2.5.1a Organisational structures

Reading an organisational chart: who reports to whom

1. An organisational chart is drawn as a pyramid: a single box at the top for the owner or managing director, a wider row of department managers below it, and under each manager the row of staff that manager is responsible for, with a line joining every box to the box above that it reports to.
   1. Hierarchy and levels: the layers of authority from top to bottom, one level for each horizontal row of boxes on the chart.
   2. Chain of command: the line down which instructions pass from the top to the bottom, so a long chain puts more layers between the decision and the person carrying it out.
   3. Span of control: the number of people a manager is directly responsible for, wide when many report to one manager and narrow when only a few do.
   4. Tall structure: many layers, narrow spans of control and a long chain of command.
   5. Flat structure: few layers, wide spans of control and a short chain of command.

1. Centralised decision making: decisions taken at the top of the business and passed down the chain to be carried out.
2. Decentralised decision making: decisions delegated to managers or staff further down the hierarchy.

Tall or flat: what each shape does to the business

The table sets the two shapes side by side on the five features an exam question tests most often.

1. The rows move together rather than separately, because taking out a layer leaves the remaining managers holding the staff that layer used to supervise, so every gain in speed and cost is bought with a wider span.
2. A tall structure gains control: each extra layer is another rung on the promotion ladder for an ambitious employee, and a supervisor watching six people can spot a mistake the day it is made.
3. A tall structure loses time: every instruction stops at each layer on the way down, so a change agreed by a director on Monday may still not have reached the till by the following week, and staff at the bottom feel remote from choices they had no part in.
4. A flat structure gains pace and commitment: an idea from the shop floor reaches the owner in one step, and staff given real responsibility usually work harder at decisions they helped make themselves.
5. A flat structure loses supervision and promotion: a manager responsible for twenty staff cannot coach each one, and an employee with no next rung to climb to often leaves for a business that has one.

Centralised or decentralised: where the decision is taken

1. Centralising gains consistency and tight control, because every branch follows one procedure and one head-office team sets the price, which is how Aldi holds a narrow product range at the same low prices in every store.
2. Centralising loses local speed, because a store that spots a problem has to wait for head office to agree a change, and staff who are never asked come to feel untrusted and stop passing ideas up.
3. Decentralising gains quicker local decisions and uses knowledge head office does not have, so a supermarket branch manager can build rotas around the shopping patterns of that town rather than a national average.
4. Decentralising loses consistency, because two branches may settle the same complaint differently, and it works only with capable, trained staff since one weak manager given real authority can damage the brand across a whole town.

Judging which structure suits a business

1. A small business in a fast-moving market is more likely to benefit from a flat, decentralised structure, while a larger or more stable business may accept more hierarchy and central control to keep standards consistent.
2. Staff skill and trust set the limit: wide spans and decentralised decisions work better with experienced employees, while new or high-risk work may need closer supervision.
3. Overall, choose the structure that fits what the business competes on, balancing consistency and control against speed, local knowledge and employee responsibility.

2.5.1b The importance of effective communication

What effective communication means: the right information, to the right person, in time

1. Effective communication has to pass three tests, because sending a message and communicating it are not the same thing.
   1. The right person: the information reaches whoever has to act on it, not everyone in the building and not only the manager who already knew.
   2. In time: it arrives while the receiver can still do something with it, since a change to an order sent after the delivery van has left changes nothing.
   3. Understood: the receiver takes the same meaning from it as the sender intended, which is what feedback tests, because a reply or a repeated-back instruction proves understanding where silence proves nothing.

What a business gains when communication works

1. Fewer mistakes: staff who know exactly what is expected do the job right first time, so less material is wasted and less labour is paid for twice.
2. Faster response: a decision reaches the people carrying it out in hours rather than days, so the business can cut a price or pull a faulty batch before customers or rivals react.
3. Better morale and lower staff turnover: staff who are kept informed about changes feel trusted and valued, so fewer of them leave and the business spends less on recruiting and training replacements.

Insufficient communication: what too little does to efficiency and motivation

1. Mistakes and duplicated work: two people process the same order because neither was told the other had it, so the labour is paid for twice and the customer still waits.
2. Wasted time: staff stop work to chase a manager for information that should have arrived with the task, so output per hour falls while the wages carry on being paid.
3. Low morale: staff who hear about a change from a customer rather than from their manager feel left out, so motivation drops and absence and turnover rise.
4. Poor customer service: staff who do not know that an offer has started or that a product has been withdrawn give the wrong answer, so the business looks disorganised and the sale goes elsewhere.
5. Slow decisions: a manager waiting on figures from another department cannot choose, so a supplier discount or a delivery slot is gone before anyone acts.

