unit 2 Flashcards
human resource management definition
Strategic approach to the management of people within a business to meet its objectives
what does HR do and why is it Important?
- HR planning
- recruitment
- training
- appraisal (judging how good they are)
- remuneration (paying people)
- dismissal
- motivation
Its important because: People are a business’ most important resource.
HR tries to get the best employees and getting them to work productively.
HR planning definition
predicting how many employees are needed and what skills they need
HR planning internal factors
- labour turnover (% of workers leaving)
- change in company objectives (E.g. expansion, new product)
- productivity of employees (Increased productivity may mean less need to hire more workers)
- automation (Possibly fewer workers needed, but need to hire a machine specialist)
- flexitime (Homeworking, teleworking. This can lead to job sharing, access to a larger pool of talent, more equitable)
HR planning external factors
- demographic change (Increase in retirement age, more woman entering the workforce)
- changes in labour mobility (Willingness to move location for a job. Willingness to take jobs with a different skill set)
- immigration (People moving from one country to another. Immigration increases the pool of labour)
- economy (E.g. a recession might decrease demand for the product reducing the new for so many employees)
- change in laws (E.g. maximum 40-hour week. Increase in Retirement age)
- gig economy (temporary workers)
Why do people resist change?
- fear of change
- self-interest
- poor communication by business
- lack of trust in management
what is capital Expenditure
The purchase of fixed assets that usually will last more than one year and the main purpose is to drive growth in the business.
including:
- factories
- machinery
- vehicles
- furniture
what is revenue expenditure
The day to day spending of a business to keep it running; paid weekly/monthly.
not being able to pay could lead to bankruptcy.
- utility bills
- employee salaries
- office supplies
- rent
-insurance
external sources of finance (8)
- share capital
- loan capital
- over drafts
- trade credit
- crowdfunding
- leasing
- microfinance providers
- business angels
internal sources of finance
- personal funds
- retained profit
- sale of assets
personal funds
- definition
- pros
- cons
owner(s) put their own savings into the company, usually startups or sole traders
PRO
no interest payments or loss of control
CON
may not have personal funds
sale of assets
- definition
- pros
- cons
selling items that belong to the business (eg. factory, land, machines etc.)
PRO
gain a one off payment
CON
might be future costs involved (rent)
retained profit
- definition
- pros
- cons
a company may make profit - this is put back into the business, or paid to shareholders
PRO
using money the business has earned
CON
shareholders may sell shares if you don’t pay large enough dividends
equity finance - external source of finance
- definition
- examples (2)
giving up a percentage of company in return for investment
- share capital
- business angels
share capital
- definition
- pro
- con
selling part of the business to an investor in return for finance (limited liability companies - because must have shares)
PRO
- doesn’t need to be repaid
CON
- give up some ownership and control
business angels
- definition
- pro
- con
wealthy individuals who invest in small business
PRO
- gain knowledge, experience and connections
CON
- give up some ownership and control
- may have short to medium term profit expectations
debt financing - external source of finance
- definition
- examples (4)
borrowing money
- loan capital
- overdraft
- trade credit
- microfinance provider
loan capital
- definition
- pros
- cons
borrowing money (usually from a bank)
PRO
- do not give up control of the business
CON
- have to pay back with interest
overdraft
- definition
- pro
- con
bank allowed the business’s account to go negative
PRO
- very flexible and short term
CON
- can be high rates of interest
trade credit
- definition
- pro
- con
when businesses buy inputs from another business - buy now pay later
PRO
- good for cash-flow
CON
- businesses may give a discount for paying early so you can lose money
microfinance provider
- definition
- pro
- con
providing small loans to business/entrepreneurs who might not be able to borrow elsewhere (often in LDC)
PRO
- can get access to finance
CON
- small amounts
- some see that this is unethical
leasing
- definition
- pro
- con
paying for the use of an asset for a period of time (machinery/car etc)
PRO
- no upfront payment
CON
- likely to be more expensive in the long run
crowdfunding
- definition
- pro
- con
when many people invest small amounts of money into a business (donations, equity, peer-to-peer lending)
PRO
- use of large numbers
CON
- investors will also expect some sort of reward
factors to consider when choosing a source of finance (6)
- time period
short: overdraft, trade credit
long: loan, shares - amount needed
a lot: share capital - cost involved
- legal structure
- size of existing borrowing
- attitude to ownership and control
