1. Theme 3: Business decisions and strategy
What criteria would you use to measure your performance in the sixth form?
Can the same criteria be used to measure workforce performance?
3.5.3 Human resources

2. 3.5.3 Human resources In this topic you will learn about
Calculate and interpret the following to help make business decisions:
labour productivity
labour turnover and retention
absenteeism
Human resource strategies to increase productivity and retention and to reduce turnover and absenteeism:
financial rewards
employee share ownership
consultation strategies
empowerment strategies

3. Human resource data
Human resource data is quantifiable information that can be used to measure workforce performance
This will help inform decision making e.g. is corrective action needed, should bonuses be paid, are staff motivated?
Human resource data includes:
Labour productivity
Labour turnover and retention
Absenteeism

4. How significant is the UK’s productivity gap?
Labour productivity
Labour productivity is a measure of workforce performance that looks at output per worker
Calculated as:
Total output
Number of workers
Example:
A car firm produces cars per year
It has a labour force of workers
What is the labour productivity of the company?
= 100 cars per worker
1 000
Labour productivity is normally shown over a period of 1 year
How significant is the UK’s productivity gap?
What factors do you think are influencing labour productivity in the UK?
UK productivity gap with developed nations now widest for 20 years

5. Labour productivity
In year 1 Laptops4u had 100 workers who produced laptops.
In order to try and reduce costs at the end of year 1 they laid off 20 workers.
In year 2, with 80 workers, they produced laptops.
On average an employee is paid an annual salary of £17 000
What was the labour productivity in year 1 and year 2?
What was the percentage change in labour productivity?
What is the relationship between labour productivity and labour cost per unit? 5

6. Labour turnover
Labour turnover is the rate of change in a firm’s labour force
Calculated as:
Number of staff leaving x 100
Average number of staff
Example:
A car firm has full time employees in 1 year
Of these, 50 employees leave the company
What is the labour turnover for the company?
x 100 = 5%
1 000
Labour turnover is normally shown over a period of 1 year
What are the advantages
of labour turnover?
What are the disadvantages

7. Labour turnover Staff turnover costs Britain £4.1bn
Staff turnover costs Britain £4.13bn a year, according to a report by Oxford Economics and the insurer Unum. It costs an average of £30,614 to replace a departing employee. That is £5,433 for agency fees, advertising and interviewing, plus £25,182 over the time that new hires take to hit full productivity.
Source: July 2015
Why do you think labour turnover rates vary between industries? Use the data provided to justify your response.

8. Labour turnover
In year 1 Laptops4u had 100 workers who produced laptops.
In order to try and reduce costs at the end of year 1 they laid off 20 workers.
In year 2, with 80 workers, they produced laptops.
What is the labour turnover between year 1 and year 2?
Make a list of six factors that might lead to high labour turnover in a business.
Choose two of these factors and explain what a business could do to reduce labour turnover in these circumstances. 8

9. Retention rates
Retention rates are a measure of a firm’s ability to keep its workforce within the business normally for more than one year
Calculated as:
number of employees serving for more than 1 year x 100
average number of staff
Low retention rates may present a threat to a business:
High recruitment, selection and training costs
Risk of loss of important information (secrets)
Loss of talent
Why do Brompton Bikes want to retain their engineers?
Resigning staff 'costing firms £42bn a year‘
What are the costs to a business of resigning employees?

10. Absenteeism
Absenteeism can be defined as the number of staff who miss work as a proportion of the total number of staff
Calculated as:
Number of staff absent per time period x 100
Total number of staff days worked per time period
We would normally look at absenteeism over a period of time e.g. 1 month
Worked example:
A car firm has 1000 full time employees
Of these, 40 employees did not turn up for work on a Friday
What is the absenteeism rate for that Friday
40 x 100 = 4%
1000

11. Absenteeism
At Laptops4u absenteeism was seen as a problem. In 2016 there were 100 workers who worked an average of 225 days each a year. Altogether, the workforce took 4500 days off.
What was the absenteeism rate for 2016?
In small groups think of 3 different ways to reduce the absenteeism rate. How will these methods reduce absenteeism?
What are the costs to a business of absenteeism:
In the short term?
In the long term? 11

12. Activity – Light flights
Light Flights took over a light aircraft manufacturer in 2015 and immediately invested in factors of production at the company. New capital equipment in the form of machinery and new methods of training were brought into the firm. The result was an increase in labour productivity but, at the same time, a rise in labour turnover (2016 = 6%).
Company information
2015
2016
No. of workers
1000
900
Aircrafts produced
200
225
Days workers absent
1500
2000
Total no. of days available for work
20000
18000
Comment on the workforce performance at Light Flights between 2015 and 2016. 12

13. Recap year 1 financial incentives.
Human resource strategies to increase productivity and retention and to reduce turnover and absenteeism
Recap year 1 financial incentives.
Financial rewards are the variety of methods that have a money value and are used to reward the workforce and influence their behaviours at work
Financial methods of motivation include:
Piece rate is when payment is based on the number of items (pieces) produced by an employee
Commission is when payment is based on the number of units sold
Bonus is an additional, lump sum, one off payment to an employee for meeting individual, team or company targets
Profit share is when a proportion of employee pay varies with the profits of the company
Performance related pay (PRP) is when employees receive a bonus based on the performance of the employee measured against a pre agreed range of criteria
Staff bonuses at JLP lowest for 12 years – but is it still a motivator?

14. 4 minutes - Test yourself
How many non-financial techniques to improve performance can you list?
End

15. An introduction to employee share ownership.
Human resource strategies to increase productivity and retention and to reduce turnover and absenteeism .
Employee share ownership
Giving employees shares or the option to buy shares in the company
The employee therefore directly benefits from the success of the company
Dividends received
Increased share value
An introduction to employee share ownership.

16. What is meant by a soft HR strategy?
Human resource strategies to increase productivity and retention and to reduce turnover and absenteeism
What is meant by a soft HR strategy? .
Consultation strategies
Seeking the thoughts and opinions of employees prior to making decisions
Involving employees in decision making
Increases feeling of worth and involvement
Easier to implement change as staff feel involved in the decision making process
Employees have valuable input as they are often the ones working within functions and understanding key issues e.g. production problems of customer service

17. Empowerment strategies
Human resource strategies to increase productivity and retention and to reduce turnover and absenteeism
Empowerment strategies
Delegating greater responsibility to employees
Allowing them to use their abilities and to have a greater say in the decision making process
Consultation and empowerment strategies can be achieved through:
Matrix structure
Employee/employer groups e.g. works councils or trade unions
Open, two way communication channels
Meetings and forums .

18. 3.5.3 Human resources In this topic you have learnt about
Calculate and interpret the following to help make business decisions:
labour productivity
labour turnover and retention
absenteeism
Human resource strategies to increase productivity and retention and to reduce turnover and absenteeism:
financial rewards
employee share ownership
consultation strategies
empowerment strategies