Unit Labour turnover - hodderplus.com · Furthermore, labour turnover is increasing, ... Another...

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OCR Business Studies for AS

Revision questions

(27 marks; 27 minutes)

1 Define the following terms:

(a) labour productivity (2)

● Output per worker – it can be calculated by output/number of workers

(b) labour turnover. (2)

● The rate of change in the workforce.

2 Why might an increase in labour productivity help a firm to reduce its costs per unit? (3)

● Because, as labour productivity increases, the labour cost per unit falls as the cost of labour isspread over a greater number of units.

3 In what ways might a hotel business benefit if labour turnover rose from 2% to 15% per year? (4)

● The new staff might bring in new ideas, new and improved attitudes, lower wages and more up-to-date skills (e.g. computer skills).

4 Some fast food outlets have labour turnover as high as 100% per year. What might be the effects ofthis on the firm? (4)

● High training costs, low levels of motivation, high labour cost per unit due to low level of skills.

5 How might a firm know if its personnel strategy was working effectively? (5)

● By considering current measures in comparison with the past, other firms and/or targets.

Revision exercises

B1 Data response


(Refer to questions on page 190 of the textbook.)

1 Calculate the following ratios for both years: (5)

Labour turnover

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(a) labour productivity

Year 1: 50,000/250 � 200

Year 2: 55,000/220 � 250

(b) labour turnover.

Year 1: 12/250 � 100 � 4.8%

Year 2: 8/220 � 100 � 3.6%

2 Explain what questions these figures might raise in the minds of the firm’s management. (10)

1 mark for each question raised, with up to 4 marks for explaining why the question might be asked.

Possible questions could be:

● Why have the figures changed?

● Are the positive changes reflected in other areas of the firm, such as the firm’s profit, its marketposition, etc.?

● How do they compare with competitors?

● How can the firm ensure the favourable changes continue into the future?

B2 Data response



1 Calculate labour turnover and labour productivity at Best Motors for all five years. (10)



Labour turnover Productivity

4 years ago 13.04% 33.91%

3 years ago 8.00% 32.12%

2 years ago 16.00% 32.20%

1 year ago 25.00% 32.92%

This year 26.92% 31.19%

Labour turnover

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Labour turnover

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t262 Using your results, evaluate the effectiveness of Best Motors’ human resources management. (8)

Possible answers include:

● Productivity is decreasing slightly, which implies motivation is falling.

● Furthermore, labour turnover is increasing, which implies employees have either lost motivationor the human resources department is getting more ruthless in terms of firing workers (prob-ably the former).

● There is little cause for optimism and there needs to be significant improvement in the firm’shuman relations management.

8 marks

Level 3 Analysis of information in context (8-7)

Level 2 Application of knowledge in context (6-4)

Level 1 Knowledge and understanding of business concepts (3-1)

3 What additional information would you seek in order to help James gain a better understandingof how staff have been managed at Best Motors? Explain your reasoning. (7)


● Other data could be used (e.g. labour satisfaction surveys).

● Another important factor is quality of output (e.g. number of defects per car and wastage levels).

● Cost of labour data.

B3 Case study



1 Briefly outline your observations on each of the three shops in terms of their human resourcesmanagement. (12)

4 marks for each shop. Up to 2 for observations, and up to 3 for discussing them.

● Grayton Road: moderate throughout, but low sales.

● St John’s: high turnover and absence – fair sales per employee.

● Lark Hill: best performing – stable staff, low absences and high sales per employee.

2 Give possible reasons for the factors you described in answer to question 1. (9)

Up to 3 marks for each shop.

● Grayton Road – two new staff – perhaps staff left following absence and poor sales per employee.

● St John’s – high turnover – possibly temporary staff, but possibly poor management.

● Lark Hill – staff staying, loyal and working well.

3 Taking the business as a whole, make justified recommendations as to how any problems could betackled by the management. (9)

● Look at Lark Hill and see if lessons can be applied elsewhere.

● Grayton Road needs to improve output – look at motivation and/or organisation.

● Stabilise labour situation at St John’s.



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Revision questions


1 Which features of the organisation of a McDonald’s could be described as Taylorite? (3)

● High division of labour; high degree of mechanisation; de-skilled jobs.

