Kewirausahaan (Pasca-UTS)
[9] Enterpreneurship
Planning a Business
• Good planning
Think before acting, or calculate before
proceeding
Must be written or documented
• Planning concept as a process
Planning Criteria
5W+1H
Why What Who When Where How
What is a Business Plan
• A document with a goal to
systematically describe and summarize
a business plan to be developed
Expected benefits:
• The main guideline which focuses the
expected plans and defines what must
be developed
• Business activities that will be
performed according to the plan
• Tools to seek/gather funds and trusts
from the third party (ex. Investor,
financial institution, etc)
Business Plan Role
• Has important and strategic roles in
business success
• 3 important information in planning:
Where are we going (the goal/objective)
Where are we now
How do we achieve the goal from where
we are now (strategy)
Typical Business Plan Format
• Title page
• Executive Summary
• Introduction
• Products and services
• Marketing plan
• Operational plan
• Management and organization
• Financial plan
• Required analyses
• Appendix: terminology, supporting
data, etc
Title Page
Criteria:
• Representation. Organization and
design must represent the type and
character of the proposed business
• Availability of the business logo/symbol
• Informative, contain the detail
information of the business name,
address, online link, e-mail, contact
number relevant to the potential
investor or consumer
Executive Summary
• The highlight of a business plan, and
written after the business plan is
completed
• Goal: to describe briefly the business
plan proposed to the potential investor
• Must clear, precise and concise yet
short (maximum 2 pages)
• Contain the information:
Why/background of the business itself
Short description and goal of the business
Important strategies
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SWOT Analysis • No commitment from the stakeholder
▪ Organize the factors which may and decision maker (lack of seriousness)
influences the business • Non-standard format/language, even
Internal: strength and weaknesses more typos (misspelling)
External: opportunities and threats Good Guideline
Strength • Geoff Huston ISP’s Business Plan
• capacity and capability identification to Example
achieve the goal which are beneficial to Strong objectives
winning and competing Process and modeling the opportunity,
Weakness costs and requirement
• Deficiencies identification and more Market and cost identification
importantly be aware of the Costs calculation
competitor’s strength. Convincing (realistic) estimations
• Strategy to minimize and strengthen What’s the Business Objective?
deficiencies hence able to compete (at • Long Term ISP business
least to enhance chances of winning) • Growth and Sale
Opportunities • National Agenda
• Business opportunities identification • Leverage from other activities
from the external environment • Risk protection
• The opportunities may be looked at by Business Planning Process
the competitors as well • Identify Market opportunity
Threats • Identify Costs
• External challenges and threats that • Model Tariffs
may have impact on the business • Model Business Requirements
Competition Advantages Analysis Market Identification
The elements: • Define Market segment
▪ Potential: skill set, technology, size
resources, etc uptake
▪ Position: when, where, and how to competitive position
compete market position
▪ Outcome performance: satisfaction, Identifying Costs
loyalty, market share, and profit • capital costs
Supporting Document • recurrent costs
▪ Terminologi • marketing costs
▪ References • staff and administrative costs
▪ Appendix Capital Costs
Things must be avoided • equipment
Business plan must not have core routers
• Unrealistic goal and target ▪ capital cost depreciation at 30%
• Lack of detail, inaccuracy, and p.a.
unconvincing content, or badly access servers
organized ▪ capital cost depreciation at
30%pa
2
 ▪ capital cost per access port • Scaling overheads as a percentage of
charged to customer capacity costs
service platforms • generation of the business model via
▪ ratio of service platforms to marginal cost examination
customer numbers Costs
▪ depreciation at 30% pa Leased Line costs - recurrent expenditure
staff equipment
▪ fixed capital cost per staff
member
▪ can be converted to recurrent via
International Line costs
capital depreciation at a rate of
30% pa
Recurrent Costs
• equipment housing costs
equipment location costs Domestic Line costs
• lease line costs
telco leases
radio equipment costs
can be converted to recurrent cost of
ownership at 20% depreciation of capital Marginal Transmission cost
value
Marketing costs
• advertising
• staff Marginal Cost
• publications, seminars, other marketing Calculate staff and equipment costs as a
activities fixed overhead on the traffic volume - this
• Total can be considered as a connection allows the business to generate working
cost per client capital to expand
Staff and Administrative costs
• technical support staff
usually fixed number
Capital Investment cost
staff churn cost (30%)
The enterprise will require initial capital
• support desk staff
investment which must generate positive
usually incremental off the customer base
earnings, which must be factored into the
• administrative staff
model
usually fixed number
• Other administrative costs
billing costs
debt risk factor Retail Pricing Model
Lets put this together for a medium sized • Use a 64K access line as the basic unit of
national ISP connection
• Cost Totals • Assume an average line loading of
• Cost proportions business usage
3
average line occupancy of 20% Additional Services
• Determine retail pricing from marginal
cost at average line occupancy
• Flat Rate pricing
Retail Pricing Model

