10.3 - Disadvantages of Employing People and the Usage of Advisors and Consultants

The decision to employ people directly should not be taken lightly. There are both advantages and disadvantages to this method and these need to be fully considered before any hiring decisions are finalised.

The limitations of employing people include:

• Money costs - the recruitment process costs money and time
• Administrative costs - including tax-related matters
• Hiring inexperienced candidates
• Great deal of paperwork involved - including keeping track of staff, holiday entitlements, sick leaving amongst others

The limitations of advisors and consultants include:

• Lack of adaptability of proposal to suit the business
• Failure to implement favourable long-term change
• Lack of original ideas and focus
• Lack of enthusiasm for the business
• It can be expensive

Activity 27 - If your business is seasonal, which types of employees should you seek?

10.2 - Usage of Advisors and Consultants

Business employ the services of advisors and consultants who offer specialist services on key issues pertaining to the business. In order for these services to be used, a business must realise it lacks certain expertise and therefore must seek that expertise externally.

The areas of specialisation which the consultants cover include:

• Financial and management controls
• Information technology
• Quality management 
• Human resources
• Marketing
• Manufacturing and business services

In reality, however, any sector of business will likely have an employment agency supplying it. This would be the definition of a niche market that someone would have filled. 

From the very outset, the role of the consultant and advisor needs to be clearly defined. The objectives should be set out in writing before the consultant begins their work. 

Consultants are taken on for both long and short periods, with the fee decided and the reference terms agreed. 

Consultants need to work in unison with the business employees to effectively accomplish the goals, objectives and plans of the business. 

10.1 0 Employee Types in Small Businesses

Permanent Staff

Permanent employment is usually the major type of employment used by most businesses. It offers better working conditions and stability to the employee. However, it does not give employers flexibility to increase or decrease workload as is needed because of the nature of the contract between the employer and employee; you cannot easily get rid of permanent workers to reduce costs in the short term. The employer would need to notify the employee in advance before the termination of the contract, as well as giving notice periods, severance pay, and might need to demonstrate that selection for redundancy has been fair and without any kind of bias.


Temporary Staff

This is a very flexible way to employ people but it often leads to a workforce that lacks loyalty as they know their employment is only temporary.

The business can reduce or increase it's staff requirements easily and it can terminate contracts of employments without as much hassle as with the permanent employees.

There are laws which have been enacted lately to enhance the rights of temporary workers and to improve their working conditions.


Full-Time Staff

These are staff that work a full standard working week throughout the year except their holiday entitlement periods. In this type of employment the contract needs to state the the holiday entitlement, number of required hours for work, overtime availabilities and amount payable. In many ways, this category is very similar to permanent staff.


Part-Time Staff

This offers the benefit of flexible working patterns to fit into the schedule of the employees. The hours are less than full-time. Equal rights accrue to the part-time workers as it does to the full-time worker.

Women make up the majority of the part-time workforce in the United Kingdom, accounting for around 60% of the total.


Activity 26 - Identify the advantages and disadvantages of the different types of employee. 

Section 10 - Employing People in Business

Introduction

In this section we will examine the human resource. 

The size and type of any business will determine what type of human resources that business requires, and indeed how many. 

By type, we mean:

• Temporary Staff
• Fixed-Term Staff
• Permanent Staff
• Part-Time Staff

In recent years, there has been a significant growth in the use of consultants and advisers. These have specific expert knowledge which the company might lack and can be highly beneficial to a business, but they tend not to be cheap. 

There are benefits and drawbacks of each 'type' of employee, and the business owner needs to consider carefully what types are required for the business to thrive. 

A successful business will understand the risks involved in employing workers and will use the type that maximises its advantage. Therefore, it needs to identify the risk factors and drawbacks to the respective types and determine the best one for its business. 

9.2 - Factors Affecting Start-Up Locations - Market, Government Intervention and Qualitative Factors

Market

There's fierce competition for consumers, and this requires businesses to differentiate themselves from each other, One way of doing this is the chosen location. In places where supermarkets fail or aren't present, the corner shop will tend to thrive as they meet the needs of the local customers who're not prepared to travel.


