Business Impacts of Flexibility


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Business Impacts of Flexibility

  1. 1. Business Impacts of Flexibility: An Imperative for ExpansionA Corporate Voices for Working Families ReportResearched by WFD ConsultingSponsored by the Alfred P. Sloan FoundationNovember 2005
  2. 2. Business Impacts of Flexibility: An Imperative for Expansion AcknowledgementsBusiness Impacts of Flexibility: An Imperative For This report was researched and written by ArleneExpansion is a product of Corporate Voices for Johnson, Karen Noble and Amy Richman atWorking Families’ Workplace Flexibility Project. WFD Consulting. Corporate Voices’ WorkplaceOur flexibility work has been led by the companies Flexibility Project is made possible by the supporton our Flexibility Task Force, chaired by Christine of Kathleen Christensen and the Alfed P. SloanFossaceca of JPMorganChase and Maryella Gockel Foundation. We also gratefully acknowledge theof Ernst & Young. financial support of Baxter International. Flexibility Task Force Accenture Sharon K. Klun, Director, U.S. Work/Life Initiatives Allstate Insurance Company Anise Wiley-Little, Director, Diversity and Work Life Baxter International Donna Namath, Senior Manager, Community Relations and Work/Life Initiatives Deloitte & Touche LLP Stan Smith, National Director, Employer of Choice, Next Generation Initiatives Discovery Communications Evelyne Steward, Vice President, Work/Life Strategies Eli Lilly Company Candice Lange, Director, Workforce Partnering Ernst & Young Maryella Gockel, Flexibility Strategy Leader, Americas People Team GlaxoSmithKline Annette Byrd, U.S. Manager, Work/Life Support JPMorganChase Christine Fossaceca, Vice President & Manager, Work Life Solutions KPMG Barbara Wankoff, Director of Workplace Solutions Marriott International, Inc. Nina Madoo, Director, Workplace Strategies Merck & Company, Inc Howard Inman, Director, Diversity & Work Environment The Phoenix Companies, Inc. Cynthia Watts-Elder, 2nd VP, Human Resources, Talent Acquisition and Diversity Sodexho Jodi Davidson, Director of Diversity, Campus Services Division
  3. 3. Corporate Voices for Working FamiliesTable of Contents pageExecutive Summary 4Context & Objectives 5Methodology 5Measuring the Impact of Flexibility 6Making the Business Case 9Contribution of Flexibility to Talent Management 9Positive Impact of Flexibility on Human Capital Outcomes 12Impact of Flexibility on Financial Performance 20Implications for Action 25Appendix: Collecting & Leveraging Data 28About Corporate VoicesCorporate Voices For Working Families is a non-partisan, non-profit corporate membership organizationcreated to bring the private sector voice into the publicdialogue on issues affecting working families.Collectively our 50 partner companies employ more than fourmillion individuals throughout all fifty states, with annual netrevenues of $800 billion. Over 70% of our partner companiesare listed in the Fortune 500, and all share leadership positionsin developing family support policies for their own workforces. 3
  4. 4. Business Impacts of Flexibility: An Imperative for Expansion Executive SummaryT he large body of business data summarized Financial Performance, Operational and Business in this report demonstrates that the business Outcomes - Organizations find that flexibility is case to expand workplace flexibility is a driver of financial performance and productivitysubstantial and compelling. Drawing on internal and is correlated to increased revenue generation,organizational research and information provided by as well as having positive impacts on cycle time and29 American firms, this report presents for the first client service.time the weight of evidence companies themselveshave collected about the positive business impacts Businesses find that it is not only formal flexibleof flexibility. Until now, flexibility has often been arrangements that produce these impressivepositioned as simply a benefit or accommodation results, but also a culture that supports occasionalto employees. Based on the research and experience flexibility. Positive outcomes such as retention,of many firms, this report provides evidence that employee engagement, job satisfaction, andemployers can gain tremendous benefit from financial performance are consistent acrossproviding flexibility in when and how work gets different industries. Moreover, the positive effectsdone. For organizations that intend to improve of workplace flexibility are documented in hourly,business performance and shareholder value, that non-exempt environments as well as for salaried,need to get the best from their employees, and exempt employees.that want to compete successfully for talent, thisreport finds that flexibility is not only a powerful Organizational studies assembled in this report leadbusiness tool but a key component of successful to the conclusion that unless business organizationsmanagement practice. move forward to accomplish the expansion of flexibility, they will not realize the powerful humanThe many data points and rigorous studies presented capital and business outcomes that flexibilityin this report illustrate that flexibility is advancing can generate. In light of this robust and well-business success in a number of ways. The positive documented business case, it is essential to:impacts of flexibility can be summarized underthree headings: • communicate the business imperative for workplace flexibility,Talent management - Organizational researchpresents compelling evidence of the positive impact • create standards and principles for effectivelyof flexibility on talent management, especially implementing broad-based flexibility, andretention of key talent. Based on their internalresearch, organizations conclude that flexibility has • develop leadership for expanding flexibilitysaved individual companies millions of dollars inprevented turnover. Accordingly, Corporate Voices for Working Families is launching a communications campaign toHuman Capital Outcomes - Internal disseminate the evidence for a business imperativeorganizational studies establish that individuals and is developing and distributing Principles ofwho have even a small measure of flexibility in when Effective Flexibility. Corporate Voices will conveneand where work gets done have significantly greater an Executive Summit on Workplace Flexibility tojob satisfaction, stronger commitment to the job, generate leadership and momentum for makingand higher levels of engagement with the company, flexible approaches an integral part of the way workas well as significantly lower levels of stress. As is done and how people are managed. By expandingdemonstrated in profit value chain research, these and successfully implementing flexibility, businesseshuman capital outcomes translate into innovation, can engage a powerful means to improve financialquality, customer retention, and shareholder value. and human capital results.