Dial Access
• Transmission is a minor cost for dial
access
Risk Reduction • Also must factor in:
Reduce risk of over exposure by using ‘high’ modem capital cost and limited service life
and ‘low’ volume tariff steps phone support with large after hours
component
marketing cost
customer churn rate
target market capture level (competitive
price sensitivity)

Stepped Retail Tariff

The Business Challenge
How to manage exponential GROWTH
The Business Plan
• Establish tariff position
Additional Services • Estimate Market size for the service
• Offer services at a variety of access • Calculate Revenue
speeds • Calculate service provision costs
• Use differential tariffs to encourage • Revenue - costs = bottom line
reselling Estimate Demand
• Use a flatter tariff to strength direct
retail position

4
 competitors to copy or surpass it
Calculate Revenue continuously.
Competitive Advantage, How?
• Develop one or more distinctive
competencies in areas that the
company’s customers perceive is
Scale the Network important.
Estimate communications capacity to • What the customer considers important
service the client base is called value.
Cost benefit analysis
Value is perceived
Estimate Costs
Everything is valuable to somebody
Factor in service provision costs
• Create Market for
Segmentation
Targeting
Positioning
The Bottom Line Types and Strategies
Am I winning or losing at this tariff and
market level?

[10] Enterpreneurship Business

Competition Advantage
What is Competitive Advantage?
“When two or more firms compete within
the same market, one firms possesses a
competitive advantage over its rivals when
it earns a persistently higher rate of profit The Five Generic Strategies
(or has the potential to earn a persistently
higher rate of profit)” R. M. Grant, 2000
▪ a basis for the firm’s long term
success?
▪ a basis for value creation?
• Do we really know where it resides?
• Can it be sustainable?
• In short:
Being able to do something that the
customer wants better than your Low-Cost Leadership
competitors for a long time. Success keys
Or • Make achievement of low-cost
Develop a product or service that the relative to rivals the theme of firm’s
customer wants to buy and then being business strategy
able to defend against attempts by your
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 • Find ways to drive costs out of
business year-after-year
Low-cost leadership means low
OVERALL costs, not just low
manufacturing or production costs!
Achieving a Low-Cost Strategy
• Open up a sustainable cost advantage
over rivals, using lower-cost edge to
either
Under-price rivals and reap market share
gains
Earn higher profit margin selling at going
price
Do a better job of engineering and
managing company’s value chain
Typical Company Value Chain
Approaches to Securing a Cost Advantage
• Do a better job than rivals of performing
value chain activities efficiently and cost
effectively
• Revamp value chain to bypass cost-
producing activities that add little value
from the buyer’s perspective
Revamping the Value Chain
• Abandon traditional business methods
and shift to e-business technologies and
use of Internet
• Use direct-to-end-user sales/marketing
methods
• Simplify product design
• Offer basic, no-frills product/service
• Shift to a simpler, less capital-intensive,
or more flexible technological process
• Find ways to bypass use of high-cost raw
materials
• Relocate facilities closer to suppliers or
customers
• Drop “something for everyone”
approach and focus on a limited
product/service
• Reengineer core business processes
Controlling the Cost Drivers
• Capture scale economies; avoid scale
diseconomies
• Capture learning and experience curve
effects
• Manage costs of key resource inputs
• Consider linkages with other activities in
value chain
• Find sharing opportunities with other
business units
• Compare vertical integration vs.
outsourcing
• Assess first-mover advantages vs.
disadvantages
• Control percentage of capacity
utilization
• Make prudent strategic choices related
to operations
When Does a Low-Cost
Strategy Work Best?
• When the customer perceives the cost
side of the value equation to be more
important than any differentiation that
can be presented.
• Price competition is vigorous
• Product is standardized or readily
available from many suppliers
• There are few ways to achieve
differentiation that have value to
buyers
• Most buyers use product in same ways
• Buyers incur low switching costs
• Buyers are large and have significant
bargaining power
• Industry newcomers use introductory
low prices to attract buyers and build
customer base
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Careful Considerations
• Being overly aggressive in cutting price
• Low cost methods are easily imitated by
rivals
• Becoming too fixated on reducing costs
and ignoring
Buyer interest in additional features
Declining buyer sensitivity to price
Changes in how the product is used
• Technological breakthroughs open up
cost reductions for rivals
Differentiation Strategies
Being able to do something different that
