors
-Legal factors
-Environmental factors
-Supplies
Operational management aims – the general goals of
the operations management function within an
organisation

Operations management objectives- the focused

targets of the operations management function within an
organisation

Operations management strategies – long/medium

term plans designed to achieve the firms operations
management measures

Operations management tactics – short term

operations management measures adopted to meet the
needs of a short term threat or opportunity.
 Economies of Scale
The advantages enjoyed by a firm as it increases the
scale of production leading to a fall in unit cost.

Methods of economies of scale:

-Purchasing (Bulk buying) economies - Buying in bulk secures

lower prices although suppliers have a lower profit margin buy have
high volume.

-Technical Economies –Spending more on larger and more efficient

machinery, a lower fixed cost over a greater output.

-Specialisation Economies – Employ specialist people to focus on

particular areas who are better qualified, more experience and more
 Diseconomies of scale
The problems experienced as a firm
increases the scale of production leading to a
rise in unit cost, making the firm less
competitive.

Methods of diseconomies of scale:

Communication diseconomies- as a firm grows in size it

becomes more difficult to communicate efficiently.

Coordination diseconomies–as a firm grows it becomes more

difficult to co-ordinate the increased number of personnel and
customers. (Taller structures)
Optimal mix of resources
Capital Intensive production- the use of a relatively high
proportion such as machinery in the production of a good or
service.
Advantages Disadvantages
Increased productivity High investment outlay

Improved quality and speed Lack of human initiative

Reduced labour costs Greater resistance to change by

workforce e.g. retraining to use
Greater opportunities for new equipment
economies of scale
Labour Intensive Production- The use
of a relatively high proportion of labour i.e.
workers in the production of a good or
service.
Advantages Disadvantages
Often cheaper, especially when Employer/employee relations can
produced in low wage locations. be a problem. E.g. industrial
disputes and industrial action
Workforce can easily adapt to Lack of skilled workers in some
change, especially multi-skilled. industries.
Continuous improvement through HRM costs can be very high e.g.
workforce can benefit the firm. E.g. recruitment, selection and training.
ideas
Government funding often
available to protect jobs in the
economy.
Innovation
The development of an idea into a new product or process.
Businesses invest time and money in order to make a
profit.

Product innovation- changing a product that already exists or developing

an invention into a brand new product.

Process innovation – changing a process of production that already exists

into practise a brand new production process.
How does a strategy of innovation influence other functional areas.

Finance: Human Resources: Marketing:

-Financing innovation -Workforce planning - Market led
-Budgetary control -Industrial relations marketing
- Effective marketing
Research and Development
The scientific investigation (research) and technical growth
(development) of a new product or process.

Factors that effect how much an organisation spends:

- Chances of success
-The nature of the product
- Efficiency of
-Competition
innovation
-The market
- Company culture
-Company finance
Purpose and costs of
Innovation
Purpose Costs
Firms can not afford to stand still Innovation can be costly in the
in competitive markets. R&D stage and drain on
resources.
Todays innovations are For all innovations there is an
tomorrows potential starts and opportunity cost.
cash cows.
A firm that comes up with the Few innovations see the light of
right innovation can guarantee day so a firm may effectively be
future income if it is protected by wasting finance.
a patent.

Although it is expensive the

alternative risk of losing future
markets might be worse.
Benefits and risks of
innovation
Benefits Risks
Creates a USP for the product Firms can make substantial
losses if innovation fails.
Less competition due to Other companies are likely to
protecting the ideas using react with their own innovations.
patents.
More efficient and cost effective Legal implications often arise
production processes. with other firms questioning
whether the product/process is
an innovation
Likely to be a premium product Operational difficulties and the
with opportunity for premium company may suffer setbacks as
pricing strategies. they may be in hurry to release
the product.
Making location Decisions
Main factors are technology, costs of factors of production,
resources, the market, government intervention
infrastructure and other qualitative factors.
Quantitative factors Qualitative factors
Easier to identify for a firm More difficult to identify
Investment appraisal, break even They are based on value judgments
analysis, cost minimisation and and might include staff, expert and
economies of scale. customer opinions.
Cost considerations – labour, Human resources – impact on
building, material and transport costs employer/employee relations and
workforce planning.
Revenue – sales potential Can link to environmental targets
Grants that may be available to locate Consider the impact on the reputation
in areas of low economic activity. of the firm and its brand
Benefits of Optimal Location
Optimal location – (the best location) will depend on
an a number of factors and as location decisions are
strategic in nature, it will be decided at board room
level.
Quantitativ Qualitativ
e
High fixed costs in Goodeinfrastructure
prime locations (access for staff and
(rent) customers
Lower labour costs Quality of product (are
in less affluent staff skilled?)
areas Working environment
Government grants (Harder to attract quality
 Multi-site Location
When a business is operating from more than one
location.