2 Explain the meaning of the term ‘economic man’. (3)

● Man is focused upon financial self-interest, not the social good.

3 Explain how workers in a bakery might be affected by a change from salary to piece rate. (3)

● According to Taylor they would be motivated to work harder and units of output would increase.However, this increase in productivity could result in a fall in quality as workers rush to produceunits quickly in order to earn more money, and do not focus on quality.

4 Give a brief outline of Mayo’s research methods at the Hawthorne plant. (4)

● In the Relay Assembly Test Mayo found six volunteers who tried out a new way of working every12 weeks. These included individual versus group bonuses, different work layouts and so on.Before and after every change there was detailed consultation with the women. Productivitystayed consistently high.

5 How may ‘group norms’ affect productivity at a workplace? (3)

● May be ‘social loafing’, i.e. common pattern of low level of effort; or there may be a positiveculture of effort and suggestions for improvement.

6 Explain the meaning of the term ‘the Hawthorne effect’. (2)

● The effect on worker morale and motivation of a manager taking an interest in what they do.

7 Which two levels of Maslow’s hierarchy could be called ‘the lower-order needs’? (2)

● Physical and safety needs.

8 Describe in your own words why Maslow organised the needs into a hierarchy. (3)

● To emphasise the underpinning role of the lower-order needs.

● To show that the fulfilment of a set of needs would mean they cease to motivate.

● To show how a threat to lower-order needs would mean they become of supreme importanceonce more.

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9 State three business implications of Maslow’s work on human needs. (3)

● Importance of job security; the importance of status; the need for continual challenges to keepthe brightest interested.

10 Herzberg believes pay does not motivate, but it is important. Why? (3)

● To avoid dissatisfaction; to avoid a feeling of being exploited (avoid a remembered pain);important as a signal of recognition for achievement.

11 How do motivators differ from hygiene factors? (3)

● Motivators can cause upward motivation, hygiene factors can only prevent dissatisfaction.

12 What is job enrichment? How is it achieved? (3)

● Job enrichment is a programme to give staff the opportunity to use their ability. It is achieved byproviding a complete unit of work and automatic feedback on achievement.

13 Briefly explain what is meant by motivation. (3)

● Motivation refers to those factors which channel behaviour towards a goal. It is seen by mostbusiness leaders as the factors that prompt people to work hard. It may be seen as internallydriven—the will to work due to enjoyment of the work itself; or externally driven—the desire toachieve a goal resulting from the promise of a reward or the threat of punishment.

14 Suggest two reasons why employee motivation is important to a business. (2)


● high levels of motivation result in low levels of absenteeism

● high levels of motivation mean low labour turnover

● highly motivated employees have higher levels of productivity.

15 Give two examples of hygiene factors and two examples of motivators. (4)

Possible hygiene factors include:

● company policy and administration

● supervision

● salary



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● interpersonal relationships

● working conditions.

Possible motivators include:

● achievement

● recognition

● work itself

● responsibility

● advancement.

Revision exercises

B1 Data response



1 Which of the factors had the least effect on satisfaction or dissatisfaction? (1)

● Security.

2 One of Herzberg’s objectives was to question whether good human relations were as important injob satisfaction as claimed by Elton Mayo. Do you think he succeeded? (6)

● The graph shows human relations factors such as Relationship with supervisor, Relationship withpeers, Relationship with subordinates and Status. None of these causes large responses as the resultof satisfaction or dissatisfaction. Therefore Herzberg’s research did suggest that human relationswere of less importance than in Mayo’s theory.

3 Herzberg found that responsibility had the longest-lasting effects on job satisfaction. Why may thisbe the case? (5)


● Because of the permanent boost to self-esteem/ego.



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● Because responsibility may imply empowerment over one’s whole working life, not just one taskor issue.

● Because responsibility provides scope for achieving many of the other motivators, such asachievement, recognition and personal growth.

4 Discuss which of the factors is the most important motivator. (8)


● Achievement is the one quoted most often . . .

● . . . but responsibility is the longest lasting.

● Therefore the answer lies between the two.

● Achievement can arise even if the person has not been given responsibility (success in a task, even if someone else is responsible for the action/department); this is why it is morenumerous . . .

● . . . but if responsibility has a longer-lasting effect, managers should view it as the moreimportant of the two, and seek to provide it.