the customer perceives important
Success Keys
• Create value
The benefit side of the value
equation
Buyers perceive as valuable and are
willing to pay for
• Find ways to differentiate that create
value for buyers and that are not easily
matched or cheaply copied by rivals
• Not spending more to achieve
differentiation than the price premium
that can be charged
Can be incorporated at a cost well
below the price premium that
buyers will pay
Advantages Factors
Types of Differentiation Themes
• Unique taste -- Dr. Pepper
• Multiple features -- Microsoft Windows
and Office
• Wide selection and one-stop shopping -
- Home Depot and Amazon.com
• Superior service -- FedEx, Ritz-Carlton
• Spare parts availability -- Caterpillar
• More for your money -- McDonald’s,
Wal-Mart
• Prestige -- Rolex
• Quality manufacture -- Honda, Toyota
• Technological leadership -- 3M
Corporation, Intel
• Top-of-the-line image -- Ralph Lauren,
Chanel
Sustaining Differentiation
• Most appealing approaches to
differentiation
Those hardest for rivals to match or imitate
Those buyers will find most appealing
• Best choices for gaining a longer-lasting,
more profitable competitive edge
New product innovation
Technical superiority
Product quality and reliability
Comprehensive customer service
Unique competitive capabilities
Where to Find Differentiation
Opportunities in the Value Chain
• Purchasing and procurement activities
• Product R&D and product design
activities
• Production process / technology-
related activities
• Manufacturing / production activities
• Distribution-related activities
• Marketing, sales, and customer service
activities
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How to Achieve a
Differentiation-Based Advantage
Signaling Value as Well as
Delivering Value
• Buyers seldom pay for value that is not
perceived
• Signals of value may be as important as
actual value when
Nature of differentiation is hard to quantify
Buyers are making first-time purchases
Repurchase is infrequent
Buyers are unsophisticated
When Does a Differentiation
Strategy Work Best?
• There are many ways to differentiate a
product that have value and please
customers
• Buyer needs and uses are diverse
• Few rivals are following a similar
differentiation approach
• Technological change and product
innovation are fast-paced
Pitfalls of Differentiation Strategies
• Trying to differentiate on a feature
buyer do not perceive as lowering their
cost or enhancing their well-being
• Over-differentiating such that product
features exceed buyers’ needs
• Charging a price premium that buyers
perceive is too high
• Failing to signal value
• Not understanding what buyers want or
prefer and differentiating on the
“wrong” things
Competitive Strategy Principle
A low-cost producer strategy can defeat a
differentiation strategy when buyers are
satisfied with a standard product and do
not see extra attributes as worth paying
additional money to obtain!
To produce quality products and services
through effective leadership of skilled
employees using advanced methods
through the innovative use of technology.
Best Cost Provider Strategies
• Combine a strategic emphasis on low-
cost with a strategic emphasis on
differentiation
Make an upscale product at a lower cost
Give customers more value for the money
Objectives
• Deliver superior value by meeting or
exceeding buyer expectations on
product attributes and beating their
price expectations
• Be the low-cost provider of a product
with good-to-excellent product
attributes, then use cost advantage to
underprice comparable brands
Risk of a Best-Cost Provider Strategy
• Risk – A best-cost provider may get
squeezed between strategies of firms
8
 using low-cost and differentiation • Human resource
strategies • Environmental safety
Low-cost leaders may be able to attract Strategic Issues
customers away with a lower price • Global competition challenges
High-end differentiators may be able to • Competitor’s innovative product
steal customers away with better product • Maintain business growth
attributes • The question
CA Mapping Is the current strategy sufficient to
maintain and protect the market
position?
Can the strategy generate market
growth?
Performance Review
• The main aims of a business
performance review are to provide an
understanding of the business and
How Does a Company Compete? provide an interpretation of results
If the bottom line to a business is profit, • Care must be taken in reviewing
then the top line is value to customer. business performance, primarily
Good Competitor because of lack of consistency in
• Knows its products and services. definitions, and changes in economic
• Knows its customers. conditions
• Knows its competitors. • An important area of business
[11] Business Performance performance review is the use of ratio
• Market growth analysis looking at
• Increasing profit margin and decreasing Profitability
production cost Efficiency
• Net profit, ROI, EVA (economic value Liquidity
added) Investment
• Leader in technology, product Growth
innovation, product quality Financial structure
The Stages of Performance Review

