Business and People

What you'll learn

This revision guide covers how businesses manage their human resources to achieve objectives. You'll understand organisational structures, recruitment and selection processes, training methods, motivation theories, and different payment systems. These topics typically account for 20-25% of your Pearson Edexcel International IGCSE Business Studies exam.

Key terms and definitions

Organisational structure — the way a business arranges its workforce, showing lines of authority and communication between different roles and departments

Span of control — the number of subordinates directly managed by one supervisor or manager

Chain of command — the line of authority through which instructions pass from top management to lower levels of the organisation

Recruitment — the process of identifying the need for a new employee and attracting suitable candidates to apply for the job

Induction training — initial training given to new employees covering company procedures, health and safety, and workplace familiarisation

Motivation — the internal and external factors that stimulate employees to take actions that lead to achieving business goals

Fringe benefits — non-financial rewards given to employees in addition to their basic wage or salary, such as company cars or private healthcare

Dismissal — termination of employment by the employer due to employee misconduct or inadequate performance

Core concepts

Organisational structures and hierarchy

Businesses organise their workforce using different structures to establish clear responsibilities and communication channels.

Hierarchical (tall) structures feature:

• Many levels of management between top executives and shop-floor workers
• Narrow span of control (few subordinates per manager)
• Long chain of command
• Clear promotion opportunities
• Slower decision-making and communication

Flat structures feature:

• Few levels of management
• Wide span of control (many subordinates per manager)
• Short chain of command
• Faster communication and decision-making
• Fewer promotion opportunities but greater employee autonomy

Functional organisation groups employees by specialism (e.g., marketing, finance, production, human resources). This allows expertise to develop but can create communication barriers between departments.

Matrix organisation combines functional and project-based structures, where employees report to both a functional manager and project manager. This increases flexibility but can cause confusion over authority.

Centralised organisations concentrate decision-making power at head office or with senior management. This ensures consistency and control but can slow responses to local market conditions.

Decentralised organisations delegate authority to regional or departmental managers. This speeds up decision-making and increases motivation but may lead to inconsistent practices across the business.

Recruitment and selection

The recruitment process follows a systematic approach to find suitable employees:

Step 1: Identify the vacancy The business recognises a need for a new employee due to expansion, resignation, dismissal, or retirement.

Step 2: Write a job description This document outlines:

• Job title and department
• Main duties and responsibilities
• Position in hierarchy (who they report to)
• Working conditions and hours

Step 3: Prepare a person specification This details the ideal candidate's:

• Qualifications and educational background
• Experience and skills
• Personal qualities and attributes

Step 4: Advertise the position Internal recruitment advertises vacancies within the business through notice boards or company newsletters. Advantages include lower cost, faster process, and candidates already familiar with the business. Disadvantages include no new ideas entering the business and potential jealousy among colleagues.

External recruitment advertises through job centres, newspapers, recruitment agencies, or company websites. Advantages include wider choice of candidates and fresh perspectives. Disadvantages include higher costs and longer selection processes.

Step 5: Selection process Methods include:

• Application forms providing standardised information
• CVs (curriculum vitae) showing career history and qualifications
• Interviews assessing communication skills and suitability
• Aptitude tests measuring specific abilities
• Assessment centres using group exercises and presentations

Training and development

Businesses invest in training to improve productivity, reduce accidents, and increase employee satisfaction.

Induction training introduces new employees to:

• Company policies and procedures
• Health and safety requirements
• Location of facilities
• Key personnel and team members

On-the-job training occurs in the workplace while employees perform their normal duties:

• Demonstrations by experienced workers
• Job rotation through different roles
• Mentoring and coaching
• Advantages: cost-effective, immediately relevant, maintains production
• Disadvantages: trainers may pass on bad habits, possible disruption to productivity

Off-the-job training takes place away from the normal workplace:

• College or university courses
• External training providers
• In-house training centres
• Advantages: expert trainers, no distractions, access to specialist equipment
• Disadvantages: expensive, employees absent from workplace, may not be job-specific

Motivation theories and practices

Understanding motivation helps businesses improve productivity and reduce labour turnover.

