Flexible resourcing choices for human ressource needs

1. FLEXIBLE RESOURCING CHOICES

Understanding the dynamics of the organisational environment is only one part of taking a strategic approach to employee resourcing. Having gained an understanding one must decide how the organisation can best interact with its environment to maximise its performance. One set of key choices concerns the extent to which the organisation can aspire to flexibility and in what ways this can be achieved. Three types of flexibility are often identified in the literature: numerical flexibility, temporal flexibility and functional flexibility. A fourth type, financial flexibility, is discussed in Chapter 28.

1.1. Numerical flexibility

Numerical flexibility allows the organisation to respond quickly to the environment in terms of the numbers of people employed. This is achieved by using alternatives to traditional full-time, permanent employees. The use, for example, of short-term contract staff, staff with rolling contracts, staff on short-term, government-supported training schemes, outworkers, and so on, enables the organisation to reduce or expand the work­force quickly and cheaply.

Atkinson is one of a number of commentators who has described the way in which firms may develop flexibility in their approach to employment, as shown in Figure 5.1. The flexible firm in this analysis has a variety of ways of meeting the need for human resources. First are core employees, who form the primary labour market. They are highly regarded by the employer, well paid and involved in those activities that are unique to the firm or give it a distinctive character. These employees have improved career prospects and offer the type of flexibility to the employer that is so prized in the skilled craftworker who does not adhere rigidly to customary protective working practices.

There are then two peripheral groups: first, those who have skills that are needed but not specific to the particular firm, like typing and word processing. The strategy for these posts is to rely on the external labour market to a much greater extent, to specify a narrow range of tasks without career prospects, so that the employee has a job but not a career. Some employees may be able to transfer to core posts, but generally limited scope is likely to maintain a fairly high turnover, so that adjustments to the vagaries of the product market are eased.

The second peripheral group is made up of those enjoying even less security, as they have contracts of employment that are limited, either to a short-term or to a part-time attachment. There may also be a few job sharers and many participants on government training schemes find themselves in this category. An alternative or additional means towards this flexibility is to contract out the work that has to be done, either by employ­ing temporary personnel from agencies or by subcontracting the entire operation.

A slightly different version of the peripheral workforce is created when the organisa­tion boundary is adjusted by redefining what is to be done in-house and what is to be contracted out to various suppliers.

1.2. Temporal flexibility

Temporal flexibility concerns varying the pattern of hours worked in order to respond to business demands and employee needs. Moves away from the 9-5, 38-hour week include the use of annual hours contracts, increased use of part-time work, job sharing and flexible working hours. For example, an organisation subject to peaks and troughs of demand (such as an ice cream manufacturer) could use annual hours contracts so that more employee hours are available at peak periods and less are used when business is
slow. Flexitime systems can benefit the employer by providing employee cover outside the 9-5 day and over lunchtimes, and can also provide employee benefits by allowing personal demands to be fitted more easily around work demands.

The research evidence suggests increased usage of all forms of temporal flexibility in recent years. Longer opening hours in retailing and the growth of the leisure sector mean that many more people now work in the evening (17 per cent) and at night (6 per cent) than used to be the case. The proportion of jobs that are part time also continues to rise, albeit at a slower rate than in the 1970s and 1980s, while the length of the working week for higher-paid full-time workers has increased by three hours on average during the past decade. There has also been some growth in the use of annual hours contracts, but these arrangements have not become as widespread as was predicted a decade ago. Only 6 per cent of employers have chosen to adopt this approach for some of their staff (Kersley et al. 2006, p. 79).

1.3. Functional flexibility

The term ‘functional flexibility’ refers to a process in which employees gain the capa­city to undertake a variety of tasks rather than specialising in just one area. Advocates of such approaches have been influenced by studies of Japanese employment practices as well as by criticisms of monotonous assembly-line work. Horizontal flexibility involves each individual employee becoming multiskilled so that he or she can be deployed as and where required at any time. It is often associated with shop-floor manufacturing work, but can be applied equally in other workplace settings. Vertical flexibility entails gain­ing the capacity to undertake work previously carried out by colleagues higher up or lower down the organisational hierarchy.

The primary purpose of functional flexibility initiatives is to deploy human resources more efficiently. It should mean that employees are kept busy throughout their working day and that absence is more easily covered than in a workplace with rigidly defined demarcation between jobs. Another source of efficiency gains arises because employees are more stretched, fulfilled and thus productive than is the case in a workplace with narrowly defined jobs. Despite its potential advantages research suggests that employers in the UK have been less successful than competitors elsewhere in Europe at developing functional flexibility. According to Blyton (1998, p. 748), this is primarily because of a reluctance to invest in the training necessary to support these new forms of working. By contrast, Reilly (2001, p. 132) points to employee resistance and the increased likelihood of errors occurring when functional flexibility programmes are introduced. It could also simply be a reflection of increased specialisation as jobs become more technically com­plex and rely to a greater extent on specific expert knowledge. Either way, according to the Workplace Employment Relations Survey, there has been a decline in formal multiskilling programmes during recent years. In 2004 only 19 per cent of workplaces reported that at least three-fifths of their core employees were trained to do more than one job, compared with 29 per cent in 1998 (Kersley et al. 2006, p. 92).

1.4. Debates about flexibility

The growth in flexible working arrangements combined with their promotion by governments since the 1990s has led to the development of robust debates about their desirability and usage in practice. As much controversy has centred on the Atkinson model of the flexible firm as on the rather different elements that go to make it up. There has been a continuing debate, for example, about whether the model of core and periph­ery is a description of trends or a prescription for the future. Two streams of research have flowed from these interpretations. The first concerns the extent to which the model has been adopted in practice, the second focuses on the advantages and disadvantages of the model as a blueprint for the future organisation of work.

