Stretch To Your Goals With A Flexible Strategy

To understand this contradiction we point to poor implementation of such solutions together with an inadequate assessment of flexibility needs at the outset. Flexibility should not be seen as a fad – the fact that company "A" implements a flexibility solution does not mean that the same solution will be suitable for company "B" even if they belong to the same industrial sector. Therefore, to implement flexibility solutions, it is important to understand why organisations might require flexibility.

Flexibility Drivers

A common reason for implementing flexibility solutions in organisations is the need to cope with market drivers such as demand variability and demand uncertainty. The type or characteristics of the product or service that an organisation offers may drive the organisation to require flexible solutions. In addition, the demand for work-life balance is becoming a major driver for the need for flexible working in many organisations.

Market Drivers

These are conditions which organisations have little or no control over. They include the following:

• Demand Variability – used to describe the case in which, although expected demand varies significantly from period to period over the relevant period (usually one year), this variability is relatively predictable. Such variation could for example reflect a strongly seasonal demand profile. The challenge for an organisation experiencing demand variability is to be able to implement suitable solutions that will enable it to cope with peak seasonal demand (e.g. by increasing hours of working) and also be able to manage the off peak period effectively. This condition is carefully differentiated from demand uncertainty.
  
  
• Demand Uncertainty – exists when the actual demand experienced in any week or month is highly unpredictable from period to period. If demand uncertainty is mainly "short term", then the overall demand over the relevant planning period may still be relatively quite predictable – say to within 10% or so – as the ups and downs level out. When demand uncertainty is long term then it implies that over the whole planning period the ups and downs of demand from week to week or month to month will not in fact "average out" and the total demand over the whole planning period is also highly unpredictable. These uncertainties make forecasts highly unreliable hence the need for flexibility solutions. The need to have flexible working is even more significant where an organisation offers a wide range of products and services that require a variety of employee skills.

Increasing globalisation of markets is a major driver of flexible working. In some global organisations, projects are carried out in a seamless manner across time zones requiring flexible working approaches. The need to carry out trading on a real time basis across major financial markets and different time zones is a major driver of flexible working for companies in the city.

Internal Drivers

In addition to the market drivers discussed above, many organisations seek to implement flexibility solutions to cope with situations within their organisations. The nature of the product and service and the characteristics of the order filling process may leave some organisations with no option other than to implement flexibility solutions. For instance, companies producing products with very short product shelf life (e.g. sandwiches) must implement flexible working hours that would enable the companies to be responsive to demand requirements.

Work-Life Balance

The need for people to achieve a balance between work and non-work activities is increasingly becoming a major driver of flexible working in organisations. John Smith, a financial analyst at Goldman Sachs, noted that "The September 11 incident has made people to realise that there is more to life than working 90 hours a week trying to close deal after deal". There is enormous pressure on organisations to implement flexible working in various sectors of the economy.

The FIFA world cup is probably the most popular sporting event in the world. In 2002, Japan and South Korea hosted the event. These countries are about nine hours ahead of the GMT. For instance, the much talked about match between England and Argentina on June 7 was transmitted live to viewers in the UK at 11.30am GMT when people were expected to be at work. The debate as to how employers would accommodate the interests of their football loving employees over the month long competition generated a lot of interest. So what solutions are available to organisations for coping with these sorts of drivers?

Flexibility Evaders

Rather than implementing flexible solutions, some organisations implement solutions that remove or reduce the need for flexibility. These solutions are known as flexibility avoidance strategies or flexibility evaders. They may include using sister companies to carry excess loads, subcontracting or purchasing from other companies for resale. The interesting thing about these solutions is that from the customer’s point of view, a company that employs any of these solutions may actually be seen as flexible because the company may still be able to deliver the required order on time. Some demand management solutions are also flexibility evaders. They may involve negotiating delivery lead times with customers and in some cases rejecting orders.

Flexibility Enablers

There are four major sources of flexibility in organisations : the input supply network, technology, processes and people. I am going to focus on how flexibility can be achieved through people in organisations. Figure 1 below shows the result of a survey of flexible working solutions employed by UK manufacturing companies.

Figure 1


Two of the solutions employed are defined as follows:

• An annualised hours contract is a contract, which enables the employer to vary the number of hours worked in a given period, within a context of the agreed total working hours for the year.
  
  
• Job sharing contract involves the equivalent full time job to be shared between employees in a certain proportion, say two employees sharing 50% each. The job sharers are expected to vary hours of work in a flexible way and are free to exchange each other’s rota.

As Figure 1 shows, over-time is the most popular enabler of flexibility with about 75% of companies presently using it. However, many companies would prefer not to use it in the future. By contrast, although an annualised hours contract is presently being used by about 10% of the companies surveyed, about 40% of the companies would use this solution in the future reflecting the growing popularity of this solution.

The reason for the differences observed between present use and future desirability of the solutions would seem to correlate to the perception which companies have of the relative costs of the different flexibility enablers. For example, only about 10% of companies perceived annualised hours contracts to be expensive compared with almost 60% that perceived over-time hours to be expensive.

Generally, an annualised hours contract tends to work well where demand is highly variable but seasonal (i.e. total demand over the planning horizon of one year is relatively predictable). Over-time works well where the demand is fairly predictable and the variability of demand is low. The banked hours system is similar to an annualised hours contract in principle. The only difference is that the latter is based on a yearly contract whereas the banked hours system could be based on a flexible (usually weekly) time horizon depending on needs.

Figure 2

Best Fit Flexibility Solution for Different Demand Scenarios D=Cumulative demand or sales over the planning horizon T Solid line represents cumulative forecast Broken lines represent actual demand over and below forecast

Figure 2 above shows different flexible solutions suitable for two major different demand scenarios.

Training employees in different tasks (multi-skilling) can improve the flexibility of an organisation since employees can be moved easily from a quiet area of an operation to a busy area. In a team environment, having flexible or multi-skilled staff tends to reduce the effect of absenteeism as workers can provide adequate cover where required.

Is the use of these solutions limited to a particular industry or sector? I would argue that it is not. Cranfield research has shown that many of these solutions are sector independent. As Figure 2 shows, it is the business condition that determines the type of flexible solution that a company should employ. Although many of these flexible working solutions originated in the manufacturing sector, leading service companies have successfully implemented some of them in their operations. Click here to view Halifax General Insurance case study.

Conclusion

Requirements for flexibility in companies differ depending on the conditions in which the companies operate. Therefore, the key message is simple: don’t be a copycat. Flexibility needs must be well assessed prior to the implementation of any flexibility solution and a four stage process is proposed:

1. Identify the specific drivers of flexibility needs
   
   
2. Identify potential flexibility solutions
   
   
3. Choose the flexibility solution(s) that best fit the drivers identified
   
   
4. Develop a plan for implementing the solutions – one of the major barriers to implementation is change and this must be well managed.

Finally, a mix of solutions rather than a single flexible solution may provide the best way of achieving flexibility in companies.

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