Strategic issues & choices in using contingent workforce

1. Strategic Issues and Choices in Using
Contingent and Flexible Workers
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor

2. Role Played by Contingent Workers
and Flexible Work Schedules
Contribute to meeting the goals of cost control and
 Product or service innovation
Cost control objective requires firms to reduce output
costs per employee
Contingent 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

3. Cost Control Objectives
Employers’ use of well trained contingent workers also
contributes through reduced training costs
Not 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

4. 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

5. 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

6. Flexible Schedules
Flexible schedules contribute to lowest
cost imperatives
Flexible employees demonstrate lower
absenteeism than employee with fixed work
schedules

7. 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

8. Flexible work schedules
Flexible work schedules promote differentiation
strategies for two reasons:
First, flexible work schedules enable employees to work
when they are at their physical or mental best
Some 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

9. Contingent Employment
Employers 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

10. Contingent Employment
Workers do not forget past practices that once led to job
security and sound retirement benefits
Workers 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

11. Contingent Employment
First, both contingent and core workers may develop
less loyalty for their employers
Hiring 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

12. Contingent Employment
Second, 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

13. Contingent Employment
Third, 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

14. Contingent Employment
Finally companies must bear the costs of training
contingent workers
In many cases, employing contingent workers can be
as costly as employing core workers
Savings from not offering contingent workers
discretionary benefits is offset by training costs
These 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

15. 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?