Topic 2.5 Making human resource decisions
Topic 1.5 focuses on the external factors that impact business activity, which are often outside the direct control of the business. It covers stakeholders, technology, legislation, and the economic environment, and how businesses must respond to these influences.
Topic Overview
Topic 2.5 Making human resource decisions focuses on how businesses manage their workforce to achieve objectives. This includes deciding on the number and type of employees needed (workforce planning), how to recruit and select them, and how to motivate and retain staff. Effective HR decisions can improve productivity, reduce costs, and enhance competitiveness, while poor decisions can lead to high turnover, low morale, and legal issues. Understanding this topic helps you see how people are a key resource that must be managed strategically.
This topic builds on earlier content about business operations and finance, as HR decisions directly impact costs (e.g., wages, training) and revenue (e.g., through motivated staff). It also links to external factors like legislation (e.g., equality laws) and economic conditions (e.g., unemployment rates affecting recruitment). You'll learn about different organisational structures, communication methods, and motivation theories (e.g., Taylor, Maslow, Herzberg) that influence how businesses manage people. Mastering this topic is essential for analysing case studies and evaluating HR strategies in exams.
In the wider subject, HR decisions are one of the four functional areas (alongside marketing, operations, and finance). They are crucial because employees are often a business's biggest cost and most valuable asset. By the end of this topic, you should be able to recommend appropriate HR strategies for different business contexts, justify your choices using theory, and assess the impact of decisions on stakeholders like employees, managers, and shareholders.
Key Concepts
Core ideas you must understand for this topic
- →Workforce planning: Analysing current staff, forecasting future needs, and planning recruitment, training, and redundancy to ensure the right number and type of employees.
- →Recruitment and selection: The process of attracting and choosing suitable candidates, including internal vs external recruitment, job descriptions, person specifications, and selection methods like interviews and tests.
- →Motivation theories: Taylor's scientific management (financial rewards), Maslow's hierarchy of needs (psychological, safety, social, esteem, self-actualisation), and Herzberg's two-factor theory (hygiene factors and motivators).
- →Organisational structures: Hierarchical vs flat structures, span of control, chain of command, delegation, and centralisation vs decentralisation.
- →Employment law: Key legislation like the Equality Act 2010 (discrimination), National Minimum Wage Act, and Health and Safety at Work Act, and how they affect HR decisions.
What You Need to Demonstrate
Key skills and knowledge for this topic
- Identification of stakeholders and their conflicting objectives
- Impact of technology on sales, costs, and the marketing mix
- Purpose and impact of consumer and employment legislation
- Impact of economic factors such as unemployment, inflation, interest rates, taxation, and exchange rates on business
- Business responses to external changes
Marking Points
Key points examiners look for in your answers
- Identification of stakeholders and their conflicting objectives
- Impact of technology on sales, costs, and the marketing mix
- Purpose and impact of consumer and employment legislation
- Impact of economic factors such as unemployment, inflation, interest rates, taxation, and exchange rates on business
- Business responses to external changes
Examiner Tips
Expert advice for maximising your marks
- 💡Use the provided source booklet to contextualize your answers
- 💡Ensure you can explain the difference between internal and external influences
- 💡When discussing legislation, always consider both the cost of compliance and the consequences of non-compliance
- 💡Practice applying economic concepts like inflation or interest rates to a small business scenario
- 💡When evaluating HR decisions, always consider both financial and non-financial impacts. For example, if a business uses piece-rate pay, discuss how it may increase output but could reduce quality or cause stress.
- 💡Use real-world examples to support your answers. For instance, mention how John Lewis uses partnership and profit-sharing to motivate staff, linking to Herzberg's motivators.
- 💡In case study questions, always refer to the specific context given. Don't just list theory—apply it to the business's size, industry, and objectives. For example, a small start-up might prefer a flat structure, while a large manufacturer may need a taller hierarchy.
Common Mistakes
Pitfalls to avoid in your exam answers
- Failing to link external factors to specific business decisions
- Confusing the objectives of different stakeholder groups
- Generalizing the impact of economic factors without considering the specific business context
- Ignoring the costs and consequences of complying with legislation
- Misconception: Motivation is only about pay. Correction: While pay is important (Taylor), theories like Maslow and Herzberg show that non-financial factors like recognition, responsibility, and job satisfaction also motivate employees.
- Misconception: A tall organisational structure is always better because it has clear lines of authority. Correction: Tall structures can lead to slow communication and low employee morale due to limited delegation; flat structures can be more flexible and motivating.
- Misconception: External recruitment is always better than internal recruitment. Correction: External brings new ideas but is more expensive and time-consuming; internal is cheaper, faster, and boosts morale but may limit fresh perspectives.
Frequently Asked Questions
Common questions students ask about this topic
Before You Start
Prior knowledge that will help with this topic
- •Topic 1.3 Putting a business idea into practice (understanding business aims and objectives, which influence HR decisions).
- •Topic 2.1 Growing the business (understanding how business size and growth affect HR needs).
- •Basic knowledge of business functions and stakeholders from earlier topics.
Study Guide Available
Comprehensive revision notes & examples
Key Terminology
Essential terms to know
Likely Command Words
How questions on this topic are typically asked
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