| Job enlargement | An increase in the number, as opposed to level, of responsibilities that an employee has in order to increase motivation |
| enterprise | a business who's purpose is to produce and sell goods and services- involves risk taking by an entrepeneur |
| SME | stands for small and medium sized enterprise as measured by number of workers, turnover or value of the business |
| needs | human requirements which must be satisfied for survival |
| wants | human desires which are unlimited |
| entrepeneur | a person who has an idea for a business, develops the idea and orgaises the recourses to see the idea through, they create and build business enterprises |
| primary sector | first stage of production that involves the extraction of raw materials |
| secondary sector | second stage of production that involves the manufacture and assembly of goods. Raw materials are converted into finished goods |
| tertiary sector | third stage of production that involves the commercial services that support the production and distribution process eg-insurance, transport,advertising |
| stakeholder | anyone with interest in a business and affected by the activity of a business |
| business plans | a written document that describes a business-covers objectives and strategies sales and financial forecast |
| market | where buyers and sellers are able to interact and bring about an exchange |
| competition | where businesses strive against one another to capture a alrger market and increase their market share. This may involve price or non price competition. |
| local market | products or services exchanged by groups within a limited geographical area such as a town or county |
| global market | products/ services are exchanged by groups internationally |
| mass market | a product appeals to an entire market and the business uses with one basic marketing strategy utilising mass distribution and mass media |
| niche market | products that sell to a very small market, often specialised goods that require specific marketing strategies to attract the target market |
| trade market | business to business selling of goods or services |
| consumer market | business to consumer selling of goods or services |
| product market | the selling of tangible items that are sold to consumers/other businesses |
| service market | the selling of non tangible items that are sold to consumers and other business such as cleaning |
| seasonal market | the selling of goods or services at partuclar times of the year due to high demand |
| market size | often measured in terms of sales value (revenue) or sales volume |
| makret share | the percenatge of all sales within the makret that are held by business product or brand |
| market trends | the overall patterns of data that are revealed when considering sales or growth within a market |
| market segmentation | the process of breaking down the market into sub groups with similar characteristics |
| monopoly | a pure monopoly exists when one firm has full control over a market so one seller exists. A legal monopoly is where one firm controls 25% or more of the market share. |
| oligopoly | a few main firms dominate the market e.g 4-5 firms may have 80% of the market share between them. They have differentiated products with strogn brand image. they are price makers as they have a degree of market power, barriers to entry are high |
| monopolistic competition | a large number of reltively small business in competition with each other. there is some product differentiation, low barriers to entry |
| perfect competition | a large number of small firms in the market selling homogenous goods. There are no barriers to entry or exit, firms are price takers |
| consumer protection | a group of laws and organisations designed to ensure the rights of consumers as well as fair trade, competition, and accurate information in the marketplace |
| demand | The amount of a commodity that consumers are willing and able to purchase at any price. |
| supply | The amount of a commodity that producers are willing and able to sell at any price. |
| equilibrium | Where demand and supply curves intersect, at this point there is no excess demand or excess supply in the market and the market price is found. |
| price elasticity of demand | Measures the responsiveness of demand to a change in price. If demand is inelastic: demand responds less than proportionately to a change in price e.g. bread. If demand is elastic: demand responds more than proportionately to a change in price e.g. new cars |
| Income elasticity of demand (YED) | Measures the responsiveness of demand to a change in income. If demand is inelastic: demand responds less than proportionately to a change in income e.g. soap. If demand is elastic: demand responds more than proportionately to a change in income e.g. foreign holidays. |
| Inferior goods | Consumers demand less of these goods as incomes rise as they trade up to better products e.g. value baked beans, public transport. |
| Normal goods | Consumers demand more of these goods as incomes rise e.g. DVDs, books, cinema tickets. |
| Luxury goods | Consumers demand proportionately more of these goods as income rise. These goods are luxuries such as designer accessories, restaurant meals |
| Market research | The systematic collection, collation and analysis of data relating to the marketing and consumption of goods and services. This can include both primary and secondary methods of market research. |
| Primary research | The gathering of ‘new’ data which has not been collected before, questions are set by the business so that all questions are relevant to their products. Primary research is therefore collected first-hand e.g. questionnaires, interviews, focus groups |
