Unit 2: People in Business (Cambridge IGCSE Business Studies 0450)
2.1 Motivation
What is Motivation? (2.1.1)
Motivation is the internal or external drive that influences the direction, intensity and persistence of an employee’s effort at work.
Key Theories (required by the syllabus)
- Maslow’s Hierarchy of Needs – physiological, safety, social, esteem, self‑actualisation.
- Herzberg’s Two‑Factor Theory – hygiene factors (salary, conditions, policies) prevent dissatisfaction; motivators (achievement, recognition, responsibility, advancement) create satisfaction.
- Frederick Taylor’s Scientific Management (Piece‑Rate Theory) – financial incentives linked to output increase effort.
Enrichment (optional): McGregor’s Theory X & Theory Y and Alderfer’s ERG Theory can be mentioned for extra credit but are not required for the exam.
Financial Motivation (2.1.2)
- Basic wage/salary
- Piece‑rate or commission
- Performance‑related bonuses (individual, team, profit‑sharing)
- Allowances (travel, housing, overtime)
- Share options / employee stock ownership schemes
Non‑Financial Motivation (2.1.3)
- Recognition and praise (awards, employee of the month)
- Career development and training
- Job enrichment, job rotation and enlargement
- Good working conditions (flexible hours, comfortable environment)
- Employee involvement in decision‑making
Advantages & Disadvantages (2.1.4)
| Aspect | Advantage | Disadvantage |
|---|
| Financial rewards | Clear, measurable, easy to administer | May encourage short‑term focus, can create rivalry |
| Non‑financial rewards | Boosts morale, encourages loyalty and creativity | Harder to quantify; may not suit all employees |
| Motivation programmes | Improves productivity and staff retention | Costly to design, implement and monitor |
Sample Exam Questions
- Explain how a piece‑rate system can motivate employees.
- Discuss two non‑financial methods a business could use to increase staff motivation.
- Analyse the likely impact on productivity if a company introduces a performance‑related bonus scheme.
2.2 Leadership, Management Functions & Trade Unions
Definitions (2.2.1)
- Leadership – influencing people to achieve organisational goals.
- Management – planning, organising, commanding, coordinating and controlling resources.
Five Management Functions (2.2.2)
| Function | What it involves |
|---|
| Planning | Setting objectives, deciding on actions to achieve them. |
| Organising | Arranging resources and tasks to implement the plan. |
| Commanding (Leading) | Directing and motivating staff to carry out tasks. |
| Coordinating | Ensuring activities across the organisation work together smoothly. |
| Controlling | Monitoring performance, comparing with targets and taking corrective action. |
Leadership Styles (required – 2.2.3)
- Autocratic – decisions made by the manager; little employee input.
- Democratic (Participative) – employees consulted; decisions often shared.
- Laissez‑faire – minimal supervision; employees have high freedom.
Advantages & Disadvantages of Each Style (2.2.4)
| Style | Advantages | Disadvantages |
|---|
| Autocratic | Quick decisions; clear authority | Low morale; high staff turnover |
| Democratic | Higher motivation; better ideas | Slower decision‑making |
| Laissez‑faire | Encourages creativity; independence | Risk of lack of direction; inconsistent performance |
Choosing an Appropriate Style
Consider the nature of the task, employee skill level, organisational culture, and external pressures (e.g., market competition, regulatory environment).
Trade Unions (2.2.5 – required)
Trade unions are organisations that represent workers’ interests. They negotiate collective agreements on pay, conditions, hours and health‑and‑safety issues. Unions can improve employee morale and provide a structured channel for grievances, but they may also increase labour costs and lead to industrial action.
Example: In the UK, the GMB union negotiated a 3 % pay rise for retail staff in 2023 after a short strike.
Sample Exam Questions
- Compare the likely impact on employee morale of an autocratic and a democratic management style.
- Explain why a manager might adopt a laissez‑faire approach in a research‑and‑development department.
- Evaluate the statement: “Effective leadership is more important than effective management in a start‑up business.”
- Discuss the advantages and disadvantages of trade union membership for both employees and employers.
2.3 Training
Definition (2.3.1)
Training is the systematic process of developing the skills, knowledge and attitudes of employees so they can perform their current jobs more effectively or prepare for future roles.