Frederick Taylor (Scientific Management) believed workers are motivated primarily by money:

• Time and motion studies to find most efficient methods
• Piece-rate payment systems
• Close supervision
• Limited applicability in modern knowledge-based work

Abraham Maslow's Hierarchy of Needs suggests employees are motivated by five levels of needs (ascending order):

1. Physiological needs (food, shelter, warmth)
2. Safety needs (job security, safe working conditions)
3. Social needs (teamwork, friendships at work)
4. Esteem needs (recognition, status, promotion)
5. Self-actualisation (challenging work, creativity, achievement)

Businesses must satisfy lower-level needs before higher levels become motivating.

Frederick Herzberg's Two-Factor Theory distinguishes between:

Hygiene factors (prevent dissatisfaction but don't motivate):

• Pay and conditions
• Company policies
• Supervision quality
• Job security

Motivators (create positive satisfaction):

• Achievement and recognition
• Responsibility and promotion
• Interesting, challenging work

Herzberg advocated job enrichment (adding challenging tasks requiring skill) rather than job enlargement (simply adding more tasks at the same level).

Payment and reward systems

Time-rate payment pays employees for hours worked:

• Advantages: guaranteed income, predictable wage costs, suits jobs where output is difficult to measure
• Disadvantages: doesn't reward higher productivity, requires supervision to maintain effort

Piece-rate payment pays per unit produced:

• Advantages: directly links pay to output, encourages productivity
• Disadvantages: may compromise quality, difficult for team-based work, income fluctuates

Salary provides fixed annual payment divided into monthly instalments:

• Standard for professional and managerial roles
• Provides security and stability
• Often includes performance-related bonuses

Commission pays a percentage of sales value:

• Common in retail and sales positions
• Highly motivating for sales staff
• Income varies with performance

Bonus schemes provide additional payments for meeting targets:

• Individual bonuses reward personal performance
• Team bonuses encourage cooperation
• Profit-sharing schemes distribute company profits to employees

Performance-related pay (PRP) links salary increases to individual achievement of objectives set during appraisals.

Fringe benefits supplement monetary rewards:

• Company cars or fuel allowances
• Private health insurance
• Pension contributions
• Staff discounts
• Gym memberships

These are particularly valued by higher-income employees seeking tax-efficient compensation.

Employment contracts and termination

Employment contracts specify:

• Job title and duties
• Pay and working hours
• Holiday entitlement
• Notice periods
• Disciplinary procedures

Part-time employees work fewer hours than full-time staff, providing businesses with flexibility and reduced labour costs.

Full-time employees typically work 35-40 hours weekly, receiving full benefits and greater job security.

Temporary contracts cover fixed periods or specific projects, allowing businesses to respond to seasonal demand or short-term needs.

Employment termination occurs through:

Dismissal when employers terminate employment due to:

• Misconduct (theft, violence, harassment)
• Poor performance despite warnings
• Redundancy (job no longer required)

Unfair dismissal violates employment law and may result in compensation claims.

Redundancy occurs when a job is no longer needed due to:

• Business closure
• Technology replacing workers
• Relocation
• Reduced demand

Employers must follow consultation procedures and may provide redundancy payments.

Resignation occurs when employees voluntarily leave, typically requiring notice as specified in contracts.

Worked examples

Example 1: Organisational structure (6 marks)

Explain two advantages to a growing business of changing from a hierarchical to a flatter organisational structure.

Model answer: One advantage is faster decision-making (1 mark). With fewer management levels, information travels more quickly up and down the organisation, allowing the business to respond rapidly to market changes (1 mark development). This is particularly valuable for a growing business entering new markets where speed is competitive advantage (1 mark application).

A second advantage is reduced costs (1 mark). Removing management layers decreases the wage bill for supervisors and middle managers (1 mark development). The growing business can reinvest these savings into expansion or product development (1 mark application).