  5. 5. Corporate Voices for Working Families Business Impacts of Flexibility: An Imperative for ExpansionContext and Objective of This StudyI f expansion of flexibility practices can be measured by an increase in the number Methodology of organizations that offer flexible work Corporate Voices for Working Families, a non-profitarrangements, then flexibility in corporate America corporate partnership committed to fostering public andis indeed growing. In a 2000-2001 survey of 1000 private investments in family supports that are effective formajor US employers, Hewitt Associates found that the workforce as a whole, received a grant from the Alfred P. Sloan Foundation to define the business case for expanding73% offered flexible work arrangements, up from flexibility. Drawing on its strong corporate partnerships,67% five years earlier. However, a written policy does Corporate Voices established a task force of 14 companiesnot guarantee accessibility or acceptance of flexible who have experience implementing flexibility and who are committed to increasing its effectiveness and practices. Even organizations that offer amenu of flexible work options report that flexibility Working with the task force, and assisted by WFDis frequently viewed by managers and employees Consulting, a firm with extensive experience in researching and implementing flexibility, Corporate Voices surveyedas an exception or employee accommodation, its 46 partner organizations to determine what kindsrather than as a new and effective way of working of flexibility data they are collecting and how they areto achieve business results. A face time culture, connecting the data to business objectives. Subsequently, 15 organizations—including all the task force memberexcessive workload, manager skepticism, customer companies—agreed to participate in in-depth interviews.demands, and fear of negative career consequences The interviews provided detailed information about howare among the barriers that prevent employees from firms are gathering information, what they have documentedtaking advantage of policies they might otherwise about the impact of flexibility, what information has proven to have the most impact, and how the business case foruse—and that prevent companies from realizing flexibility might be strengthened. Many of the organizationsthe full benefits that flexibility might bestow. interviewed provided case studies, survey results, and examples of internal presentations on the business case for flexibility. Any Corporate Voices partners who were notUnderstanding the relationship of flexibility to interviewed received a follow-up questionnaire to determinebusiness success is key to expanding the practice if and how flexibility effects are linked to business challengesand penetration of flexibility in the workplace. and how data have been used to support implementation of flexibility.The objective of this study is to understand howcompanies measure and define the business benefit The task force met four times to advise on the objectives,of flexibility and, thereby, to clarify and strengthen data gathering, and final report. Based on the research and their own experience, the task force compiled a Statement ofthe bottom-line case for expansion of flexibility as a Principles on Workplace Flexibility.core business practice. It draws upon the experienceof organizations that are actively engaged in In addition to the advice of the task force, the project benefited from the input and insights of Ellen Galinskymaking the business case and have had success and the Families and Work Institute study on “When Workin increasing flexibility in their organizations. Works,” research on flexibility among low income workersImplicit in the inquiry is the question of how the by the Casey Foundation, the work of Chai Feldblum at the Georgetown University Law Center, and the advice ofimpact of flexibility can be effectively measured, Regina Powers of the Employment Policy Foundation ondemonstrated and communicated and what kinds connecting flexibility effects to business outcomes.of measurements build momentum for increasedworkplace flexibility. 5
  6. 6. Business Impacts of Flexibility: An Imperative for Expansion Measuring the Impact of Flexibility“Through periodic surveys of our employees and users Ernst & Young is an example of a firm that usesof flexible work options, we’ve been able to gauge the its Global People Survey to measure the extent andeffect that flexibility has in our workplace, how it impact of flexibility. Interestingly, as flexibility hasaffects particular target populations, and how we can become an integral part of people management atimprove our flexibility efforts to support our business the firm, the wording of the question has changed.goals.” In the first year of the survey, the firm asked whether Stan Smith, National Director, Next employees were “given the flexibility I need to meet Generation Initiatives my personal and professional goals.” As of 2005 Deloitte & Touche employees will be asked whether they “have the flexibility they need….” The change in wordingM easurement and data collection is reflects an assumption that everyone should have at the heart of the business case for access to flexibility and therefore what is important flexibility. Among the 29 organizations to measure is whether people are taking advantageparticipating in this study, the types of data and of and satisfied with this analysis vary greatly across organizations andillustrate both foundational and creative ways for Another common approach is to ask aboutmeasuring the impact of flexibility on employees flexibility within the context of a specializedand the business. work-life, diversity or total rewards survey. This approach has the advantage of allowing theThe most common approach among the companies employer to ask more questions about flexibilitysurveyed is to embed two to three questions about than could be included in a more general survey.flexibility in an annual employee opinion survey For maximum impact the survey should alsoor employee pulse survey. These questions usually include items related to the employee productivity,measure (1) the perceived availability of flexibility personal effectiveness, and performance, to permitand (2) the relative importance of flexibility in a analysis that measures the correlation of flexibilityperson’s decision to stay at the company. Analysis to performance and behaviors. The additionalof survey responses allows the company to see probes permit deeper understanding of employees’how the profile of people who have flexibility attitudes about flexibility, ability to use flexiblediffers from those who do not--on factors such as work options without career jeopardy, the role ofjob satisfaction, level of commitment, intent to flexibility in alleviating stress, and the dynamics ofstay, and perceived effectiveness in one’s job. The flexibility in work groups, and between managers,organizations can also compare the weight given co-workers and even clients. Through a work-lifeto flexibility compared to other motivators such as diversity survey, Allstate learned that flexible workcompensation and