3.5 Flashcards

1
Q

Benefits of ratio analysis?

A
  • Allows a business to calculate and compare trends over time
  • Shows greater insight than financial accounts
  • Information can be used against benchmark data - such as an industry average
  • Can be used to assess the performance of other functional areas of the business - operations and Human Resources
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2
Q

Drawbacks of ratio analysis?

A
  • Does not take into account qualitative issues such as brand image or customer service performance
  • Does not take into account impact of long-term decisions, such as investments today that may lower profitability in the short term but boost it is the long-term
  • Economic climate - ratios do not take into account economic conditions or the performance of other businesses
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3
Q

Issues with labour productivity calculation/ using labour productivity to analyse performance?

A

:( - Does not take into account wage rates - a key factor in employees’ performance
:( - Does not take into account technology used in the production process
:( - May be affected by other factors - internal disruptions to production, nature of the task or product being produced - which will also influence this calculation

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4
Q

Interpretation of labour turnover/retention?

A
  • Labour turnover means increased costs of recruitment and training
  • Higher turnover or low retention figure could indicate that employees are not happy with their jobs
  • This might be used as a key performance indicator as businesses try to retain the most talented workers within their company (having the best employees can be a competitive advantage)
  • Some industries will expect higher rates of labour turnover e.g. holiday companies as contracts are usually seasonal
  • High rates of labour turnover may be encouraged as a business goes through a period of change
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5
Q

Interpretation of absenteeism?

A
  • A high level of absenteeism increases business costs as productivity falls and costs to cover employees rise
  • High levels of absenteeism may also be an indicator of demotivating or tensions in the workforce
  • A business may also compare it’s health and safety records with absenteeism data
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6
Q

What financial rewards be used in Human Resources?

A

Rewards linked to output - organisations may link remuneration to level of output through performance-related pay, bonuses and commission systems. Increasing these can boost output and labour productivity.

Loyalty bonus - financial rewards linked to length of time employees have been with the company. Other bonuses such as holidays may also tie into this

Attendance bonuses - Employers may link bonuses to attendance, for example a £500 bonus linked to 100% attendance over a 6 month period

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7
Q

What is employee share ownership?

A
  • Way to remunerate employees
  • Employees buy into sharesave scheme that allows them to purchase company shares at a fixed price
  • Can make capital gains on shares as price increases over time
  • However, if share prices fall, employees get their investment back in cash
  • Encourages long-term service and is a low-risk investment opportunity for employees
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8
Q

What do consultation strategies involve?

A

A company may use a range of consultative strategies and working groups to delegate responsibility and ownership to the workforce.
Can resolve negative working practices or issues that could eventually lead to labour turnover/absenteeism

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9
Q

What is involved in empowerment strategies?

A
  • Extra training
  • Feedback - let employees know how they are doing and give them rewards
  • Communication - highlight direction of company and rationale for decisions - more likely to feel secure in their roles
  • Offer flexible working practices; part-time, home-working etc
  • Delegate authority; job enlargement/empowerment
  • Ensure employees are well resourced
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