B2 Case study



1 Analyse the working lives of the shift workers at the bakery, using Herzberg’s two-factor theory. (8)


● hygiene factors; pay, working conditions (no break between 18.00 and 22.00), ‘discomfort’, workrelationships

● motivators: none relating to the work itself; only motivation is towards subversion, such asdough fights and joking about the managers; the tedious job and ‘very simple task’ explain thelow motivation, as shown by cheering when machines break down.



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8 marks




2 If a managerial follower of Taylor’s methods came into the factory, how might s/he try to improvethe productivity level? (7)


● time and motion study to decide on the ‘one best way’

● financial incentives such as differential piece rate to stimulate greater effort (and self-regulation)

● a system of penalties put in place, such as that throwing dough would result in instant dismissal.

3 Later on in this (true) story, Tania read in the local paper that the factory was closing. The reasongiven was ‘lower labour productivity than at our other bakeries’. The newspaper grumbled aboutthe poor attitudes of local workers. Consider the extent to which there is some justification in thisview. (10)


● Workers are behaving childishly, perhaps even dangerously. The workplace culture seems unpro-ductive. But is this because of a poor example from unofficial leaders . . .

● . . . or is it an inevitable result of what appears to be incompetent management?

● A theory Y manager would accept that, if a workforce is misbehaving or under-achieving, thefault lies with management. Staff have not been given the scope for fulfilling work; the poor atti-tude is the consequence.

● To what extent: very largely the managers’ fault. The staff should have little or no blame attachedto them (on the basis of the evidence provided). Of course there may be other points of view/evidence.



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10 marks

Level 4 Evaluation and judgement of information in context (10-9)






Revision questions


1 ‘Job design is the key to motivation.’ Outline one reason why this might be true, and one reasonwhy it might not. (4)

Reasons this might be true include:

● If the job is designed in a way that allows employees/managers to have independence and/orauthority it will be more motivating.

● If the job is not designed in such a way, you may only be able to move people (threaten orreward) them into doing the job, not actually motivate them (Herzberg).

Reasons this might not be true include:

● Many people believe in a more Taylorite approach (i.e. that money is the key to motivation); insome industries this may be the only way to motivate employees.

● Maslow believed that the high-level motivators were more to do with personal feelings such asesteem and actualisation, and would have said that they were the ‘key to motivation’, not jobdesign.

2 Look at the famous saying by Lee Iacocca earlier in this Unit. Explain in your own words what hemeant by this. (3)

● He meant that it is impossible for a manager to really change things by working harder as s/hecould never cover as much ground merely by working hard as s/he could by motivating subor-dinates to work harder.

3 How should a manager deal with a mistake made by a junior employee? (4)


● It depends on the mistake – if it is a mistake due to lack of knowledge, that is different from amistake due to lack of care.

● Find out why the mistake was made and, if necessary, give the employee extra training.

● Make sure the employee knows what her/his mistake was so as it doesn’t happen again.

4 State three reasons why job enrichment should improve staff motivation. (3)

● Completing a whole unit of work is more satisfying, as staff are achieving something (one ofHerzberg’s motivators).

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● Working in groups may fulfil Maslow’s social needs and thus improve motivation.

● Being responsible for a whole unit of work may make employees feel more important – as they,in effect, become the manager of their work area. This responsibility may lead to increasedmotivation.

5 Distinguish between job rotation and job enrichment. (4)

● Job rotation means swapping jobs of comparable difficulty and responsibility, whereas jobenrichment means increasing the scope of a job, providing a range of activities and responsibil-ities.

6 How does ‘empowerment’ differ from ‘delegation’? (4)

● ‘The empowered worker not only has the authority to manage a task but also some scope todecide what that task should be.’ Whereas delegation only means passing authority down thehierarchy.

7 Identify three advantages to an employee of working in a team. (3)

● More social interaction; more variety; more of a chance to discuss ideas.

8 State two advantages and two disadvantages of offering staff performance-related pay. (4)

● Pros: may encourage greater effort; may prevent a sense of unfairness if great efforts gain noextra reward.

● Cons: performance is hard to measure – it is often subjective, and therefore gives scope for biasand disharmony; risk of distorting behaviour – staff only doing what they think is being meas-ured.

