---------- Forwarded message ---------- Date: Mon, 19 Jan 1998 13:10:30 -0800 From: Allan <[EMAIL PROTECTED]> Reply-To: Forum on Labor in the Global Economy <[EMAIL PROTECTED]> To: [EMAIL PROTECTED] Subject: Flexible WorkingObserver - Sunday January 18th Observer - Sunday January 18th By Simon Caulkin FLEXIBLE WORKING CUTS COSTS AND CREATES JOBS. WRONG ON BOTH COUNTS. The Conservatives trumpeted it as the key to reducing unemployment. Labour eventually followed suit. 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*, some aspects of workforce flexibility are actually counter-productive. Flexible working -- whether part-time, fixed term, temporary or outsourced -- has increased rapidly in the Nineties as companies have attempted to cut costs by adjusting job patterns more closely to the work available. Between 1992 and 1996, the number of temporary workers 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 it's sample were employing temporary staff, while a further 17 per cent 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 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' to0 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 that the organisation had less flexibility than before, since it could now bring in only the less successful freelances, 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 freelances 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) ranged from 16 percent for full-timers to a whopping 22 percent 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 a kind of 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; another is that lower pay for part-timers has in some cases to be made up by the state, which now spends more than £2 billion a year on supplements. 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 new misgivings about the new style of contracting within firms are paralleled by research findings about contracting between them. In a pamphlet for the Economic and Research Council (Making Markets Work: Contracts, Competition and Cooperation) Seumas Milne, Labour Editor at The Guardian, 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 'in fact 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,' writes Milne. 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 producion 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'. · Innovative Employment Contracts: a flexible friend?, David Guest, Kate Mackenzie Davey, Christopher Smewing [EMAIL PROTECTED]
