Labour flexibility and related HRM practices: A study of large Taiwanese manufacturers

Canadian Journal of Administrative Sciences, Mar 2001 by Heh Jason Huang, John B Cullen

Abstract

This study examines the human resource management practices that may affect labour flexibility, that is, the adaptability of a firm's workforce. A random sample of managers in the largest manufacturers in Taiwan completed a structured questionnaire containing a measure of employee participation as an indicator of a firm's labour flexibility. The results indicated that both the HRM paradigm and credentialism appeared to significantly encourage employee participation. Implications of the findings are discussed.

Resume

Cette etude passe en revue les pratiques de la gestion des ressources humaines qui peuvent influences la `souplesse' de la main-d'oeuvre, c.-a-d, sa capacite d'adaptation. Un nombre de gestionnaires tires au hasard parmi les plus grandes societes Taiwanaises ont complete un sondage detaille grace auquel nous avons pu mesure la participation des employer comme indice de la souplesse de la main d'oeuvre d'une societe. Les resultats demontrent que le paradigme du HRM et le "credentialism" semblent encourages de facon significative la participation de la main d'oeuvre. Les consequences de ces resultats sont ensuite examinees.

Many theorists argue that flexibility is an essential strategic asset to compete in the dynamic global environment (Evans, 1991; Volberda, 1998). One area often overlooked is the contribution of human resource management (HRM) policies to flexibility. In order to rectify the deficit, this study explores whether various human resource practices used by large Taiwanese companies contributed to developing labour flexibility. Small and medium-sized enterprises, which make up the overwhelming bulk of all enterprises in Taiwan, have received much attention in the past (Greenhalgh, 1988). The focus here is the business practices of larger firms.

Labour Flexibility

Labour Flexibility as an Aspect of Internal Organizational Flexibility

In seeking to define organizational flexibility, the academic debate is often general and abstract. From a dynamic contingency perspective (Child, 1972; Thompson, 1967), organizational flexibility is identified as a potential for maintaining a dynamic fit between the environment and the organization. This potential can be defensive (reactive) or offensive (proactive) (Evans, 1991; Volberda, 1998) and organizational flexibility can exist externally or internally. While external flexibility may be achieved through a diversified pattern of product-market investment, internal flexibility arises from the liquidity of resources. Therefore, internal flexibility is defined as management's capability to adapt to the demands of the environment. External flexibility is defined as management's capability to influence the environment so that the firm becomes less vulnerable to changes (Ansoff, 1965)

The focus of the study reported here is labour flexibility, one specific aspect of the internal flexibility. More specifically, this study examines the use of HRM practices that allow for flexibility in the use of the labour force to enable organizations to absorb and respond to unfavourable developments and to exploit favourable opportunities as they occur. While the actions to build internal flexibility can be offensive or defensive, the function of internal flexibility is usually defensive, to protect the organization against the predatory moves of competitors or to develop an ability for correcting past mistakes. In other words, internal flexibility is usually a response to contingencies rather than an attempt to influence contingencies.

There are at least two dimensions of labour flexibility: functional flexibility, for example, increasing the variety of workers' skills; and numerical flexibility, for example, adjusting workforce size to shifts in demand (Bahrami, 1992; Volberda, 1998). In seeking functional flexibility, managers aim to develop and maintain a competent and adaptable workforce that may deal effectively with non-routine and exceptional situations that require creativity and initiative. Numerical flexibility may require HRM practices (recruitment, selection, retention) that allow companies to adjust the number of employees. This may support preparatory actions or after-the-fact adjustments to environmental changes.

Labour Flexibility and Employee Participation

Flexibility involves the creation and promotion of dynamic capabilities. These capabilities allow rapid response to a variety of unpredictable contingencies and demand changes (Ittner & Kogut, 1995). Theorists generally view the capabilities-building process as an organization-wide activity involving each level of a business (Van Cauwenberg & Cool, 1982). However, a bottom-up perspective on building capabilities is often advocated (Burgelman, 1983; Pascale, 1984). Typically, front-line managers are closer to the sources of information critical to a capabilities-building process. Labour flexibility tends to be the result of a learning process by employees, and is beneficial to the firm only if it can be mobilized. Dastmalchian and Javidan (1998) suggest that empowerment is one such learning concept and identify those executives who have made a significant emotional impact on their subordinates. They conclude that encouraging employee participation helps to build a loyal and flexible workforce. Conceivably, after developing and maintaining a competent and adaptable workforce, the extent to which management encourages employee participation becomes an indicator as to whether this adaptable workforce or internal flexibility has effectively developed.