advancement. For organizations options are the most important of all work-lifethat measure flexibility issues in more general issues to its employees; 92% of Allstate employeesemployee surveys, the flexibility findings are usually rated flexibility as “very important” or “important.”considered against the backdrop of information IBM’s business case for flexibility has been builtabout changing workforce demographics, from data gathered in eight work-life surveys—twoparticularly the increase in dual earner couples and of them global--conducted since 1986. IBM’semployees with significant responsibilities in both survey data is analyzed by geography, businessthe job and personal spheres. The external and unit, gender and key talent segments. Not onlyinternal information together create a picture of a can the company see how those who use flexibilitynew kind of workforce for whom flexibility and a compare with those who don’t, IBM can also learndegree of control are extremely important. about the impacts of flexibility on retention, level of stress, and productivity for their sales force, top performers, parents of young children, software
  7. 7. Corporate Voices for Working Familiesengineers, or female executives. Bristol-Myers those units to identify the behaviors that contributeSquibb has also used a work-life survey to examine to employees’ perception of manager detail the relationship of flexibility to a range of These behaviors were translated into company-objectives, including retention of women, employee wide “workplace flexibility standards of excellence.”commitment and stress reduction. The survey Another company finds that interviewing managersenabled the company to determine the relationship for success stories about individuals and groupsof flexibility to recruitment and retention as well as who have used flexibility successfully is influentialthe contribution of flexibility to corporate objectives data; posting good “stories” on the intra-companyof work-life balance, employee satisfaction, and web site has proven to be effective in demonstratingemployee commitment. flexibility effects for the business and individuals. Ernst & Young has found that gathering andSome of the most compelling business case data communicating employees’ personal experiencehas come from flexibility evaluation surveys that helps to shift attitudes and normalize flexibility as afocus entirely on employees’ experience of and new way of working.perceptions about flexibility. The in-depth analysisthat is possible in this kind of survey sheds light Other types of measurement are the result ofon both formal and informal types of flexibility at evaluating a particular type of arrangement,different career and job levels and describes patterns often a pilot or demonstration project or a programand implications of utilization of different kinds initiated at the local level to deal with a site-specificof flexibility. These surveys also examine in depth business challenge. The downside of this approach isthe barriers and enablers of that information about pilots isflexibility, the role of managers sometimes difficult to generalizeand co-workers in achieving to the whole organization.flexibility impact, and the However, the advantage is thatinfluence of flexibility on career data are easier to collect, the localprogress, as well as anticipated manager is usually motivated topatterns of future flexible create change, and evaluationarrangements. Through surveys is usually targeted to a well-such as these that focus on defined objective or problem.flexibility practices, AstraZeneca Most data collection at PNCand Deloitte have been able to has been of this type, resultingdescribe thoroughly the impact in several dramatic stories thatof flexibility in their workplaces pinpoint the impact of flexibilityand to construct models of in specific situations. Eli Lillythe financial impact of flexibility as measured has also used pilots and demonstration projects toin corporate cost-savings achieved through the measure how flexibility affects a range of businessinfluence of flexibility on stress, turnover, and outcomes.employee engagement/commitment. Through human resource software, benefits recordsQualitative information is also a part of and/or employee survey data, most organizationscorporations’ measurement of flexibility’s effects. in this study track utilization of differentFor example, one company determined that there types of flexible arrangements, to determine theis a relationship between “manager supportiveness penetration of flexibility and to assess patterns ofand sensitivity” and successfully implementing use among different demographic groups and jobflexibility and with positive employee outcomes of types. While most formal work arrangements candiscretionary effort and retention. The company usually be identified, organizations acknowledgeused the survey data to pinpoint those business units that utilization statistics probably underestimatethat were high scoring in flexibility implementation the true reach and impact of flexibility, as theyand then conducted focus groups with managers in cannot accurately determine the extent of informal 7
  8. 8. Business Impacts of Flexibility: An Imperative for Expansionflexibility--for example employees who occasionally section of the report.alter their work hours or work from home. Somefirms want to improve tracking mechanisms as a way The following is a partial list of the types of dataof measuring the extent and impact of flexibility, but collection and data analysis being used to quantifyothers hesitate to institute more stringent tracking flexibility’s impact. Depending on the objective formechanisms for fear it would have a chilling effect implementing flexibility, there are numerous wayson informal flexibility. a company can collect and analyze information to connect flexibility to business outcomes andLess common, but powerful when it exists, is about business or operational outcomesof flexibility. In its EMEA region, IBM hasdemonstrated the influence of technology-assistedflexibility for increasing time spent with customers.PNC’s Eastwick, Pennsylvania Operations Centermeasured reduced cycle time and extended customerservice hours that resulted from a compressed workweek pilot. Marriott tracked flexibility’s impacton guest satisfaction. And First Tennessee Bankconducted a service profit chain study that tracedthe causal relationship between flexibility, customerretention, and shareholder value. More detail aboutthese examples and others are discussed in the next Most Common and Foundation Less Common Measures/Types of Measures/Types of Analysis Analysis - Employee opinion surveys - Assessment by type of arrangement - Employee pulse surveys - Department-specific, pre- and post-measures - Focus groups - Measure impact on reduction in overtime - Specialized surveys (e.g., work-life, diversity) - Conduct profit chain study - Flexibility surveys/ evaluating flexibility - Measure cycle time, with and without - Exit surveys/interviews flexibility - Utilization metrics - Document increased coverage - Profile flexibility users compared to non-users - Track impact on business processes and - Profile those who have sufficient flexibility to planning those who don’t - Gather internal success stories - Correlate flexibility access to commitment, - Track time spent with clients (vs. low value or burnout, retention and other employee office time) outcomes - Track turnover - Analysis by business unit, job status, - Track “hits” on flexibility website demographic group - Measure impact on client satisfaction - Track client/customer retention - Conduct 360 evaluation comparing manager and employee opinions - Compare employee and co-worker reports on flexibility impact
