Workplace Flexibility Practices in SMEs: Relationship with Performance via Redundancies, Absenteeism, and Financial Turnover

Abstract

This workplace flexibility study uses primary data on private sector small and medium‐sized enterprises () in ancashire, nited ingdom, collected in 2009 during the recent “credit crunch” recession. Key features include: (1) objective measures of performance; (2) a focus on the previously relatively neglected relationship between workplace flexibility practices () and three performance indicators, namely, redundancies, absenteeism, and financial turnover; and (3) a timely contribution to research on . Numerical, functional, and cost analyses, via zero‐inflated oisson and linear regressions, control for and market characteristics. Despite having limited resources, the results show a significant section of to be innovative and entrepreneurial organizations, embracing advancements in employment relations regarding employee discretion, training, participative working arrangements, and/or job security. Moreover, results indicate that have the potential to assist in responding to periods of constrained demand. Flexitime and job sharing are associated with low permanent‐employee redundancies. Training, job security, and family‐friendly practices relate to low absenteeism with reductions of up to six annual days per worker. Job security and profit‐related pay are associated with high financial turnover. Staff pay‐freeze links with high financial turnover, but to the detriment of redundancies and absenteeism, whereas management pay‐cuts or management pay‐freeze relate to low financial turnover. On a cautionary note, spending cuts, often enforced by policymakers, may be of limited benefit to , and thus other approaches would appear more fruitful.

Notes

1. A notable trend in the literature is to define the concept of workplace flexibility in relation to the scope of the study. For instance, Hill et al. (2008, p. 152) define flexibility from an employee perspective: “the ability of workers to make choices influencing when, where, and for how long they engage in work‐related tasks.” In contrast, Martinez‐Sanchez et al. (2007, p. 648) use an organizational perspective in their definition: “we define workplace flexibility as the ability to address changes in labour organization in the workplace.” Or, the definition of workplace flexibility proposed in this paper claims the middle ground, being inclusive of both perspectives.

2. Numerous studies use subjective performance indicators, such as perceived general performance and perceived financial performance, or less quantifiable measures of performance including employee morale, organizational commitment, manager‐rated organizational performance, or job satisfaction (Dex and Scheibl 2001; DTI 2005; Giardini and Kabst 2008; Origo and Pagani 2008).

3. Other decompositions of WFPs have been utilized in a number of studies examining aspects of flexibility (Caroli et al. 2010; Kalleberg 2001; Martinez‐Sanchez et al. 2007; Origo and Pagani 2008; Van der Meer and Ringdal 2009).

4. The WERS 2004 is the fifth wave in a series of British surveys aimed to provide a nationally representative view of employment relations in British workplaces (DTI 2005). For more information, visit http://www.wers2004.info/.

5. Family‐owned SMEs form a large proportion of SMEs in other countries, too—see the study in the United States by Carlson, Upton, and Seaman (2006).

6. As their economic profile and strategies would be too specific and different than for the rest of organizations in the sample, SMEs from the following three sections based on the Standard Industrial Classification (SIC 2003) are excluded from the survey of Lancashire SMEs: Section A “Agriculture, Hunting and Forestry”; Section B “Fishing”; and Section C “Mining and Quarrying.” This is in line with the sample definition restrictions observed in similar organizational research in Britain, such as the Workplace Employment Relations Survey (WIRS/WERS) series (see Bryson, Green, and Whitfield 2008).

7. See Appendix 1 containing a brief description of the 12 WFPs.

8. See Appendix 2 containing technical notes on the methods of analysis used.

9. The “bundle” hypothesis refers to testing whether practices may be grouped into scales, scores, or indexes of practices, using factor analysis for such grouping. However, there is criticism that, via these techniques, practices would be grouped in an ad hoc manner, too remote from rationales of implementation in the firm, hence certain authors have cautioned against “bundles” (Black and Lynch 2001; Van der Meer and Ringdal 2009).

10. Because of a relatively low number of observations in the sample of 135 SMEs, and to an interest in assessing separately the three specific areas of workplace flexibility (namely, numerical, functional, and cost WFPs), the 12 WFPs of interest in this paper are not entered all at the same time in a single analysis, but rather introduced as three sets of four practices at a time. See Figure 1.

11. These results are available from the authors on request.

12. In models where the dependent variable has been log‐transformed and the predictors have not, the format for interpretation is that dependent variable changes by 100x(coefficient) percent for a one unit increase in the independent variable whereas all other variable in the model are held constant. Hence, if a certain practice is introduced (i.e., a change from zero to one in its status equivalent to a one unit increase in the independent variable), the dependent variable which is natural logarithm of turnover changes, as a percentage, by 100 times the coefficient.

Additional information

Funding

Lancashire Business School, UCLan (UK)

Notes on contributors

Philip B. Whyman

Philip B. Whyman is professor of Economics and Director of the Institute for Economic and Business Research (LIEBR) at Lancashire Business School, University of Central Lancashire.

Alina I. Petrescu

Alina Ileana Petrescu is research fellow in Labour Economics and member of the Institute for Economic and Business Research (LIEBR) at Lancashire Business School, University of Central Lancashire.