Simon Caulkin in London
It was trumpeted as the key to reducing unemployment. Everyone, just everyone, agreed: flexible working was A Good Thing. It was the wonder drug for good management.
As with the medical variety, management wonder drugs all too often turn out to have nasty side effects. Indeed, sometimes the complications are worse than the original illness.
And inevitably, just as politicians have reached a consensus on the desirability of flexible working, that consensus is being challenged. According to research by academics at Birkbeck College in London, some aspects of workforce flexibility are actually counterproductive.
Flexible working – whether part-time, fixed-term, temporary or outsourced – has increased rapidly in the Nineties as companies have attempted to cut costs by adapting job patterns to the work available.
Between 1992 and 1996, the number of temporary workers in the United Kingdom rose by nearly a third, with fixed-term contracts and agency temping increasing by a similar amount. A survey by the Institute of Employment Studies found that more than half the firms in its sample were employing temporary staff, while a further 17% had done so in the past.
At the same time, the number of different contractual arrangements has proliferated. While traditional contracts are mostly still the norm, the study found that “in many organisations, traditional employees could be working on a project with specialists on fixed-term contracts, freelancers, self-employed consultants, employees of another organisation and company employees who were part of a pool or agency not tied to a specific department and who may also work for outside organisations”.
Despite the rapid growth, however, there are signs that some aspects of new-style contracting may be counterproductive. As with many “human resource management” initiatives, flexible arrangements are often introduced not to improve effectiveness but as a diktat by the boardroom for reasons of cost, fashion or consultancy hype.
Not surprisingly, the results of such ill- prepared initiatives have been mixed. True, the benefits of subcontracting to some employees should not be overlooked. For example, workers “outsourced” from, say, a weak internal IT department to a major external supplier may actually be more secure as a result of the transfer.
Part-time working, of course, suits some employees’ way of life as well as being convenient for companies. Some organisations, however, have met “huge employee resistance” to new forms of contract.
Where the new arrangements were voluntary, the best employees quickly opted to go freelance. This caused concerns about confidentiality: these workers could now in theory work for competitors – and in practice often did. This meant they were less likely to be available to their original employer.
The perverse result was the organisation had less flexibility than before, since it could now bring in only the less successful freelancers, those who couldn’t get work anywhere else.
What’s more, although fixed costs were cut, it’s not clear that flexibility yielded any overall savings. Good freelancers quickly exploited their market position and became more expensive than full-time workers.
Labour turnover increased, with added costs for recruitment, training and management time. These are not negligible.
According to the Institute for Personnel and Development, in 1996 labour turnover rates (the percentage of people leaving a job in a given year) in the UK ranged from 16% for full-timers to a whopping 22% for part-time employees, with the cost per leaver starting at 5 008 for a manager, 3 640 for a salesperson and 1 746 for clerical or secretarial staff.
Meanwhile, hard-pressed line managers were at a disadvantage when negotiating contracts with highly skilled bargainers. And using fixed-term contracts as a way of making people work harder failed because, in the absence of experienced negotiators, companies found it easier simply to renew the contracts.
All in all, the result for firms has been less the hoped-for flexibility than contract chaos, in which no one can keep track of all the variations.
More importantly, says the report, “the range of employment contracts among people working together is a recipe for low perceptions of fairness and low trust: in other words, for a poor psychological contract. Insofar as this is linked to lower commitment and possibly to lower effort, the attempt to achieve performance gains through a cost-reduction strategy is backfiring.”
Other research throws up wider concerns; one is that part-time workers invariably receive less training. Nor is there conclusive evidence that flexibility creates jobs. Shifting risk from company to individual may (or may not) make companies more efficient, but it makes society as a whole less efficient.
These misgivings about the new style of contracting within firms are paralleled by research findings about contracting between them.
A pamphlet for the Economic and Social Research Council notes that while a large part of the public sector has been privatised, marketised or contracted out – in effect subjected to flexible working – advanced thinking in the private sector now has partnership and long-term relationships with customers and suppliers as keys to success.
If partnership and trust within contractual relations are “one of the foundations of dynamic efficiency in the economy, then what are portrayed as ‘market’ reforms may actually be undermining the institutional and cultural bedrock on which successful markets depend”, says the pamphlet.
Why should the logic of partnership, which is supposed to yield competitive advantage when applied to the relationship between companies, not apply to internal employer- employee relationships?
Perhaps it’s time to take a lesson from Henry Ford. In the early days of mass production at the beginning of the century, “flexible working” – casual shifts, temporary work, arbitrary lay-offs and zero-hour contracts – were commonly used by employers to keep costs down. That led to the alienation most famously portrayed in Charlie Chaplin’s Modern Times.
It was Ford who triggered the slow humanisation of industrial relations by discovering the hidden costs of “flexibility”, dismaying his contemporaries by regularising employment and paying his workers more. But this was not altruism. It was, judged Ford, “one of the finest cost- cutting moves we ever made”.