What are the strategic issues involved with contingent and flexible workers for a company pursuing a lowest cost strategy?
Business cycles are generally anticipated and demand for a particular company's products or services usually varies over time. As a result, human resource managers work with other department managers to determine the optimal personnel policy for each department or function. Because of the peaks and valleys that effect many companies, those responsible for personnel decisions often find it advantageous to maintain the minimal number of permanent full-time employees on the payroll while augmenting that workforce with temporary and/or part-time workers.
Full-time employees can be expensive. Hourly wages or salaries are one part of the compensation package. Health insurance, paid vacation, sick days, training expenses, and other costs all factor in to the decision on how many employees can be kept on the permanent, full-time payroll. Management must calculate, using data relating to levels of past and current business activity, future manpower requirements. The use of part-time and temporary workers can be factored into projections for future business expenses. Department stores use such calculations to prepare for the Christmas shopping season. Managers of such businesses know that, starting in the autumn, consumer buying is going to increase well-above normal levels for the rest of the year. There is no reason to maintain an inflated payroll throughout the year solely on the basis of that predictable and temporary increase in business activity. Managers consequently hire "contingency" workers and increase reliance on part-time employees to help meet customer demand in the months leading up to Christmas morning. Once the holiday season has ended, those contingency workers are let-go and part-time workers see demand for their services reduced to normal levels.
Anticipating the need for an augmented workforce is a routine part of business planning. Strategies for future business cycles assume that manpower requirements will vary according to normal patterns of increased or diminished activity. The use of temporary and part-time workers helps minimize expenses while meeting increases in demand that can be assumed to be temporary in nature.
One strategic issue related to the use of contingent workers and flex workers is the preparedness of management to delegate, assign, oversee and regulate these workers. The Human Resource department has the role of providing managers with tools for performing these tasks with these sorts of workers. Contingent workers and flex workers are different from each other in that flex workers may be permanent workers given flexible options as to hours and locations of work while contingent workers are, by definition, not permanent workers. Thus the tools that managers use to fulfill their responsibilities will be varied and widely assorted.