9
Profitability Ratios
Competitive Advantage
• The collection of factors that sets a
company apart from its competitors
and gives it a unique position in the
market
• Means to add value for stakeholders
• Focus especially on adding value for
customer
Value Chain
Value Chain Interpretation
• Represents a company or any
organization
Core Competence
A unique set of lasting capabilities that a
company relies on to achieve competitive
advantage and add value
• Innovation
• Efficiency
• Customer Responsiveness
• Quality
• Special Expertise
• Simplified illustration of all activities
that an organization must perform
• Framework for analyzing a company’s
strengths and weaknesses
10
• Margin represents profit- expand Activities that enable the performance of
margin by primary activities
Being able to charge a higher price • Firm infrastructure: companywide
Operating at a lower cost within the Value support of entire value chain; includes
Chain quality of management, financial
Primary Activities in the Value Chain performance, strategy, organizational
Activities directly involved in producing, culture
selling, distributing, and servicing product • Human resource management:
for buyer. recruiting, hiring, training, reward
• Inbound logistics: receiving, storing, systems for employees
and distributing inputs for production • Research and development: design of
• Operations: all activities involved in products and processes that enhance
transforming inputs into final products company performance; not limited to
• Outbound logistics: collecting, storing, equipment
distributing product to final buyer • Procurement: purchasing and
• Marketing and Sales: activities used to managing inputs used in operations;
get customers to buy company products developing and managing supplier
• Service: installation, repair, support, relations
training for using a product Financial Analysis
Support Activities in the Value Chain
• Uses company’s financial results to • Income Before Taxes
assess company’s performance • Taxes
• Requires comparisons of results over • Net Income
multiple years and against industry Types of Ratios
standards • Profitability
• Important tool to identify company’s • Activity – Efficiency
strengths and weaknesses and potential • Liquidity
problem areas. • Debt - Leverage
Income Statement • Growth
• Sales Profitability Ratios
• Cost of Goods Sold • Gross Profit Margin = Gross Profit
• Gross Profit Sales
• Operating Expenses • Net Profit Margin = Net Income
o Wages and Salaries Sales
o Rent • Operating Profit = Operating Income
o Advertising Margin Sales
o Insurance • Return on Equity = Net Income___
o Research and Development Owner’s Equity
o Depreciation Profitability Ratios
• Total Operating Expenses Du Pont Formula
• Operating Income (Earnings Before • Return on = Net Income__
Interest and Taxes – EBIT) Assets Total Assets
• Interest
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 = Net Income X __Sales___ • Quick = Current Assets – Inventories
Sales Total Assets Current Liabilities
= Net Profit Margin X Total Debt –Leverage Ratios
Asset Turnover • Debt = Current + Long Term Liabilities
= Profitability X Efficiency Total Assets
Activity – Efficiency Ratios • Debt = Current + Long Term Liabilities
• Inventory = Cost of Goods Sold Total Owners’ Equity
Turnover Inventory • Times = Operating Income (EBIT)
• Average = ______365 days____ Interest Interest Earned
Collection (Sales/Accounts Growth
Period Receivable) • Sales = SalesYear 2 - SalesYear 1
• Fixed Asset = _______Sales________ Growth ___________________ X 100
Turnover Net Fixed Assets SalesYear 1
• Total Asset = _______Sales________ • Profit = Profit Year 2 - Profit Year 1
Turnover Total Assets Growth ___________________ X 100
Liquidity Ratios Profit Year 1
• Current = __ Current Assets___
Current Liabilities
Goodyear Tire & Rubber Company

