Above is Atkinson's model of a flexible firm. He argued that firms increasingly seek 4 kinds of flexibility functional, numerical, pay, distancing.
Functional flexibility is a qualitative approach to work, and refers to management's ability to deploy and redeploy particular sections of the workforce on a wide range of tasks in response to market demand as and when required (Sparrow 1998 cited in Teicher & Holland 2006 p. 241-242). To ensure that this can be achieved efficiently, employees are trained in a wide range of skills. The volatility of product markets and the blurring of skill boundaries through technological change provide the continuing environment for the development of this form of flexibility (Mathews 1989 cited in Teicher & Holland 2006 p. 242).
Numerical flexibility is a quantitative approach to labour utilisation that is based on the principle of adjusting the size of the workforce to the levels of economic activity at short notice (Atkinson 1984 cited in Teicher & Holland 2006 p. 242). As the workload fluctuates, management has the option to adjust or redeploy its human resources accordingly. Casual, part-time contractors and subcontractors typically provide this form of flexibility (Morehead et al. 1995; Burgess 1997 cited in Teicher & Holland 2006 p. 242).
A secondary form of numerical flexibility is distancing, which relates to the outsourcing of activities that may include core and non-core activities. The outsourcing of non-core activities is well established (for example, cleaning, catering and security) and the increased outsourcing of traditional core activities, particularly in the human resources area (Herriot 1998; Fisher et al. 2002 cited in Teicher & Holland 2006 p. 242), facilitates the reduction of the core or permanent workforce
Financial flexibility is a compensation system designed to facilitate the development of numerical and functional flexibility. It provides the duality of allowing market forces to dictate relative wage rates for the external workforce and provides the incentive for the core workforce to increase its skill base by relating pay to skill levels (Teicher & Holland 2006, p. 242) The incorporation work-time flexibility or internal numerical flexibility provides the organization with the flexibility to arrange and adjust work patterns and leads to a closer correlation between labour utilization and production demands without financial penalty or the additional costs of hiring labour (Felstead & Jewson 1999; Ozaki 1999 cited in Teicher & Holland 2006 p. 242) The use of flexibility in the business centers on "securing lower labour costs, tighter manning levels, higher machine utilization, greater staff mobility and few interruptions and bottlenecks in production" (Blyton 1992, p.301 cited in Sheridan, Conway 2001 pp. 8) Flexible work environments also improve employee retention. With the pool of talent in markets becoming smaller as well as companies getting more and more competitive, many current and potential job candidates rather work for a company which allows arrangements such as part-time work, job sharing or work from home. Employers cannot afford to lose its that edge to competitors. Not only replacing staff takes up resources in terms of time and money, there is a cost in loss of continuity and business knowledge. It has been an upward trend for organizations to shift their focus to giving employees more flexible work arrangements to increase productivity. It not only strengthens employee loyalty and higher returns on training investment; it enhances a company's public image. Companies gain recognition as an "employer of choice"; improving the ability to retain existing...