Excessive communication: what too much does to efficiency and motivation

1. Excessive communication is the opposite fault: staff are copied into every email, added to every group chat and booked into meetings that have nothing to do with their own work.
2. Efficiency falls because the working day goes on reading messages and sitting in meetings instead of doing the job, so a supervisor booked into three meetings has three fewer hours on the shop floor and the orders go out late.
   1. The message that mattered is lost among the ones that did not, so a price change or a safety notice is skimmed past with the rest and missed altogether.
3. Motivation falls because being copied into everything while having no say in any of it is draining, and staff soon learn that most of what arrives can be ignored.
   1. Messages arriving at any hour blur the line between work and home, since staff who feel expected to answer in the evening never properly switch off and come in tired.
   2. A manager who forwards everything signals that they do not trust staff to work out what matters, so experienced people feel watched rather than relied on.
4. Too little and too much end in the same place for the business, because output per hour falls either way and the staff with the most choice about where they work are the first to leave.

Barriers: why messages fail, and where structure comes in

1. Too many layers: a message sent down the long chain of command of a tall structure is reworded at every level it passes, so it arrives late and distorted, which is one of the main arguments for the flatter structures covered in the previous guide.
2. The wrong medium: a long email about an urgent shift change is read too late, and a quick verbal instruction for a complicated safety procedure leaves no record anyone can check.
3. Information overload: so much is sent that the one message that mattered is skimmed past with the rest, which is the barrier that excessive communication builds.
4. Language and jargon: the receiver does not know the technical words or does not read English fluently, so they act on a guess instead of the instruction.
5. No feedback: nobody replies or checks, so the sender never learns the message was misunderstood until the work comes back wrong.
6. Technology has flattened two of these barriers, because messaging apps, video calls and shared systems reach a home worker or a distant branch instantly, though the same tools are what make excessive communication so easy to fall into.

2.5.1c Different ways of working

Hours of work: part-time, full-time and flexible hours

1. Part-time: working fewer hours than the business's standard week, often evenings and weekends only.
   1. The business buys cover exactly when customers arrive and pays nothing for the quiet hours, so a Saturday rush can be staffed for a few hundred pounds a month rather than by funding a whole extra full-time post.
   2. The employee can fit the job around college or caring for a relative, but total pay is lower because pay follows the hours worked.
   3. The cost is continuity, since three part-timers need three lots of training and a rota, and a customer may deal with a different face on every visit.
2. Full-time: working the standard week, usually somewhere around 35 to 40 hours.
   1. The business has the same people available every day, and they build up experience of its products, its systems and its regular customers, which makes spending money on their training worthwhile.
   2. The employee gets a steady income they can budget on and usually better benefits, such as paid holiday, sick pay and a workplace pension.
   3. Those wages have to be paid in a quiet week as well as a busy one, so a fall in demand cuts straight into profit before the business can cut its wage bill.
3. Flexible hours: staff choose their own start and finish times inside limits set by the employer, often around a core period when everyone has to be there.
   1. The business keeps staff who would otherwise leave for an employer that offers it, and the phones stay answered across a longer day because early starters and late finishers overlap.
   2. The employee controls their own time, so a parent can start at 7.30am and still collect a child at 3pm without giving up hours.
   3. Cover becomes harder to guarantee, because an 8am delivery or a team meeting can find half the staff not yet in, so the employer has to fix core hours and plan the rota round them.

Contracts: permanent, temporary and freelance

The three sit in a clear order on the four things an owner weighs before offering work to anybody.

1. Continuity is what the permanent row buys, since staff who know the regular customers keep them coming back and training paid for in year one is still earning in year three, though cutting that team back later means notice periods and redundancy pay.
2. A temporary contract lets a garden centre carry its spring peak or a warehouse cover a six-week Christmas run without carrying those wages in February, but each new intake has to be trained again, which eats into the saving if the peak comes round every year.
3. Freelance work buys a specialist only for the hours the skill is needed, which is how Gymshark used fitness influencers to sell online rather than employing a marketing department, but the business controls the result far less than it controls an employee and has no guarantee that the same person is free next time.