  9. 9. Corporate Voices for Working Families Making the Business CaseD ata collected by organizations makes three Retention – Organizations have abundant evidence, kinds of business case: (1) the contribution collected primarily in employee surveys, that of flexibility to talent management, (2) availability of flexible work arrangements influencesthe impact of flexibility on positive human capital employees’ decision to stay in an organization. Theoutcomes, and (3) the impact of flexibility on following is a sample of the evidence for concludingfinancial performance and operational and business that flexibility enables companies to retain talent.outcomes. In the first two cases, measurements areconducted to determine the impact on employees; • In a recent work/life survey, approximatelythe positive effects of flexibility on the business 80% of Accenture employees said that theirare mediated through their effects on employees. ability to successfully manage work and homeIn the third case, a direct link is made between life roles had an impact on their career choicesflexibility and a positive business outcome by taking and their desire to stay at Accenture. Themeasurements of financial performance, customer survey also found a strong correlation betweenimpact, or operational change. The three types of the ability to achieve balance in one’s workbusiness case are related, but different in nature. schedule. Of the employees who report that it is easy to balance work, career, and home life,The Contribution of Flexibility to approximately 75% say they have “the flexibility I need” in terms of when work gets done. WhenTalent Management asked to compare flexibility relative to other benefits or rewards, flexibility was one of the “We have evidence in our surveys that prove top three on the list, challenging the notion to us that flexibility has contributed to the that compensation and advancement are attraction and retention of talented people.” employees’ primary motivators. The findings Denise Singleton, Vice President provided motivation to make flexibility more MetLife available across the organization. • IBM’s 2004 global work-life surveyDespite economic news of off-shoring and down- demonstrated that, for IBM employees overall,sizing, organizations want to retain talent they flexibility is an important aspect of employees’have invested in and attract the talent they need, decision to stay at the company. The surveyboth because turnover and replacement is costly incorporated both a work-life balance indexand because people with the right mix of abilities, and a flexibility index, which were found toskills and experience are never in over-supply. be strongly related; i.e. employees with higherRather than be at the mercy of external forces or work/life balance scores also had higher scorescompeting companies, employers want to have on the flexibility index. Based on responsesa strong measure of influence in attracting and from almost 42,000 IBM employees in 79retaining the talent they need. They want to be the countries, the survey found that work-lifeEmployer of Choice. To meet corporate diversity balance—of which flexibility is a significantgoals and to recruit in competitive labor markets component—is the second leading reason forsuch as those for scientific and technical staff, it’s potentially leaving IBM, behind compensationespecially important to have an edge in attracting and benefits. Conversely, employees with higherand keeping diverse and scarce talent. For all these work-life balance scores (and therefore alsoreasons, the impact of flexibility on recruitment and higher flexibility scores) reported significantlyretention is one of the best-documented and most greater job satisfaction and were much morestrongly-argued aspects of the flexibility business likely to agree with the statement “I would notcase. leave IBM.” 9
  10. 10. Business Impacts of Flexibility: An Imperative for Expansion In a follow-up to its 2001 survey -- and after powerful tool. rolling out flexible work options, manager training and other efforts to support successful • While 61% of AstraZeneca men say that implementation of flexible arrangements -- flexibility is “very important” in their intention the Corporate Finance organization of IBM to stay at the company, 80% of women say so. found that nearly all managers (94%) reported positive impacts of flexible work options • IBM found that, while work-life balance on the company’s “ability to retain talented (including flexibility) was the second leading professionals.” Because of this survey-based reason for considering leaving the company data showing the strong link between flexibility for mothers overall as well as for mothers in and retention, IBM promotes flexibility as a management, work-life balance was the number strategy for retaining key talent. one reason.• A survey of Ernst & Young’s Canadian • In the early 1990s Deloitte conducted a survey employees documented the impact of unmet to determine what initiative would be most needs for flexibility on potential turnover. Of influential in correcting the large turnover survey respondents, 78% said that it was “very rate of women. When the survey identified important” or “extremely important” to them flexibility as the factor most likely to improve to have a flexible work environment. Despite retention of women, the firm implemented the fact that 83% of respondents would flexibility as a key component of its women’s recommend Ernst & Young as a place to work initiative. Since then the turnover of women as it relates to flexibility, still 20% of employees has dropped significantly, to the point that (22% of women and 17% of men) say that men’s and women’s turnover rates are now they have considered or are considering leaving nearly equal. Retaining women in the pipeline the firm because of unmet needs for flexibility. enabled the firm to increase the number of women in leadership positions from 14 in• Of respondents to its flexibility survey of 1993 to 168 in 2003. Delaware-based headquarters and R&D employees, AstraZeneca found that an Recruitment - Research in the past two decades astounding 96% say that flexibility influences has found that work-life supports are much more their decision to stay at the company; 73% powerful in retaining employees than in attracting say that flexibility is “very important” in that them. One might expect the same finding in regard decision, and an additional 23% say that it’s to flexibility, but in fact the attraction power of “somewhat important.” flexibility has proven to be a surprisingly powerful element of the flexibility business case.