| Secondary research | The collection of data that already exists and has been collected for another purpose. It can be internal data such as sales data or external data such as government publications, research reports, newspaper articles |
| Qualitative data | The collection of data that uses pre-set questions to question a large sample size to provide statistically valid data. Usually derived from questions asking closed questions where a box can be ticked for the answer. Examples include questionnaires and surveys |
| Quantitative data | In-depth investigations into the motivations behind consumer behaviour or attitudes. Often conducted by highly trained staff among small groups such as focus groups or one-to-one interviews. |
| Sampling | Researching a selection of part of the population as it is too costly and time consuming to research the whole population. Usually the larger the sample size the more representative it will be of the population and therefore the more valid the results |
| Random sampling | Each person has an equal chance of being selected. E.g. a business may use a computer program to generate a random list from the electoral roll |
| Quota sampling | The population is segmented into a number of groups which share specific characteristics. For example, a researcher might ask for a sample of 100 females, or 100 individuals between the ages of 20-30 |
| Private sector | Any business activity that is owned and controlled by a private individual or group of individuals, including shareholders. These are usually for-profit organisations. |
| Public sector | Any business activity that is owned and controlled by the central or local government e.g. fire service, NHS, state schools, local libraries. These are usually not-for-profit organisations that focus on providing a service. |
| Aims | What a business intends to achieve in the long-term – its purpose. Ultimately it is what the business is striving to achieve such as profit maximisation, shareholder value, survival, growth. |
| Sole trader | A business owned and controlled by one person. In reality many sole traders, although small businesses, employ others to help them so they are not entirely one-man businesses, for instance they may employ sales staff e.g. plumbers, electricians, window cleaners, mobile hairdressers |
| Partnerships | More than one owner, where there is shared ownership and shared controlled. Unless a sleeping partner who invests money but takes no role in running business. They generally tend to have specialist, highly skilled workers e.g. include doctors, accountants, vets, solicitors, architects |
| Deed of partnerships | A legal document that records who partners are and money invested. States procedures for profit distribution, decision making, how partners can leave/join
Its purpose is to help prevent disagreements and ensure that the business runs smoothly |
| Private limited company | Companies owned by shareholders and run by managers/directors. Private limited cos have ltd at the end of their name and they sell their shares to known investors i.e. family of the original founders, managers, workers e.g. Cheltenham Cheese Company Ltd, Fairview Design Ltd |
| Public limited company | Companies owned by shareholders and run by managers/directors. Public limited cos have plc at the end of their name. Plcs sell their shares to the general public and their shares are traded on the stock exchange e.g. M & S plc, Tesco plc, BP plc. |
| Unlimited liability | Owner is liable for all of the businesses debts. Should the business go bankrupt they may have to sell their personal assets if business assets are insufficient to meet these debts |
| Unincorporated | Means a firm has not applied to the Register of Companies for incorporation as a joint-stock company. This signifies that the business has unlimited liability and the business and the owner do not have separate legal status |
| Limited liability | The liability of the owners of the business, the shareholders, to pay off business debts is limited to the amount of money that they have invested in the business when buying shares. Should the business become insolvent (unable to pay debts), the owners personal assets will be protected. |
| Incorporation | The process of becoming a corporate body that is establishing a business as a separate legal entity. This ensures limited liability i.e. the owners are not personally liable for the debts of the business. |
| Social enterprise | A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. |
| Charities | Organisations with very specialised aims. They exist to raise money for good causes and draw attention to the needs of disadvantaged groups in society. E.g. Oxfam raises money to support people living in poverty. Charities rely on donations for their revenue and often run fund-raising events and run charity shops to raise more money. |
| Consumer cooperative | A business owned and controlled by its members. Members can purchase shares which entitles them to a vote at the AGM. The members elect a board of directors to make overall business decisions and appoint managers to run the business day-to-day. Any surplus made by the co-operative is distributed to members as a dividend according to levels of spending. |
| Worker cooperative | A business owned and controlled by those who work in it. Workers will share in the decision-making process, share the profits and provide some capital when buying shares in the business. |
| Societies | Societies are a business that don't have shareholders or other owners. They exist only to serve their "members". |
| Location factors | Any factors that influence where a business may decide to locate or relocate to. Factors may include: labour supply, cost of land rental, nearness to suppliers and/or market |
| Revenue | The amount of money a business raises from its sale of goods/services. It can also be known as turnover |
| Profit | The excess of revenue once all costs have been deducted.