Judging the mix: what the right pattern of working depends on

1. How much demand varies through the year: a seaside cafe that takes most of its revenue between June and September would run out of cash paying a permanent full-time team through the winter, so the peak belongs on part-time and temporary contracts.
2. Whether the work needs specialist skills: a skill used twice a year, such as rebuilding a website, is cheaper bought freelance, because a specialist on the payroll is paid for the ten months nobody needs them.
3. How much the business values continuity with its customers: a hairdresser or a dentist keeps customers partly because the same person sees them each visit, so permanent staff protect revenue in a way a stream of temporary faces cannot.
4. What the business can afford: a start-up with £5,000 behind it cannot promise permanent wages before the sales arrive, so it opens with part-time and freelance help and makes posts permanent once the revenue is predictable.
5. Most businesses therefore settle on a permanent core sized to their quietest month, with part-time, flexible, temporary and freelance workers layered on top for the peaks, because the core protects quality and customer relationships while the layer stops the wage bill becoming a fixed cost the business cannot cover when demand drops.

2.5.1d Impact of technology on ways of working

Remote and hybrid working: the job stops needing an office

1. Video calls, cloud storage and instant messaging mean the tasks of most office jobs can be done from any room with a connection, so the building stops being the thing that holds the work together.
2. The business gains on two fronts when it lets staff work at home or split the week between home and office.
   1. Lower premises costs: if staff come in on alternate days the firm can rent a smaller office and share desks, so rent, heating and cleaning all fall, and those are fixed costs that had to be paid whether trade was good or not.
   2. A wider choice of staff: a vacancy can be filled by someone two hundred miles away, so the firm recruits from a national pool instead of one town, and experienced staff who value flexibility stay rather than leave.
3. The same arrangement costs the business three things.
   1. Supervision is harder: a manager cannot see who is stuck, so a problem surfaces days later, and performance has to be judged on output rather than on hours visibly spent at a desk.
   2. A team is harder to build: a new employee at home picks up far less from overhearing experienced colleagues, so informal learning slows and loyalty to the team is weaker.
   3. Equipment and security must be provided: a laptop, a phone and a secure connection are needed in every home, and customer records now sit outside the office where they are easier to lose.
4. For the employee the gain is concrete, because losing a commute returns an hour a day and the £5 or so it cost in fares or fuel, and the working day can bend around childcare or a college course.
5. The cost to the same employee is isolation and a blurred line between work and home, since the laptop sits in the same room as the sofa and a message at nine in the evening is easy to answer and hard to ignore.

Flexible hours, automation, messaging and monitoring: a gain and a cost in each

1. Flexible hours only became practical once technology stopped work having to happen in one place at one time, and three further changes follow the same pattern of a gain with a cost attached.
2. Automation is the row with the sharpest split, because software takes the repetitive work and frees staff for tasks that need judgement, such as calming an angry customer, while some jobs disappear altogether and the staff who remain must be retrained on the new system.
3. Monitoring is the row most likely to backfire, since tracking output lets a manager see a falling delivery rate in days rather than months, but staff who feel watched trust their employer less, and demotivated staff work slower, which eats the gain the tracking was bought for.

Technology changes who a business can employ, not only how

1. The deepest change is to the labour market a business is fishing in, because a firm that allows remote working can hire someone hundreds of miles away and one that does not is limited to people within commuting distance.
2. A small accountancy practice in Norwich that accepts home working can take on a bookkeeper in Glasgow, so it appoints on skill rather than on postcode and is less likely to be forced into a pay rise to tempt the only qualified applicant nearby.
3. It cuts the other way for the employee, because a job that can be done from anywhere can also be done by anyone anywhere, so the competition for it is national rather than local.

What the technology costs to buy and to depend on

1. None of these gains is free, because laptops and phones have to be bought, software is usually charged as a licence per user every month, and someone has to be paid to fix it when it stops.
2. Training is the cost that is easiest to forget, since every hour a member of staff spends learning a new system is an hour they are paid for but not producing, and output usually dips before it improves.
3. Dependence is the sharper risk, because a business that has moved its orders, files and payments online has no paper system to fall back on, so a broadband or server failure stops everybody at once rather than slowing one department.
4. That is why the smaller the firm, the harder these costs bite, as a sole trader pays the same monthly licence fee as a large company but spreads it over far less revenue.

2.5.2a Different job roles and responsibilities

Directors and senior managers: setting the direction and running the functions

1. Directors are appointed by the owners or shareholders and are accountable to them for the performance of the business as a whole.
   1. They set the overall aims and the long-term strategy, deciding the matters that commit the whole business, such as entering a new market or investing in a new site.
   2. Because they answer to the shareholders, a run of falling profit is a director's problem before it is anyone else's.
2. Senior managers each run a whole function, such as marketing, finance, human resources or operations.
   1. Their job is to turn the directors' strategy into plans with targets, deadlines and the people to deliver them.
   2. They control that function's budget and staff, so they decide how the money allocated to their area is spent and who does what within it.
   3. They answer to the directors for their function's results, so it is the marketing manager who is asked why sales have fallen.