Government Intervention

Business start-ups are frequently motivated by the level of suport offered by the government. The government makes certain areas more appealing to start-up businesses. Such areas can be called enterprise zones, regeneration areas and assisted areas. To stimulate the growth of businesses in such areas, the government invests numerous resources and gives grants to new businesses looking to get established in those specific areas. These forms of assistance include grants, lower rent incentives and interest-free loans. There are nine regional development areas in the United Kingdom which have the responsibility for:

• Promotion of business entrepreneurial activities
• Provision of training for the local workforce
• Job creation
• Enhancement of business efficiency

Governments tend to be most proactive in assisting businesses to locate new premises in derelict areas, former factory sites and unused lands.


Qualitative Factor

These are factors that do not revolve around finance and money. These factors are more concerned with other benefits such as:

• Social
• Moral
• Environmental
• Expansion
• Local Amenities 

New businesses will often be attracted to areas where the quality of life is high. Availability of shops, restaurants, entertainment and leisure facilities are factors which the entrepreneur will also take into consideration. 

Areas that are environmentally friendly are becoming increasingly desirable given the modern need for businesses to be environmentally responsible and sustainable. 

Areas with a low crime rate are also attractive. In these areas, the risk of theft, burglaries and other incidents such as vandalism are reduced. High crime areas tend to keep customers away because of a general fear of those areas. 

Expansion of the business is part of every enterprise's growth plan. Therefore, it will be attracted to an area that will stimulate business growth. 

Local amenities that are essential for businesses are very important. Communication, support services, broadband services, network supply, infrastructural facilities always encourage establishment of a new business. 

9.1 - Costs, Technology and Infrastructure

Business start-ups always need to consider the cost, technology and infrastructure of a location when they are deciding where to set up their new venture. Costs are inevitable in business and they key is to keep them low.

Technology is vital and enables the business to keep up the pace in its competitive marketplace. Infrastructures create strong incentives for a business to have its base in a particular location.

Cost, technology and infrastructure can be either push or pull factors. A push factor will motivate the business to be more aggressive and competitive to reduce costs. Pull factors are incentives that attract the business to certain areas.

Push cost factors include high overhead expenses such as office rent and congestion charges. Pull cost factors include low labour costs, government led incentives like low-cost loans and subsidised rent.

Push technology factors include non-availability of broadband services while an example of a pull technology factor is the excellent communication and network system in a location due to a high concentration of technology businesses. Hence the benefits to the business are immense and affordable.

Push infrastructural factors include poor road or rail networks or the lack of a local airport. Pull infrastructural factors include excellent support services, and communication systems.


There are other factors that affect the location of a business. These include:

• The Workforce - The business needs to have access to the best and highly skilled employees
• Land - Affordability of rent, scarcity and high poverty prices affect the choice of land
• Raw Materials - This will reduce the costs of travelling to the source of the resource. Furthermore, it's time efficient
• Proximity to the market - The distance to the target is very important. It reduces transportation costs and enhances the quality of the products. For instance, with goods that have short shelf life duration, it's a smart idea for the business to be close to the target market for it's produce

Despite the above factors already mentioned, there are businesses that are not particularly affected by push-pull factors. 

These include mobile businesses that supply intangible goods, online businesses that do not require a physical location and businesses that remain in a location regardless of the degenerative conditions of the area over a period of time. The last point is referred to as industrial inertia. 

Activity 25 - Think about a type of business in your area. What push and pull factors do they experience?

Section 9 - Location of a Business

Introduction

The location of a business, particularly a start-up, plays a major role in it's future success or failure. 

The ideal location should aim to maximise the profits while keeping the cost and expenses to a minium. 

Any business needs to have a market available, as well as a local skilled workforce. Without customers, the business would cease to exist. Hence choosing a location with the best market audience is a winning formula. 

Government incentives can also play a major role in the location of a business. Nissan, for example, built a plant in Sunderland partly because of government loans and grants. The role of technology and infrastructure and costs are discussed and their impact on choosing the right location.

Activity 24 - Can you think of an example of a business which chose the wrong location? What happened to them?