9 What might be the implications of providing a profit share to senior managers but not to the work-force generally? (5)

● Share options give scope for huge rewards at zero risk to the receiver. If the cause of a high shareprice is the excellent management, other staff might not mind. The real problem comes whenshare prices rise for other reasons (perhaps a bullish stock market), meaning the gains by themanagers can seem undeserved and unfair to ordinary staff. Companies like Wal-Mart arecareful to give share options to all.

10 What problems might result from a manager bullying staff to ‘motivate’ them? (6)

● Bullying in the workplace (as in schools) is a serious problem. It is bound to lead to a bad atmos-phere, which would encourage good young staff to go elsewhere. Bullying can also lead tooverwork and stress, which may cause an increase in absenteeism and/or stress-related illnesses.All these factors would result in an increase in labour turnover and a reduction in productivity,and therefore an increase in fixed cost per unit, thus making the firm less competitive.




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11 Identify three key characteristics of a meaningful and well-designed job. (3)

Key characteristics of a meaningful and well-designed job include:

● workers are given clear and challenging goals, allowing them to identify their contribution to thebusiness

● workers carry out tasks that lead to a definite end product

● opportunities for planning and checking the work carried out.

12 State three ways in which employers can reward staff financially. (3)

Examples of ways in which employers can reward staff financially include:

● competitive salaries/wages

● fringe benefits (e.g. company car, private health insurance)

● performance-related pay and bonuses

● profit sharing

● share options.

13 Briefly explain the difference between job enlargement and job enrichment. (3)

● Job enlargement increases the number of tasks involved in carrying out a job. These tasks tendto be similar in terms of the degree of complexity and responsibility. Job enrichment occurswhen employees are given tasks that vary in terms of their level of responsibility and complexity.




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Revision exercises

B1 Data response


(Refer to questions on page 208 of the textbook)

1 How might motivation be affected by ‘taking away the rule book’? (6)

● ‘Taking away the rule book’ forces staff to make up their own minds when faced with a decisionor a new situation. This might be worrying but should also be empowering and therefore moti-vating. One of Herzberg’s key motivators is responsibility. Removing a rule book forces peopleto take more responsibility for themselves.

2 Explain the importance to staff motivation of freely flowing, accurate communication. (6)


● Free flowing information is necessary to provide feedback on achievement . . .

● . . . and it can be a way of democratising the workplace and encouraging greater trust betweenstaff and management.

● Accurate communication is also necessary for successful delegation; you cannot hold someoneresponsible for a task if they don’t know all the relevant facts.




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6 marks






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● Some of the key findings of McGregor’s research were that employees seek job satisfaction atwork; they can be trusted to take responsibility and are keen to contribute to the decision-making process. Introducing worker empowerment would lead to increased levels ofresponsibility and involvement in decision-making, whereas learning new skills should hope-fully create greater job enrichment.

8 marks




4 In this case, high motivation boosted productivity by 30%. Discuss whether increased motivationneed always result in increased productivity. (10)


● Increased motivation should result in falling absence, less labour turnover and reduced industrial action.

● These points, plus increased levels of effort, could be expected to boost output per person.

● It will depend, though, on the focus of the extra motivation; a more motivated painter/decoratormight take longer to complete a task because of a greater commitment to quality.

● It would be risky to assume, therefore, that motivation up always means productivity goes up.

10 marks





B2 Activity

Write a questionnaire for self-completion by full-time employees.

When the research is completed, analyse the results carefully and write a summary of them in reportform.

● Student’s own answer.




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1 Describe two costs associated with training employees. (3)

Relevant answers include:

● the cost of the administration time needed to set up and evaluate the training course

● the fees paid to external training agencies

● the loss of production as a result of staff absence

● the cost of paying for cover (e.g. agency staff) to minimise the loss of production while workersare away being trained.

Award one mark for each correct answer identified.

2 Using a suitable theory, examine the link between training and worker motivation. (8)


● Herzberg – according to Herzberg, personal achievement, growth and advancement act as moti-vators; training allows workers to gain new skills or develop existing ones, allowing them tobecome more competent and gain promotion into more senior jobs.

● Maslow – according to Maslow, esteem is one of the ‘higher-order’ needs; training wouldincrease opportunities for greater recognition and achievement by improving workers’ skills.

