Economic Terms a Managerial Decision Essay

Excerpt from Essay :

Such processes are expensive and time consuming. In the case of the temporary staffs, the processes of selection and recruitment are less complex as they would revolve around referrals from current employees, who would recommend a teenage child, a friend or another acquaintance looking for a temporary job. Still, in the case of the third alternative, such problems and complexities would not be raised at all.

d) Employee skills

The general assumption when hiring temporary staffs is that they do not possess the skills and commitment of permanent employees. In such a context then, the company would have to hire permanent employees in order to best capitalize on their skills and knowledge, to invest it in and to ensure employee loyalty and performance. As the complexity of the job increases, the skill requirements also increase, further increasing the need for permanent staffs (Bragg, 2011). In a context in which the third alternative was to be selected, the need for highly skilled and committed staff members further increases.

e) History with temporary staffs

The company's history with temporary staff members has been a negative one as the temps selected were not performing at levels as high as the permanent staffs. They were often late and did the minimum work possible, only to get the paycheck. From this angle, it would be advisable to hire permanent staffs. Still, with efforts to increase operational efficiency, the company would altogether decrease its dependency on employees (Negandhi and Baliga, 1981).

f) Internal impact of hiring

If temporary workers are hired, the overall productivity is decreased and the morale of the permanent staffs decreases through comparison and more procrastination (Leopold and Harris, 2009). If permanent employees are hired, efforts have to be made towards their integration. If no hiring is made, the current team becomes stronger, more united and better consolidated.

g) External impact

In terms of both temporary as well as permanent staff hiring, the external community perceives the company as strong and financially stable. In other words, its image is improved in either case. If the store does not hire, its public image could be damaged or at least not suffer any improvements.

h) Processes of operational efficiency

The processes which would have to be completed to increase operational efficiency are complex, time consuming and expensive. They could for instance include the purchase and integration of new technologies which would improve inventory management. One such application could count the items sold and compare them with the items in the stock and alert directly the purveyor when the stock decreases so that they make a new delivery. The processes are complex and require more effort than hiring the staffs.

i) Costs with improving operational efficiency and the return on investment

The processes to improving operational efficiency are high, especially when compared to the costs of hiring new employees. Still, these differences are only observed within the short time, as investment costs are created within a month, whereas personnel costs are created on monthly basis, all year long. For instance, given that the store was to hire three new permanent employees, this would cost it an estimated $72,000 per one year ($2,000 monthly salary x 12 months x 3 employees). This virtually means that the costs with the new employees are similar with those of investing in operational efficiency. In other words, the investment in operational efficiency would become profitable starting with the second year, whereas the hiring of employees would continue to generate annual costs.

In order to observe the analysis from the lines above in a more numeric and clearer presentation, it is useful to assign points of importance to each alternative based on the manifestation of the ten factors. 0 is assigned to represent that the factor does not support the implementation of the alternative solution; 0.5 represents a medium level of factor support for a respective alternative solution and 1 represents a high level of factor support for a specific alternative solution.

Factors

Alternative # 1

Hire temporary staffs

Alternative # 2

Hire permanent staffs

Alternative # 3

Increase operational efficiency

1.

Salary costs

0.5

0

1

2.

Selection and recruitment costs

0

0

1

3.

Processes of recruitment and selection

0.5

0

1

4.

Employee skills

0

1

1

5.

History with temporary staff

0

0.5

1

6.

Internal impact of staff hiring

0

0.5

1

7.

External impact

0.5

1

0

8.

Processes for operational efficiency

0.5

0.5

0

9.

Cost with improving operational efficiency

1

1

0

10.

Return on investment

0

0

1

Total

3

4.5

7

7. Summary and recommendations

The local store is faced with an increase in its demand for products and services and the question posed referred to the means in which the company should deal with this increase in demand. The primary question was that of hiring permanent or temporary staffs. The application of grounded theory on ten factors important to the decision making processes has however revealed that the company should invest in improving its operational efficiency. This solution is recommended not only because it is feasible in the current setting, but also because automation of work and efficiency would be necessary to preserve competitiveness in the future.

References:

Bragg, S.M., 2011, The new CFO financial leadership manual, 2nd edition, John Wiley and Sons

Denzin, N.K.,…

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