The literature on organisational flexibility

This chapter reviews the literature on organisational flexibility, the different types that exists, and the different forms commonly seen in different organisations. The different forms of flexibility are discussed in section 2.2.3 using the classification provided by Looise et al (1998) Major studies reviewed, particularly the work of Atkinson (1984) focused on the fact that there are 2 main groups of workers within a firm: the core group and the peripheral group. The theory of the flexible firm made by Atkinson is at the centre of this literature review. It is discussed in section 2.2.4 followed by some empirical evidence of the use of flexibility in section 2.3

2.2Theory

An overview of the different types and known forms of flexibility used in organisations is discussed in this section. After that, an illustration of Atkinson model of the flexible firm is also provided in section 2.2.4

2.2.1 Definition of flexibility

As defined by Looise et al, 1998 and Blyton and Morris, 1989, flexibility is the ability to adjust under fluctuating and uncertain circumstances. The concept of the ‘flexible firm’ itself was originated by Atkinson in 1984 where he argues that there is a growing trend for firms to seek various forms of structural and operational flexibility. Searches he made at that time demonstrate that flexible working can provide an elastic and less rigid approach within most functions in an organization, through the use of strategies such as flexitime working, flexible labour rotations, multi-tasking, production flexibility and delivery flexibility. Flexibility strategies can also improve a company’s competitive position on the basis that the meaning of flexibility is the ability to respond to changing market circumstances effectively.

2.2.2 Types of flexibility

According to Atkinson (1984), there are three main types of flexibility areas and they are as follows:

Functional

Numerical

Financial

Functional flexibility

It is the ability of managers to extend the range of tasks a worker can perform. With functional flexibility, employees are said to be multi-tasking or multi-skilled. They are able to perform different tasks and functions within the same company as required by the management. It requires a well trained workforce with in-depth knowledge of the different areas of the company, its processes, and its prevailing culture. This practice is said to benefit both the employees in terms of job enhancement and the organization which avails a multi-skilled workforce at its disposition and ready to face rapid changes. An example in the hotel sector, a receptionist can check in/out guests in the morning and also cleans guests’ rooms as a chambermaid after the morning rush. This demonstrates the extent to which companies are given greater flexibility to act quickly and smoothly as a means of reacting to the problem of staff shortage. According to Atkinson (1985), functional flexibility may imply the same labour force changing its activities within the organization in both short term and medium term.

Numerical flexibility

Numerical flexibility can be defined as the ability of organizations to increase or decrease employment quickly in line with fluctuations in business demand, and to improve competitiveness of firms through adopting this flexible policy (Atkinson1984; Looise et al 1998; Ruiz-Mercarder et al 2001). With numerical flexibility, companies can easily increase or decrease its total number of workers in the short term to accurately achieve an exact coincidence between the needed workforce and that effectively employed. It is normally achieved through the use of different types of contracts and variations in the distribution of working time. When organizations use numerical flexibility policies, they tend to predict the requirements for human resources and then adjust their human resource supply accordingly. For this type of policy to be more effective and in order to achieve greater success in balancing demand and supply, organizations must imperatively have the ability to use employment and deployment. For example, in most hotels nowadays, the accounting and finance department tries to predict the number of tourist arrivals during different periods by using budgeting systems and then pass it on to the Human Resources department which decides whether there is a need to employ more workers on contract in order to meet the budgeted demand.

Financial flexibility

It is defined as the policy of adjusting employment costs in line with the demand for labour in the organization, and reflecting the supply of labour in the external labour market. It is therefore obvious that financial flexibility and numerical flexibility are closely associated which implies that certain forms of numerical flexibility inevitably lead to greater financial flexibility for the employer. More specifically, in terms of setting wage levels, financial flexibility means moving from uniform and standardized pay structures towards individualized pay systems. Financial flexibility usually involves a sort of performance based element of pay or simply based on merits.

2.2.3 Sources of labour

Between these three broad types of flexibility, that is functional, numerical and financial, Looise et al (1998) further classify flexibility strategies into a two-by-two matrix based on two considerations, the source of the staff (that is the acquisition of man power internally and externally) and the involvement of different skills (that is the requirement for staff to have one specific skill only or be able to work more than two positions). This two-by-two matrix is illustrated below.

Table I Labour flexibility matrix

Internal

External

Overtime

Agency staff

Quantitative

Variable working time

Short-term contracts

Part-Time

Flexible contracts

Shift working

Exchange of labour

Labour pool

Qualitative

Job Rotation

Detachment

Multi-tasking

Consultancy

Multi-functioning

Source: Looise et al (1998)

2.2.3.1 Internal quantitative source of labour:

Internal quantitative source of labour implies numerical flexibility. It represents the different ways a company can obtain a numerical increase in its labour force by looking within the organisation itself.

(a) Overtime

From Table I overtime is said to be an internal quantitative source of staff. Overtime is the term used to describe work undertaken on top of an employee’s normal contracted hours. Employees are normally paid at an enhanced rate for their overtime (usually one and a half time the normal hourly rate or even double time). Overtime is usually done voluntarily by employees as it is seen as a means of supplementing their basic wage. However, in some circumstances, it is compulsory. For many workers, particularly in white collar jobs and especially amongst professionals and managerial grades, there is no additional overtime payment, even working after normal contracted working hours.