Profit = Total Revenue – Total Costs |
| Fixed cost | Costs that do not vary with output e.g. rent, insurance, admin expenses |
| Variable cost | Costs that do vary directly with output e.g. cost of raw materials and packaging |
| Semi-variable cost | Where an element of the cost is fixed but there is also a variable component |
| Direct cost | Costs that arise specifically from the production of a product or the provision of a service. |
| Indirect/overhead cost | Costs that do not directly related to production or service provision. |
| Total cost | Total costs combine all the costs in running a business.
Total costs = Fixed costs + variable costs |
| Contribution | Contribution per unit = P – VC
Total contribution = (Contribution per unit x Output)
Total contribution is the excess of revenue once variable costs have been deducted. This is the amount of money that contributes to fixed costs and hopefully profits. |
| Breakeven | The output level where no profit is made but no loss is incurred either. Break-even output is found where Total Revenue = Total Costs
Break-even output = Fixed Costs
Contribution |
| Margin of safety | The difference between actual (or budgeted) sales and break-even output. The higher the result, the safer the business is as they are unlikely to fail even if sales drop |
| Marketing | The management process responsible for identifying, anticipating and satisfying customer requirements profitably |
| Market orientation | An approach where a business reacts to what customers want. The decisions taken are based around information about customers' needs and wants, rather than what the business thinks is right for the customer |
| Product orientation | A product orientated approach means the business focuses on the product and the production process. The business believes consumers will want the product and that is will sell in the market |
| Asset-led marketing | An asset-led strategy uses the strengths of the business to satisfy consumer needs and expand the business. Business strengths can be many and include aspects such as reputation, brand image, and global distribution |
| Marketing mix | The combination of elements within a business’s marketing strategy that are designed to meet the needs and wants of customers in order to generate sales |
| Product | Any good or service offered for sale to customers |
| Product portfolio | A range of products that a business is marketing and selling. These products are likely to be at different stages of the product life cycle |
| Brand | A brand is a name, term, sign, symbol or design which identifies a seller’s products and differentiates them from competitors’ products. Usually a brand is a product consumers rely on, for quality, value and service |
| USP | Where the product or service has a feature or features that can be used to separate it from the competition. This could be the result of a technological advantage |
| Differentiation | The process of distinguishing a product to make it more attractive to a particular target market. This involves differentiating it from competitors’ products as well as a firm’s own product offerings |
| Product life cycle | Shows the different stages that the sales of a product go though over time. The main stages are: development, introduction, growth, maturity, saturation and decline |
| Extension strategy | Techniques used by businesses to lengthen the life of a product to prevent sales going into decline. The objective is to maintain and hopefully increase sales and profits of the product e.g. new product features, new packaging |
| Boston matrix | The classification of products based on market share and market growth. There are four product classifications: star, cash cow, problem child and dog |
| Penetration pricing | Setting a low price for a new product to encourage high sales quickly. Once the product is established in the market, the price will be increased to raise profits |
| Skimming price | Setting a high price for a new product that is unique to the market in some way (has a USP). Once sales have been maximised at that price, the price is lowered to attract the next market segment (skimming process) and so on until the market has been saturated |
| Cost plus pricing | This involves adding a mark-up to the average cost of the product to determine the price. This should ensure a profit if sales targets are reached. |
| Competitive pricing | Setting a price at the same level as existing competitors (going rate pricing) to ensure customers are not deterred by pricing too high in the market. |
| Psychological pricing | Setting a price just below a round figure to make the product look slightly cheaper such as £9.99 rather than £10. This helps to attract customers and increases sales. |
| Contribution pricing | Setting a price that is greater than the variable costs involved in making the product so that a contribution is made to fixed costs and thereafter to profit |
| Promotion | An attempt to draw attention to a business or product to retain existing customers and attract new customers. Examples include advertising, sponsorship, sales promotions (BOGOF) and merchandising |
