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Implementing a flexible working project 

This is the second in our series of Flexibility articles on how to implement a successful flexible working project.

Here we deal with the benefits and costs, following the main themes set out in the previous article.


 

 

2. Quantifying the benefits and costs

In the following sections we will illustrate by example some of the benefits that have already been achieved by organisations that have embraced new ways of working.  These are of course not necessarily all achievable at the same time!  Most importantly, there is no substitute for detailed analysis in each case.  What has been achieved in another organisation can be a useful indicator, but no more.

Contents:

Effective and efficient service delivery:

Many organisations, in both the private and public sectors, are keen to improve the ways they deal with customers, clients, business partners and the general public.

Flexible working can contribute to this in a number of ways:

  • Operations can be "open for business" for longer hours, even round-the-clock.  During anti-social hours, for example, telephones can be answered by home-workers or by people working in different time zones.

  • Call centres and switchboards can improve their answering statistics by diverting overflow calls to contingent workers.

  • Mobile staff can spend more time with their customers and clients and less time visiting the office or travelling.

  • Staff can be relocated closer to their markets and customers, yet still remain part of the employer's virtual office.

Financial gains can be substantial.  It has been estimated that 80% of callers will phone a competitor if the phone is not answered or they are put in a long queue.  One sales and marketing operation, with a million inbound calls a year, estimated that increasing the percentage of calls answered in three rings from 70% to 95% allowed them to increase sales by 15% without taking on more staff.

Another organisation, in the public sector, was able to increase the average number of visits to the public made daily by its mobile professionals from 3 to 4, in effect a productivity improvement of 33%.

Low operating and administrative costs:

The most visible area of fixed cost addressed by flexible working is property.  Apart from call centres and other highly structured environments, which already implement shared desk policies and operate round-the-clock, most office buildings are seriously under-utilised.  Even call-centres may run less than half-full during quiet periods.

The transition from a personal to a shared space environment can have a dramatic impact on space needs.  One engineering consultancy in the north of England calculated it needed only 30% of its previous space.  In fact it chose to only half its space, creating staff facilities including a gym in the process.  Annual facility costs per employee reduced from 6,500 to 4,500.

Other cost reductions come from lower secretarial ratios and streamlined, paper-free processes.  Some of these are, of course, partly achievable in a conventional working environment.  In some forward-thinking organisations staff no longer needed in back-office administrative roles are redeployed into customer-facing positions.

High business efficiency and team / personal productivity:

Probably the greatest financial benefits from flexible working result from efficiency and productivity improvements, yet they are often difficult to quantify in advance.  The point here is that flexible working enables substantial gains, but it is up to managers and their teams to deliver them in the context of new ways of working.

Increasing efficiency implies raising the business output per unit cost.  Technology-enabled process and communications improvements can deliver substantial improvements, even in a conventional working environment.  Additional gains attributable to flexible working include:

  • Less time spent travelling on business: according to the AA the actual cost of business car travel is around 50p per mile.  To this must be added the cost of the employee, who is largely unproductive whilst driving: for an average professional this is around 20 per hour, or a further 75p per mile at average driving speed.  A modest reduction of 2,000 miles per year per mobile professional translates into a saving of 2,500.

  • Facility to work anywhere and anytime: a similar approach can estimate the improvements in productivity from staff being able to work wherever and whenever they happen to be.  Common scenarios include working at business partner sites, working at home before or after meetings and working on trains, planes, at railway stations or airports.  Based on employment costs of 20 per hour, an extra 2 hours of productivity per week is worth almost 2,000 a year.

Also the work itself can be substantially more productive.  For example being able to respond rapidly to messages from colleagues or business partners helps avoid "catch-up" time, which many executives estimate as taking 3-4 hours per week of their time.

High staff motivation and retention:

Many companies report that attracting good staff and retaining them in a competitive labour market is a problem, especially in certain sectors such as the IT industry.  All else being equal, employees often seem to be prepared to move for just a modest increase in salary.

Yet surveys show that many people put lifestyle and work-life balance above salary in their priorities for a new job.  Commuting, especially through congested traffic or on unreliable, overcrowded trains, is another disincentive.

There is a cost associated with staff turnover:

  • The direct recruitment costs for replacement labour

  • The direct cost of training new staff

  • The low initial productivity of new staff.

There are also financial implications associated with knowledgeable staff leaving and joining competitors.

As an example, outsourced recruitment cost via an agency is typically 15% of first year salary.  Training a new recruit might cost around 1,000.  Productivity for the first six months may average 50% of the ultimate level.  On this basis, the cost of replacing an employee on a salary of 25,000 per year, and all-in employment costs of 50,000 per year, would be over 15,000.

Increasing the average stay at an employer from three to five years results in a saving of 30,000 per employee over fifteen years, or 2,000 per year.

Commuting is a burden that many employees treat as a necessary evil.  Whilst any savings from not commuting strictly go directly to the employee - season ticket, second car, expensive housing - employers may also gain by being able to attract employees, who do not need to commute, with lower salaries.  In London, many commuters spend over 2,000 per year of post-tax income on their season tickets alone.

Equal opportunities, environmental and social sustainability:

It is probably artificial to attempt to translate gains in these areas into financial benefits, though aspects of the following approach may be appropriate in some situations:

Equal opportunities:

Costs of compliance with legislation by alternative means, access to a higher quality pool of labour.

Environment:

Local Agenda 21 compatibility, avoidance of green taxes and penalties.

Social:

Relocation of work into areas attracting grants, low labour costs, access to a high quality and less mobile workforce.

An additional benefit, again hard to quantify, might be associated with positive press comment and other PR activities.

 

Next article: Planning for results

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