(b) Variable working time

It refers to a situation where the employee is free to choose his or her working time. Usually, employers accept to make workers choose between variable working time as long as they attain a certain quota in their work as targeted by the management.

(c) Part-time

It denotes jobs where the number of hours is less than the standard working week. However, there is a problem when talking about part-time jobs. There is no general agreement on what constitutes a standard working week, although there are sometimes industry or establishment norms. It implies that the term part-time can be used to denote someone working a three hour week as well as someone working thirty hours a week.

(d) Shift working

Shift working is another internal source of quantifying labour. It allows establishments to work continuously by deploying a large workforce across three segments in the working day: early shift, late shift and night shift. In many instances, employees will rotate across these shifts from week to week.

2.2.3.2 Internal qualitative source of labour

Internal qualitative source of labour is more likely to be linked with functional flexibility. It encloses the different ways a firm can get working within the company itself to do different tasks.

(a) Job Rotation

Job rotation means that employees within a particular work area have the ability to perform a variety of tasks and will move from one to another at various times within the working day or the working week. This means that employees have to be fully flexible and able to perform different tasks when necessary during the working day.

(b) Multi-tasking and multi-functioning

Multi-tasking or multi-functioning implies that a worker can do other jobs apart from those assigned to him. For example, in the hotel sector, a person can work as barman and prepare cocktails and also work as cook in the kitchen.

2.2.3.3 External quantitative source of labour

External quantitative source of labour refers to the different ways a firm can become numerically flexible and get an increase in labour force by looking for workers outside the firm.

(a) Agency staff

Staffing agencies co-ordinate and engage with corporations, organizations and other clients, size up their human resources needs and match their staff needs according to specific requirement. This implies that agency staffs are those persons who are registered to a staffing agency which in turn try to place them in certain specific jobs according to their qualifications. For example, if a hotel is looking for a cook with 2 years experience, it may contact the staffing agency which will look in its data base system for a cook with the experience necessary.

(b) Short-term contracts

Short-term contract jobs are jobs that have a definite end date. The length of the contract is specified in the contract itself. Short-term or contract jobs could last for one month, three months or even twelve months, depending on the nature of the job. Some people choose short-term jobs because they don’t want to feel like they will be stuck in the same job for a long time.

(c) Flexible contracts

Flexible contract is another quantitative source of labour. It implies employing persons through agency staffs, employing freelance workers or casual workers or even outsourcing the work to specific agencies in the particular field of work required. An example in the hotel sector, instead of employing someone permanently to do gardening or cleaning, there is a gardening agency that provides workers for a certain time period. These workers would be paid directly by the hotel itself but will leave when the job is over.

(d) Exchange of labour

Exchange of labour is a system where an organization does not need to any recruitment and selection to obtain the necessary labour. Instead it looks within other companies most of the time within the same group of companies and take the best candidate according to requirements. In the hotel sector for example, let’s say La Pirogue Hotel need a chef cook. Instead of recruiting one, the hotel will try to find one within the other hotels in the group, i.e. the Sun Resorts Ltd.

(e) Labour pool

Labour pool refers to a source of trained people from which labour can be hired. It is another external quantitative source of labour where companies can find trained people required for a particular job. The University Of Mauritius is a labour pool. When, for example, a finance company needs ten persons to work in a particular department, they may come to the University of Mauritius and choose the ten best finance students that fits their requirements.

2.2.3.4 External qualitative source of labour

It implies functional flexibility but the source of labour this time is outside the firm.

(a)Detachment

Professional detachment is about doing a task when you don’t like it very professionally. If a person is affected by the way the customers talk and that affects the way he or she is doing the job, then the latter are not professional in his work. Professionalism is manifested when someone carry out the job when he does not like it at all.  Professional detachment paves the way for achieving excellence and avoiding a lot of unnecessary headaches that one will get from personal involvement.

(b) Consultancy

Consultancy is an arrangement where a specialist firm sells its services to other firms. For example, KPMG offer advice about matters like taxation or investment or management to other firms. Consultancy is therefore an external qualitative source of labour as the consulting firm will send workers to the other company and provide advice which may benefit the company in terms of better quality work.

2.2.4 John Atkinson model of the flexible firm

In the 1980s, debates around flexibility were focused on the model of the flexible firm proposed by Atkinson (1985). The most distinctive feature of Atkinson’s model was the suggestion that firms started dividing their workforce into CORE and PERIPHERY workers. The model is illustrated in the figure below.

Figure 1: The flexible firm

Source: Atkinson (1985)

The core group

According to Atkinson, the most important part for a flexible firm is its core group. Core workers are full time, i.e. permanent employees who benefit of job security and high earnings. In return, they perform different tasks and work as flexible workers across different traditional skills boundaries. They are functionally flexible. The firm invests in these workers in terms of training and they develop new skills which make it possible for them to perform different tasks. Typical members of the core group include managerial and professional staffs and multi-skilled workers.