| Above the line promotion | Promotion through independent media that allow a business to reach a wide audience easily. This is paid for communication and, though it can be targeted, it can also be seen by anyone outside the target audience. It is considered impersonal to customers |
| Below the line promotion | Promotional methods where the business has direct control over the methods used. They are short-term incentives, largely aimed at the target market and is far more personal. It does not involve mass advertising techniques |
| Place | involves business decision making to ensure that products are available where and when customers want to go and buy products |
| Distribution channel | the methods by which a finished product can reach the consumer such as selling directly or selling via an intermediary |
| Multi-channel distribution | where a firm uses more than one method of selling their product to the market e.g. selling to a wholesaler as well as selling to retailers |
| Direct marketing | Producer sells directly to the consumer with no intermediary involved. Goods are sold through internet websites, catalogues, etc. |
| Wholesaler | A wholesaler is an intermediary that buys goods from manufacturers and sells them to retailers. They break-bulk and often sell goods on credit. Often these are “cash and carry” organisations as mostly used by small shops who buy stock from cash and carry outlets in their area |
| Agent | An agent, or broker, brings buyers and sellers together for a fee (commission) – they do not buy the goods and sell on like a wholesaler. Agents are often used when selling in a foreign country as they have better knowledge of the market |
| Global marketing | Is the process of adjusting a company's marketing strategies to adapt to conditions in other countries to meet global objectives |
| Global brands | The name of a product or service that is known and sold in all parts of the world by a particular company |
| Digital media | Any media that is encoded in a machine-readable format. Digital media can be created, viewed, distributed, modified and preserved on computers. Examples include websites, graphics in 2D and 3D for video purposes |
| Social media | Websites and applications that enable users to create and share content or to participate in social networking |
| e-tailing | The sale of goods and services through the Internet. Electronic retailing, or e-tailing, can include business-to-business and business-to-consumer sales |
| m-commerce | The use of wireless handheld devices such as cellular phones and laptops to conduct commercial transactions online |
| Budget | A target for costs or revenue that a business or department must aim to reach over a given period of time. E.g. the sales department will have a budget with sales and sales revenue targets to meet, the production department will have a budget of costs for raw materials, maintenance of machines, etc. |
| Internal sources of finance | Finance that is acquired from inside the business such as retained profits or by sale of business assets |
| External sources of finance | Finance that is acquired from outside the business such as loans from banks or capital investment from private investors |
| Owner’s capital | Own savings that a business owner invests into their own business. This applies to sole traders and partnerships |
| Retained profit | The excess of revenue over cots that is retained in the business for their own use. This will often be used to finance expansion or research & development |
| Sale of assets | A business generates finance by selling off items they own but are unlikely to use again e.g. the selling of machinery or vehicles |
| Overdrafts | Where a business spends more money than they have in their bank account. This is a short term source of finance as high interest rates are charged |
| Loans | Where a business obtains finance from a bank who will charge interest. A higher interest rate will be charged if the risk of the loan not being repaid is high e.g. due to new business |
| Share capital | Finance that is raised by selling shares to investors. In return for a share, shareholders will expect a dividend to be paid (a share of the profit) |
| Venture capital | A private investor injects finance into a business in return for equity (a share of ownership). Often venture capitalists are experienced entrepreneurs and therefore he/she often provides advice to the business owner as well |
| Leasing | An arrangement where a business makes monthly payments for the use of an asset. Once the leasing period ends, a business can negotiate a new lease usually for upgraded assets. Unlike hire purchase, the asset is never owned by the business. Vehicles and machinery are often leased |
| Trade credit | An arrangement where a business orders goods from a supplier, receives the goods and agrees to pay for the goods later e.g. after 28 days |
| Debt factoring | The sale of debt that a business is owed by their customers. This is an expensive source of finance as the factoring company do not pay for the full value of the debt to cover their own costs and profits |
