Staff as an asset or staff as a cost

Two philosophies sit behind every HR decision:

• Staff as an asset (soft HRM): people are the source of competitive advantage. Invest in training, involve them in decisions, retain them. Higher short-run cost, but higher productivity, quality, retention and innovation.
• Staff as a cost (hard HRM): labour is an input to be minimised. Low pay, minimal training, hire and fire with demand. Lower short-run cost, but higher labour turnover, weaker quality and poorer service.

The flexible workforce lets firms match labour supply to demand: multi-skilling, part-time and temporary contracts, flexible hours and home working, and outsourcing non-core activities.

Dismissal is ending employment because of the employee's conduct or capability. Redundancy is ending employment because the job no longer exists — the employee has done nothing wrong and is legally entitled to redundancy pay.

Employer/employee relations: an individual approach (each employee negotiates their own terms) versus collective bargaining (a trade union negotiates for the whole workforce — stronger employee power, but slower and potentially more confrontational).

Dismissal or redundancy?

Recruitment, selection and the cost of getting it wrong

Internal recruitment is cheaper and faster, the candidate is a known quantity and it motivates existing staff — but it creates a vacancy elsewhere and brings no new ideas. External recruitment brings fresh skills and a wider field, but costs more (advertising, agency fees) and carries greater selection risk.

Costs of recruitment, selection and training include advertising, management time, agency fees, induction, lost output while the new starter is trained, and the productivity gap before they are competent.

• Induction training: orientation for new starters — policies, systems, health and safety.
• On-the-job training: learning while working (shadowing, mentoring). Cheap, directly relevant, but poor habits can be passed on and output is disrupted.
• Off-the-job training: away from the workplace (college, external courses). Higher quality and broader, but expensive and the newly qualified employee becomes more attractive to rivals.

Your turn — labour turnover

Your turn — the cost of turnover

Is £60,000 worth spending on retention?

Hierarchy, span of control and structure

Key vocabulary: the hierarchy is the number of levels; the chain of command is the line of authority from top to bottom; the span of control is the number of subordinates reporting directly to one manager.

• Tall structure: many layers, narrow spans. Close supervision and clear promotion routes, but slow communication, high management overhead and less empowerment.
• Flat structure: few layers, wide spans. Fast communication, empowered staff, lower cost — but managers can be overloaded and there are fewer promotion opportunities.
• Matrix structure: staff report both to a functional manager and to a project leader. Excellent for cross-functional innovation, but creates conflicting priorities and dual accountability.

Centralisation keeps decisions at the top (consistency, control, economies of scale). Decentralisation pushes decisions down (speed, local responsiveness, motivation through empowerment).

Your turn — span of control

Structure and motivation

Taylor, Mayo, Maslow and Herzberg

• Taylor — scientific management. Money is the main motivator. Use time-and-motion study to find the one best way, train workers to follow it and pay piece rates. Raises productivity in repetitive work, but treats people as machines and can cause resentment and poor quality.
• Mayo — human relations. The Hawthorne studies showed that attention, teamwork and social needs raised output, whatever was done to the lighting. Motivation comes from group norms, communication and feeling valued.
• Maslow — hierarchy of needs. Physiological → safety → social → esteem → self-actualisation. A satisfied need no longer motivates, so managers must identify the level a worker is on and offer the next one.
• Herzberg — two-factor theory. Hygiene factors (pay, conditions, supervision, company policy) only prevent dissatisfaction — improving them does not motivate. True motivators are achievement, recognition, responsibility, advancement and the work itself, delivered through job enrichment: a complete unit of work with autonomy and feedback.

Exam gold: Herzberg explains why a pay rise produces only a short-lived boost — pay is a hygiene factor. It removes dissatisfaction; it does not create satisfaction.

Whose theory is it?

Tap a statement, then tap the theorist who argued it.

Financial and non-financial motivators

Financial incentives: piecework (pay per unit — raises output but can wreck quality), commission (a share of sales value), bonus (a lump sum for hitting a target), profit share (aligns staff with the firm's success) and performance-related pay (needs fair, objective appraisal or it breeds resentment).

Non-financial techniques: delegation, consultation, empowerment, team working, flexible working, job enrichment (more challenging work — vertical), job rotation (moving between tasks — reduces boredom) and job enlargement (more tasks at the same level — horizontal).

Distinguish carefully: job enlargement adds more of the same kind of work; job enrichment adds responsibility, autonomy and a complete unit of work. Only enrichment is a Herzberg motivator.

Applying Herzberg

Management, leadership and leadership styles

Management is about planning, organising, controlling and delivering the existing plan efficiently. Leadership is about setting direction, creating vision and taking people with you through change. A firm needs both.

• Autocratic: the leader decides and instructs; one-way communication. Fast and decisive — vital in a crisis or with untrained staff — but demotivating for skilled workers and it wastes their ideas.
• Paternalistic: the leader decides but explains, and genuinely considers staff welfare. Builds loyalty, but is still top-down and can feel patronising.
• Democratic: the leader consults and involves staff in decisions. Better decision quality and strong motivation (Mayo, Maslow's esteem needs), but slow and impractical in a crisis.
• Laissez-faire: the leader delegates almost entirely. Superb for expert, self-motivated teams (R&D, creative agencies), disastrous where staff need direction — it drifts into a lack of control.

Evaluation: there is no single best style. The right style is contingent on the situation: the urgency of the decision, the skill and motivation of the staff, the corporate culture and the leader's own personality.

Match the leadership style

Tap a situation on the left, then the leadership style that best fits on the right.

Choosing a style

The big ideas to know

You have covered staffing, recruitment, structure, motivation and leadership for Theme 1.4. Press Finish to see your score.