Retailers must be close to their customers and many large UK

organisations mass produce products where labour is cheap but
base their head quarters in the UK
Advantages: Disadvantages:
-Lower costs -Globalisation
-Improved market focus -Increased unit costs
-Avoidance of trade -Increased risks
barriers -Loss of control
-Increased flexibility -Cultural differences
-Overcoming cultural
barriers
 International Location
Offshoring- where companies outsource business
activities, largely because labour and facility costs are
much cheaper there.

Outsourcing – where companies give responsibility for

some of their activities.
Cost reduction: Trade barriers:
takes place due to lower fixed and Anything that limits the free
variable costs. Locating movement of goods and services
internationally can reduce labour between countries.
costs and raw materials. The -Protectionism
UK/EU has very high land costs -Tariffs
compared to developing countries. -quotas
Lean Production
Lean production – A collective term relates to
working practices derived from Japan that
focus on cutting waste whilst maintaining or
improving quality.
Time Based Management
The effective management of resources to ensure that unproductive
time is eliminated from the production process.

Flexibility is crucial so that firms are successful and:

-Have reduced lead times
-Less wastage through increased efficiency
-Faster development time for new products.
Just in Time (JIT production) – A technique used to minimise stock holdings at
each stage of the production process form the delivery of raw materials through
to meeting customers demand.

Benefits Drawbacks
Less costs in holding stock Little room for error
Less working capital required Very reliant on suppliers
Less obsolete/ruined stock Unexpected orders are hard to meet
Lower associated costs e.g. security High initial set up costs
and insurance Complex systems have to be put in
Avoids having unsold stock place
Possible loss of purchasing
economies.
Kaizen – A system that concentrates on small, but frequent improvements in
every aspect of the production process.

This requires a highly motivated and committed workforce and is a

vital component of Total Quality Management in order to improve
the quality of the production process.
Critical Path
A technique used Analysis
to identify the order in which all
tasks need to be completed when planning a complex
project.

The critical path is the set of activities that will lengthen the
duration of
Value of CPA
the project if delayed.
Limitations of CPA
Identifies the critical activities allowing Is only a starting point for a
them to be closely monitored. successful project
Shortens the overall time of a project Relies on estimations of durations
by identifying simultaneous activities.
Improves focus on project Does not take into account external
influences.
Greater productive efficiency Large projects can be too complex for
CPA.
Allows for JIT
 HUMAN RESOURCE
STRATEGIES
Human Resource objectives – The targets that the
HR function of a business wants to achieve in a given
period of time.

They may focus on a number of areas:

-Matching workforce skills, size and location to business needs

-Minimising labour costs

-Marking full use of workforce potential

-Maintaining good employee/employer relations

 HR Objectives – Internal and External
influences
Internal
Influences
Finance – allocating capital expenditure, cutting budgets,
implementing profit centres and increasing ROCE all effect HR.
Operations Management – whether the firm is labour or capital
intensive, An innovative firm will require expertise and high quality
workers.
Marketing– Low cost will mean lower wages whilst differentiation implies
creative thinking. Diversification may require investment for training and
External Influences
recruitment.
-Workforce skills and availability (skills shortages – demographics)
-Technological change (Greater capital intensity make use of tech)
-Market conditions (Whether its growing or what- effects demand
for workers and consumer habits as tastes change for jobs)
-Political factors (laws e.g. Minimum wage and age discrimination)
-Social factors ( Family commitments)
Soft and Hard HR Strategies
HR Strategies – the overall way in which a
business treats its staff.
Hard HR strategy – views Soft HR strategy – views
employees as valuable employees as valuable assets,
assets, a major source of a major source of competitive
competitive advantage and of advantage and a vital
vital importance in achieving importance in achieving
strategic objectives strategic objectives
- Empowerment
- Control mechanisms
- Consultation
- Centralised decision
- Greater autonomy and
making responsibility
- Tall organisation - Flatter organisational
structure structure
- McGregor’s Theory X - Maslow's higher level of
Workforce plans
A detailed plan of the strategies that the HR
department will undertake to ensure that future
workforce needs are met.