• Deloitte has quantified the cost savings that can be attributed to flexibility by calculating • In its 2003 global employee survey, Discovery the cost of turnover for those professionals Communications learned that 95% of who say they would have left the firm had they employees in the U.S. say that availability of not had a flexible arrangement. Based on this flexible work arrangements is a critical factor in calculation, the firm determines that it saved taking a job. an estimated $41.5 million in turnover-related costs in 2003 alone. • Bristol-Myers Squibb found that flexible work options are a very effective recruitment tool. OfSurveys consistently find that flexibility is employees hired in the last three years, one inimportant to both men and women. However, for five agree or strongly agree that the company’sorganizations that want to increase female presence flexible work options program influenced theirin the leadership pipeline or stem the attrition of decision. Again, the influence on women’sexperienced women, flexibility is a particularly thinking was even greater than for men: 30%
  11. 11. Corporate Voices for Working Families of women compared to 12% of men say the flexible work options were a factor in deciding to join the company. ������������������������������������������� ������������������������������������������ ������������������������������������������� ������ ������ �������� ������� ����� ��� ���������������������������������������������� 11
  12. 12. Business Impacts of Flexibility: An Imperative for ExpansionThe Positive Impact of Flexibility Client service, quality, innovation—all are the result on Human Capital Outcomes of human capital input and flow directly to the bottom line. Growing emphasis on the concept of “In an extensive study of our workforce we Total Rewards reflects employers’ awareness that it learned that in order to optimize the ROI is not just compensation and benefits that motivates of human resource policies and practices, employees, but the total employment experience. our people must experience an underlying Therefore, anything that employers can do to foundation of respect. They told us loud and influence positive employee attitudes and behaviors clear that showing respect for their time and will have an effect on business performance. personal commitments is integral to showing respect for them as people. We concluded that Flexibility has proven to have powerful effects offering flexibility and some degree of control on employees’ work experience and the attitudes over time is fundamental to getting a strong that make them able and willing to contribute to return on human capital investments.” organizational goals. Alice Campbell, • Watson Wyatt’s Human Capital Index found Senior Director that firms with high employee satisfaction Baxter Healthcare have decidedly higher market value—and that a flexible work place is associated with a 9%Understanding employees’ experience and change in market value.perceptions has become a keystone of humanresource management, because human capital is the Employee Satisfaction – Measuring employeesource of most value creation. In our knowledge satisfaction is an enduring element of employeeand service economy there is a strong correlation surveys. It is not simply a measurement of whetherbetween managing people well and a company’s employees are “happy,” but rather is a validatedfinancial performance. research construct that correlates with a range of behaviors essential to effective ������������������������������������������������ performance, including discretionary effort ����������������������������������������������� and intent to stay. Workplace research is proving that flexibility has a very strong and positive effect on ������ �������� employee satisfaction. • IBM’s 2004 global work-life survey ������ ������ found that, compared to employees with �������� work-life difficulty, employees who scored higher on the work-life balance index (and therefore also scored higher on the flexibility ����� index) were significantly more satisfied along ��������� a number of dimensions, including job �� satisfaction, their rating of IBM, their sense ��������� ���������������������������������������� of accomplishment at work, their rating of ���������������������������������������� �������� ���������������������������������������������� the workplace as a healthy place to work, and their willingness to give extra effort.���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� • JP Morgan Chase measures the impact of flexibility in its annual employee survey.
  13. 13. Corporate Voices for Working Families The company found that support for work-life Respondents to the survey fell into four categories: resources and integration, of which flexibility (1) those who had a regular work schedule, (2) those is a major component, is a key driver of overall who had a flextime schedule which allowed for daily employee satisfaction. Employees with access tovariation of work time around core hours, (3) those flexibility are much more likely to report overall on a “Flexweek” in which they had an established satisfaction than those who feel they do not have schedule for performing a full time in less than 5 access to flexibility. The company concluded days, (e.g. four ten-hour days or four nine-hour that, even though some employees are content days and one four-hour day) and (4) those with a with their work schedules (represented in the “Flexible Flexweek” who could every week change following figure in the “no interest” column), the way they distributed full-time hours. The increasing accessibility of flexibility—both company found that employees with the most formal and informal—could positively affect flexibility and control over their hours, i.e. those on overall employee satisfaction scores and Flexible Flexweek, reported more job satisfaction, positively affect employee perceptions of the greater sense of control, and less intention to leave than those on other schedules. There was�������������������������������������������������������� no difference in supervisors’ performance rating for employees on the different type of ��� schedules, leading the company to conclude that greater flexibility produces greater job satisfaction without a consequent tradeoff in ��� �� ��� employee performance. ��� Increased Employee Engagement/ Commitment - Closely related to employee �� satisfaction,1 but even more powerful in its effects, is the concept of employee ����������������� ������������������� ������������������ engagement and commitment. Engagement ������������ ����������� �� fuels discretionary efforts and concern for quality. It is what prompts employees to identify with the success of the company, to �� recommend the company to others as a good place to work and to follow through to make sure problems get identified and solved. “Committed employees believe they have a � stake in the organization, and that belief is �������������������� reflected in their behavior.”2 Recent research ���������������������� by the Corporate Leadership Council concludes that every 10% improvement in company. commitment can increase an employee’s level of discretionary effort by 6% and performance by 2%; highly committed employees perform at a Eli Lilly discovered that there is a linear relationship 20% higher level than non-committed employees. between the degree of flexibility that employees have Hewitt Associates research finds that double-digit and the level of job satisfaction that they describe. growth companies have 39% more highly engaged Approximately one year after implementing a employees and 45% fewer highly disengaged “Flexweek” policy, the company surveyed employees. employees than single-digit growth companies. In 1. Many validated measurements of commitment/engagement include a component of employee satisfaction. Therefore commitment can be understood as an overarching measuremente that encompasses and extends beyond “satisfaction.” 2. WFD Consulting, “Commitment, What It Looks Like,” 1999. 13