Supervisors, team leaders and the staff who do the work

1. Supervisors and team leaders run a team day to day and are the link between the managers above them and the staff doing the work.
   1. They allocate the work, set the rota, check it has been done to the required standard and pass any problem they cannot solve up the chain.
2. Operational staff do the work the business exists to do, such as baking the bread, driving the delivery van or serving at the till.
   1. They are responsible for their own output and for following the procedures set above them, such as food hygiene rules or a safety check before a machine is used.
   2. They answer to their supervisor or team leader rather than to a director, so a problem with the work goes up one level first.
3. Support staff keep the business running behind the front line, in administration, IT, human resources and finance.
   1. They bring in no sales directly, but if the payroll is wrong or the tills stop working the shop cannot trade, so what they are responsible for is keeping everyone else able to work.
   2. They answer to the senior manager of the function they sit in, such as the head of finance for the person who runs payroll.

How the roles map onto the structure

The same jobs still have to be done whatever the size of the firm, as this comparison shows.

1. On the market stall every one of those jobs is still done, but one person does all of them, so the roles exist as tasks rather than as job titles.
2. As a business grows the jobs split off one at a time, supervision usually first, which is why the word manager can mean a department of two hundred in one firm and a shift of three in another.

2.5.2b Recruitment documents

The job description: what the business needs done

1. A vacancy starts with the business writing down three things about the role, because it cannot describe the right person until it knows the work.
   1. Job title and reporting line: the name of the post, where it sits in the structure and which manager the person answers to.
   2. Duties and responsibilities: the tasks the person carries out day to day and what they are held accountable for.
   3. Hours and location: full time or part time, the shift pattern, and the site or shop the person works at.
2. Its first job is to tell an applicant what they would actually be doing, so someone who wants different work rules themselves out before applying.
3. Its second job starts after the hire, because the listed duties become the standard the manager measures the employee against when the work is reviewed.

The person specification: who could do it

1. The person specification turns those duties into the qualities someone would need to carry them out, and the requirements are usually split into two lists.
   1. Essential: the candidate cannot do the job without it, such as a full clean UK driving licence for a delivery round.
   2. Desirable: it would help but can be trained later, such as having used the same till system before.
2. The split gives the business objective criteria, so every applicant is measured against the same written list rather than against whichever candidate the manager warmed to.

The application form and the CV: what the applicant sends back

1. An application form is a standard set of questions written by the business, covering personal details, qualifications, work history, why the applicant wants the job and who will give a reference.
2. Because every applicant answers the same questions in the same order, the business can hold each form against the person specification and shortlist quickly and fairly.
3. A curriculum vitae, or CV, is the applicant's own summary of their education, work history and skills, written and laid out however they choose.
4. That gives more of a sense of the person, and the layout itself shows how clearly the applicant writes.
5. It also makes comparison slower, because no two CVs are set out the same way and an applicant can leave a gap in their work history out altogether.

Why these documents matter beyond paperwork

1. Written documents make selection more objective, because each applicant is judged against criteria fixed before anyone applied rather than against a manager's impression on the day.
2. That helps the business meet the legal duty not to discriminate covered in 1.5.3b, since the person specification is the evidence that the same test was applied to everyone.
3. The documents also cut the risk of hiring the wrong person, which is expensive because the business pays to advertise, interview and train someone before that person is productive.
4. A vague job description is the usual cause of that waste: the person hired expected different work, so they leave within months and the whole cost of recruiting and training is spent again on a replacement.

2.5.2c Recruitment methods

Internal recruitment: filling the post from people you already employ

1. Internal recruitment happens in two ways: promoting an employee into a more senior post, or transferring one sideways from another department or branch.
2. Shorter induction: the appointee already knows the products, the till system, the suppliers and the customers, so they are working properly within days instead of spending weeks being shown round.
3. A visible promotion ladder: staff who watch a colleague move up can see that effort is rewarded, so they work harder and are less likely to leave for a rival.
4. No new thinking: an insider has only ever worked the way this business works, so a firm that promotes from within year after year keeps repeating methods nobody has questioned.
5. A knock-on vacancy: promoting a supervisor empties the supervisor's own post, so one recruitment has quietly become two and the saving is smaller than it first looked.