Strategies may include:

-Training or redeployment

-Internal promotion or external recruitment

-Natural wastage

-Relocation or restructuring
Internal and External influences of workforce
plans
Finance – will be affected by whether the firm is following a hard
or soft approach. Soft approach may require bigger training
budgets.
Operations Management – May involve new technology,
innovation and kaizen groups. Capital intensive industries may see
redundancies.
Marketing– An objective of increased market share will lead to an
External
increased influences:
demand for workers, often requiring different skills and
experience.
-Market conditions
-Labour market and demographic trends
-The state of the economy and government
policy
-Legislation
-Local factors
Issues and value of using workforce
plans
Issues:
Value:

-Informed decision making

-employer/employee relations

-Costs (recruitment, selection and -Natural

wastage (save future
training) redundancy costs)

-Corporate image -Respond to changing nature of

the labour market
-Market failure
-Sufficient staff with the right skills
-Opportunity cost to allow the business to run
effectively.
-Motivation
 Organisational Structure
The relationship between different people and
functions in an organisation.
Hierarchica A formal structure with clear levels of authority and
l channels of communication. This may be functional or
divisional.
Matrix A dynamic structure with project teams compromising of
people from different function and different levels.
Informal There is no clear hierarchal structure, creativity and an
enterprising culture is promoted.
Factors influencing the choice of structure:
-The size of the organisation
-The nature of the organisation
-The culture and attitudes of senior
management
-The skills and experience of its workforce
-The dynamic/ external environment.
Improving Competitiveness
Restructuring may look to:
Centralisation:
-Reduce costs
Decisions made at the top of the
-Spread work load
hierarchy.
-Reduce duplication
-few decision makers speeds up
-Improve communication
decision making
-Respond to changes in
-Maintains tight control
technology
-Bureaucratic
-Meet new demands

Decentralisation: Delayering:
Decisions made at many levels Taking out levels of the
within the hierarchy. hierarchy.
-Delegates decision making -Flatters structures
-Frees up management time -Empowers employees as less
-Provides motivation direct supervision
-Reduces bureaucracy -Expertise may be lost
-Widens span of control
Managing Communication
Communication – the process of passing information
between interested parties to the right person, at the
right time and in a format that is understandable to the
recipient.
Effective is important:
Methods of communication –
-Coordinates – motivates must be appropriate to the
– clarifies roles content being delivered.
-Eases the implementation
of change Barriers of communication –
-Enables feedback as information overload,
-Facilitates decision cultural and language
making problems can damage the
-Keeps everyone informed performance of the workforce.
 Employee Representation
Giving a voice to employees through a recognised body that represents
them.
Forms of employee representation:
-Work councils
-Employee groups
-Trade unions
Advantages Disadvantages
Medium for effective two way Opportunity cost of time
communication
Reduces feeling for ‘them and us’ Can cause conflict due to different
agendas
Employees kept informed Slows down decision making
Employers have some Employer may not be able to
understanding of employee respond to employee wishes
perceptions
Improved motivation Non homogeneous employees
Work councils – A group made up of managers and
representative employees who meet regularly to discuss
issues relating to the business and specifically issues
affecting the workforce.
-Pay and working conditions – Workforce plans
-Proposed or planned changes to business activities
Employee groups – A group made up of management, HR
manager and elected employees from specific areas of a
business in order to facilitate two way communication.
- Can meet to discuss specific issues affecting the workforce

Trade Unions – National organisation with a remit to protect

its members and improve their economic and working
conditions.
-Securing jobs – Maximising pay
-Ensuring safe conditions and fair treatment of members by
Avoiding and Resolving
disputes
Industrial dispute – when there is a disagreement
between the employer and the employee/employer
representative.

Industrial action – when the employees take actions

to try and impose pressure on the employer.

These actions might include:

-Work to rule – Demonstration

-Lobbying - Strike