Why Training Is Important? (2.3.2)
Benefits to the Business
- Increases productivity and efficiency.
- Reduces errors, waste and re‑work.
- Improves product/service quality.
- Facilitates the introduction of new technology or processes.
- Enhances competitiveness.
- Lowers staff turnover and recruitment costs.
- Ensures compliance with legal, health‑and‑safety and industry standards.
Benefits to Employees
- Higher job satisfaction and confidence.
- Opportunities for career progression.
- Improved employability inside and outside the organisation.
- Personal development and increased motivation.
- Potential for higher wages, bonuses or promotions.
Types of Training (2.3.3)
- On‑the‑Job Training (OJT) – learning while performing the actual job (e.g., apprenticeships, job rotation).
- Off‑the‑Job Training – classroom, e‑learning, workshops or seminars away from the workplace.
- Induction Training – introduction for new staff to policies, procedures and organisational culture.
- Skills‑Specific Training – technical or functional skills required for a particular role (e.g., IT, machine operation).
- Management/Leadership Training – developing supervisory and managerial capabilities.
- Health & Safety Training – ensuring legal compliance and a safe working environment.
Training Process (2.3.4)
- Identify Training Needs – analyse performance gaps, new technology, legal requirements, employee aspirations.
- Set Objectives – specific, measurable, achievable, relevant, time‑bound (SMART) goals (e.g., “Increase order‑processing speed by 15 % within three months”).
- Design the Programme – choose delivery methods, develop materials, decide duration and location.
- Deliver the Training – conduct sessions, provide resources, encourage participation.
- Evaluate Effectiveness – use feedback forms, tests, observation and performance data (e.g., before‑and‑after productivity figures).
Evaluation Techniques (2.3.5)
- Reaction – trainee satisfaction surveys.
- Learning – tests or assessments immediately after training.
- Behaviour – observation of on‑the‑job performance changes.
- Results – impact on productivity, sales, error rates, turnover.
Legal Controls Over Training (2.3.6)
- Health‑and‑safety legislation may require specific training (e.g., manual handling, fire safety).
- Data‑protection laws (GDPR) govern how employee personal data collected during training is stored and used.
- Equality legislation ensures training opportunities are offered without discrimination.
Sample Exam Questions
- Explain two ways in which training can improve a business’s productivity.
- Discuss the advantages of training for employees.
- Outline the five steps in the training process and give an example of how a business might evaluate the effectiveness of a training programme.
Suggested Diagram
Flowchart of the training process: Identify needs → Set objectives → Design programme → Deliver training → Evaluate effectiveness.
2.4 Recruitment & Selection
Definition (2.4.1)
Recruitment is the process of attracting a pool of suitable candidates for a vacancy. Selection is the process of choosing the most suitable candidate from that pool.
Recruitment Methods (2.4.2)
- Internal recruitment – promotions, transfers, employee referrals.
- External recruitment – advertisements (newspaper, online job boards, company website), recruitment agencies, job fairs, head‑hunters.
Selection Techniques (2.4.3)
- Application forms / CVs
- Screening tests (aptitude, psychometric, technical)
- Interviews (structured, unstructured, panel)
- Assessment centres (role‑plays, group exercises, presentations)
- Reference checks and background verification
Legal & Ethical Controls (2.4.4)
- Equality legislation – avoid discrimination (gender, race, disability, age, religion).
- Right‑to‑work checks – confirm eligibility to work in the country.
- Minimum wage & National Living Wage compliance.
- Health & safety duties – ensure safe recruitment practices.
- Data protection – store applicant information securely and only for a limited period.
Part‑time vs Full‑time Employment (2.4.5)
| Aspect | Part‑time | Full‑time |
|---|
| Typical hours | Less than 35 hrs/week | 35 hrs/week or more |
| Pay | Pro‑rated to hours worked | Fixed salary or hourly rate |
| Benefits | Often limited (e.g., no paid leave) | Full statutory benefits (holiday, pension, sick pay) |
| Flexibility | Higher – useful for students, carers | Lower – more regular schedule |
Redundancy vs Dismissal (2.4.6)
- Redundancy – job no longer needed due to organisational changes (e.g., automation, downsizing). It is a lawful termination provided proper consultation and redundancy pay are given.
