Flexibility and Firm Performance

The pursuit of increased flexibility has important implications for firm performance. Because such initiatives impact on both cost and motivation, they influence performance (Valverde, Tregaskis, & Brewster, 2000). The extent of such costs and performance effects depends on the type of initiative adopted. Enhanced functional flexibility can contribute to greater performance where employees can be deployed to multiple tasks or skills are deepened. Employees enjoying job enlargement or increased responsibility may be more motivated. This could enable a reduction in resources committed to supervision or lower level management. The cost of functional flexibility is the need to ensure continuing employment relationships and the provision of employee development opportunities. As suggested above, these two may be incompatible.

Numerical flexibility seeks to reduce labour costs by better matching labour demand and supply through the use of variable hours and fixed term contracts. Such employees may also reduce costs if pay rates are lower or indirect costs (pension, sickness benefits) can be avoided. The costs of numerical flexibility revolve around the recruitment, retention, and effective deployment of such workers. This may necessitate increased managerial resources. Again, the global factory may find it more effec?tive to synchronise labour demand and supply requirements through externalisation, effectively passing the costs and risks to an outside party. Rather than having to deal with labour as a factor of production, the focal firm sources products, intermediate components, and services from outside organisations in an embodied form.

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