External recruitment: buying in what the business does not have

1. External recruitment fills the post with someone from outside, chosen from people who have never worked for the business.
2. Skills and experience: someone who has run an online shop for a rival arrives knowing how to do it, which is the only way a firm gets a skill no current employee has ever used.
3. Room to grow: going outside is the only route that adds a person to the payroll, because promoting an insider just moves the same employee around.
4. A long induction: a newcomer has to learn the products, the systems and the people while drawing full wages, so for a technical post the business pays for months of work it does not yet get back.
5. Managers weigh the two routes across five things.

Where a business advertises an external vacancy

1. Own website and social media: close to free, and it reaches people who already follow the business, which is how a firm like Gymshark reaches an audience built through fitness influencers.
2. Job boards and recruitment agencies: a board puts the vacancy in front of thousands of people within a day, while an agency can approach experienced people who are not even looking, in return for a fee that often runs into thousands of pounds for one appointment.
3. Local press, shop windows and word of mouth: cheap and strictly local, so they suit a delivery driver or a Saturday shop assistant rather than a specialist post.

Judging which route a business should take

1. Do the skills already exist inside: if no current employee has ever run a payroll or a website, promotion cannot invent that skill, so the business has to go outside however much it costs.
2. How fast, and for how much: a high-street bakery like Greggs that loses a shift supervisor before a busy weekend needs the post covered in days and will not pay an agency fee for a role it can fill from the counter.
3. New thinking or continuity: a business with falling sales gains from someone who has done the job differently elsewhere, while one that is trading well gains more from a person who will keep it steady.
4. Overall, promote from inside when the skill is already there and the post must be filled quickly, and recruit outside only when the business needs a skill or an outlook nobody inside has, because that gap is the one thing money spent on advertising can actually close.

2.5.3a How businesses train and develop employees

Formal, informal and self-learning: three ways to build a skill

1. Formal training follows a planned programme, such as a food hygiene course, a first-aid certificate or an apprenticeship run with a local college.
   1. Every trainee leaves doing the task the same correct way, which matters where a mistake injures someone or loses a customer, but the fee is paid up front and the worker is away from the job while it happens.
2. Informal training happens at the workbench or the counter, where an experienced colleague shows the new person how the machine is loaded or how a difficult customer is handled.
   1. Nothing is spent beyond the colleague's time and the learner keeps producing while they learn, but what gets taught depends entirely on who is teaching, so shortcuts and bad habits are passed on with everything else.
   2. The induction a new starter is given in their first days, being shown the till, the stockroom, the safety rules and who to ask, is informal training at its most common.
3. Self-learning puts the employee in charge, working through online courses or materials the business provides in their own time or in quiet periods.
   1. It costs the business almost nothing and never takes anyone off a shift, but it relies on the person choosing to do it, and nobody checks that the learning has actually happened.
4. The three methods differ on four things a business weighs before choosing, and none of them wins on all four.

The last row settles most decisions, because only formal training ends in something an outsider will accept as proof, which is why a food business pays for hygiene certificates instead of relying on a colleague's explanation.

Ongoing training: what carries on for staff already in the job

1. Ongoing training continues throughout someone's employment instead of stopping in their first week, because products, systems and the law all change while a person is in the job, so staff at a supermarket who learned the old checkout system need training again once it is replaced.

Target setting and performance reviews: how a business decides who needs what

1. The targets agreed have to be specific and measurable so that both sides can tell at the next review whether they were met, which is why 'complete the food hygiene certificate by June' works where 'improve your customer service' does not.
2. Training needs surface early: the review shows the gap between what someone can do now and what the job needs, so a course is booked before that gap turns into a complaint, a wasted batch or an accident.
3. Effort is pointed at what matters: a member of staff with three agreed targets knows which parts of the job the business is judging, so their week is spent on those rather than on whatever is nearest.
4. The business builds a written record: if someone eventually has to be let go, there is evidence that targets were agreed, missed and discussed, rather than one manager's opinion.
5. Reviews go wrong when the target measures the easy thing rather than the important one, so a target on calls answered per hour gets calls rushed and customers ringing back with the same problem.
   1. A review nobody follows up teaches staff it is a form-filling exercise, since a course promised in March and never booked makes the next set of targets worth less.
   2. A target the employee had no say in is resented rather than owned, so they work to the number instead of to the job.

Judging how much a business should spend on training

1. Training spending should rise with the skill and safety demands of the job and with how quickly technology or working methods change; simple, stable work can rely more on informal training and self-learning.
2. Staff turnover matters because training is repaid over the time an employee stays, but a high leaving rate is usually a retention problem to fix rather than a reason to leave the remaining workforce untrained.
3. Overall, compare the cost of training with the likely cost of mistakes, waste, accidents and lost customers if employees do not have the skills the job requires.

