Setting human resource objectives

AQA's HR objectives: employee engagement and involvement · talent development · training · diversity · alignment of values · the number, skills and location of employees.

Behind them sits a strategic choice about how the firm regards its people:

• Hard HRM — labour is a resource like any other, to be acquired as cheaply as possible and used efficiently. Minimal training, tight control, pay at the market minimum, workforce flexed with demand (zero-hours, temporary contracts). Cheap; associated with high labour turnover, low discretionary effort and weak quality.
• Soft HRM — labour is an asset to be developed. Heavy investment in training, empowerment, job security, involvement in decisions. Costly up front; associated with high productivity, low turnover, better quality and stronger innovation.

Neither is universally right. A supermarket's seasonal shelf-stackers and a pharmaceutical firm's research chemists genuinely do warrant different approaches — the cost of losing the latter is enormous, and the discretionary effort you can extract from them is what the whole business runs on. The examinable move is to link the HRM approach to the competitive strategy: low-cost strategies pull towards hard HRM, differentiation strategies towards soft.

Organisational design

• Hierarchy — the number of layers. Tall structures have many layers and narrow spans; flat structures have few layers and wide spans.
• Span of control — how many subordinates report directly to one manager. Narrow spans allow close supervision and support (good for inexperienced staff, or safety-critical work) but cost more managers and slow communication. Wide spans are cheap and force delegation, but supervision thins out.
• Authority and delegation — passing authority down. Delegation motivates (it signals trust and enriches the job), develops future managers and frees senior time — but the manager remains accountable, and delegating to unready staff invites failure.
• Chain of command — the line of authority from top to bottom. Long chains distort messages and slow decisions.

Delayering: what really happens

Centralisation and decentralisation

Influences on the choice: the leadership style (a Theory X, "tells" manager centralises) · the size and geographic spread of the firm · how uniform the product and the customers are · how competent and trusted local managers are · the state of the economy (firms tend to re-centralise in a crisis to grip costs) · and the technology available — real-time data now lets head office monitor everything, so a firm can decentralise decisions while centralising oversight.

The cost of decentralising

Job design and the human resource flow

Hackman and Oldham's model says a job is motivating when it has five core characteristics: skill variety, task identity (you complete a whole, visible piece of work), task significance (it matters to someone), autonomy, and feedback. These produce three psychological states — experienced meaningfulness, experienced responsibility, knowledge of results — which in turn produce motivation, quality and satisfaction. It is the theoretical case for job enrichment: redesign the job, not just the pay.

The human resource flow is how people move into, through and out of the business:

• Human resource plan — forecast the number, skills and location of employees the strategy will need.
• Recruitment and selection — internal (cheap, fast, motivating, known quantity — but no fresh thinking, and it just moves the vacancy) or external (new skills and ideas — costlier, slower, riskier).
• Training — induction, on-the-job (cheap, relevant; risks passing on bad habits), off-the-job (broader, higher quality; costly, and the trained employee may leave).
• Redeployment — moving people to where they are needed, which retains knowledge and avoids redundancy costs.
• Redundancy — the last resort. It carries direct costs (payments), and hidden ones: the survivors' morale and loyalty, lost skills, and the reputational damage that makes future recruitment harder.

Analysing human resource performance

Your turn — labour turnover

Your turn — retention rate

Your turn — labour productivity

Your turn — labour cost per unit

Your turn — employee costs as % of turnover

What those numbers are telling the board

None of these means anything in isolation. Every one demands a comparison: against last year (is it deteriorating?), against the industry average (12% turnover is dreadful in engineering and enviable in hospitality), and against the firm's own targets.

The cost of labour turnover is far larger than the recruitment advert. It includes: recruitment and selection costs · induction and training costs · the lost productivity of a new starter climbing the learning curve · the disruption to the team · lost customer relationships · and the knowledge that walks out of the door. Some turnover, though, is healthy — it brings in fresh thinking and lets a firm shed poor performers. A turnover rate of zero can signal stagnation.

