Using HR Data to assess business success

There are lots of different pieces of HR data that can be used to measure success:

• Wages.
• Recruitment costs.
• Promotion.
• Labour turnover.
• Employee engagement.
• Absenteeism.
• Morale.
• Labour productivity.
• Management (styles).
• Working environment.
• Health and safety.

High labour turnover is bad, although you don't know why they left - it includes retirees.

Assessing Success using Environment Data

The UK government recommends that businesses report on environmental performance in four key areas:

• Emissions to air (e.g. Greenhouse gases, particles, dust).
• Emissions to land (fertiliser, pesticides, waste).
• Emissions to water (metals and organic pollutants).
• Use of scarce and non-renewable resources.

Environmental data is becoming more important:

• The media look at it.
• It can affect the business' reputation.
• Climate change.
• Non renewable materials.
• More stakeholders are now interested.
• Poor planning may impact on the future.

Assessing a business' sucess via its marketing

The following marketing related items can be used to assess a business' success.

• Return on advertising.
• Customer loyalty and retention.
• Brand awareness.
• Where and how they're marketing.
• Analysis of social media.
• Analytics of video and images.
• Web traffic.
• How much is spent on marketing.

It is important to note that marketing data may be misleading  It must be placed in the context of wider business activities and compared to previous years.

Core Competencies

Businesses have things that they are really good at. They are the business' core competencies.
It is something unique that a business can do well, strategically.
Core competencies are based on three different things, and if they can answer the following questions, they are a core competency:

• How do they provide access to a wide range of markets?
• How does it provide consumer benefits?
• Is it difficult to imitate?

Criticisms of Core Competencies 

• Businesses may outsource too many things, resulting in a loss of knowledge and skill.
• Businesses have to trust the outsourcers to produce high-quality products.
• Businesses lose some control over the business.
• Forces the business to avoid taking major risks.
• Outsourcing allows poor working practices.

Triple Bottom Line

The triple bottom line is a way of assessing business performance based on three important areas:

• Finance (Profit)
• People
• Planet

Profit

• Familiar to managers.
• Identified from the income statement.
• Audited, so the information and figures are reliable.

Planet

• How the business activities impact the environment.
• More tangible - such as emissions.

People

• Assesses how the business is socially responsible.
• Hard to calculate and report.

Benefits of the Triple Bottom Line

• It encourages businesses to think beyond narrow measures (like profit).
• Encourages CSR reporting.
• Supports measurement of environmental impact.

Drawbacks and Criticisms

• Not very useful as an overall measure of business performance.
• Difficult to reliably and consistently measure.
• No legal requirement, meaning that take-up is poor.

Kaplan and Norton's Balanced Scorecard

The balanced scorecard provides a relevant range of financial and non-financial information that supports effective business management.

There are four sections/perspectives.

• Financial Performance
• Customers
• Internal Business Processes
• Learning & Growth

Perspective	What?	How?
Financial Performance	Looking at the overall financial performance of a business, such as it’s profit, the income statement and balance sheet.	Comparing the financial data with previous financial data.
Customers	How the customers see the business.	Look at customer satisfaction, reviews, surveys, customer loyalty.
Internal Business Processes	Do we provide what our stakeholders want – customers & employees. What do we do well?	Labour Productivity, Capacity Utilisation, Employee Retention and Quality.
Learning & Growth	How can we improve and learn?	Targets, leadership, kaizen, and R&D.

Positive

The balanced scorecard includes more information than the triple bottom line, such as how the customers see the business and the business’ internal business processes. It also includes information on learning and growth. As a result, the balanced scorecard provides the business with a wide amount of information to be judged on.

Negative

Whilst he balanced scorecard shows a wide range of information, it doesn’t paint the whole picture of the business. Not all financial figures are included, and some parts may be inaccurate as they may be hard to measure or find data for. As a result, for the scorecard to be successful, it should be used as part of the whole business strategy.

Liquidity Ratios - Current Ratio and Acid Test Ratio

The ability of the business to play the amounts that it owes when it's due.
Most of the required information used for these is from the balance sheet.

It requires the current assets and the current liabilities to be considered.

Current Assets - Cash, Stock/Inventories, Amounts that are owed (trade debtors)
These need to be enough to pay for the liabilities.
Current Liabilities - Amounts owed to suppliers, Overdraft.

Add the current assets and current liabilities

Current Ratio
Current assets/current liabilities

Evaluation the current ratio 
1.5-2.5 suggests the business in a decent position.
A current ratio of below 1 is bad and may suggest the business is struggling.

Firms have different requirements.
It should be compared to competitors.
The trend is more important.

Acid Test Ratio
The same with inventories/stock removed.