2.5.3b Link between training, motivation and retention

How training raises motivation: competence, value and a way up

1. Training reaches motivation by three separate routes, and each one ends in more effort from the same person.
   1. Competence: an employee who has been trained can do the job properly, so they stop dreading the parts they used to get wrong, and that confidence shows up as faster, calmer work.
   2. Feeling valued: paying for someone's training is a signal that the business expects to keep them, so they read it as being invested in rather than being used up.
   3. A route upwards: training that adds a recognised skill puts promotion within reach, which gives an employee something to work towards instead of a job that looks identical in five years.
2. The three routes reinforce each other, because someone who is good at the work and can see a way up has a reason to try today and a reason to still be there next year.

From motivation to retention: keeping the skills you paid for

1. A motivated employee is more likely to stay, because the usual reasons for leaving are boredom, feeling stuck and feeling unnoticed, and training works directly on all three.
2. When they stay, the business keeps the skills and experience it has paid to build, so the money spent on the course goes on earning for years rather than months.
3. Training bought for someone who resigns six months later is largely money spent on a rival's employee, which is why retention is the step that turns training from a cost into a return.

What losing an employee actually costs

Every resignation costs the business in four separate places, and the table sets each one against what has to be paid for.

1. The first two rows are the business paying twice for one set of skills, once for the leaver and again for the replacement, and that spending buys no extra output at all.
2. The middle row is the part customers notice, because a short-staffed shop serves more slowly and a half-trained replacement makes the mistakes the leaver stopped making years ago.
3. The last row never appears on an invoice and lasts longest, since a replacement can be taught the process but not which customers chase a late order and which supplier always delivers short.

The loop, and what training cannot do on its own

1. Put plainly, the loop runs in one direction: training raises motivation, motivation raises retention, and retention protects the return on the training.
2. A business that refuses to train still pays, because unmotivated staff leave sooner, so it recruits more often than the rival that trained and usually spends more on replacing people than the training would have cost.
3. The loop breaks where pay or management is poor, since no course keeps an employee who is underpaid for the work or supervised by someone who never listens.
4. Training also makes an employee more attractive to rivals, so a competitor can offer a wage the business cannot match and walk off with the skills it funded.
5. Training therefore works as one part of a package with fair pay, real promotion prospects and decent day-to-day management, and cannot carry retention by itself.

2.5.3c Retraining to use new technology

Why new technology forces a business to retrain

1. Technology in a business does not stand still, so a new till system, a new machine, a new piece of software or a move to online ordering all change what the job actually consists of.
2. Without retraining the investment does not deliver, since equipment nobody can operate properly produces nothing.

What retraining looks like in practice

Few businesses send everyone away on a course, so retraining for a new system usually arrives by one of three routes.

1. The supplier route is the quickest but it ends when the engineer drives away, so most owners pair it with in-house training to keep the knowledge in the building.
2. Every route carries the same hidden cost of a period of lower output, so a counter assistant who took 20 seconds to ring up an order may take 45 in the first week and the lunchtime queue grows.

Benefits: what the business gets back for the training bill

1. The promised productivity gain arrives: staff who know every function log orders as they take them, so the owner spends two hours a week on paperwork instead of six, and those four hours go into serving customers.
2. Fewer mistakes and less waste: trained staff enter the stock counts correctly, so the system orders the right quantity of flour, so less is thrown out on a Sunday night and the cost of sales falls.
3. Staff can be moved between tasks: once everyone can work the system, an absence on the counter is covered from the kitchen, so the shop opens on time and nothing is paid to an agency for cover.
4. Experience stays in the business: someone retrained rather than replaced still knows which customer orders twenty rolls every Friday and which supplier delivers late, and a new hire would take months to learn either.

The costs and difficulties of retraining

1. The direct cost: a supplier's training day might be £400 on top of the equipment, and the wages of everyone sitting in that room are paid whether or not anything is sold.
2. Lost output while people learn: the shop serves fewer customers for a fortnight, so takings dip in exactly the weeks when the first repayment on the new system falls due.
3. Resistance from staff: nobody on the counter asked for the change and some fear the technology is there to replace them, so they use only the parts they already understand and quietly keep the paper pad going.
   1. Saying early what the system is for, and that the plan is to retrain rather than cut jobs, removes most of that fear, because the anxiety comes from not knowing.
4. The risk of losing the skill: a retrained employee is now worth more to a rival as well, so the business can pay to create a skill that walks out of the door in six months.
5. The true cost of a new system is therefore the price of the equipment plus the training, the lost output and the management time behind it, which is why a purchase that looked affordable can overrun its budget.
6. Retraining is what turns a technology purchase into a technology benefit, because a system only repays its cost once someone can use every part of it.