| Cash flow | The difference in amount of cash available at the beginning of a period (opening balance) and the amount at the end of that period (closing balance) |
| Cash flow forecast | A prediction of the amount of money flowing into and out of a business on a monthly basis over a period of time, usually 6 or 12 months |
| Cash flow surplus | A situation where there has been more money flowing into the business than flowing out, creating a positive cash flow. A business could draw on this money to invest or rely on the funds in an emergency |
| Cash flow deficit | A situation where there has been more money flowing out of the business than flowing in, creating a negative cash flow. A business would need to arrange finance to cover the shortage of cash such as an overdraft or short term loan |
| Trading, profit and loss account (the income statement) | A financial account that shows sales revenue, cost of sales, gross profit, all other expenses and net profit. It also shows how net profit is distributed in terms of corporation tax, dividend payments and amount of profit retained for investment purposes |
| Gross profit | The excess of sales revenue once cost of sales have been paid.
Gross profit = Sales Revenue – Cost of Sales |
| Cost of sales | The cost of buying in or producing the stock that has been sold in a financial year. For a manufacturer: direct materials + direct labour + direct overheads. For a retailer: Opening Stock + Purchases – Closing Stock |
| Net profit | The excess of gross profit once all other expenses (overheads) have been paid.
Net profit = Gross Profit – Overheads |
| Overheads | All indirect costs incurred by a business. These include costs such as administration, marketing, human resources and business rates |
| Gross profit margins | The proportion of sales revenue that is gross profit.
GPM = Gross Profit x 100
Sales Revenue |
| Net profit margins | The proportion of sales revenue that is net profit.
NPM = Net Profit x 100
Sales Revenue |
| Flexible workforce | A workforce designed to provide labour in the quantities required at the time that businesses need it. |
| Flexible hours | Allowing workers to be flexible with regards to hours of work/when they work and where they work. E.g. allowing workers to work 2.5 days a week in a job share, allowing a worker to work flexitime or allowing a worker to work from home. These policies help to motivate the worker as the workers feel more valued as their personal circumstances are taken into account. |
| Home working | Where an individual works from home rather than attending the office. |
| Part time | Employment for a specific period of time, for example six months to cover maternity leave |
| Job sharing | Two people share the same job, often on a fifty-fifty split. |
| Multi-skilling | This involves businesses training their workforce to be able to work effectively across a wide range of tasks |
| Zero hours contracts | This type of contract means that an employee has to be available for work but is not guaranteed any work |
| Hot desking | This that an employee has no fixed work space within an office environment |
| Workforce planning | ‘Trying to predict the future demand for different types of staff and seeking to match this with supply’. Therefore, workforce planning involves looking to the future and judging the level of demand for skills within the business. |
| Recruitment process | Attracting candidates to a vacancy that has arisen within the business |
| Internal recruitment | Finding someone already employed by an organisation to fill a vacancy. Internal vacancies may simply be placed on a notice board, published on an intranet or advertised in an in-house magazine. |
| External recruitment | Finding someone outside the organisation to fill a vacancy. The actual method or methods used will depend on the type of vacancy and the number of vacancies available. |
| Job analysis | the process which identifies and determines in detail the particular duties and requirements of the job, and also what the position requires in terms of aptitudes, knowledge, and skills. |
| Job description | This explains the tasks involved in the job, the job title, responsibilities attached to the job, place of work, and employment conditions (holidays, salary etc.). |
| Person specification | This describes the skills, knowledge and experience needed by an individual to complete the job. It will detail educational requirements, experience and skills needed, perhaps physical attributes (e.g. for a fireman) and important aspects of personality required |
| Interviews | Carried out by a panel consisting of a specialist personnel manager, a manager from the department the person is applying to and an independent member. |
| Work trials | Trying out a potential employee before offering them a job |
| Testing | This is subjecting a candidate to online tests before offering an interview. These can be psychometric or aptitude |
| Selection exercises | Methods used to help select the most appropriate candidate |