Evidence on the first of these questions is patchy. There is no question that rhetoric about flexibility and the language of flexibility is increasingly used. The flexible firm model appears to be something that managers aspire to adopt, but the extent to which they have actually adopted it is questionable. In many organisations the drive for economies of scale means that far from becoming more flexible, organisations are just as likely to introduce bureaucratic systems and standardised practices in response to competitive pressures. And yet we also have seen for a long period now increased use of part-time workers, consultants, subcontractors, agency workers and of moves towards multiskilling. Karen Legge’s (1995) conclusion that flexibility is used in a pragmatic and opportunistic way rather than as a strategic HRM initiative thus seems to hold true today.

On the question of the desirability of flexibility a number of views have been expressed. The theoretical advantages for organisations arise from productivity gains. In different ways each type of flexibility aims to deploy employee time and effort more efficiently so that staff are only at work when they need to be and are wholly focused on achieving organisational objectives throughout that time. However, the extent to which this is achieved in practice is not clear. Many writers equate the term ‘flexibility’ with ‘insecurity’ and argue that the consequences for organisations in terms of staff commitment and willingness to work beyond contract are damaging. Staff turnover is likely to increase in response to the introduction of flexible working practices, while recruitment of talented people will be harder too. In short it is plausibly argued that the flexible firm model, at least as far as the ‘peripheral’ workforce is concerned, is incompatible with best practice approaches to HRM which seek to increase employees’ commitment. Sisson and Storey (2000, p. 83) make the further observation that too much ‘hollowing out’ can impair organisational learning and lead to the loss of expertise, a loss from which it is difficult to recover. These unintended consequences, it is argued, can worsen rather than improve an organisation’s com­petitive position. Others (see Heery and Salamon 2000, Burchell et al. 2002) see too much flexibility as having damaging longer-term economic consequences. For example, it can lead to a reduced willingness on the part of employers to invest in training, the absence of which creates skills shortages that hold back economic development. It can also lead to a situation in which managers exploit the vulnerability of peripheral workers by intensifying their work to an unacceptable degree. Finally, it can be argued that in dividing people into ‘core’ and ‘peripheral’ groups, flexible firms perpetuate inequality in society more generally and that this leads to poverty, crime, family break­down and political alienation. Fudge and Owens (2007) label the new types of work ‘precarious’ and point to the fact that in the majority of cases it is carried out by women who are much less likely than men to enjoy the benefits associated with long-term, full­time, stable, pensionable employment associated with an income which is sufficient to sustain a household.

There are other balances in resourcing strategy that can be addressed, for example the balance between numbers of permanent staff employed and the hours that each employee works. In November 1993 Volkswagen in Germany announced that in their current poor financial situation they were employing too many people. In order to avoid redundancies they agreed with the workforce that hours would be reduced by 20 per cent so that they worked a four-day week, and that wages would be reduced by 10 per cent. There is a good deal of emphasis in Europe on reducing the working week to help reduce redundancies, unemployment and absence levels, and to improve family life.

2. READY MADE OR HOME GROWN?

Organisations have a choice whether to depend extensively on the talent available in the external labour market or to invest heavily in training and development and career systems to exploit the potential in the internal labour market. Some organisations thrive despite having high levels of staff turnover, while others thrive on the development of employees who remain with the organisation in the long term. The emphasis on either approach, or a balance between the two, can be chosen to support organisational strategy.

Sonnenfield et al. (1992) propose a model which relates entry and exit of staff with promotion and development of staff in the organisation. One axis of the model is supply flow. They argue that, strategically, organisations that focus on internal supply tend to see people as assets with a long-term development value rather than costs in terms of annual expenditure. The other axis is labelled the assignment flow, which describes the basis on which individuals are assigned new tasks in the organisation. The criteria for allocation may be in terms of individual contribution to organisational performance, or on group contribution – which Sonnenfield et al. identify as factors such as loyalty, length of service and support of others. They argue that, strategically, organisations that emphasise individual contribution expect individuals to provide value on a continuous basis, whereas those that emphasise group contribution see employees as having intrinsic value.

The model proposed describes the combination of these two aspects of resourcing and results in four typical ‘career systems’ as shown in Figure 5.2. In each box alongside the career system label (academy, club, baseball team and fortress) Sonnenfield et al. identify the strategic organisation model and the competitive strategy which are most likely to drive each career system. They also identify the likely orientation of the human resource function. In this chapter we are concerned with the characteristics of the career systems, which are discussed below.

2.1. Academies

In academies there is a heavy emphasis on individual contribution, in terms of reward and promotion. They are characterised by stability and low turnover of staff, with many employees remaining until retirement. There is an emphasis on development and often competition for promotion and barriers to leaving the organisation. Examples of typical industries where academies operate are pharmaceuticals and automobiles.

2.2. Clubs

Again there is a heavy emphasis on the internal labour market, but promotion in clubs is more likely to be based on loyalty, length of service, seniority and equality than on individual contribution. There is an emphasis on staff retention. Sectors where this type of system is likely to operate include public bodies, although the introduction of competitive forces will mean that a different career system may be appropriate.

2.3. Baseball teams

Organisations characterised as baseball teams use external labour sources at all levels to seek the highest contributors. There is an emphasis on recruitment to maintain staffing levels. Employees will tend to identify with their profession rather than the organisation, and examples given are advertising, accountancy and legal firms.

2.4. Fortresses

Fortress organisations are concerned with survival and cannot afford to be concerned with individuals, in terms of either reward or promotion. They are more likely to depend on external recruitment, often for generalists who meet the needs of a retrenchment or turnaround situation. Examples given are publishing, retailing and the hotel sector.

Source: Torrington Derek, Hall Laura, Taylor Stephen (2008), Human Resource Management, Ft Pr; 7th edition.