001 workforce flexibility

001 workforce flexibility

1. Market competition points to the desirability of enhanced responsiveness to the customer and sweeping away of institutional rigidities that might impede a flexible response.

   • Atkinson (1984) definition of flexibility in 3 facets
     • Functional flexibility
       • A firm’s ability to deploy employees between activities and tasks to match changing workloads, productions methods or technology. Ioosely associated with multiskilling. As products and production methods change, flexibility implies that the same labour force changes its activities, in both the short and medium term.
     • Numerical flexibility
       • a firm’s capacity to adjust labour inputs to fluctuations in output, so that at any given time the number of workers deployed exactly matches the number needed. There are 2 ways that such numerical flexibility can be achieved.
         • 1. It may simply require greater freedom for employers to hire and fire at will, which could be achieved through changing the relationship between worker and employer, towards a temporary contract of employment.
           • 2. Achieving numerical flexibility may not have such potentially brutal implications for employees, because it may require no more than the deployment of worked time within shift patterns in a more flexible manner e.g. through the use of annual hours contracts or variable shift lengths.
     • Financial flexibility
       • Involves a move away from uniform and standardised pay structures towards more individualised systems containing a greater element of variability, dependent upon performance. It is sought so that pay and other employment costs reflect the state of supply and demand in the labour market.
     • employers seek an optimal balance between functional, numerical and financial forms of flexibility through segmenting the labour force into core and peripheral groups.
       • The core group, which conducts the organization’s key firm-specific continuous activities, enjoys job security and the possibility of career development in the internal labour market, in return for the opportunity to be multiskilled.
         • It is from this group that the organization derives functional flexibility. The peripheral group, from which numerical flexibility is sought, comprises 3 categories of employees
           • • Those who perform relatively routinized or deskilled tasks which require an element of firm-specific training, but which offer few career prospects. Their employment, in the organization’s secondary internal labour market, while theoretically continuous is vulnerable to market or technical change.
             • • Second, in the primary external labour market, are those with specialist non-firm-specific skills, required by an organization on a discontinuous basis (e.g. systems analysts), and who can demand a high fee for specific items of service.
             • • Finally, there are tasks (e.g. cleaning, catering) which can be contracted out to small firms employing some of their own ‘core’, but largely unskilled labour, drawn mainly from the secondary, external labour market, whose pay and conditions are likely to be poor.
       • It has been suggested that enhanced flexibility is the key to appropriate labour utilisation and HRM.
         • However, critics argue that because both core and peripheral workers form part of an organisation, distinguishing and treating them differently is unfair.
           • Bryson (1999) has argued that the core employees are more exposed to training and development, and benefit more from employment security, career development and pay than peripheral employees.
       • Training Among core group workers, a substantial proportion are likely to be engaged in training and retraining at any one time, in order for their functional flexibility to be achieved.
         • Training
           • Among peripheral and external groups, the rationale for training is weaker and unlikely to be given such high priority by the firm. Retraining costs are unlikely to be borne by employers.
       • Job and employment security
         • Within the core group, employees will increasingly enjoy security of employment provided they are both capable to perform and willing to retrain. Outside it, employment security is reduced.
           • During a country's recession period, the peripheral workers are the ones at higher risk of being dismissed from the workplace, because the majority of them have short-term contracts, whereas the core employees have a more secure position based on their full-time contracts in the company.
       • Promotion prospects
         • In the core group, promotion prospects are favourable. Career development will increasingly involve mastering and deploying new skills.
           • However, career development for secondary workers is likely to involve movement between employers and will therefore be more restricted.
       • Conditions of employment
         • Among primary workers, conditions are likely to improve with the aim of encouraging retention.
           • For secondary employees (particularly those in the secondary external labour market), conditions of employment seem likely to deteriorate substantially – payments for non-worked time (holidays, sickness and pension) are likely to be the most badly affected.
       • Pay
         • For core workers, pay will be increasingly determined by individual performance, rather than through collective agreements.
           • For the peripheral group, pay is likely to vary more explicitly with hours worked, as employers try to match their labour inputs more precisely to their needs over time.
         • Osterman (1992) argued that building and investing in the internal labour market could enable firms to retain skilled labour with firm knowledge and hence minimize transaction costs e.g. recruiting.
           • Additionally, the internal labour market would show signs of greater motivation, effort and organizational citizenship behaviour. However, investing in the internal labour market could also create a sunk investment due to a static workforce with no new perspectives/ideas.
       • Atkinson’s flexible firm model (1984)

2. Lepak and Snell (1999)

   • Lepak and Snell argued that the key decision for most organizations is whether to make or buy human capital i.e. develop your own staff or recruit the skills you need from the labour market either on a permanent, temporary or contract basis.
     • They proposed that within organizations, considerable variance exists with regard to both the uniqueness and value of skills. Juxtaposing these two dimensions, they built a 2 X 2 matrix describing different employment relationships and HR systems:
       • • Internal development – these staff are core to the operation; the relationship is entirely within the organization and the focus of HR is that of skills development and fostering commitment.
       • • Acquisition – these are staff that the organization is unable to develop internally and needs to recruit them from the labour market. The relationship is termed symbiotic.
         • The organization acquires a skill it needs while the employee gains a job and possibly improves their financial position. The transaction is essentially market based in which both sides wish to achieve their own goals.
       • • Contracting – outsourcing to agency staff or using temporary staff. The relationship is transactional in that it involves a contract. Contracted staff have little power and involvement within the organization, hence the nature of their employment is one of compliance to achieve organizational goals.
       • • Alliances – using a relationship with another firm to provide essential services e.g. IT, or legal services. This is a partnership in which both parties collaborate
   • The major implication of this model is that some employee groups are more instrumental to competitive advantage than others due to their uniqueness and value. As a consequence, the decision to make or buy staff is based on the efficiency and flexibility offered by the different employment modes.
     • In any organization, the core skills that determine competitive advantage should be developed internally, and commitment emphasised, to ensure tenure, and at the same time reduce the costs of hiring from the labour market.
       • Using specialist outside agencies can draw upon specialist knowledge not available internally so that resources can be focused on the development of staff with core, critical skills.

