Strategic Issues and Choices in Using Contingent and Flexible Workers

Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)Professor

Role Played by Contingent Workers and Flexible Work Schedules

Contribute to meeting the goals of cost control and

Product or service innovationCost control objective requires firms to reduce

output costs per employeeContingent employment saves companies

considerable amounts of money because: - They do not give these workers most discretionary

benefits, or - Provide less general amounts of such benefits- Discretionary benefits represent a significant fiscal

cost to companies

Cost Control ObjectivesEmployers’ use of well trained contingent workers

also contributes through reduced training costsNot all contingent workers know company specific

work practices and procedures Company specific training represents a significant

cost to companies Companies that do not employ contingent workers

long enough to realize productivity benefits from training, undermine cost control objectives

Company sponsored training may seem to contradict lowest cost imperative in short term

Factors Increase Short Term Costs

Cost of training materials and instructors’ professional fees

Downtime while employees are participating in training

Inefficiencies that may result until employees master new skills

Longer Term Perspectives on Cost Control

Contingent work arrangements support lowest cost imperatives in longer term perspectives

Productivity enhancements and increased flexibility should far outweigh short run costs

- if companies establish track records of:• high productivity, • quality and • exemplary customer service

Flexible SchedulesFlexible schedules contribute to

lowest cost imperativesFlexible employees demonstrate

lower absenteeism than employee with fixed work schedules

Product and Service Innovation Objective

This requires creative, open minded risk taking employees

Companies that pursue differentiation strategies must take a longer term focus to attain their objectives

Both arrangements should contribute to innovations

Companies will benefit from influx of new employees from time to time who bring fresh ideas with them

Contingent employment should minimize problems of groupthink, as all group members view issues through lens of conformity

Flexible work schedulesFlexible work schedules promote differentiation

strategies for two reasons: First, flexible work schedules enable employees to

work when they are at their physical or mental bestSome individuals most alert during morning hours,

others most alert during afternoon/evening hours because of differences in biorhythms

Second, flexible work schedules allow employees to work with fewer distractions & worries about personal matters

Inherent flexibility of these schedules allows employees to attend to personal matters as needed

Contingent EmploymentEmployers justify increased contingent employment

with business necessity - cost containment & flexibility

Companies are trading employee loyalty for reduced costs and greater flexibility

Employees previously were maintaining employment within their choice companies as long as they wished

Many employees remained with a single company for decades at a time culminating in a retirement bash and receipt of a ‘gold’ watch for long time service

Such companies as Ford Motor Company, General Motors, IBM and Lincoln Electric exemplified extended employment

Contingent EmploymentWorkers do not forget past practices that once led to

job security and sound retirement benefitsWorkers may not take personal interest in

companies’ performance as employment relationship becomes more tentative

Workers will look for better and more secured employment else where & less loyal to employers

Companies may become victim to reduced employee loyalty, resulting in:

- heightened job insecurity among core employees - lower control over product or service quality- higher turnover - compliance burdens and costs and - greater training costs

Contingent EmploymentFirst, both contingent and core workers may

develop less loyalty for their employersHiring contingent workers may lead core

employees to feel less secure about their status Because staffing companies with contingent

workers generally represents a lower cost alternative to core employees

Consequently, core employees’ loyalties may become diminished, which can translate into lower worker dependability and work quality

Contingent EmploymentSecond, employers can lose control over

product or service quality when they employ contingent workers

This occurs when companies engage contingent workers on short term basis

It takes contingent workers time to learn company specific procedures and work processes

Companies that do not employ contingent workers long enough will not maintain sufficient control over quality

Contingent EmploymentThird, turnover rates among core workers will

probably increase when companies employ contingent workers

Core employees may feel uncertain about their job status and this uncertainty will lead to lower loyalty

Absence of job security and diminished loyalty will increase core employees’ job search activities

most qualified core employees may receive competitive job offers that lead to dysfunctional turnover

Contingent EmploymentFinally companies must bear the costs of training

contingent workersIn many cases, employing contingent workers

can be as costly as employing core workersSavings from not offering contingent workers

discretionary benefits is offset by training costsThese costs become less significant for

companies that employ contingent workers long enough to realize returns on the training investment through higher productivity and work quality

Case

Everyone telecommutes at your firm. All work is done in virtual teams of four. Divide up into groups of four and respond to the following questions:

How will you organize your team?Do you need a virtual leader?How will you select your virtual team?How will you hold team members

accountable?