8 marks




3 To what extent do you believe that the research carried out for Ernst & Young confirms the viewthat money does not motivate? Explain your answer. (14)


● A number of motivational theorists claim that money may not be an effective motivator – thisappears to be supported by the research findings.

● Many motivational theorists claim that other factors, such as the opportunity for personal devel-opment, are more important, especially among more highly qualified employees, such asgraduates.

However:

● Although money may not motivate, theorists such as Herzberg would still accept that unsatis-factory levels of pay can lead to demotivation (a hygiene factor).

● The survey results may be misleading – job recruits may wish to create a favourable impressionby not focusing on the financial aspects of a job.




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Revision questions


1 Distinguish between autocratic and paternalistic management. (4)

● Autocratic –authoritarian; focus on getting the task done.

● Paternalistic –acts in best interests of employees; interested in social and security needs ofemployees.

2 Identify two features of democratic management. (2)

● listening approach

● delegation.

3 Outline one advantage and one disadvantage of an autocratic management approach. (4)

Advantage:

● quicker decisions

Disadvantage:

● may not have as much commitment from employees.

4 Distinguish between McGregor’s Theory X and Theory Y. (4)

● Theory X managers assume employees are lazy and do not want to work. Theory Y managersassume employees can find work as natural as play and want to contribute.

5 Why is it ‘clear that Theory Y managers would be inclined to adopt a democratic leadershipstyle’? (4)

● Theory X managers believe employees have ideas and want to contribute. As a result, this typeof manager would want to listen and empower staff, i.e. a democratic approach.

6 Is there one correct leadership style for running a football team or a supermarket chain? (4)

● No, the ‘correct’ style depends on the type and size of the business, its current situation and thepersonalities of the employees.

7 Explain why autocratic managers may be more use in a crisis than democratic ones. (4)

● In a crisis some tough decisions will have to be made which may not be popular amongst


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employees. An autocratic leader is more likely to make these decisions. Furthermore it may beimperative that decisions are made quickly in order to minimise disaster and an autocratic stylelends itself better to speedy decision-making.

8 Explain a circumstance in which an autocratic approach to leadership may be desirable. (4)


● if the task is very risky

● if employees do not have the necessary skills to solve the problem themselves

● if the job needs doing quickly.

9 Many managers claim to have a democratic style of leadership. Often their subordinates disagree.Outline two ways of checking the actual leadership style of a particular manager. (4)

Up to 2 marks should be allocated for any sensible way of checking.


● ask employees which style they think the manager adopts

● look at how decisions are made

● look at the extent of control by the manager.

10 Analyse the leadership style adopted by your teacher/tutor. (6)


2 marks should be allocated for the identification of leadership style plus up to an additional 4 marksfor analysis of the effect that this style has on the class.

Revision exercises

B1 Data response


1 Identify and explain the sections of the text that fit in with the ideas of Theory X and Theory Y. (5)

2 marks should be allocated for an understanding/explanation of theory X and theory Y leadership plusup to an additional 3 marks for use of the information provided in the text.



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● McGregor’s theory X leaders are leaders who set out clear objectives, give orders and expect thoseorders to be strictly followed. The autocratic leaders mentioned in the text fit in with McGregor’stheory X leaders.

● A theory Y leader is a leader who trusts employees to word hard and take responsibility andtherefore is less autocratic in his/her approach. The managers described as sensitive or trustingin the text are likely to be theory Y leaders.

2a What types of leader would be suggested by a ‘bureaucratic’ style of management? (2)

● A bureaucratic style is more likely to be indicative of an autocratic style of management.

2b Outline two possible effects on a large business of this type of management style. (4)

One mark should be allocated for the identification of each point plus an additional mark for expla-nation.

Positive effects include:

● good management of administration and possibly finance.

Negative effects include:

● less creative input

● less of a focus on innovation

● lack of new ideas.

3 Discuss the implications for a company such as Apple of operating as a ‘centrally planned dicta-torship set up to take orders from the chief executive rather than the customer’. (15)

Possible positive effects include:

● clear objectives

● employees should have a good understanding of the goals of Apple

● decision-making may be faster as fewer people have an input in decisions.

Possible negative effects include:

● employees may fear bringing new ideas for products or process up with management

● employees may become demotivated

● creativity may be stifled



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● a brand such as Apple thrives on dynamism and innovation – any stifling of this could have anegative effect on their reputation and, in turn, their sales.