Watch the trap: a falling labour cost per unit looks like an unambiguous win. But it can be produced by cutting training and pay — which will show up 18 months later as rising turnover, falling quality and lost customers. Always read HR ratios together.

Read the HR data together

Theories of motivation

• F. W. Taylor (scientific management) — workers are motivated by money. Break the job into simple standardised tasks, time them, and pay piece rate. Raises output; treats people as machines, kills initiative, and is associated with alienation, poor quality and industrial conflict.
• Elton Mayo (human relations) — the Hawthorne studies found that productivity rose whenever workers received attention and worked in cohesive groups, regardless of the physical conditions. Social needs, teamwork, communication and recognition matter.
• Abraham Maslow — a hierarchy of needs: physiological → safety → social → esteem → self-actualisation. A need only motivates once the ones below it are satisfied — so a pay rise motivates a worker in poverty and does very little for one whose real hunger is for esteem.
• Frederick Herzberg (two-factor theory) — the crucial distinction. Hygiene factors (pay, conditions, supervision, company policy, job security) cause dissatisfaction if they are wrong, but their presence does not motivate. Only motivators (achievement, recognition, responsibility, the work itself, advancement) genuinely motivate — through job enrichment.

The examinable insight: Herzberg means that paying people more will not motivate them — it will only stop them being actively dissatisfied. If a firm's engagement problem is boredom, another £2,000 will not fix it, because the money is aimed at the wrong factor entirely.

Match each theorist to their central claim

Tap an item on the left, then its partner on the right.

Financial and non-financial methods

Financial:

• Piece rate — paid per unit produced. Drives volume; endangers quality; useless where output is not countable.
• Commission — a share of the sales value. Powerful for sales staff; can encourage mis-selling and pressure tactics that damage the brand.
• Salary schemes — security and predictability, but no direct link to effort.
• Performance-related pay (PRP) — a bonus tied to appraisal against targets. Focuses effort on measurable objectives; but the targets may be unfair or beyond the employee's control, it can corrode teamwork (everyone competing for the same pot), and Herzberg would say it is a hygiene factor being asked to do a motivator's job.

Non-financial: job enrichment (more responsibility and complexity — the Herzberg answer) · job rotation (variety, and a more flexible workforce) · job enlargement (more tasks at the same level) · empowerment and delegation · team working (Mayo) · consultation, recognition and praise · flexible working.

Financial, non-financial, or structural?

Tap a method, then tap the category it belongs to.

Apply Herzberg

Employee involvement and representation

Trade unions represent employees collectively and bargain over pay and conditions. Works councils bring employee representatives and management together to consult on issues affecting the workforce — consultation, not bargaining.

The employer's case for engaging with them: collective bargaining is far cheaper than negotiating with 4,000 individuals · representatives surface problems the board would never see · agreements once made are far more likely to stick · and involvement in a decision converts resistance into ownership (this reappears as Kotter and Schlesinger's "participation" in 3.10).

The employer's fears: slower decisions · the risk of industrial action · potentially higher wage settlements · reduced managerial freedom to restructure.

Good employer–employee relations are an operational asset, not a nicety. They cut absenteeism and turnover, raise the discretionary effort that quality depends on, and make change possible — the firm that consulted its workforce before it needed to is the one that can restructure when it must. The firm that never did faces a strike.

Thinking like an examiner

• Link HRM to strategy. Hard HRM fits a low-cost strategy; soft HRM fits differentiation. The mismatch — soft HRM in a price war, or hard HRM in a research lab — is a business failure waiting to happen.
• Never read an HR ratio alone. Falling labour cost per unit alongside rising turnover is a warning, not a win. Benchmark against last year and the industry.
• Herzberg is the sharpest tool you have. Diagnose whether the problem is a hygiene factor or a missing motivator before you prescribe.
• Structure shapes behaviour. Spans, layers and the centralisation decision determine how fast the firm can react and how much the people in it feel trusted.

The big ideas to know

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