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Companies Focus Their Attention on Flexibility

To limit contingent staffing, some companies are making permanent employees more agile.

March 6, 2011
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Related Topics: Work/Life Balance, Contingent Staffing, Corporate Culture, Employee Engagement, Motivating Employees, Job Design and Analysis, Strategic Planning, HR & Business Administration
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Staffing flexibility has a new look these days. You might call it a vintage approach to workforce planning.

In recent years, companies have sought greater labor force agility largely by paring back their payrolls and tapping temporary workers or independent contractors when needed. Now, some employers are exploring ways to make traditional full-time and part-time employees fit more flexible workforce strategies. Given people’s desire for more stable employment and the potential drawbacks of hiring contingent workers, organizations as diverse as Hilton Worldwide and Eden Medical Center in the San Francisco area are bucking the trend to ramp up the number of temporary hires.

Hilton, for example, coordinates its staffing on a regional basis, sending full-time employees from one hotel to another nearby hotel to address temporary spikes in demand. This strategy not only makes efficient use of the hotel chain’s staff but also helps develop an agile workforce, says Jim MacDonald, Hilton’s vice president of human resources for the Americas. The employee-swapping approach “allows us to invest more in full-time team members that have a wide range of specialties,” MacDonald says. “Our ultimate goal is to have as many full-time team members as possible.”

To be sure, contingent labor arrangements are growing. Between September 2009 and December 2010, the number of temporary help jobs increased by 495,000, or 29 percent, according to a preliminary government estimate.

Turning to temporary workers is typical during economic recoveries, but some workplace experts are raising questions about the move to a “just-in-time” labor model. Among the concerns are: lack of commitment to the employer, steep wage markups for some temporary jobs, uncertain qualifications of contingent workers and the risk of misclassifying workers as independent contractors, a problem the Obama administration has been targeting.

Rather than rely on contingent workers, Peter Cappelli, management professor at the University of Pennsylvania’s Wharton School, says companies can remain agile through job-sharing, redeployment of workers to different parts of the business and temporary furloughs. “Most U.S. companies have way overdone their use of contingent labor,” Cappelli says. “They haven’t thought through the alternatives of being internally flexible.”

The HR consulting firm Mercer expects more of its clients to develop innovative staffing models. “More creative, flexible work arrangements are going to be the future,” says Andy Geller, a partner in Mercer’s Human Capital practice. For example, one of Mercer’s financial services clients is exploring a novel staffing approach to deal with blips in demand in the mortgage business. The company faces cyclical swings, such as higher processing volume in the summer, as well as unpredictable manpower needs, such as during a surge in home buying when interest rates drop.

In the past, Geller says, these challenges led to significant overtime demands for full-time employees even as the company tried to tap temporary agency workers.

Now, Mercer and its clients are considering setting up a pool of on-call employees. These workers would not be paid a fixed salary but would be guaranteed a certain amount of work each year. They also would receive training and possibly some benefits such as tuition reimbursement. To keep costs down, the company could target workers who already have health insurance, such as retirees or spouses of people with full-time jobs. Like a substitute teacher who comes back to the same school regularly, these employees would have more continuity with the business than a typical temp, Geller says. “The aim is to keep them linked to the organization.”

In the wake of the recession, many workers want a close connection with employers. A 2010 study of U.S. employees by consulting firm Towers Watson & Co. found that respondents ranked “security and stability” as their top priority, ahead of both “significantly higher pay” and “opportunity to rapidly develop skills/abilities.”

Closer ties and greater stability will likely result in a more engaged workforce that is committed to the company and willing to put in extra effort. The prospect of a more dedicated staff is a key reason that hiring more full-time workers appeals to Pete Eggleton, administrative director of human resources at Eden Medical Center, a hospital system. “If you have people who are contingent, they’re not necessarily loyal to you or to the patients that you serve,” he says. “They’re loyal to the paycheck.”

Eden Medical Center meets its nursing needs largely through a combination of nurses who are “benefited,” meaning they receive benefits such as health insurance and work a minimum number of hours a week, and “per diem” nurses who fill in as needed and don’t collect benefits.

Currently, about two-thirds of Eden Medical Center’s workforce is made up of nurses with benefits. The remainder are primarily per diem nurses, along with a small percentage of nurses from temporary help agencies. Eggleton says he would like to bump the share of nurses with benefits to 75 or even 80 percent.

On the other hand, flexibility is important at Eden Medical Center, which employs about 1,700 people, including roughly 600 registered nurses. For instance, patient demand can increase as much as 50 percent between summer and winter, when people are more likely to be sick.

So during a recent recruiting campaign to fill about 70 registered nurse jobs, roughly 35 percent of them were designated as per diem slots. Eggleton, though, says he can imagine his benefited staff taking on more hours in the future. Nurses can work just two 12-hour shifts a week and still get benefits.

Eggleton remains wary of hiring too many temporary employees because he says he believes they could have a “renter” as opposed to an “owner” mindset. A contingent nurse, Eggleton argues, could work night shifts in one facility and then show up for the day shift at Eden. And Eden officials wouldn’t necessarily know about the nurse’s extensive hours.

This concern applies equally to per diem employees and agency temps, Eggleton says. “It’s not good from either the nurses’ perspective or from a patient perspective to have somebody routinely working a double shift. We would have no clue about that.”

Workforce Management, February 2011, p. 3-4 -- Subscribe Now!

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