12
Trend Analysis
Graph of Trend Analysis
Comprehensive Illustration of Ratio
Analysis
• Ratio analysis provides information
about a company’s liquidity,
profitability, long-term solvency, cash
flow adequacy, and market strength.
GM Present Strategy & Current
Performance
Timeline & Headlines
• 2005 - Plummeting Auto Sales began in
2005
• 2006 - Fortune Magazine 1st to
Mention GM was headed for
bankruptcy
• Nov 08 – CEO Rick Wagoner flew a
private jet to Washington to ask to
bailout (lots of criticism)
• Dec 08 – Bush Admin gave GM $17.9
Billion in government loans
• Feb 09 – GM asked for an additional
$16.6 Billion (or run out of Money)
• March 16, 2009 – GM stated they had a
plan for out of court reconstruction
13
• March 29, 2009 – CEO Rick Wagoner
resigned because of pressure from
Obama’s Administration (trying to
make a clear signal that GM was
making a big change)
• March 29, 2009 – Wagoner was
replaced by Vice Chairman COO Fritz
Henderson
(Note: Henderson will get $1.3 Million
unlike Wagoner’s $1)
GM Present Strategy & Current
• March 30, 2009 – Government
Performance
Released plans to provide working
Current Performance : Human Resources
capital over the next 60 days so GM
• 2008 - Cut 15,000 Jobs
can restructure (If not successful, they
• 2009 – Will cut 5,000 White Collar
will file Chapter 11-bankruptcy)
Employees in the 1st round of layoffs to
GM Present Strategy & Current
reconstruct
Performance
They hope they will be more profitable @
Current Strategy
lower sales levels with less employees!
 GM will restructure during the 60 days
GM Present Strategy & Current
allowed by the government:
Performance
1. Profitability Sustainability
Current Performance: Accounting
2. a Healthy Balance Sheet
• Current Ratio on April 11, 2009: 0.55
3. a More Aggressive Operating Structure
Can only pay $0.55 on every $1 of debt
4. Technology Leadership
owed
5. This will make GM Stable &
Auditors (Deloitte) issued a “going-
Competitive in Mkt
concern warning”
GM Present Strategy & Current
Not sure there is enough $ or resources to
Performance
stay afloat
Current Performance
• Current Performance is the weakest in
27 years
• Under a New CEO who gets paid larger
salary
• Only a SHORT 60 days to restructure!
GM Present Strategy & Current
Performance
Current Performance: Financial
• GM shares @ $2.70
• Down 89% from 52 wk high of $24.24
(April 30, 2008)
GM Present Strategy & Current
Performance
Current Performance: Marketing
14
• Shrinking Market Share of 23.4%
• Increasing Market Share = Increasing
Financial Performance
• Bankruptcy:
allows for a new product lineup without
debt issues
Market share would increase
Financial Performance would increase!
GM Present Strategy & Current
Performance
Conclusion
 The fate of the company relies on how
well they restructure over the next 60
days!
 GM’s Current State:
Huge Operating Losses
Shrinking Market Share
Small Current Ratio
Huge Layoff Rates
Falling Stock Prices
Not only will the accountants be issuing a
“going-concern” for GM but they will be
faced with bankruptcy and possible closing
down all together.
 Their current performance is very poor
and is in dire need of reconstruction
which is exactly the stage they are at
currently.
[12] Business Failure Signs
• Management declining ownership or
commitment
• Decreasing sales
• Decreasing profit (increasing loss)
• Increasing debt ratio
• Increasing operational costs
• Investment capital reduction
• Lower stock price (public company)
• Harder to acquire credit
• High rate of employee turnover
• New regulation impact
• Fraud and corruption
Avoiding Failures
• Operational cost reduction
Efficiency
Streamlining
Slash and burn
• Increase sales
Improve product quality and quantity
• Review credit losses
• Risks avoidance
Partnership collaboration
Product diversification
Strengthening assets (and resources)
• Re-examine stock and resources
(reorganization/restructurization)
Improve the business model
Intellectual
Material
etc
Major Causes of Business Failures
• Economic factors
industry weakness
poor location/product
• Financial factors
too much debt
insufficient capital
• Most failures occur because a number
of factors combine to make the
business unsustainable.
Instincts Become Flaws
15
• Lack ability to turn vision into strategy
and strategy into execution
• Lack details behind policies and
procedural steps
• Not enough focus on all the players,
their responsibilities, customer
interactions and expected results
• Lack use of readily available technology
or governance frameworks
Failure Process
• Bankruptcy
• Liquidation
• Taken over (bought at much lower
price)
Top 10 Reasons to Fail
1. Failing to understand and deliver
accurately and timely on customer
requirements and commitments
2. Delivering poor customer service
throughout the purchasing lifecycle
3. Hiring and keeping the wrong people in
business-critical positions
4. Failing to manage contract terms and
strategic vendor relationships
5. Inability to diversify the workforce
through cross-training and strategic
outsourcing
6. Failing to hold management and staff
accountable for results and
performance
7. Failing to develop and adhere to
business plans and budgets
8. Providing a poor customer or employee
experience
9. Inability to harness innovation and
manage change
10.Lack of corporate documentation to
train staff, rebuild after disaster,
complete an audit or succeed in the
courtroom
The Causes of Business Failures Are Many
and Complex