| Telephone interviews | Interviews held over the phone rather than face-to-face. |
| Training | Provides workers with knowledge and skills which enable them to perform their jobs more effectively. |
| On-the-job training | Where an employee is shown or taught how to complete tasks by a more experienced worker. This takes place in the workplace |
| Off-the-job training | where the employee attends an external venue to study for qualifications or to receive specific knowledge |
| Apprenticeships | formal agreements between an employer and a young employee that commits the employer to facilitate training and workplace experience for the employee |
| Appraisal | This means there will be regular meetings (once every six months or on an annual basis) in which the staff member’s performance is analysed, normally against performance targets. |
| Superior’s assessment | The traditional form of appraisal where the line manager of the individual will carry out the appraisal |
| Peer assessment | Refers to the process of having employees of a similar level of responsibility critically comment upon the performance of a co-worker and perhaps suggest methods of improvement. |
| Self-assessment | Self-assessment is the process of having the employee critically reflecting upon their own performance, recording their progress and suggesting targets for the future. |
| 360 degree feedback | These involve the appraised staff member receiving feedback from people (named or anonymous) whose views are considered helpful and relevant. |
| Workforce performance | The identification and analysis of what an organization is going to need in terms of the size, type, and quality of workforce to achieve its objectives |
| Labour productivity | This is measured by the output per worker per time period and is a measurement of worker efficiency. |
| Absenteeism | Voluntary non-attendance at work, without valid reason. Absenteeism means either habitual evasion of work, or wilful absence as in a strike action. It does not include involuntary or occasional absence due to valid causes, or reasons beyond one's control, such as accidents or sickness. |
| Labour turnover | Labour turnover is defined as the proportion of a firm's workforce that leaves during the course of a year. |
| Organisational design | Organisational design is a clear strategy for managing and growing a business. It can also include the alignment of any dysfunctional areas of the business to streamline operations. |
| Authority | The power or right to give orders, make decisions, and enforce obedience. Authority is held by senior workers in a business such as directors and managers. |
| Responsibility | Directors, managers and supervisors all have responsibility for the staff working under them; line managers have to supervise and give support to their subordinates |
| Chain of command | The way authority and power are passed down in a business. For instance an order may originate with the Board of Directors and be passed to the Marketing Director before being passed to a Sales Manager for action |
| Span of control | Refers to the number of subordinates working under a line manager. E.g. a production manager may have 4 production supervisors; therefore his/her span of control is 4. A narrow span of control allows for tight control and close supervision. A narrow span of control allows for more delegation |
| Delegation | Authority, and sometimes responsibility, to pass down from a superior to a subordinate. For instance, the finance manager may give the task of producing the monthly cash-flow statement to his/her assistant |
| Hierarchy | This shows the level of management in a business, from the lowest to the highest rank. It show the chain of command, line of communication and span of control for line managers |
| Centralised organisation | Key decisions are made by senior management with little responsibility authority being passed down the hierarchy. In its extreme case, subordinates would have no authority in the business |
| Decentralised organisation | This is where responsibility and authority are passed away from the top of the business to subordinates. Complete decentralisation would mean that subordinates would have all the authority to take decisions |
| Empowerment | The authority and power to complete a task is given to workers by managers. This motivates workers and enables managers to switch their time from monitoring of workers to more useful tasks such as strategic planning |
| Delayering | The removal of one or more layers from the hierarchy, making the organisational structure flatter. Businesses often do this to improve communication, as fewer layers make this quicker and more accurate, and save money, fewer workers need to be paid |
| Flat organisational structures | An organisation structure where the span of control is wider, the chain of command is shorter and there are fewer layers in the hierarchy. |
| Tall organisation structures | An organisation structure where the span of control is narrower, the chain of command is longer and there are more layers in the hierarchy. |
