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Flexible-Firm Model

June 11, 2010 by Rushda Mohinudeen in HRM, Management

The concept of a “flexible firm” (as proposed by John Atkinson, 1985) recognizes that organizations will requires enhanced flexibility to meet ever evolving market and competitive pressures. The “flexible firm” model suggests that we can design our workforces to proactively meet our business needs through flexible staffing arrangements. In other words it is a concept of simply integrating flexible conditions into the administration an organization’s functional operations, in order to meet the demands of a highly competitive market and attain its strategic aims and goals. Flexibility is a calculated risk utilized by organizations to survive and gain strategic competitive advantage.

Atkinson’s model for labour flexibility included “core” workers and “peripheral” (secondary) workers. Numerical flexibility, the expansion and contraction of labour to address market fluctuations, would primarily impact “peripheral” groups: part-time, temporary, or contractual workforces. “Core” groups of full-time employees would provide their organizations with functional flexibility: an employee pool of skills that could be moved about in reaction to emerging technological, market or product changes.

Benefits associated with a flexible staffing strategy include:

  • Better matching of staff levels to business volumes
  • Long-term competitive edge
  • Lower wage and non-edge costs
  • Improved customer service.

The flexible practices are more likely to be adopted by large, technologically advanced employers that operate within concentrated or niche markets

Increased international competition has produced various initiatives world-wide for greater organizational flexibility, and emerging new economic trends may be characterized by smaller firms, industrial districts, vertical disintegration, flexible firm strategies and production networks, and flexible technology. The emerging technological pattern of flexible specialization implies that not only certain flexible organizational forms may be observed in different firms or industries, but that flexible specialization is a necessary and crucial factor in championing mass production.

Flexibility has two basic dimensions:

  1. Flexibility in employment
  2. Flexibility in work.
  • Flexibility in employment is a labour market concept. As markets and the business cycle undergo their usual changes, managers of firms find it desirable to change the size of their work forces. In the last two decades there has been a large and varied list of innovations which have increased flexibility in employment. Part-time, Temporary work, Sub-contracting, and work-from-home etc. are just some of the forms of employment flexibility.
  • Flexibility in work refers to flexibility within the firm or within the production process. This is the notion that flexible technologies enable a more rapid transmittance of machines and processes between production functions or types. Coupled with more flexible forms of work organization, such as working time, group and team approaches, the new technologies enable a firm to produce variations of products, even different products, cheaply in small batches. Thus it is possible for firms to act in response and adapt easily and quickly to rapidly changing markets. Over the past two decades a variety of “flexibilities” have been observed in a number of production activities, including innovative ways of organizing, rewarding and managing work.

For a “flexible firm” model to work, it requires a sophisticated interaction between strategic business planning and Human Resource Management. When HR is unclear on the long-term business needs for labour flexibility, short-term reactions such as staffing activities are often subjected to product or market pressures, will result in poor employee relations and reduced quality and productivity. Essentially the HR Team needs to be aware of every single critical detail of the organization’s strategies aims and align themselves accordingly, in order to achieve them.

In most advanced industrialized societies, Governments have debated ways of reducing labour market (including pay) rigidity as well as increasing overall organizational flexibility. The managements of various organizations have been concerned with job flexibility, multi-skilled employees, and increasing their ability to hire and fire; and unions have reassessed their stand towards new production concepts and employee involvement. The focus has been on two types of flexibility:

  • Numerical – The adjustment of the number of employees employed to meet fluctuations in demand.
  • Functional – The adjustment of employees’ tasks to meet changing workload and production methods.

Linked to both numerical and functional flexibility is pay flexibility; that is, a firm’s ability to adjust labour costs. Particularly pay accordingly to changing market conditions (both product and labour)

The most common management innovations for flexible practices are;

  • Contracting work out / Sub-contracting
  • Joint consultative committees
  • Use of casual labour
  • Part-time labour
  • Overtime
  • Shift work
  • Quality circles
  • Briefing groups
  • Semi-autonomous work groups
  • Joint consultative committees
  • Group incentive schemes.

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9 Comments

  1. sashaJune 11, 2010 at 8:12 am

    Hey.. Thanx a lot.. I”l post the link to ma friends. :)

  2. ZaraJune 15, 2010 at 9:14 am

    hey sasha, i suggest to add the process of implementing flexible firm in an organization too.. then this article would be completed.

    • sashaJune 17, 2010 at 8:43 am

      I hope she will come out with an article on implementation.. :D

      • AuroraJune 18, 2010 at 1:59 am

        Yeah cool, I”ll work on it. Thanks for the re-posting Sasha.

  3. hanxlkJune 18, 2010 at 3:20 am

    Nice post Aurora…
    Keep it up….

  4. pauslealAugust 4, 2010 at 7:20 am

    I’ve recently started a blog, the information you provide on this site has helped me tremendously. Thank you for all of your time & work.

  5. RikMay 11, 2011 at 12:23 am

    Hi,

    Wasn’t this model proposed by Guest in 1987?

  6. Legal MagazineSeptember 10, 2011 at 5:41 pm

    There is also the concept of flexible firm in professional firms. In our magazine we cover some examples.

  7. Ibrahim TankoOctober 27, 2011 at 11:43 pm

    Excellent description of this model,but my problem is with the aspect of financial flexibility. I know this to be concerned with commissions,incentives but not the wage per say,for example performance related pay. What is your view? Thanks.