Failure Occurrences
• A large number of businesses fail each year, but the number in any one year has never
been a large percentage of the total business population
• The failure rate of businesses has tended to fluctuate with the state of the economy
• Bankruptcy is more frequent among smaller firms.
• Large firms tend to get more help from external sources to avoid bankruptcy, given their
greater impact on the economy.
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Business Failure Rate per 10,000 Firms

The Myth Financial Crisis

• Myth: 90% of all new businesses fail Financial Crisis in US
within one year Debt Crisis
• Truth: Only about 18% of all businesses
are forced to close their doors with a
loss to creditors.
The rest either close voluntarily or are still
in business
Bond Ratings

Questions? Summary
• Low tax impact • Are business results by accident or by
To big banks? design?
To consumers? • Are systems and processes efficient
To pensioners? and producing accurate results?
• Bonds related impacts • Are industry IT or Governance
To the countries? frameworks in use?
To the people?
• What if money is no longer good?
17
• Is there enough documentation to
generate an in-depth knowledge about
each process?
[13] HR Department Organizational Chart (Large Company)
Human Resource
Critical Performance
• Service is delivered by people.
• Low quality HR leads to low quality
customer service.
• In the 21st century effective
knowledge management translates
into competitive advantage and
profits.
• Knowledge comes from employees.
HR Management
• HR is multidisciplinary:
Economics (wages, markets, resources)
Psychology (motivation, satisfaction)
Sociology (organization structure, culture)
Law (min. wage, labor contracts, EEOC)
• HR is embedded within the work of all
managers, and most individual
• Are you operating in a state of chaos or
control?
contributors due to the need of
managing people (subordinates, peers
and superiors) as well as teams to get
things done.
Employment Relationship
• Economic – exchange of pay for work.
• Legal – network of common law and
statutory rights and obligations
affecting both parties.
• Social – ‘social norms’ influence
employees’ actions in the workplace.
• Psychological – dynamic, two-way
exchange of perceived promises and
obligations.
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HR System Context What are business core/distinctive
1. The “Five Factors” Influencing the HR System competencies?
External Environment What is the basis that competitive
Social: social values, roles, trends, etc. strategy be sustained?
Political: political forces, changes. Ex. agenda for What are the strategic objectives?
Social Security. Compare corporate and Business
Legal: laws, court decisions, regulatory rules. strategies.
Economic: product, labor, capital, factor markets. 5. Technology of Production & Organization of
2. The Workforce Work
Demographics Physical layout/employee proximity
3. Organization Culture Required employee skills
Weak vs. Strong culture Ease of monitoring employees’ input
“Type” of culture
4. Organization Strategy
Common Structure