| Matrix structures | An organisation structure that attempts to organise the management of different tasks in a way that cuts across traditional departmental boundaries. This structure enables people with particular specialist skills to work together in project teams. |
| Motivation | The process whereby managers aim to encourage employees to work harder, meet targets and improve their productivity and quality of work. Financial or non-financial methods can be used |
| F W Taylor (scientific management) | Simple view – workers are motivated by money, therefore clear targets should be set and workers who exceed these should be rewarded with a bonus. He used a “work study”, the breaking down of a workers job into discrete tasks, to find an appropriate target |
| E Mayo (human relations) | Believes that workers are motivated by establishing a close-knit community where workers are praised, given attention and communicated with regularly. His work arises out of the Hawthorne experiments that found these factors were more important than changes to working conditions |
| A Maslow (hierarchy of needs) | Herzberg identified hygiene and motivating factors. Hygiene factors in themselves do not motivate and can lead to workers being dissatisfied if not present - they include pay, working conditions, and hours of work. Hygiene factors must however be meet for motivating factors to have an effect and these include taking on new challenges, new responsibilities e.g. promotion, job enrichment |
| V Vroom (expectancy theory) | Vroom believed that workers are motivated to perform certain activities to achieve some goal to the extent they expect that certain actions on their part would help them to achieve the goal. |
| L Porter and E Lawler (expectancy theories) | Porter and Lawler concluded that an individual’s motivation to complete a task is affected by the reward they expect to receive for completing the task. Porter and Lawler categorised the rewards as intrinsic and extrinsic: intrinsic rewards are the positive feelings that the individual experiences from completing the task e.g. satisfaction, sense of achievement; extrinsic rewards are rewards emanating from outside the individual such as bonus, commission and pay increases. Porter and Lawler's Expectancy Theory Model suggested that an individual's view regarding the attractiveness and fairness of the rewards will affect motivation. |
| Financial method of motivation | Monetary rewards that seek to encourage employees to work harder or for longer hours. There are many methods such as commission, bonuses and overtime pay |
| Piece rate | Piece-rate pay gives a payment for each item produced – it is therefore the easiest way for a business to ensure that employees are paid for the amount of work they do. Piece-rate pay is also sometimes referred to as a "payment by results system". |
| Commission | Commission is a payment made to employees based on the value of sales achieved. It can form all or (more often) part of a pay package. Commission is, therefore, a form of "incentive pay" (see also profit-related pay, bonuses). |
| Bonus | A sum of money added to wages/salary as a reward to employees. This is often given if a worker exceeds target set for production or sales, thereby motivating the worker. |
| Salary | The annual payment made to worker for carrying out their job role. It is quoted as gross pay, before deductions, per annum. |
| Profit sharing | A payment system where workers, if included in the scheme, gain a share of the profits put by for workers (profit will also be distributed to shareholders, etc.). Therefore it is a financial incentive to workers to work hard as all workers benefit from the increased profits of the business. |
| Share ownership | Employees are given shares in the business or the right to buy shares at a discounted price. This motivates workers to improve the performance as they directly benefit through increased dividends and/or increased share price. |
| Performance related pay | An employee may receive a bonus based on their performance measured against a pre agreed range of criteria, usually set during an appraisal meeting. This motivates the worker to achieve their targets to secure the stated bonus. |
| Non-financial rewards | Non-monetary rewards that incentivise workers. There are numerous methods such as promotion, team working, job rotation, job enrichment |
| Consultation | The process of seeking the thoughts and opinions of employees prior to making decisions that may affect them. This results in workers feeling more valued and therefore helps to motivate workers |
| Job design | The process of seeking the thoughts and opinions of employees prior to making decisions that may affect them. This results in workers feeling more valued and therefore helps to motivate workers |
| Job design | Job design sets the tasks and responsibilities of a specific job. Job design can be changed to motivate workers e.g. introducing job rotation to prevent boredom. |
| Job enlargement | An increase in the number, as opposed to level, of responsibilities that an employee has in order to increase motivation |