2.5.4a The importance of motivation

Motivation: the effort that goes beyond the minimum

1. A manager can require an employee to turn up on time and follow the rules, but no contract can require them to care about the work.
2. Motivation is what closes that gap, because a motivated worker chooses to do the extra check, the extra tidy and the extra customer that nobody has told them to do.
3. Two people on the same wage, doing the same job after the same training, can produce very different amounts of work, and the difference is usually motivation rather than ability.

What a motivated workforce gives the business

Motivation shows up in multiple effects a business can assess.

1. Higher productivity: motivated staff work faster and waste less time between tasks, so output per worker rises and the same rent, machinery and management are spread over more units, which cuts the cost of producing each one.
2. Better quality: someone who cares about the work checks it before it leaves their hands, so there are fewer faults, fewer returns to refund and less material thrown away as waste.
3. Better customer service: staff who want to be there greet people, answer questions properly and sort problems out, which brings repeat custom and good online reviews that pull in new customers at no extra cost.
4. Lower absenteeism: motivated staff take fewer unnecessary days off, so the business does not pay overtime or agency fees for cover and does not lose a day of output every time someone stays at home.
5. More ideas: the people closest to the work can see where time and material are wasted, and they suggest improvements when they believe their views count for something.

Retaining staff and attracting new ones

1. A demotivated workforce runs all of that backwards, with low output, poor quality, complaints, high absence and, in the end, people walking out and a recruitment bill the business never planned for.
2. Higher retention: motivated staff stay, so the business avoids the cost of advertising a vacancy, interviewing and training a replacement, and keeps experience that a new starter takes months to build.
3. Attracting employees: a business known for treating its staff well receives more applications for each vacancy, so it can pick a stronger candidate and fill the post before the gap starts costing output.
4. A reputation for miserable staff does the reverse, because word travels through reviews and former employees, so posts stay open for longer and the staff who remain cover the extra work and become demotivated themselves.

Why motivation is a financial issue and not only a people issue

1. Motivation reaches profit from both directions at once, because more output and better quality lift revenue while lower absence and lower turnover cut costs, and profit is what is left when costs come out of revenue.
2. That is why two shops with the same stock, the same prices and the same wage bill can finish the year with very different profits.
3. Pay is only one of the things that decides how motivated people are.
   1. How people are managed: whether a manager listens, gives credit for good work and treats everyone consistently.
   2. What the work itself is like: whether the job carries some variety and some control over how it is done, or is one task repeated for eight hours.
   3. Whether there is anywhere to go: someone who can see a route to a better job tries harder than someone who knows next year will look exactly like this one.
4. Businesses draw on two sets of tools, financial methods and non-financial methods, which the next two guides take in turn.

2.5.4b Financial methods of motivation

Remuneration and fringe benefits: the package the job comes with

1. Remuneration is the basic wage or salary, and it is the reward every other financial method is added on top of.
   1. It motivates because earning money is why most people work at all, and a rate set above the going rate in the area attracts stronger applicants and keeps existing staff from leaving for a rival.
   2. Its weakness is that a pay rise is treated as normal within a few months, and no hourly rate makes a repetitive job interesting to do.
2. Fringe benefits are the non-cash extras, such as a staff discount, a company vehicle, a pension contribution, free meals or private healthcare.
   1. They motivate because they improve daily life in a way the employee notices every week, and a discount card or a subsidised canteen is often valued at more than it costs the employer to provide.
   2. Their weakness is that they cost money whether or not that particular employee wants them, and a benefit that has been there for years is taken for granted rather than felt as a reward.

Rewards tied to results: bonus, commission and promotion

1. Bonus: an extra payment on top of normal pay for hitting an agreed target or for a strong performance review.
   1. It motivates because the employee can see exactly which effort earns the extra money, so attention goes straight to the thing being measured.
   2. Its weakness is that staff chase the target at the expense of everything else the job needs, and a bonus people expect and then do not receive causes more resentment than never offering one.
2. Commission: a payment for each item sold, or a percentage of the value sold, paid on top of or instead of a basic wage.
   1. It motivates because earnings rise directly with effort, so a hard week shows up in this month's pay rather than in a review a year away.
   2. Its weakness is that it pushes staff to talk customers into a purchase that does not suit them, which costs the business repeat custom, and it leaves take-home pay unpredictable in a quiet month.
3. Promotion: moving an employee up into a more senior, better paid role carrying more responsibility.
   1. It motivates because good work is rewarded with a permanent rise rather than a one-off payment, and everyone below can see a route upwards worth working towards.
   2. Its weakness is that a business has only so many senior posts, so most of the workforce cannot be promoted this year, and promoting the wrong person costs twice by losing a good worker from the old job and putting a weak manager over a team.

