Business Studies- Employee Performance

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Labour productivity

Labour productivity- the output per worker in a given time period

  • key test of employee performance

  • output per worker ↑ overtime, labour productivity/efficiency is ↑

  • give constant wage rates, labour cost per unit of output will be ↓

  • influences the competitiveness of the business- opportunity to set lower prices

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Labour productivity

  • productivity data- compared/ contrasted with results from businesses- same industry

  • reasons why labour productivity might ↑

    • improved staff motivation + higher levels of effort

    • more efficient/ reliable capital equipment

    • better staff training

    • ↑ worker involvement- involvement in problem solving, speed up method of production (e.g: kaizen/ quality circle groups)

    • improved internal efficiency

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Absenteeism-  measures the rate of workforce absence as a proportion of the employee as a total

  • worked out for the whole year- knowing the total number of working days lost through absenteeism and expressing this as a % of the total no. of days that could have been worked

  • absenteeism= disruptive to any business

    • especially for consumer service- cannot be held in ‘stock’

    • poor service- loss of customer loyalty, may not return

    • $ to employ extra staff or ask employees to work OT

  • absenteeism- used to measure workforce motivation

    • well-focused/motivated workforce- avoid missing work

    • apart from Herzberg’s motivating factors- not being fully present at work, the ‘hygiene’ factors of the job might be making absenteeism worse

    • e.g: poor working conditions- lead to illness/ over-supervision lead to stress (days off work consequence of either problem)

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Labour turnover

Labour turnover- measures the rate at which employees are leaving an organisation


  • labour turnover = high and ↑ OT, good indicator of staff discontent, low morale and possibly, recruitment policy leads to wrong people being employed

  • high labour turnover more likely- in areas of low unemployment

    • better paid + more attractive jobs available in local area

  • labour turnover rates can also depend on the industry

    • e.g: fast food restaurants- usually students/part-time/temporary employment vs. law practices and scientific research firms
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Labour turnover


  • Cost of labour turnover:
  • $ of recruiting, selecting and training new staff

  • poor output levels + customer service due to staff vacancies

  • difficult to establish loyalty + regular, familiar contact- establish good customer relationship

  • difficult to establish team spirit
  • Potential benefits of labour turnover:
  • low skilled + less productive staff might be leaving- replaced with more carefully selected workers

  • new ideas + practices- brought by new workers

  • business plans to reduce staff anyway- rationalisation, high labour turnover will do this- leaving staff not replaced

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Other measures

Other measure of workforce performance- several other measures but not applicable to all types of business activity:


  • wastage levels- the number of wasted or damaged products expressed as the proportion of total output

  • reject rates as proportion of total consumers served

  • consumer complaints as proportion of total consumers served

  • days lost through strikes within a business

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Employee performance

Employee performance-strategy to improve it


  • no one solution to a problem of poor employee performance

  • after calculating the measure- find out why

    • managers need to analyse productivity

  • techniques frequently used:

    • regular appraisal of performance- against agreed preset targets, fail to reach, actions must be taken (disciplinary nature? further training?)

    • training to ↑ efficiency + offering opportunities for general educational qualifications (stretch + challenge)

    • quality circles- small groups of worker- encouraged to take responsibility (identifying + suggesting solutions)

    • cell production and autonomous work groups- team of workers given multi-skilling training + opportunity to take responsibility (making decisions?)

    • financial incentives

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