Evaluating the acid test ratio
Better indicator for business that hold high stocks.
If it's significantly below 1, it's bad news.
Less relevant to supermarkets due to high stock turnover.
Trend - deterioration in the ratio can suggest a problem.

Training

• Process where a person/employee gains skills and knowledge.
• Helps to assist the organisation/business in meeting its objectives.
• HR organises induction (training for new staff) and training.
• HR plan will contain information on retraining and development.
• There are two types of training, off the job and on the job.

On the job

Advantages

Easy to organise.

Specific to the job and the business.

Cheap

Disadvantages

Disrupts normal working of the business.

Depends on the member of staff who is training them having the correct skills.

Off the job

Advantages

Done by specialist trainer.

Intensive and focused.

No workplace distractions.

New ideas can be exchanged.

Disadvantages

Expensive.

Disruptive (worker off site and therefore not being productive).

May be unable to apple training.

Methods of Selection

• Interviews (face to face, over the phone, skype).
• Assessments to test skills.
• Group tasks.
• Psychometric tests.
• References from previous employers.
• Application forms.

Internal vs External Recruitment

Internal Recruitment

Recruiting from within the business.

External Recruitment

Recruiting from outside the business.

HR Planning and Recruitment Process

HR Flow

•       This is the flow of people moving into, out of and within the business.

•       There is Human Inflow, Internal Human Flow and Human Outflow.

HR Plan

•       Assesses current and future capacity of the business.

•       Sets out actions needed to meet the HR needs.

HR Planning

•       Make sure the business has the right number of staff, with the correct skills needed to meet the business’ objectives.

•       HR Planning is done by predicting the supply of staff.

Motivation and Engagement

Employee Engagement

•       When the employee is enthusiastic and enjoys work.

•       The employees take positive actions to meet business’ goals.

Taylor’s Theory

•       Motivated by pay.

•       People don’t want to think at work.

•       People just want to work.

Herzberg’s Theory

•       Hygiene and motivators.

•       Hygiene factors demotivate.

•       Motivators motivate workers to work harder.

McGregor’s Theory

•       Hygiene and motivators.

•       Hygiene factors demotivate.

•       Motivators motivate workers to work harder.

Mayo’s Theory

•       He thought reduced light would reduce productivity… but it actually increased it.

•       Why? It made workers feel that the business was more interested in them.

Maslow’s Theory

•       There are 5 reasons people are motivated.

•       It leads onto the next reason once one reason has been met.

•       He made the hierarchy of needs.

Types of Product and Managing Products

Managing Products

·         The product lifecycle.

·         Analysis of product portfolios.

·         Branding.

·         New product development.

Types of Product

	Convenience	Shopping	Speciality
Example	Chewing Gum	TV	Sports Car
Distribution (Place)	Very Wide	Wide	Limited
Price	The price isn’t really that important as it is normally relatively low	The price is important as customers shop around and compare different products	The price isn’t very significant, as it is a special purchase.
Product	There is some brand loyalty.	There is some brand loyalty, but there is also comparison between brands	There is strong brand awareness
Promotion	They aim the product at large numbers of customers, they aim to draw them into the store and use in store promotions to attract impulse buys	Will raise brand awareness	The products are very targeted (e.g. people of different wealth)
Process	They are often impulse buys	They may have payment and credit terms	May want payment terms
Physical Environment	It is not very significant	It is relatively significant	It is very significant
People	There is limited importance	Important as customers want staff to know about strengths of brands and the particular model product that they are buying	Very important as staff in store reflect on the brand a lot

Analysis of the Marketing Mix

Analysis of new product development decisions

May be required because…

• ·         An existing product is coming to the end of its product lifestyle.
• ·         There are new opportunities opening up due to changes happening in the market.
• ·         The business has a desire to build on the strengths of the brand.
• ·         It is a way of achieving growth.
• ·         To allow them to match what their competitors are doing.

Pricing decisions

• ·         Costs.
• ·         Positioning of the product.
• ·         The stage of the products lifecycle.
• ·         Price elasticity of demand.
• ·         The competitiveness of the market.
• ·         Other elements of the marketing mix.

Promotion decisions

• ·         The target market.
• ·         The message the business is trying to bring across.
• ·         The promotion budget.
• ·         The positioning of the business or the product.
• ·         The competitive environment.

Branding decisions

• ·         The brand represents a promise made by the business.
• ·         As customers, we recogniser brands and associate the brands with particular values.
• ·         The brand’s logo, slogan and anything else that makes it different from competitors recognised.

Distribution decisions

• ·         The degree of coverage (locally, globally and nationally).
• ·         Costs of different distribution strategies.
• ·         The target market.
• ·         Positioning
• ·         Competitors.