  14. 14. Business Impacts of Flexibility: An Imperative for Expansion 2002, the Gallup research organization documented has been found to be highly predictive of dramatic differences in the productivity of commitment. business units in the top and bottom quartiles on engagement. Clearly, increasing the percentage of • Deloitte’s employee survey asked whether engaged employees and decreasing the number of employees agreed with the statement “My manager grants me enough flexibility ����������������������������������������������������� to meet my personal/family responsibilities.” Those who agreed ��� that they have access to flexibility scored 32% higher in commitment than those who did not have access to flexibility.���������������� ��� • AstraZeneca’s survey findings ��� are that commitment scores are 28% higher for employees who say they have the flexibility they need ��� compared to employees who do not have the flexibility they need. ��� • JP Morgan Chase found that 95% of employees working in an environment where the manager is ��� ������� �������� �������� �������� sensitive to work and personal life- �������� -including informal flexibility--feel motivated to exceed expectations, ������������������� compared to 80% of employees in ���������������������������������� environments where the manager is not sensitive to needs for informal flexibility. the disengaged has an impact on business results. The use of validated survey instruments allows • At Bristol-Myers Squibb, commitment scores of researchers to measure degrees of commitment and users of flexible work arrangements were higher engagement in a workforce and reflect the findings than that of non-users, especially in relation in scales and indices that have predictive power to the affective elements of commitment beyond mere self-report. The dramatic effect of associated with loyalty, job satisfaction and flexibility on employee commitment is one of the recommending the company as a good place to most powerful components of the business case for work. flexibility. • Based on external studies that prove that higher Reducing the Costs of Stress - Stress is extremely employee commitment and engagement costly to employers in productivity loss, illness, drive higher levels of discretionary effort and disability, medical expenses and health care dollars. retention, Ernst & Young analyzes its Global According to the Stress Institute of America’s latest People Survey results to determine which survey figures, stress is costing U.S. employers about $300 questions best predict individuals’ scores on billion per year in lost productivity, healthcare the People Commitment Index. The flexibility and replacement costs. Chrysalis Performance question, which measures people’s perceptions Strategies finds that stress is responsible for 19% of of whether they have the flexibility they need, absenteeism, 40% of turnover, 55% of EAP costs,
  15. 15. Corporate Voices for Working Families 30% of short-term and long-term disability costs, out. Those on flexible arrangements scored, on 10% of coverage for psychotherapeutic drugs, 60% average, 30% lower in stress and burnout. of total cost of workplace accidents and 100% of workers’ compensation claims and lawsuits due to • A New England-based financial services stress. Stress is the leading cause of unscheduled company found that employees who say they absence and is linked to higher turnover. Stress have the control they need over their work is also a major factor in productivity loss due to schedules have burnout index scores less than “presenteeism” when employees come to work too half that of employees who do not have control stressed to be effective. over their work schedules. A compelling part of the business case for flexibility The impact of flexibility on non-exempt/hourly is that flexible work practices reduce stress. employees – The question often arises as to whether non-exempt and exempt staff experience flexibility • IBM found that employees who have flexibility similarly and whether the business case for report less work-life stress than employees who flexibility is the same for non-exempt and exempt do not have flexibility. This exemplified itself in employees. an ability to work longer hours without feeling work-life stress; workers with flexibility could In brief, the picture for non-exempt/hourly work up to an additional day per week without employees is very similar to the exempt population, experiencing work-life conflict, compared to and in some areas more positive. However, access workers who did not have flexibility. to some types of flexibility, including informal flexibility, may be more difficult for employees in • Employees at Bristol-Myers Squibb who use hourly and non-exempt positions. flexible work arrangements are significantly less likely to report feeling stressed and burned • At Bristol-Myers Squibb, 87% of non-exempt/ hourly employees (vs. 90% overall) use either �������������������������������������� formal or informal flexibility. A significantly ���������������������������� ���������������������� �������������������������� ������������������������� ����������������������� ��������������������������� �������������������������������� ���������� ������� ����������� ����������� ���������������������� 15