3. Universal vs contingency perspective

   • Using data from 420 establishments, Lepak et al. (2007) compared a universal perspective suggesting that the level of high investment human resource (HIHR) exposure core employees receive is always greater than the level of exposure for support employees, with a contingency perspective suggesting that the relative level of exposure for these employee groups is contingent on industry and strategy
     • The results did not provide support for the universal prediction that core employees always receive higher levels of exposure to HIHR systems than support employees within the same establishment
     • . Interestingly, however, industry did exert a unique impact such that core employees received significantly greater exposure to HIHR systems than support employees in nonmanufacturing firms. There were no significant differences in exposure for these two groups in manufacturing industries
     • This research directly supports predictions by strategic HRM models that variability in HR practices is large and meaningful, resulting from differences in employee group contributions to strategic advantage
       • These findings suggest that establishments operating in industries that rely on technological processes to constrain the contributions of core employees are less likely to rely extensively on HIHR practices compared to those establishments where operating procedures depend on core employees’ discretion and input to the production of goods and services.

4. Gig economy

   • The ‘gig’ economy has been defined as the economic sector consisting of freelance workers who survive by taking on a series of small jobs, particularly when those jobs are arranged through digital technology.
     • Many see the gig economy as fundamentally changing the nature of work, with marked declines in full time and regular employment, more jobs classified as self-employed, working as freelancers or holding more than one job.
     • There is a strong view that work will become less secure, with more disagreement over whether the quality of work on offer will consequently decline. However, companies in the gig economy (e.g. Deliveroo) enjoy reduced labour costs since pension contributions, sick pay, etc. are not the companies’ responsibility, due to the staff being “self-employed”.

5. HRM differentiation

   • HR has to segment employment offerings, challenging the existing models of HRM, which suggests that all HR practices should be universal and commitment-oriented.
     • However, there are difficulties in managing varied HR systems e.g. treating different types of employees in different ways may act as a potential source of conflict.

6. Advantages of flexible org. structures

   • Guest (1987) argued that flexible organisational structures will result in a capacity to respond swiftly and effectively to changes, and ensure the continuous high utilisation of human resources.
     • • Employers get to save in recruitment costs and fixed labour costs. • With workplace flexibility, organisational resources are matched more closely with customer/product demand.
     • • A flexible workplace results in greater profits and a higher market share, due to the hard work and dedication of its employees.
   • According to Dickens (2005), the benefits for the employees include: • An improvement in work-life balance: In today's large companies, many employees are striving to meet both work and personal commitments. Workplace flexibility improves quality both in their work and personal lives.
     • • A flexible workplace environment shows that the needs of the workers are taken into consideration, and this in turn increases their loyalty, and commitment towards their employers.
     • • Increases employee job satisfaction: Employees become more confident and motivated to perform in their highest capacity, as they are more flexible to meet their duties and are driven to work harder.
     • Dickens (2005) states that for the employer, the benefits include the following: • Having a flexible workplace increases the retention of the permanent employees; organisations get to retain experienced and valuable employees. They become less likely to leave or search for work elsewhere.
       • • Minimizes absence and turnover: A flexible workplace decreases the stress level of employees, which is often caused by trying to meet their job and family commitments at the same time. Flexibility enables them to develop a greater sense of well-being.
   • IBM researchers found that workers who had flexibility in their workplace had increased commitment and loyalty and a higher productivity level of productivity. Managers were able to cut down on costs and recruit and retain valuable employees (Millmore et al., 2007).
   • Disadvantages
     • Disadvantages The major disadvantages of flexible patterns are the following (Stredwick & Ellis 2005): • Training costs often increase when implementing workplace flexibility.
       • • There is an increase in complexity in administration. Often, there is a need of a specialized management team for the flexible workforce in organisations.
       • • Communication gets affected; it tends to become difficult due to the segmentation of the workforce.
       • • Workplace flexibility often creates tension amongst the diverse categories of workers due to uneven treatment in terms of pay.
       • • Workplace flexibility increases job insecurity, especially for the part-time workers
       • • The company cannot continuously monitor the employee and how they work e.g. Apple does not have control over how people producing their products are treated in China or in Indonesia, as their operations are all outsourced
       • • While there is plenty of evidence to suggest a fairly widespread movement towards enhanced task flexibility, the degree of flexibility sought for, and achieved, in most cases appears modest, at best since the change is in terms of job enlargement rather than job enrichment.
         • In some cases, employers’ decision to seek numerical flexibility may be questioned due to the costs incurred by lack of commitment and loyalty and a loss of quality
         • • Organizations are treating labour as a variable rather than a fixed cost. In theory, PRP is meant to achieve some direct financial flexibility through directing pay to those who “deserve it”. However, due to financial constraints, the amount of PRP may be small and so, not only have little incentive effect, but may actually demotivate workers, if significantly out of line with expectations.