3.5 - Assessing Competitiveness Flashcards
Human resources metrics
Labour productivity
Labour turnover
Labour retention
Absenteeism
Labour productivity
A measure of output per employee
Total output / Average no. of employees.
Labour productivity timeline
Labour turnover
The proportion of employees leaving a business during a specific time period
Labour turnover calculation
(Number of staff leaving)/(Average number of staff) x100
Rise of labour turnover can be due to
Poor management
Poor recruitment and selection
Low wage levels
Better employment elsewhere
Labour retention
The proportion of employees remaining with a business during a specific time period.
A high labour retention means few staff are leaving.
Labour retention calculation
(Number of staff remaining)/(Average number of staff) x100
Absenteeism
A measure of the proportion of staff that were absent from work during a specific period of time.
Absenteeism formula
(Number of staff absent) / (Number of staff employed) x 100
What problems does high levels of absenteeism cause
Sick pay to be paid.
Hiring temporary staff to cover those ill increases costs.
Output is reduced if staff are key in production process.
Other staff may be demotivated if they have to cover for absent workers.
Wider culture of absenteeism may develop.
Strategies to improve employee performance
Offering financial rewards.
Offering employees shares in the company.
Consultation.
Empowerment.
Empowerment
Providing employees the responsibility to make their own decisions and work on their behalf.
Consultation
Involves managers obtaining the views of employees when making decisions.
Employees feel more involved.
Offering employees shares in the company
Increase employee commitment to achieving objectives.
They have a financial stake in the success of the business.
Offering financial rewards
Increase commitment and effort, leading to higher output and productivity.
Statement of comprehensive income
Also known as a profit and loss account.
Shows the income and expenditure of a business over a period of time.
Concludes the liquidity of the business.
Liquidity
The ability of a business to meet its short term commitments with its available assets.
Statement of financial position
Shows financial structure of the business at a specific point, identifying assets and liabilities and capital (money) used to fund the business.
Also known as a balance sheet.
Ratio analysis
Extracting information from financial accounts to assess business performance.
Gearing ratio
Shows the balance of non-current liabilities to shareholder capital used to fund a business, expressed as a %.
gearing ratio formula
(non-current liabilities/capital employed) x 100
return on capital employed (ROCE)
Also known as the primary ratio.
Compares profit to capital invested in the business.
Measures how effectively a business uses capital invested can be used to generate profit.
ROCE calculation
(Operating profit/capital employed) x100
Highly geared business
More than 50% of its capital employed are long-term loans.
Steps to reduce gearing
Issuing more ordinary shares to create further share capital.
Retaining more profits to avoid future borrowing.
Repaying loans to lower interest costs for the business.
Balance sheet limitations
Only a ‘snapshot’ of business assets, liabilities and capital at a specific point.
Ratio limitations
only use numerical data, so key qualitative factors are ignored.
