Workplace Flexibility Practices in SMEs: Relationship with Performance via Redundancies, Absenteeism, and Financial Turnover

Abstract

This workplace flexibility study uses primary data on private sector small and medium-sized enterprises (SMEs) in Lancashire, United Kingdom, collected in 2009 during the recent “credit crunch” recession. Key features include: (1) objective measures of SME performance; (2) a focus on the previously relatively neglected relationship between workplace flexibility practices (WFPs) and three SME performance indicators, namely, redundancies, absenteeism, and financial turnover; and (3) a timely contribution to research on SMEs. Numerical, functional, and cost WFPs analyses, via zero-inflated Poisson and linear regressions, control for SME and market characteristics. Despite SMEs having limited resources, the results show a significant section of SMEs to be innovative and entrepreneurial organizations, embracing advancements in employment relations regarding employee discretion, training, participative working arrangements, and/or job security. Moreover, results indicate that WFPs have the potential to assist SMEs in responding to periods of constrained demand. Flexitime and job sharing are associated with low permanent-employee redundancies. Training, job security, and family-friendly practices relate to low absenteeism with reductions of up to six annual days per worker. Job security and profit-related pay are associated with high financial turnover. Staff pay-freeze links with high financial turnover, but to the detriment of redundancies and absenteeism, whereas management pay-cuts or management pay-freeze relate to low financial turnover. On a cautionary note, spending cuts, often enforced by policymakers, may be of limited benefit to SMEs, and thus other approaches would appear more fruitful.