Example 2: Motivation theory (4 marks)

State and explain two ways a small hotel could use Herzberg's theory to motivate reception staff.

Model answer: The hotel could introduce job enrichment by giving reception staff responsibility for handling customer complaints independently (1 mark), which provides recognition and achievement opportunities that Herzberg identified as motivators (1 mark explanation).

The hotel could implement a promotion structure allowing experienced receptionists to become shift supervisors (1 mark), addressing the need for advancement and increased responsibility that Herzberg's theory identifies as key motivating factors (1 mark explanation).

Example 3: Training methods (8 marks)

Discuss whether a large supermarket chain should use on-the-job or off-the-job training for new checkout staff.

Model answer: On-the-job training would be suitable because new checkout staff can learn by observing experienced colleagues while working (1 mark). This allows them to ask immediate questions about real situations like processing refunds or dealing with price discrepancies (1 mark development). The supermarket maintains service levels as trainees still serve customers, avoiding the opportunity cost of closed tills (1 mark analysis). However, customers may experience slower service during the training period, potentially damaging the supermarket's reputation (1 mark analysis).

Off-the-job training could provide structured instruction on the electronic point-of-sale system without customer pressure (1 mark). Professional trainers could ensure all staff learn correct procedures for security and cash handling (1 mark development). However, this approach is expensive as the supermarket must pay for training facilities and staff wages while they're not productive (1 mark analysis).

Overall, on-the-job training is more appropriate for a large supermarket chain (1 mark judgement). Checkout operations are relatively straightforward and the business handles high customer volumes where maintaining service is critical. The cost savings and immediate productivity outweigh the benefits of formal off-the-job training for this role (1 mark justified conclusion).

Common mistakes and how to avoid them

• Confusing span of control with chain of command — span of control measures how many subordinates report to one manager, while chain of command shows the line of authority from top to bottom. Always define these terms precisely in answers.

• Listing motivation theories without application — don't just describe Maslow or Herzberg; explain specifically how a business applies the theory to its workforce with concrete examples from the question context.

• Assuming money is always the main motivator — while Taylor emphasised financial incentives, modern theories recognise non-financial factors like recognition, responsibility, and interesting work. Show balanced understanding based on job type and worker characteristics.

• Treating all training as equally suitable — match training methods to specific situations. On-the-job suits practical skills and cost-conscious businesses; off-the-job suits complex technical skills or safety-critical procedures.

• Forgetting to justify recommendations in discuss/evaluate questions — always provide a clear conclusion that weighs up arguments and relates to the specific business context provided in the question.

• Mixing up dismissal, redundancy and resignation — dismissal is employer-initiated due to conduct or performance; redundancy means the job is no longer needed; resignation is employee-initiated. Use the correct term with accurate definitions.

Exam technique for "Business and People"

• Master command words: "State" requires brief factual points (1 mark each); "Explain" needs points plus development showing how/why (2-3 marks); "Discuss" or "Evaluate" requires arguments for and against with a justified conclusion (8-12 marks typically).

• Use business context religiously — generic answers earn limited marks. Reference the specific business type, size, market, or situation from the question in every developed point to access higher mark bands.

• Structure extended answers clearly — for 8+ mark questions, write distinct paragraphs for different points or perspectives. Start with your argument, develop it with reasoning, and link to context. Conclude by weighing up factors and making a justified recommendation.

• Apply numerical awareness — calculate labour turnover percentages, productivity per worker, or wage costs when data is provided. Show working and interpret results in business terms to demonstrate commercial understanding.

Quick revision summary

Businesses structure their workforce hierarchically or with flat structures, balancing control against speed and flexibility. Recruitment follows systematic stages from identifying vacancies through selection. Training develops skills through on-the-job or off-the-job methods. Motivation theories from Taylor, Maslow, and Herzberg explain how financial and non-financial factors drive performance. Payment systems include time-rate, piece-rate, salary, commission, and bonuses, supplemented by fringe benefits. Employment contracts specify terms, while termination occurs through dismissal, redundancy, or resignation under legal frameworks protecting both parties.