Edexcel International A Level Business: Managing people and Entrepreneurs and leaders (YBS11) – Revision Notes

These notes are for the final weeks of revision on sections 1.3.4 Managing people and 1.3.5 Entrepreneurs and leaders of Unit 1, Marketing and people, in the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business specification (Issue 1, September 2017). For full explanations, read the study guide. Then test yourself with the practice questions. Broader Unit 1 notes are in Marketing and people revision notes, and the topic overview and practice set cover the whole unit. See also the course hub, the printable checklist and the free 10-minute diagnostics.

1.3.4 Managing people

Approaches to staffing

Term	Meaning	Watch for
Staff as an asset	People are a source of advantage worth investing in	Higher training and pay bills
Staff as a cost	People are an expense to minimise	Low morale, high turnover
Multi-skilling	Staff trained for several jobs	Training time
Part-time and temporary	Fewer hours or fixed period	Less commitment
Zero-hour contract	No guaranteed hours	Insecure income for staff
Flexible hours, home working	Choice over when or where	Harder to supervise
Outsourcing	An outside firm does the task	Less control
Dismissal	Contract ended for a reason about the employee	Fault-based
Redundancy	The job itself no longer exists	Not the worker’s fault
Individual approach	Terms agreed one to one	Slower across many staff
Collective bargaining	Union or group negotiates for many	Stronger employee voice

Must-know distinction: dismissal concerns the individual worker; redundancy concerns the post.

Recruitment, selection and training

• Recruitment attracts applicants; selection picks one.
• Internal: cheaper, faster, known person, but narrow choice and a gap elsewhere.
• External: wider pool and new ideas, but dearer and slower to settle.
• Costs to list: advertising, agency fees, interview time, tests, induction, trainer time, lost output while learning.
• Worked reminder: advert £900, agency fee 10% of a £25,000 salary (£2,500) and two managers interviewing for 3 hours each at £25 an hour (£150) give a hiring cost of £3,550, before any induction or training.
• Induction: introduction to the firm. On-the-job: learning at the workstation. Off-the-job: away from work, such as a course.

Organisational design

Term	One-line definition
Hierarchy	Levels of authority
Chain of command	Route for instructions down and reports up
Span of control	Number of people reporting to one manager
Centralised	Key decisions at the top
Decentralised	Decisions pushed down
Tall	Many levels, narrow spans
Flat	Few levels, wide spans
Matrix	Project teams drawing people from several departments

Quick calculation. Number of managers needed is staff divided by span. For 120 staff: span 8 gives 15 managers; span 15 gives 8. Wider span means fewer managers and lower cost, but each manager watches over more people.

Impact table.

Structure	Efficiency	Motivation
Tall	Close control but slow, costly	Clear promotion steps; may feel restrictive
Flat	Quick, cheaper	More responsibility; fewer promotion steps, risk of overload
Matrix	Shares skills across projects	Variety; two bosses can conflict

Motivation

Why it matters: better output and quality, lower absence and turnover, so lower recruitment cost.

Theorist	Key idea	Practical use
Taylor	Simple tasks, close supervision, pay by output	Piecework
Mayo	Social needs, attention and teamwork	Team working, consultation
Maslow	Hierarchy: physiological, safety, social, esteem, self-actualisation	Meet the lowest unmet need
Herzberg	Hygiene factors prevent dissatisfaction; motivators create satisfaction	Fix pay, then enrich the job

Financial method	Idea
Piecework	Paid per unit
Commission	Percentage of sales
Bonus	Extra for hitting a target
Profit share	Employees share profit
Performance-related pay	Pay linked to assessed performance

Non-financial method	Idea
Delegation	Authority passed down
Consultation	Ask before deciding
Empowerment	Staff decide about their own work
Team working	Shared goals
Flexible working	Choice of hours or place
Job enrichment	More responsibility and challenge
Job rotation	Switching between tasks
Job enlargement	More tasks at the same level

Method in steps for a motivation question.

1. Name the problem in the case (turnover, errors, absence).
2. Pick a theory that explains it.
3. Pick a method that fits that theory and the workforce.
4. Say what it costs and how long it takes to work.
5. Judge it against one alternative.

Quick calculations.

• Commission: 3% of £80,000 sales is £2,400.
• Piecework: 480 units at 75p is £360.
• Profit share: 5% of £260,000 is £13,000; shared among 26 staff, £500 each.

Leadership

• Management: plans, organises, coordinates and controls. Leadership: sets direction and inspires.
• Autocratic: leader decides alone. Paternalistic: leader decides but explains and cares. Democratic: involves staff. Laissez-faire: broad aims, staff decide how.
• Entrepreneur to leader: the founder must delegate, trust managers and put systems in place, which is hard for someone used to controlling everything.