Matching the method to the job

What sets each payment off is what decides the behaviour the business is buying, and the role each method fits follows from that.

1. Bonus and commission are the only two an employee can raise by themselves this month, which is why they shift daily effort hardest and why they bend behaviour towards whatever is counted.
   1. Promotion depends on a post existing, so a firm growing quickly, as Gymshark did after Ben Francis started screen-printing gym clothing in a Birmingham garage in 2012, can offer it far more often than a business whose size has been steady for years.

The limits of paying people more

1. Every financial method raises the wage bill straight away, and pay is difficult to cut back, so the cost carries on into years when trading is weaker.
2. The effect usually fades because the higher pay becomes the new normal, leaving the business paying permanently more for effort that lifted only for a while.
3. Money also does nothing about work that is dull or a manager who never says thank you, so a firm that answers every complaint with a rise ends up paying to keep staff who still dislike the job.
4. The methods that reach those problems, job rotation, job enrichment and autonomy, are non-financial and are covered in the next guide.

2.5.4c Non-financial methods of motivation

Motivation you do not pay for: changing the job, not the pay packet

1. Edexcel names three non-financial methods, job rotation, job enrichment and autonomy, and each one changes what the employee actually does all day.
2. Pay and working conditions sit underneath all three, and the financial methods, remuneration, bonus, commission, promotion and fringe benefits, are covered in 2.5.4b.

The three methods: rotation, enrichment and autonomy

1. Job rotation: moving staff between different tasks in the business, usually tasks at the same level of difficulty.
   1. It motivates because variety cuts boredom and because each person builds a wider set of skills, so a Greggs shop moving staff between the counter, the ovens and the cleaning would keep the shift from dragging and could still open properly when someone calls in sick.
   2. Follow the chain to the business: concentration holds up across a long shift, so fewer errors reach the customer and less product is thrown away, which lifts productivity without raising the wage bill.
   3. Rotation also shows a manager which task each employee is quickest at, so the rota can be built around strengths instead of habit.
   4. Its weakness is that the tasks may all be equally dull, so swapping between them changes very little, and output dips every time somebody starts a job they are still learning.
2. Job enrichment: giving an employee more challenging and more responsible work, such as handling complaints or ordering stock, rather than simply more of the same work.
   1. Enrichment hands over a whole slice of the job, such as one employee owning the weekly stock order from counting the shelves to placing it with the supplier, so they see the result of their own decision rather than a fragment of somebody else's.
   2. It motivates because the work itself becomes more interesting and because handing over responsibility tells the employee they are trusted, so they take more care over the result and are less likely to look for another job.
   3. It also builds the skills a supervisor needs, so the next vacancy can be filled from inside, which saves the cost of advertising the job and of training a stranger.
   4. Its weakness is that the harder work has to be trained for first, and not everyone wants more responsibility, so an employee who was content as they were may read the change as pressure.
3. Autonomy: giving staff control over how they do their work and letting them make decisions without asking a manager first.
   1. It motivates because being trusted raises commitment, and because the people closest to the work usually know the quickest way to do it, so a problem on the shop floor is fixed in minutes instead of waiting for permission.
   2. Autonomy works best with a written limit, such as a team leader allowed to refund up to £20 without asking, so staff know where their own judgement ends and a quick decision cannot become an expensive one.
   3. Its weakness is that it only works with capable, well-trained staff, and it produces inconsistency, since two employees left to their own methods will not deal with the same customer in the same way.
4. The three differ in what they change for the employee, what they cost the business and what the business must already have in place.

Judging the three methods against paying more

1. A better-designed job will not hold staff who can earn more for the same work elsewhere, so a business paying below the going rate should deal with pay first.
2. Once pay is competitive, rotation suits repetitive work, autonomy suits capable staff who need more control, and enrichment works when managers can hand over real responsibility rather than simply extra tasks.
3. Overall, choose the method that matches the cause of low motivation and the employee's skills, rather than assuming either more pay or one job-design method will work for everyone.