The first peripheral group

Outside the core group there is a great variety of peripheral workers. However, the first peripheral group is composed of full-time workers. As compared to the core group, these workers enjoy less job security and inferior career prospects. They are hired to do specific jobs usually of semi-skilled nature. Because workers within the first peripheral group are easily recruited and easily fired, firms can vary their number according to different levels of activity and hence become numerically flexible. In the hotel sector, a typical example could be a waiter or waitress. When there is too much work, more waiters are recruited and when the load of work goes down, again some are fired.

The second peripheral group

The second peripheral group is made of part-timers, people on job share, and a variety of temporary workers such as workers from agency staffs, people on short term contracts and also those on government schemes. These workers perform the same type of jobs as the first peripheral group and also give the firm numerical flexibility depending on fluctuating activities and hence allow to cope with uncertain growth. The only difference between these two groups is that the second peripheral group is made of part time workers whereas in the first peripheral group, workers are on a full time basis.

Outside the firm

(Self-employment/ sub-contracting/ increased outsourcing/ agency temporaries)

There is a variety of external workers outside the firm who perform either routine tasks such as cleaning and security or very specialized ones. For example many firms employ external workers to do cleaning jobs or ensure the security. There are also sub contracts, agency staffs and home-workers. Home workers may be those working in areas of computing or networking and who can work also through long distances. With these external workers, firms are able to cope with predictable changes in their activities and therefore become financially flexible rather than numerically flexible as they enable the firm to limit financial commitment.

2.3 Empirical evidence

In this section, different studies pertaining to flexibility are illustrated. Some figures are provided to demonstrate the use of different forms of flexibility in organisations.

The evidence for flexibility

When Atkinson make the study, be based his model on evidence from case studies and surveys including the NEDC (1985) survey of 72 firms in the food and drink, engineering, retail and financial services industries. The NEDC, National Education Data Center, is a U.S agency responsible for providing policy-relevant analysis and reports derived from education data and indicators. It was created in the 1980s by combining offices from several federal agencies. The surveys and case studies identified widespread increases in numerical flexibility in the early 1980s.

Surveys also included the Advisory, Conciliation and Arbitration Service survey the ACAS (1988). The latter demonstrated that there was also a slight increase in different forms of numerical flexibility. For example, it argues that sub-contracting was the most common and has increased in the manufacturing sector, in larger organisations and in parts of the public sector, such as health and civil service whereas job sharing was on an increasing trend in sectors such as banking where there are problems of balancing staffing and workload.

Studies made also provide the evidence that the number of flexible employees increased. They were divided into two particular groups: part-time employees and self employed. In 1981 there were over 4 million people working part-time and in 1993, the number of part-time workers has nearly reached 6 million. The studies demonstrate that the increase in part-time workers occurred at the expense of full-time workers. In 1993 when the number of part-timers increased by 227,820 to a total of 5,998,112, full-time jobs declined by 275,464 to a total of 14,889,977. Over the period 1981-1993, the number of part-timers rose by 1.25 million while full-time jobs declined by 0.5 million.

The proportion self employed in the U.K workforce also increased substantially throughout the 1980s at a faster rate than the increase in part-time employees. In the 1990s there were nearly 3.4 million self-employed, approximately 1/8 of the total workforce.

Hunter and MacInnes (1991) study

Hunter and MacInnes made a study in 1991 on a survey carried out by the Employers Labour Usage Strategies (ELUS). The results progressively focused on workplaces having the most marked tendency to employ peripheral workers. ELUS visited 877 workplaces which made use of peripheral workers of various kinds. Hunter and MacInnes then took a sub-sample of 39 of these establishments. They identified three groups of workers:

First there was a set of skilled professionals and technical occupations comprising large numbers of freelance, agency staffs and self-employed workers.

Second there was a group of manual and non manual workers who were seen by their employers as having a low level skill or as easily transferable. Not much learning and training were required to do their jobs. Some were on a temporary or a part-time basis

Finally, there was a smaller group between the two others which covered both skilled and unskilled jobs that were dependent in some way on limited contracts.

The conclusion made by Hunter and MacInnes was that employees have started extending their use of non-standard contracts and this demonstrate the progression of different forms of flexibility in organisations.

2.4 Conclusion

Researches on flexible work are relatively well established and at least since the work of Atkinson (1984) there has been much attention to the concept of flexibility in organisations. Flexibility is seen as a means to improve a firms’ competitiveness by lowering labour costs. The 2 most important types of flexibility that will be considered within the rest of the project are numerical flexibility and functional flexibility. These two concepts are very important as numerical flexibility tries to make the firm able to cope with increases in work by changing the amount of labour quickly in response to changes in the market and on the other side, functional flexibility make it possible for employees to carry on different tasks and hence reducing company labour costs. Evidences in Europe proved that many companies are more flexible since the 1990s and are actually looking for more and more better ways to be flexible and efficient both in terms of costs and productivity.