1.3.5 Entrepreneurs and leaders

Role of an entrepreneur

Role	Points
Creating and setting up	Spot an opportunity, plan, raise finance
Running and expanding/developing	Manage cash and people, then grow
Intrapreneurship	Employees innovate inside an existing business
Barriers	Finance, experience, red tape, competition, fear of failure
Risk and uncertainty	Risk can be estimated; uncertainty cannot

Motives and characteristics

• Characteristics and skills: risk-taking, creativity, determination, self-confidence, organisation, communication, opportunity spotting.
• Financial motives: profit maximisation (highest possible) and profit satisficing (enough to be content).
• Non-financial motives: ethical stance, social entrepreneurship, independence, home working.

Business objectives

Objective	Short note
Survival	New or struggling firms; cash flow
Profit maximisation	Highest profit; hard to know
Sales maximisation	Highest sales; margins may fall
Market share	Firm sales divided by market sales, times 100
Cost efficiency	Lower unit cost
Employee welfare	Pay, safety, conditions
Customer satisfaction	Loyalty and repeat sales
Social objectives	Benefit to community or environment

Quick calculation. Market share: £2.4m of a £30m market is 8%.

Business choices

• Opportunity cost: the next best alternative given up. Two uses of £20,000 earn £3,000 and £2,600 a year. Choosing the first gives a net gain of £400 and an opportunity cost of £2,600.
• Trade-off: more of one aim means less of another, for example growth against short-term profit.

Method in steps for a judgement question

1. State your answer in the first sentence.
2. Give one developed reason for it, using case figures.
3. Give one developed reason against it.
4. Say which matters more for this business, and why.
5. Name what the judgement depends on, such as firm size, staff skill, time frame or cash available.

Must-know distinctions

• Asset versus cost view of staff.
• Dismissal versus redundancy.
• Individual approach versus collective bargaining.
• Span of control versus chain of command.
• Job enrichment (depth) versus enlargement (breadth).
• Hygiene factors versus motivators.
• Risk versus uncertainty.
• Profit maximisation versus profit satisficing.
• Management versus leadership.

Quick self-test

1. State two ways a business can create a flexible workforce.
2. Define redundancy.
3. A manager supervises 9 staff. Which term describes the 9?
4. Give one benefit and one cost of internal recruitment.
5. Which motivation theorist favoured pay by output?
6. According to Herzberg, what do hygiene factors do?
7. Name two financial methods of improving performance.
8. What is the difference between job enrichment and job enlargement?
9. Define profit satisficing.
10. A firm chooses project A (net return £7,000) over project B (£5,500). What is the opportunity cost?

Answers

1. Any two from multi-skilling, part-time and temporary staff, zero-hour contracts, flexible hours and home working, outsourcing.
2. The job no longer exists, so the employee is let go through no fault of their own.
3. Span of control.
4. Benefit: cheaper or quicker, and the person knows the firm. Cost: the choice is narrow, and it leaves another vacancy.
5. Taylor.
6. They prevent dissatisfaction but do not by themselves motivate.
7. Any two from piecework, commission, bonus, profit share, performance-related pay.
8. Enrichment adds responsibility and challenge; enlargement adds more tasks at the same level.
9. Aiming for a satisfactory profit rather than the highest possible.
10. £5,500 a year, the value of the next best alternative.

Where marks are usually lost

• Defining a term but never applying it to the case.
• Calling redundancy dismissal, or the reverse.
• Saying a flat structure is always better, with no mention of managers’ workload.
• Writing that pay always motivates, and not using Herzberg.
• Leaving out the cost of a motivation method.
• Treating risk and uncertainty as one idea.
• Quoting a leadership style without saying why it suits the task or the people.
• Giving the whole cost, not the next best option, as an opportunity cost.
• Ending an evaluation with no judgement and no condition on which it depends.

Frequently asked questions

What are the four motivation theorists in Edexcel IAL Business Unit 1? The YBS11 specification names Taylor (scientific management), Mayo (human relations), Maslow (hierarchy of needs) and Herzberg (two-factor theory).

What is the difference between job enrichment and job enlargement? Job enrichment adds more challenging and responsible tasks, while job enlargement adds more tasks at a similar level. Job rotation moves staff between similar tasks to reduce boredom.

What are the four leadership styles? Autocratic leaders decide with little consultation, paternalistic leaders decide but explain and care about welfare, democratic leaders involve others in decisions, and laissez-faire leaders set broad aims and leave staff to get on.

What is the difference between risk and uncertainty for an entrepreneur? Risk can be estimated because outcomes and probabilities are known or can be guessed from past data. Uncertainty cannot be measured because the outcomes are unknown.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business, Specification, Issue 1, September 2017 (Pearson Education Limited); Unit 1: Marketing and people, sections 1.3.4 and 1.3.5.