Labour Productivity, Calculating Costs and Capacity Utilisation

Green highlighted text is an formula.

Labour Productivity

Measures how many units one employee makes

Labour Productivity = Total Output/Number of Employees

Calculating Unit Cost

Measures the cost per unit.

Unit costs = Total costs/Total output

Calculating Costs

Total fixed costs = Total costs – Total variable costs

Total variable costs = Total costs – Total fixed costs

Total Costs = Total variable costs + Total fixed costs

Total Cost = Unit costs x no of unit costs

Unit cost = Total costs/number of units

No of units = Total costs/unit costs.

Capacity Utilisation

Capacity utilisation shows what percentage of the maximum possible output is being utilised (existing output).

Capacity Utilisation = Existing Output/Maximum Possible Output

The Boston Matrix

The Boston Matrix is used to analyse product portfolios. Each product can be put in an area based on Market Share and Market Growth.

Product Lifecycle

What is the product lifecycle?

•      The different stages of a product’s progress in terms of sales.

•      It is plotted on a lifecycle curve.

•      Just before the product reaches the decline stage, the business can use extension strategies so that they can improve sales and increase the life of the business.

Extension Strategies

•      Extension Strategies are used to improve the sales of a product before it enters into the decline stage.

•      They will extend the life of a product.

•      They include: Finding new uses for the product, promoting the product more effectively, increasing the usage of the product, modifying or changing the product (e.g. creating a new version) and finding a new market segment.

Extension Strategies Examples       

•      Advertising – trying to gain a new audience for the product or reminding the existing audience that the product exists.

•      Reducing the price – This will make the product more attractive to customers.

•      Adding value – Adding new features to the product (this is common in tech products such as mobile phones).

•      Explore new markets –Try and launch the product in a country that doesn’t have they product or a similar product.

•      New packaging – Make the packaging better with subtle changes or brightening it up. This can also include repackaging things in a compilation – particularly music.

The Four V's of Operations Management

Volume Dimension

The intention of this is to have low costs, but have a high volume of output. An example of this is McDonalds. The volume of McDonald's operation is key to their business' organisation. This is due to the staff being able to work systematically and do repeated tasks - meaning the business is well organised. This means there are lower costs but still a high volume of output.

Variety Dimension

The variety offered. Bus vs Taxi is a good example as buses don't give the option to drop off and pick up where you want, but taxis do. This means that taxis have more variety. However, the more variety means there will be higher costs.

Variation Dimension

This is best explained with an example. There are two house building companies, QuickHouse Ltd and CustomBuild Ltd. QuickHouse shows the houses online, you order it, and the house is built using prefab methods. CustomBuild on the other hand, has show homes. You choose the features you want in your house and they build it for you. CustomBuild will have much higher costs as well as a lower volume of output compared to QuickHouse - CustomBuild may be able to build 2 houses in 6 months while QuickHouse could build 200.

Visibility Dimension

This dimension is related to the customers being able to track, see or order through the operations process. An example would be courier companies - who use online parcel tracking. This would be high visibility. While, on the other hand, there is low visibility, which would be something like a web development company - you can't directly see and track what they are doing.

Stages of Production (Business)

Influences on the Marketing Mix

Introduction         

•       The positioning of a product is not always fixed. It can change.

•       It may need to be adapted when internal and external conditions change.

Internal and External Influences

Type of product

•       A large influence is the type of product.

•       There are two types of product, industrial and consumer.

Consumer

•       Bought by households.

•       Differ in the way consumers buy them.

•       Different types of consumer product include:

•       Convenience – bought frequently, little planning required, low customer involvement, price usually low, mass promotion and widespread distribution.

•       Shopping – Bought less frequently, customers are careful about suitability, price, quality and brand, more selective distribution meaning fewer outlets, both the producer and reseller will advertise it.

•       Speciality – Unique characteristics or brand, buyers make a special effort when buying, high price, exclusive distribution or limited outlets and promotion is carefully targeted.

Industrial

•       There are multiple types of products for industrial.

•       Materials and parts – raw materials and components, sold mostly to other businesses and price and service are key issues.

•       Capital items – Products used in production (of another product) or operations. It includes IT systems, buildings and infrastructure.

•       Supplies and services – Operating supplies (just supplies) and business services (such as maintenance and security).

Marketing Mix for Business to Business

•       Specialist buyers and sellers – they know what they are talking about.

•       Dealing with professional buyers.

•       Buyer seller relationship needs to be good. There is an emphasis on repeat business.

•       The value of the purchase tends to be higher (as things are bought in bulk)

•       Quality and price are important as it affects another company. Prices are often negotiated.

•       Support is a greater requirement.