Pathways from flexible work arrangements to financial performance
| Pages | 731-747 |
| Date | 01 April 2019 |
| DOI | https://doi.org/10.1108/PR-11-2017-0353 |
| Published date | 01 April 2019 |
| Author | Bernice Adei Kotey,Bishnu Sharma |
| Subject Matter | HR & organizational behaviour,Global HRM |
Pathways from flexible
work arrangements to
financial performance
Bernice Adei Kotey
UNE Business School, University of New England, Armidale, Australia, and
Bishnu Sharma
School of Business, University of the Sunshine Coast, Sunshine Coast, Australia
Abstract
Purpose –The purpose of this paper is to investigate the direct and indirect effects of flexible working
arrangements (FWAs) on return on labour (ROL).
Design/methodology/approach –Data from 4,204 employees and their employers were used to construct
regression models to assess separately, the direct relationships between the FWAs and ROL and also the
indirect relationships, with job satisfaction and staff turnover as mediating variables, applying Baron and
Kenny’s (1986) mediation rules.
Findings –Flexible work hours significantly and directly increased ROL and indirectly through reduction in
staff turnover, while the negative direct effect of job sharing on ROL was indirectly reduced by its positive
effect on job satisfaction. Time in lieu of overtime (TOIL) and working from home reduced ROL with the
direct negative effects of TOIL on ROL worsened by a reduction in job satisfaction.
Practical implications –The results suggest that not all FWAs increase ROL and that the direct effects of
FWAs on ROL emanate from the efficacy with which work is reallocated in FWA negotiations. The indirect
effects derive from employees’reciprocation of FWAs through improved job satisfaction and turnover.
The onus is therefore, on employers to maximise returns from FWAs through efficient work reallocation
during negotiations.
Originality/value –The study makes a contribution by examining the direction of effects of FWAs on ROL
and the pathways (direct and indirect) by which the effects occur. Research in this area has hitherto
considered subjective and qualitative performance measures. FWAs, such as job sharing and TOIL, which are
rarely considered in the literature, are covered in the study.
Keywords Quantitative, Mediation, Flexible work arrangements, Job satisfaction, Advanced statistical,
Employee turnover, Return on labour
Paper type Research paper
Introduction
The importance of human resources to organisational performance cannot be
underestimated ( Jiang et al., 2012), as evidenced by the increasing weight given to
knowledge and intellectual capital over physical assets in building competitive advantage
(Alegre et al., 2011; Barney et al., 2011). Human resources are, however, more difficult to
manage than physical resources because management does not have direct control over
employee behaviour, but must ensure all dimensions of work and the work environment are
designed in a way that motivate employee performance (Becker and Huselid, 1998; Gerhart,
2007). New and growing challenges in the environment of organisations, driven by
globalisation, intense competition, multiculturalism and diversity, deregulation, changing
employment and human right legislation, technological advances and emphasis on
customer satisfaction, all add to the complexity of managing human resources. These
challenges have amplified management’s efforts at finding the most effective strategies to
motivate high performance among employees (Delaney and Goddard, 2001).
Over the decades, researchers in the field of human resource management have assisted
by proposing theories, models and processes by which human resources can be used
more effectively (Vroom, 1964; Lawler, 1973; Barney, 1991; Delaney and Goddard, 2001).
Personnel Review
Vol. 48 No. 3, 2019
pp. 731-747
© Emerald PublishingLimited
0048-3486
DOI 10.1108/PR-11-2017-0353
Received 21 November 2017
Revised 26 April 2018
Accepted 4 July 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0048-3486.htm
731
Pathways from
FWAs to
financial
performance
The current focus, however, is on the rising stress levels from managing various facets of
life as well as the ageing population in developed economies (Bal and Dorenbosch, 2015)
both of which have heightened the importance of work–life balance (WLB) and associated
flexible work arrangements (FWAs) to motivating employees. Following from these,
researchers have demonstrated positive associations between FWA availability or
provision and outcomes, such as employee job satisfaction, work commitment and reduced
turnover (Posthuma et al., 2013; Cegarra-Leiva et al., 2012; Wang et al., 2011; Russell et al.,
2009). Kotey (2017) found that FWAs feature prominently among the strategies used to
attract unique capabilities and build competencies for competitive advantage. It is assumed
from these associations that FWAs improve financial performance, but research on the
links between FWAs and objective financial performance is rare. Researchers who use
subjective and qualitative performance measures argue that they reflect financial
performance (Bal and Dorenbosch, 2015) although the extent of overlap between the two
measures is unknown.
This study charts the pathways by which FWAs affect financial performance through
job satisfaction and staff turnover. It makes a number of contributions to the literature.
First, it identifies direct financial returns to employers for making FWAs available to
employees and suggests that the underlying causes are linked to efficiencies/inefficiencies in
work reallocation in FWA negotiations. It notes that for employers to benefit from FWAs,
they must ensure that individual employee workloads are effectively matched with reduced
work time such that negative work intensification is minimised, employees have the skills
and knowledge to complete allocated tasks, and have control over their performance.
Second, the study finds that contrary to the wide promotion of FWAs as improving
performance, not all FWAs provide positive financial returns. This means policy makers
need to educate employers that the majority of FWAs entail costs but are necessary to
maintain competitive advantage. Third, the study finds that not all FWAs that lead to job
satisfaction improve return on labour (ROL), and that the financial effects of job satisfaction
and reduced turnover from FWAs are relatively small compared with the direct effects of
work allocation. Finally, among the FWAs examined are job sharing and time in lieu of
overtime (TOIL) that are not usually covered in FWA studies.
The rest of the paper is organised into four sections. The second section examines the
literature on the costs and benefits of FWAs and draws on the social exchange theory to
formulate hypotheses for testing. The research methodology and results from the analyses
are presented in the third and fourth sections, respectively. The last section concludes the
study with a discussion of the findings and implications for policy and practice.
Literature review
FWAs and work–life balance
The need to balance the increasing intensity of work with family and other social demands
(Shirom, 2005) has led to a push for FWAs to reduce the negative effects of work on health,
well-being and social lives of employees (Lewis et al., 2007; Wang and Verma, 2012).
Accordingly, FWAs have been endorsed by world bodies such as the International Labour
Organisation (ILO) (Messenger, 2006), the European Union (EU) and the Organisation of
Economic Co-operation and Development (OECD) (Goetschy, 2006; Zeytinoglu et al., 2009) as
a means of helping employees achieve an effective WLB. Referring to an ILO publication,
Croucher et al. (2013) noted that productivity improvements from programmes such as
FWAs benefit not only the workplace but also advance economic and social outcomes for
the communities in which the organisations are located.
In pursuit of effective WLB for employees, many OECD countries have legislated a
standard or maximum number of working hours in a week. The maximum average work
week in the EU is 48 h (European Trade Union Confederation, 2008), although this varies
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