Leadership 29Level 4 Evaluation and judgement of information in context (15-13)






2 Explain which leadership style is closest to (Sir) Terry Leahy’s leadership of Tesco. (8)

There is no correct answer here. Any sensible answer should be credited provided it is backed up withrelevant evidence/implication.




B2 Data response


1 Analyse how Terry Leahy’s approach compares with that of a charismatic leader. (6)

● Terry Leahy does not seem like a charismatic manager but rather a quiet leader who observes,listens and makes thoughtful, intelligent and well-informed decisions.

3 Discuss whether it is a good use of senior managers’ time to spend a day working on the shopfloor. (11)

Possible reasons to say yes include:

● Improves their knowledge of shop floor problems and difficulties.

● May improve their ability to communicate with lower level staff.

● May improve their credibility with subordinates.

Possible reasons to say no include:

● Any opportunity cost of managers spending time on the shop floor.

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B3 Assignment

1 Arrange to interview an employee. Preferably this person should be a full-timer who has workedfor at least a year. The employee could be a manager but should not be a director.

2 Your objective is to gain a full understanding of the leadership style prevailing at the employee’sworkplace, and the style employed by the individual’s own manager.

3 Devise your own series of questions in advance, but make sure to include the following themes:

a) How open are communications within the business?

b) Are staff encouraged to apply a questioning or critical approach?

c) Are there any forums for discussion or debate on important policy issues affecting staff?

d) What does the organisational hierarchy look like? Where is your employee on that diagram?How powerful or powerless does he or she feel?

e) How exactly does the employee’s boss treat him or her? Is there delegation? Consultation? Howeffective is communication between the two of them?

Write at least 600 words summarising your findings and drawing conclusions about how well theexperience conforms to the leadership theory dealt with in this Unit.


Essay questions

1 ‘A good leader can always turn an ineffective business into a successful one.’ To what extent cangood management make a difference to the success of a firm?

Possible lines of argument include:

● Good management can ensure objectives are clear, communication is good and employees arewell-trained and motivated, but that does not mean they can always make a business into asuccess.

● It is impossible to say a good leader can always turn an ineffective business around as it woulddepend on the extent of the problem, the available time to make it a success and how good theleader is.

● Some leaders may be capable of turning any business around given the resources and the financebut that does not mean that any good leader could do the same.

2 ‘Management is no longer about leading others; it is about working with them.’ Critically assessthis view.

● It depends on the culture and style of the organisation in question. In some organisations man-agement is still very much about leading a team whereas in others it may be more about gettingthe best out of every member of a team – be it leading them or not.

● It is possible to lead a team without being autocratic so, in fact, just because a manager isworking with a team does not mean that he or she is not also leading that team.

3 Consider the view that autocratic management has no place in today’s business world.

Reasons to agree:

● It is an old-fashioned style of management which is not readily accepted by today’s businesssociety as people expect to be treated with respect at work.

● It may stifle creative thinking and innovation.

● It may reduce motivation levels which today’s management are possibly more conscious of thanmanagement in the past.

Reasons to disagree:

● It depends on the culture of the organisation. Some organisational cultures are well-suited toautocratic management – e.g. the army, the stockmarket.

● In some situations autocratic management may be preferable for any firm – e.g. in times offinancial difficulty.

● With the UK economy heading toward a recession, autocratic management may come back intofashion as cost cutting and efficiency become key strategies of survival in harsh market con-ditions.

4 ‘Good managers are born and not made.’ Discuss this view.

● Entrepreneurs such as Richard Branson started at such a young age that it implies that goodmanagers are born.

● Management is largely about the ability to communicate with people – this is usually considereda skill which is natural, although it can be improved with training and development.

● It may depend on the individual and their life experiences.

● If good managers are just born and not made, why do so many big companies have graduatemanagement programmes?



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Revision questions


1 What is meant by the chain of command? (2)

● The chain of command is the line of communication through which orders are passed downfrom the top to the bottom of the organisation.

2 Define span of control. (2)

● The span of control is the number of people who report to a given manager in the hierarchy.

