Topic 5: People and Business

What You Need to Learn

• Identify the qualities of a good employee and understand what work ethic means
• Explain how employees impact a business through productivity, reputation and financial success
• Understand motivation theories (Taylor and Mayo) and employee incentives
• Describe the business cycle and how businesses reward, develop and involve individuals
• Explain employee ownership, bonus schemes and share schemes

5.1 The Qualities of a Good Employee

Every job has specific requirements that an employee needs to meet. These include:

• Qualifications – formal certificates, degrees or diplomas needed for the role
• Training – learning specific skills required for the job (e.g. health and safety, using specialist software)
• Skills – practical abilities such as communication, teamwork, problem-solving or technical skills

However, the most important attribute any employee can have is a good work ethic (sometimes called ethos). Work ethic refers to an employee's attitude towards their work and their commitment to doing a good job.

Table 5.1: Good Work Ethic vs Bad Work Ethic

5.2 The Impact of Employees on a Business

Businesses rely on their employees to carry out a wide range of job roles:

The quality of employees affects a business in three key areas: Productivity, Reputation, and Financial Success.

5.2.1 Productivity

Productivity is defined as the output per employee over a given period of time. It measures how efficiently employees convert inputs (time, effort, resources) into outputs (goods and services).

Employees with a good work ethic have a positive impact on productivity:

• They work hard and complete tasks efficiently
• They use initiative and find better ways to do things
• They help the business gain a competitive edge over rivals

Employees with a poor work ethic have a negative impact on productivity:

• They do the bare minimum and waste time
• They cause delays and lower overall output
• Absenteeism (regularly being absent from work) is a major problem – it disrupts workflow, increases costs (hiring temporary cover) and lowers team morale

5.2.2 Reputation

Staff and Reputation

Employees who work in face-to-face roles (such as sales assistants, receptionists and customer service staff) have a direct impact on the reputation of a business. If they are polite, helpful and knowledgeable, customers will have a positive experience and return.

Quality and Value for Money

Every business must find the right balance between quality and value for money. This is a trade-off:

5.2.3 Financial Success

Employees – particularly those in financial roles (accountants, financial controllers, managers) – have a direct impact on the financial success of a business through effective money management.

Effective financial management involves:

5.2.4 Getting the Best Out of Employees

How do businesses motivate their employees to work hard and be productive? Two key motivation theories help us understand this:

Frederick Taylor – Scientific Management

Taylor believed that workers are primarily motivated by money. His approach was called payment by results:

• Workers should be paid according to how much they produce
• Piece work – paying employees for each unit they produce (e.g. per item made or packed)
• The more you produce, the more you earn
• This approach treats workers almost like machines – focused purely on output

Elton Mayo – Human Relations Theory

Mayo disagreed with Taylor. His research at the Hawthorne factory showed that pay is not the only motivator. Mayo found that workers are also motivated by:

• Discussion with managers – feeling listened to and valued
• Teamwork – working collaboratively with colleagues
• Social clubs and activities – feeling part of a community at work

Employee Incentives

Modern businesses use a range of incentives to get the best out of their staff:

5.3 The Impact of Businesses on the Lives of Individuals

5.3.1 The Business Cycle

The economy goes through regular cycles of growth and decline, known as the business cycle:

UK Unemployment – Key Statistics

5.3.2 How Businesses Reward Individuals

Businesses reward their employees in a number of ways beyond just a salary:

5.3.3 How Businesses Develop Individuals

Motivation

Good businesses invest in their people and help them grow. A motivated workforce is more productive, more loyal and more likely to stay with the company.

Training

Training typically follows a structured progression:

Promotion Structure

Businesses offer clear career paths that give employees goals to work towards:

5.3.4 Involving Individuals in Business Success

Employee Ownership

Some businesses are owned by their employees rather than by external shareholders. The most famous example is the John Lewis Partnership:

Employee Bonus Schemes

Many businesses operate bonus schemes that reward employees for meeting targets or when the company performs well. Bonuses give employees a direct financial stake in the success of the business.

Employee Share Schemes

The government encourages businesses to offer employees the chance to own shares in their company. There are 5 government-approved share schemes, and they offer tax exemptions (employees pay less or no tax on the shares they receive). This:

• Gives employees a financial stake in the company's success
• Aligns employees' interests with those of shareholders
• Helps retain staff (employees may need to stay for a set period to keep their shares)
• Provides tax benefits that make the shares more attractive than a simple pay rise

Practice Quiz

Summary

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