(3.5) Assessing Competitiveness Flashcards
What are the 4 human resources strategies to increase productivity, retention, reduce turnover and absenteeism?
Financial rewards - increased pay
Employee Share Ownership - Gives employees a share of the company (allows them to feel apart of the company)
Consultation strategies - involve employees in the decision making, involves listening to employees
Empowerment strategies - allowing staff to set their own objectives (need to have a strong culture)
What is the equation for labour productivity?
Output per period / Number of employers per period
What is the best type strategy for increasing labour productivity and why?
Empowerment Strategies - allows experienced staff to set their own objectives, requires a strong culture,
However staff needs to be confident
What are the advantages and disadvantages of having a good labour productivity?
+Drives down costs
+increases competitiveness - business can charge lower prices
+Makes better use of capital resource -
+Makes optimum use of Human Resources -
-May Compromise on quality
What is the formula for labour turn over?
( Staff leaving per year / Average number of staff ) * 100
What is the best strategy for improving labour turnover?
Employee Share Ownership - makes staff feel part of the organisation and want the organisation to grow. Only managers (higher ups) usually get shares
What might cause labour turnover?
Low pay
Lack of training and development opportunities
Poor working conditions
Poor recruitment and selection processes
Economic boom
What is the formula for labour retention?
( Staff not leaving per year / Average no of staff ) * 100
What is the best strategy for labour retention?
Financial Rewards - more money can lead to employees working harder
What is the benefits of a high retention rate?
Lower requirement and selection cost
Better continuity
Stable workforce
Better experience and skill sets of workers
What is the formula for absenteeism?
( Days absent per year / Total number of working days ) * 100
What is the best strategy for absenteeism?
Consultation strategies - employees are more likely to motivated if they are involved in the decision making process
Why is absenteeism bad?
Business has to pay sick pay
Temporary staff have to be paid for
Existing staff have to be paid overtime
Output suffers - temp staff are less productive
Absence can delay / prevent big projects
Production delays / quality decrease could prevent customers
Demotivating for remaining staff
Cultural shift - is it ok to call in sick
What is the gearing ratio?
It tell you what proportion the business value is financed by long term debt
What is the gearing ratio formula and what does the output tell us?
(non-current liabilities/ Capital Employed) x 100
Gearing > 50%
-vulnerable to increases to interest rates
Gearing < 50%
- May be able to borrow more
- Business isn’t taking enough risk
What is the Return on Capital Employed (ROCE)?
It tells us the Return on capital employed. Relates profit to the size of the business
What is the Return on Capital Employed (ROCE) formula and what does the result mean?
(Operating Profit/ Capital employed) x 100
- The higher the percentage the better
- Identify trends
- Low quality profit (eg selling random assets or benefiting from a trend) might boost ROCE and be miss leading
- Needs to compared to interest rates (would saving in the back be more profitable than investing in a business)
What are the limitations of ratio analysis?
The basis for comparison - less reliable over times when comparing
The quality of financial accounts - eg when inflation is high are asset values inflated accordingly
Limitations of the balance sheet
Qualitative information is ignored - eg change in leader ship
Other differences - eg different accounting methods or accounting methods can be misleading for investors
Window dressing - Making the ratio analysis look better than it is
What is the formula for capital employed?
TA - TL
Net Assets
Why are shareholders interested in the statement of financial position?
- Shareholders may see how their investment has been spent
- Suppliers and creditors will be interested to see whether the business will be able to pay its debts
- Managers may use it to analyse liquidity and asses the level of risk associated with debt