3 Some theorists believe that the ideal span of control is between three and six. To what extent doyou agree with this? (5)

● Fayol’s maxim of five has merit for the following reasons: it should mean that the superior canknow subordinates personally and be familiar with their work; furthermore, it should allow eachsubordinate to have sufficient access to the superior when needed; however, in some situations,it may not be realistic or efficient to have a span of control of between three and five.

4 Explain two implications of a firm having too wide a span of control. (4)

● The manager may struggle to communicate effectively with all employees.

● Subordinates may feel they do not have a close enough relationship with the manager.

● Subordinates may become demotivated as they have just a slim chance of promotion.

● The manager may not have quite enough knowledge and/or control of subordinates.

5 Explain what an organisational chart shows. (4)

● An organisational chart shows the structure of a given organisation and the relationshipsbetween the employees within the organisation. It shows who is responsible for whom and eachmanager’s span of control.

6 Why is it important for a growing firm to think carefully about its organisational structure? (4)

● As firms grow, organisational structures may have to change. The change may come in the formof more employees, or more drastic change such as new departments being formed or additionalteams being added to existing departments.

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7 State three possible problems for a business with many levels of hierarchy. (3)

● A long chain of command may mean that messages from the top of the organisation may notget to the bottom of the organisation, or may get confused.

● Lots of expensive middle-management salaries to pay.

● Productivity may be low as there are too many managers and not enough ‘doers’.

8 What is meant by the term ‘accountable’? (2)

● To be accountable is to have to answer to a superior.

9 What do you think would be the right organisational structure for a hospital? Explain your answer. (4)


10 Identify two reasons why a business might use an organisational chart. (2)


● to clearly illustrate the roles and responsibilities of employees

● to demonstrate channels of communication and the flow of information

● to demonstrate the layers of hierarchy and the lines of authority.

11 Explain what is meant by a narrow span of control. (3)

● a situation in which a manager has a small number of staff directly answerable to him/her.

12 Describe one benefit and one drawback for a business of reducing the levels within its hierarchy.(4)

Benefits include:

● allows managers to offer close supervision, which may be useful if staff are inexperienced, labourturnover is high, or the task is complex or difficult

● allows better communication between managers and the employees for whom they are respon-sible

● may increase employees chances of promotion as a narrow span of control may mean manylayers of hierarchy in which promotion chances arise regularly.




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Drawbacks include:

● workers may feel over-supervised which prevents staff from gaining increased responsibility, animportant motivator.

● communication may suffer as a whole because a narrow span of control may result in manylevels of hierarchy through which information has to pass.

● may restrict the scope for staff to use their initiative or to experiment.

13 Outline two elements required for successful delegation. (4)

Answers include:

● the delegation of meaningful tasks in which employees can take pride

● staff who take pride in the responsibility they are able to show and the trust that is shown inthem

● good communication between managers and the employees to whom tasks will be delegated

● a decentralised organisational structure in which employees can work on delegated taskswithout feeling over-supervised.

14 Outline two potential barriers to communication within a firm. (4)

Answers include:

● wide spans of control may make it difficult for a manager to communicate effectively with all theemployees for whom he/she is responsible, and may create a need for more formal rather thaninformal communication

● many layers of hierarchy may make vertical communication slower and less effective.

15 Draw up a table showing the advantages and disadvantages to the business and to the workforce:

● a centralised business

● a decentralised business by product

● a decentralised business by geographical area.




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t30Advantages Disadvantages

Centralised • Standardisation• Easy to control costs• Could encourage collaboration

between departments • May need fewer middle

managers – thus cutting costs

• Middle and lower managementmay be less motivated as theyhave less decision-making power

• May stifle creativity

Decentralisedby product

• Motivates product managers • Gives the person who knows

most about the product theability to make key decisions

• Employee motivation mayincrease as their ideas are morelikely to be considered

• Less control • Costs are likely to be higher• May increase the layers of the

hierarchy • Top management may have a

lack of information

Decentralisedby region

• Local knowledge can be used tomake the right decisions in thearea

• Motivates regional managers • Employee motivation may

increase as their ideas are morelikely to be considered

• Less control • Costs are likely to be higher• Regional differences may

threaten the standardisation ofthe brand

Revision exercises

B1 Data response



1 Describe the chain of command that Sara would use if she needed to discuss overtime with Pete. (3)

● Sara would have to discuss the issue with James, who would, in turn, discuss the issue with Pete.