- Dismissal – termination because of employee conduct or performance (e.g., misconduct, poor performance). Requires following a fair procedure; may lead to unfair dismissal claims if mishandled.
Advantages & Disadvantages of Different Methods (2.4.7)
| Method | Advantages | Disadvantages |
|---|
| Internal promotion | Motivates staff; lower training cost | Limited fresh ideas; creates vacancy elsewhere |
| Online advertisement | Wide reach; cost‑effective | High volume of unsuitable applications |
| Recruitment agency | Specialist expertise; saves time | Agency fees; less control over shortlist |
| Assessment centre | Comprehensive view of abilities | Expensive; time‑consuming |
Sample Exam Questions
- Outline two advantages of using internal recruitment for a managerial vacancy.
- Explain how an assessment centre can help a business select the most suitable candidate for a sales role.
- Discuss the impact of discrimination legislation on the recruitment process.
- Compare redundancy and dismissal as methods of terminating employment.
2.5 Communication
Why Communication Is Important (2.5.1)
- Ensures that objectives, policies and instructions are understood.
- Facilitates coordination between departments and teams.
- Builds relationships with customers, suppliers and other external stakeholders.
- Supports motivation and employee engagement.
Methods of Communication (2.5.2)
- Formal written – letters, memos, reports, emails, intranet notices.
- Formal oral – meetings, presentations, briefings.
- Informal written – instant messaging, social media groups.
- Informal oral – hallway conversations, telephone chats.
- ICT‑based channels – video‑conferencing, webinars, collaborative platforms (e.g., Teams, Slack).
Common Barriers (2.5.3)
| Barrier | Impact | How to Overcome |
|---|
| Physical (distance, noisy environment) | Message may be missed or distorted | Use appropriate technology; choose quiet venues |
| Language & Jargon | Misunderstanding of meaning | Use simple language; provide glossaries |
| Attitudinal (pre‑conceptions, low morale) | Selective listening or resistance | Encourage two‑way feedback; build trust |
| Organisational (hierarchical barriers, information overload) | Delay or loss of information | Clarify channels; limit unnecessary emails |
Sample Exam Questions
- Explain why effective communication is vital for a new product launch.
- Discuss two barriers to internal communication and suggest ways a business can overcome them.
- Outline three formal and two informal communication methods that a retail chain could use.
2.6 Trade Unions
Role of Trade Unions (2.6.1)
- Represent workers in negotiations with management (collective bargaining).
- Seek improvements in pay, working conditions, hours, health & safety and pensions.
- Provide legal advice and support to members in disputes.
- Organise industrial action (strikes, picketing) when negotiations fail.
Impact on Business (2.6.2)
- Positive: Can improve employee‑employer relations, reduce turnover, and provide a clear framework for grievance handling.
- Negative: May increase labour costs, limit managerial flexibility, and cause production disruptions during strikes.
Sample Exam Question
- Evaluate the advantages and disadvantages of trade union membership for both employees and employers.
Summary Table – People in Business
| Topic |
Key Benefit to Business |
Key Benefit to Employees |
| Motivation |
Higher productivity, lower absenteeism |
Increased job satisfaction, career development |
| Leadership & Management |
Clear direction, efficient decision‑making |
Better communication, greater involvement |
| Training |
Improved quality, adaptability to new technology |
Enhanced skills, better career prospects |
| Recruitment & Selection |
Right people in the right roles, reduced turnover |
Fair opportunities, job security |
| Communication |
Coordinated operations, stronger stakeholder relationships |
Clear expectations, higher engagement |
| Trade Unions |
Structured employee relations, reduced industrial disputes (when well‑managed) |
Collective voice, improved pay and conditions |
General Exam‑Skill Tips for Unit 2
- Use PEEL (Point, Explain, Example, Link) for essay‑type answers.
- When asked to “outline”, give concise bullet points or a numbered list; keep each point to one sentence.
- For “discuss” questions, present at least two advantages and two disadvantages, then finish with a balanced conclusion.
- Link theory to real‑world examples (e.g., a supermarket using piece‑rate pay, a tech firm offering leadership training).
- Remember the exact Cambridge terminology – e.g., “induction training”, “democratic management style”, “collective bargaining”.