  16. 16. Business Impacts of Flexibility: An Imperative for Expansion smaller percentage use informal arrangements as strong for non-exempt employees because the (22% vs. 35% overall), suggesting that informal cost of turnover is usually not as high and often the arrangements may not be as practical or competition for talent is not as intense. Moreover, appropriate for non-exempt/hourly positions. the absence of flexibility may not be as influential Their satisfaction with flexibility, the impact in the tenure of non-exempt/hourly workers. For on intention to stay and the importance to example, in one company, when people on a flex recruiting among non-exempt staff are virtually arrangement were asked, “If you did not have the identical to the employee population overall. opportunity to work a flexible schedule, how likely is that you would leave the company?”, 43% of • Allstate found that non-exempt employees exempt employees said it was likely they would value flexibility as much or more as exempt leave while only 16% of non-exempts said it was employees, but the patterns of utilization are likely. Non-exempt and hourly employees may not somewhat different. (See illustration below.) have the same degree of freedom to leave the job. However, the effects of flexibility on commitment and burnout are almost ����������������������������������������������������� identical for exempt and non-exempt employees (see chart below). In all cases,��� commitment is higher and burnout is lower for non-exempt employees who ������� have access to flexibility compared�� to those without flexibility. One can ������ expect, therefore, that positive effects on health, productivity and well-being, ���������� and subsequent savings to the company�� in health care and absenteeism costs, would be as great for non-exempt and hourly employees as for exempt, salaried�� employees. Supporting high levels of engagement and commitment is especially important�� for non-exempt employees as they are often in client-facing roles (as in retail and hospitality) where low engagement � undermines client service and customer �������������� ���������������� ������������������ ��������� relations. Non-exempt workers are ����������� �������������������� �������� ������������� also likely to be in environments (such ���������������������������������� as manufacturing and clerical) where they must be attentive to quality and accuracy; disengaged employees are In general in all companies examined, non-exempt much less likely to take responsibility for making administrative employees tend to use part-time systems work and solving problems as they arise. options more than exempt employees but utilize To the extent that non-exempt jobs can be routine other options less, especially telecommuting. The or tiring, it is all the more important that the less frequent use of telecommuting often has to do company give attention to practices that will keep with the nature of the job. these employees energized and focused. In terms of retention, the business case may not be As seen in the chart above, individual organization
  17. 17. Corporate Voices for Working Families Impact of Flexibility on Commitment and Burnout by Job Type Company 1 Company 2 Company 3 Difference between Difference in scores Difference in scores employees who between employees between those who use flex work who “have the flex agree with this arrangement and they need” and those statement and those those who don’t who don’t who don’t “My manager grants me enough flexibility to meet my personal/ family responsibilities” Commitment Score Exempt +6% +27% +44% Non-exempt +9% +23% +63% Burnout Score Exempt 1.25 times higher 4.3 times higher for 2 2/3 times higher for for non-flex non-flex non flex Non-exempt 1.5 times higher 3.5 times higher for 2 ½ times higher for for non-flex non-flex non-flexresults vary due to different baseline measures, is not suitable for many non-exempt jobs), still flexdifference in flexibility implementation, and time, compressed work and other options have beenslight differences in the question asked. However, proven successful. At Texas Instruments, over 60%in all cases the direction of change is the same: of non-exempt employees are on compressed work(1) flexibility has a significant, positive effect on week schedules in the manufacturing operations.raising commitment and lowering burnout and (2) In other companies, some of the most high-impactthe positive impact of flexibility on non-exempt effects of flexibility on work process have beenemployees is virtually the same as the impact on documented in call centers and operations centers.exempt employees. The Power of Informal or Occasional FlexibilityThere is sometimes an assumption that flexibility – Though the term “flexibility” usually connotescan’t work in non-exempt environments because some type of formal schedule or work arrangement-the jobs are too structured, or require physical -such as part-time, compressed work week or jobpresence for a specified period of time. While it is sharing—it is important to note that informal, day-true that not all types of flexibility are suitable for to-day, occasional flexibility also has been shown toall situations (as noted previously, telecommuting have strong impacts on retention and human capital 17
  18. 18. Business Impacts of Flexibility: An Imperative for Expansionoutcomes. Informal flexibility is, in fact, a powerful its workforce, Baxter Healthcare found thatway to leverage the positive benefits of flexibility employees identified “as-needed” flexibilityover a broader range of employees than normally as an important component of flexibility,take advantage of formal flexible arrangements. along with more formal work arrangements. “As-needed” flexibility was defined as forIn order for informal flexibility to have positive emergencies or occasional absences for personalorganizational effects, however, it needs to be or family appointments or commitments.implemented within an organizational contextthat openly affirms flexibility as a part of effective • At Bristol-Myers Squibb, 14% of employeespeople management —not in a context where have a formal flexible work arrangement. Ofprivate deals are secretly and inconsistently made the remaining, 67% say they have informalas accommodations for particular employees flexibility. When asked about the importanceor “rewards” reserved for high performers. of informal flexibility in terms of their intentionOrganizational experience shows that there is a to continue working at the company, thespectrum along which flexibility is implemented. response is resounding: 71% say that it is “veryAt the left end of the spectrum shown below important.” Again, women place even greater(Accommodation-Based Flexibility), organizational importance on informal flexibility; 78% ofbenefits are not optimized. More organizational women say it is “very important” to their staying,benefits accrue when flexibility practice is based compared to 65% of men. The retention effectin both business and individual needs, becomes is especially strong for women in management:explicitly acknowledged as a strategy, and is 84% say informal flexibility helps keep them atintentionally incorporated within consistent policy the company.guidelines. The broadest impact of flexibilityoccurs when an organization develops a true • It is not just employees who see the value ofculture of flexibility that incorporates a variety of informal flexibility for retention. At Deloitte,work arrangements, both formal and occasional. A virtually all managers (96%) report thatculture of flexibility is characterized by widespread opportunities to use informal flexibility haveuse of occasional, as-needed flexibility, absence an impact on retention.of perceived penalties for using flexibility, and anemphasis on results rather than “face time.” • In its comprehensive study of the effects of flexibility at the workplace, Deloitte found thatThe examples that follow illustrate practices at the it was not only users of formal flexible workright half of the spectrum and demonstrate the arrangements that exhibited positive humanimpact of informal flexibility within a culture of capital outcomes. Employees who reportedflexibility: using some kind of flexibility as infrequently as once a month also exhibited higher levels• In a far-reaching study of all components of of commitment, lower levels of stress and ������������������������������������������������ ������������������������������ �������������������������� ���������������������� ������������������������� ������������������������������������ ���������������������������������� ������������������ �������������������� ����������������������������������� ������������������������������ ������������������������������������ ���������������������� ������������ �������������������������������� ������������������������������ ���������������������������������� ������������������������� ������������������������������� �������������������������� ������������������
  19. 19. Corporate Voices for Working Familiesstronger intention to stay at the companythan employees who did not take advantageof occasional, informal flexibility in when orwhere they worked. ����������������������������������������������������� ������������������������������������������������������� �������� ���������� �� �� ������������ ��� �������� ��� ��������� ��� ������������������������������������������������ 19
  20. 20. Business Impacts of Flexibility: An Imperative for Expansion The Impact of Flexibility stock price over a ten-year period than comparison organizations or the S&P average. on Financial Performance, Operational and Business Demonstration of Service Profit Chain from Outcomes Flexibility to Revenue and Shareholder Value The intuitive logic of the proposition that respecting “Managers buy the people part of the business case, employees’ needs makes for better business results is but they’re not sure about the productivity piece. So often sufficient for making the flexibility business it’s important to get that data, especially in light of case. But it is also possible to make the link between business pressures.” flexibility and business outcomes more visible by Work-Life and Diversity Manager showing how flexibility influences productivity measures, financial performance, or level of client With respect to retention, recruitment, employee service. engagement, and stress reduction, the impact of flexibility on the bottom line is mediated through • First Tennessee Bank used flexibility as a its positive effect on employees. The impact of centerpiece in putting the service profit chain flexibility for the business can be deduced based theory into practice. In several branches, the on total quality and value profit chain research bank trained managers on flexibility practices that demonstrates how employee retention and and focused on creating a work environment in engagement translates into customer retention those branches that was supportive of flexibility and loyalty and eventually to increased profit for and people’s personal lives. The result was that shareholders. Organizations that take the service employee retention in these branches proved profit chain approach of retaining customers by to be 50% higher than in other branches, and focusing on making the company a good place for this contributed to a greater retention rate employees to work have shown a larger increase in of customers at these branches. The bank demonstrated that as employee satisfaction ���������������������������������������� increased, customer retention increased by ����������������������������������������� 7%, which translated into $106 million profit increment in two years’ time. ��� • In an analysis of its employee survey results, Ernst and Young found that individuals’ ��� perceptions of their own flexibility are highly predictive of level of commitment, which in turn was found to be highly predictive of ��� revenue per person as well as retention. The firm found that Business Units in the top quartile���������� of People Commitment scores had revenue �� per person that was 7 percentage points better �������������������� than Business Units in the middle half, and 20 ���������������� ��������������� percentage points better than Business Units �� in the lowest quartile of People Commitment scores. This led the firm to conclude that having flexibility is an important driver of performance �� and, ultimately, of financial results. � ����������������������������������������� �������������������������������
  21. 21. Corporate Voices for Working Families �������������������������������������������� GlaxoSmithKline ��������������������������������������� saw the potential of flexible work arrangements, particularly job sharing among ������������ customer service ��� representatives, as a way of retaining���������������� talent. In setting������������������ up the criteria������������������������ for evaluating������������������� the job share ���������������� arrangements, the ���� company decided that “revenue neutrality” would be sufficient for success. That is, if the job sharing ���� ���� ���� ���� ���� ���� arrangements could accomplish ��������������������� the goal of retaining associates, then Productivity Effects of Flexibility people in job share positions would only have to produce as well as the population at large. • JP Morgan Chase measures the impact on By adopting the “do no harm” principle, the productivity of having a manager who creates an program did not have to prove financial or environment that supports informal flexibility productivity gain to be successful. (In fact, and is sensitive to employees’ personal lives. Of however, the arrangements resulted in greater employees with a sensitive manager, 84% rate productivity and extra coverage.) their area’s productivity as good or very good, compared with 55% of employees that do not • In its Management Flexibility pilots, Marriott have a sensitive manager. learned that a flexible approach resulted in greater productivity, even though people • AstraZeneca implemented job sharing and worked fewer hours. To address concerns part-time sales jobs in its field sales force. about turnover and survey feedback about Productivity in pharmaceutical sales forces long work weeks among hotel property is defined in terms of many continually- managers, Marriott piloted a process in which monitored metrics, including number of calls managers were encouraged to “do whatever it made, number of presentations and “yield” takes to get your job done, but be flexible in on activities. Therefore, the company was how you do it.” By rethinking the traditional able to track various metrics of job sharing ways work had been done, the focus shifted representatives. Their productivity, as measured away from work schedule and “face time” to by these monitored metrics, has consistently efficiency and effectiveness. The result was that proven to be in line with the productivity of after six months, managers reported working, full-time sales representatives. on average, five hours less per week than they had prior to the pilots. The company carefully • The Consumer Health Care Division of tracked financial impacts and customer service 21