2 What symptoms would indicate that James’ span of control was too wide? (5)


● Problems communicating with subordinates, resulting in misunderstandings and delays – mess-ages may not be communicated correctly or in time.

● Problems motivating staff because of a lack of personal contact with James as manager. This maycause staff to feel alienated, which may have a negative impact on performance.

● An increase in James’ workload which may cause him to suffer from work overload, leading tostress and poor decision-making.

3 Explain the usefulness of this chart for a new member of staff. (2)

● This chart would help a new employee to understand the relationship between differentmembers of staff, and who is responsible for whom.

4 How might Crazy Beetles use a matrix management approach? (5)


● For the purpose of project management it might take one member from each department to form a matrix; this may improve the chances of the project succeeding as it would speed upcommunication between departments and ensure that all department opinions were taken intoaccount.

5 To what extent would Sara benefit if she introduced a more decentralised approach? (10)

Possible benefits include:

● Higher level of motivation due to more decision-making power.




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t30● Employees may take on more responsibility, which would increase their level of skills and

improve productivity.

● Decisions are made by those who know the most about the task in hand, which may improvedecisions.

Possible problems include:

● If decisions are not being made by Sara, she may not always be aware of what is happening inher business.

● If subordinates are not aware of business objectives, decisions made may not be in line with busi-ness objectives.

10 marks





B2 Data response



1a What is the Managing Director’s span of control? (1)

● According to Figure 30.2, the Managing Director’s span of control is three.

1b Comment on the strengths and weaknesses of this organisational structure. (6)

Strengths:

● The business is organised along functional lines – this should make it relatively easy for staff tounderstand their roles, who does what and who answers to whom.

● Relatively narrow spans of control of three – making supervision and communication withindepartments relatively quick and easy.

Weaknesses:

● Organising the business on functional lines may encourage staff to function in their individualroles and departments, rather than adopt a ‘whole business’ attitude, e.g. staff in marketing maynot consider the financial implications of their ideas.




Uni

t30● Relatively narrow spans of control may lead to over-supervision and a lack of opportunity for

individual workers to use their initiative, leading to demotivation.

1c How important does Human Resources seem within this business? (3)

● There is a Human Resources Director within Chicken Little, meaning that the function is recog-nised and given some importance. However, the Director has no subordinates, whereas theMarketing and Operations Directors have three subordinates each, suggesting that the role isconsidered to be less important than the other two.

2 Explain why vertical communications may not be as effective today as they used to be in the pastat Chicken Little. (5)

● There are now two layers of ‘middle management’ between the company’s Managing Director,Paxo, and the workforce. For example, official communication from the five quality staff has topass through a Quality Manager and an Operations Director before reaching Paxo. This willinevitably slow down communication . Junior staff may also be discouraged from approachingPaxo because of the formal structure.

3 Discuss the ways in which the Factory Manager might benefit or suffer from the organisationalstructure shown in the diagram. (10)

Possible benefits include:

● The Factory Manager will have a clear idea of how (s)he fits into the organisational structure,who (s)he is responsible for. This should make the process of supervision and delegation easier.

● The Factory Manager will also have a clear idea of who (s)he is accountable to – for example, theOperations Director is the Factory Manager’s line manager.

Possible drawbacks include:

● The structure may reduce the amount of horizontal communication – i.e. it may be relativelydifficult to liaise with managers in other departments, such as marketing.

● It may be more difficult to communicate directly with the Managing Director, as messages mayneed to go through the Operations Director. This may discourage the Factory Manager frompassing on ideas about making the factory run more efficiently.

10 marks





B3 Data response



1 Explain two reasons why marketing is centralised at the head office of Activities4U. (6)

Reasons for centralising marketing:

● consistency of approach/message/control

● one marketing budget/cost centre

● centralised advertising

● centralised market research

● economies of staffing, specialisation.

2 Argue the case for centralising training at head office rather than within each activity centre. (12)

Case for centralising training at Head Office:

● legislation – e.g. Health and Safety to ensure consistency, CRB legislation

● to maintain a consistent standard/uniform policy

● one cost centre

● centralised control

● easier communication.

This case has to be analysed in terms of making a comparison with decentralising to each activitycentre.




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