19
Recruitment chemicals used in a hairdressing salon for
• The process by which a job vacancy is example have to be carefully stored and
identified and potential employees are handled to protect employees.
notified. Discrimination
• The nature of the recruitment process • Crucial aspects of employment
is regulated and subject to legislation:
employment law. Race
• Main forms of recruitment through Gender
advertising in newspapers, magazines, Disability
trade papers and internal vacancy lists.
Job description – outline of the role of the
job holder
Person specification – outline of the skills
and qualities required
of the post holder
Applicants may demonstrate their
suitability through application form, letter
or curriculum vitae (CV)
Selection
• The process of assessing candidates
and appointing a post holder
• Applicants short listed – most suitable Discipline
candidates selected • Firms cannot just ‘sack’ workers
• Selection process – varies according to • Wide range of procedures and steps in
organisation: dealing with workplace conflict
Interview – most common method Informal meetings
Psychometric testing – assessing the Formal meetings
personality of the applicants, will they fit Verbal warnings
in? Written warnings
Aptitude testing – assessing the skills of Grievance procedures
applicants Working with external agencies
In-tray exercise – activity based around Development
what the applicant will be doing, e.g. • Developing the employee can be
writing a letter to a disgruntled customer regarded as investing
Presentation – looking for different skills in a valuable asset
as well as the ideas of the candidate A source of motivation
Employment Legislation A source of helping the employee fulfil
• Increasingly important aspect of the potential
HRM role
• Wide range of areas for attention Training
• Adds to the cost of the business • Similar to development:
Even in a small business, the legislation Provides new skills for the employee
relating to employees is important –
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Keeps the employee up to date with
changes in the field
Aims to improve efficiency
Can be external or ‘in-house’
Rewards Systems
• The system of pay and benefits used by
the firm to reward workers
• Money not the only method
• Fringe benefits
• Flexibility at work
• Holidays, etc.
Trade Unions
• Importance of building relationships
with employee representatives
• Role of Trade Unions has changed
• Importance of consultation and
negotiation and working with trade
unions
HR Planning Purpose
HR System Internal Fit (Performance Management System)
HR Metrics
• Absence Rate
• Contributes to smooth change
management and leadership
Productivity
Measuring performance
• How to value the workers
contribution
• Difficulty in measuring some types
of output – especially in the service
industry
• Appraisal
Meant to be non-judgmental
Involves the worker and a nominated
appraiser
Agreeing strengths, weaknesses and ways
forward
to help both employee and organisation
21
[(Number of days absent in month) ÷ (Average number of employees during mo.) ×
(number of workdays)] × 100
• Cost per Hire
(Advertising + Agency Fees + Employee Referrals + Travel cost of applicants and staff +
Relocation costs + Recruiter pay and benefits) ÷ Number of Hires
• Health Care Costs per Employee
Total cost of health care ÷ Total Employees
• HR Expense Factor
HR expense ÷ Total operating expense
• Human Capital ROI
Revenue − (Operating Expense − [Compensation cost + Benefit cost]) ÷ (Compensation cost
+ Benefit cost)
• Human Capital Value Added
Revenue − (Operating Expense − ([Compensation cost + Benefit Cost]) ÷ Total Number of
FTE
• Revenue Factor
Revenue ÷ Total Number of FTE
• Time to fill
Total days elapsed to fill requisitions ÷ Number hired
• Training Investment Factor
Total training cost ÷ Headcount
• Turnover Costs
Cost to terminate + Cost per hire + Vacancy Cost + Learning curve loss
• Turnover Rate
[Number of separations during month ÷ Average number of employees during month] ×
100
• Workers’ Compensation Cost per Employee
Total WC cost for Year ÷ Average number of employees
If Performance Falls Short
• Train
• Discipline
• Coach
• Out the Door

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