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Flexibility in employment: developments in the hospitality industry
Int. J. Hospitality Management Vol. 8 No. 2, pp. 157-166, 1989 Printed in Great Britain
0278-4319/89 $3.00 + 0.00 ~ 1989 Pergamon Press plc
Flexibility in employment: developments in the hospitality industry Clare Kelliher Faculty of Hospitality Operations and Management, Ealing College of Higher Education, St Mary's Road, London W5 5 R F , U.K.
The debate which has been developed in recent years around the trends towards introducing more flexible working practices into organisations has spawned a literature which is largely centred on the manufacturing industries. Shwe the labour force in the service sector tends to be generally less organised and management have greater control over industrial relations matters, it has been assumed that the flexibility debate has little relevance for this area. This article examines one area of the service sector, public sector catering, which does not conform to this model and reports on the recent developments inflexibility which have taken place here.
Key words:
employment
flexibility hospitality industry
Introduction In recent years there has been considerable debate about developments towards a model of the 'flexible firm' and management journals have been full of reports on the introduction of flexible employment practices in a wide variety of organisations.* In the face of an increasingly competitive environment, organisations have sought ways of making themselves more responsive to changing market demands, whilst at the same time making more effective use of labour and technology. One strategy of attempting to achieve this balance has been to introduce flexible systems in the utilisation of labour. Flexibility in employment allows firms to adjust and readjust their labour costs in line with fluctuations in the level of their business activity. Labour costs may be adjusted by altering the number of staff employed, the level of hours staff work, the nature of the work carried out or the payment system used. The aim is to employ only the required number of staff in the required capacities at any point in the business' life. The purpose of this article is to examine the relevance of the trend towards flexibility in employment for the hotel and catering industry. Much of what has been written about flexible employment practices has focused on the manufacturing industries. There has been a general assumption that flexibility is far more widespread in the service industries and therefore that the debate is not relevant to the service sector. The NEDO (National * See, for example, Personnel Management, Manpower Policy and Practice, Management Today. 157
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Economic Development Office) (1986) survey on Changing Working Patterns found that flexibility 'was not generally reckoned to be an important priority for service sector firms. They either had it by tradition or they could get it relatively easily.' However, while this may at least in part be true, to suggest that employment throughout the service sector is characterised by a high level of flexibility would not be a wholly accurate reflection of the current situation. Certain parts of the service sector and in particular the public services, have historically operated in a highly regulated employment environment, with little option for management to make short-term variations to the amount or nature of work carried out. Therefore, any attempts by organisations in these areas to introduce more flexible working practices are likely to be of equal significance and interest to those in the manufacturing industries. The focus of this article is to look at one such case: the introduction of flexible employment practices into public sector catering. As a result of the increased pressure on public sector caterers in recent years to be more cost-effective and with the introduction of competitive tendering for catering services, management have been forced to re-examine the ways in which they utilize their labour. Recent research carried out by the author (see Kelliher and McKenna, 1987, 1988) on the employment implications of competitive tendering in public sector catering, shows that notable developments towards flexibility have taken place. External competition and the threat of possible job loss have in many situations enabled management to overcome existing restrictive practices and introduce more flexible working systems. The term 'flexibility' has been used widely and in a number of different contexts, therefore before attempting to examine the implications for the catering industry, it is important to be clear about what is meant in this context. For the purpose of this article the IMS (Institute of Manpower Studies)/NEDO definition will be used. The N E D O report on Changing Working Patterns suggests that the use of flexible strategies in employment falls into three basic categories: numerical flexibility, functional flexibility and pay flexibility. Numerical flexibility is defined as 'the ability of firms to adjust the number of workers, or the level of worked hours, in line with changes in the level of demand for them' (NEDO, 1986). In other words numerical flexibility allows management to minimize the gap between the supply of and demand for labour in the organisation at any one point in time. In this way both staff 'idle time' and staff shortages can be reduced. Numerical flexibility can be implemented in a number of ways: increased use of temporary and part-time workers, increased use of overtime, changes in shift patterns and use of variable working times (e.g. annual hours contracts). The extent and nature of business fluctuations will vary between industries, from daily or even shift variations in the hotel or retail industries, to longer term product cycle variations in manufacturing. As a result different strategies of numerical flexibility will be appropriate to different organisations. Clearly this type of flexibility is of most use to organisations who experience significant and predictable fluctuations in their business activity. Where fluctuations are unpredictable it may be difficult for management to act sufficiently quickly to tailor staffing levels to
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changes in demand. Equally strategies of numerical flexibility are of most use where skill levels are low and little training or induction is required, since to be effective it is important that additional staff attain acceptable levels of performance in a short time period. Functional flexibility is defined as 'the ability of firms to re-organize the competances associated with jobs, so that job holders can deploy such competances across a broader range of tasks' (NEDO, 1986). Using functional flexibility organisations can deploy staff in different ways according to business demands. This may involve employees taking on a broader range of tasks at a similar level (horizontal) or taking on additional tasks at different levels (vertical). A common example in manufacturing industries has been to incorporate maintenance into machine-operators' jobs. Functional flexibility can be usefully implemented where there are predictable changes in the nature of the work in line with changes in business activity. Staff can therefore be re-deployed in line with these changing activities. This type of flexibility however cannot be implemented as easily and simply as numerical flexibility, since it requires some level of prior investment in the employee. Employees who are to switch from task to task, clearly require greater levels of training than employees who simply carry out a single task. They also need to be familiar with different working environments if they are to transfer easily and reach appropriate performance levels in the shortest time period. Pay flexibility is defined as: 'the ability of firms to adjust pay structures to encourage functional flexibility, match market rates for scarce skills and/or reward individual performance' (NEDO, 1986). Pay flexibility allows organisations to adjust payment levels in line with business priorities. For example, employees may be paid according to merit, productivity or the current value of their skills to the organisation. Where strategies of functional flexibility are being pursued, staff may be encouraged to train for additional tasks by paying enhanced rates for 'multi-function' staff. In certain industries pay flexibility may be more difficult to implement than other types of flexibility. Pay tends to be a rather more sensitive area and may require considerable managerial freedom to implement. For example, management discretion on pay is limited in the Wages Council Industries, equally amongst unionised workforces there may be considerable opposition to pay flexibility, particularly where it challenges traditional earnings differentials or security of earnings.
Flexibility in the hotel and catering industry Critics of the recent interest in flexibility argue that flexibility in employment is not new, but has traditionally been used by employers as a means of matching the nature and level of staffing to their business requirements. Pollert (1987) argues that 'managerial concern with labour flexibility is not new' and that '"Dual" and "segmented" labour market theorists have long pointed to the link between competitive labour market conditions and employers' strategies to exploit a cheap and variable labour force.'
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Certainly, flexible employment practices are not new developments in many sectors of the hotel and catering industry. In those sectors of the industry where demand is erratic, employers have customarily adjusted their utilisation of labour in line with the peaks and troughs in demand. As long ago as 1976 Mars and Mitchell (1976) wrote of employers using a variety of strategies of flexible employment in the industry. Clearly, in any industry where significant changes in the level of demand occur, the ability to use labour in a flexible manner is of prime importance to management. Unlike the case of manufacturing firms who can use 'slack' periods to stockpile for times of heavier demand, service firms who cater to the incidence of demand have only very limited possibilities for this option. For example, if there are no customers in a restaurant, there is little the food service staff can do to prepare for a rush later. The problem is accentuated by the labour intensive nature of much hotel and catering work. Thus in order to control labour costs effectively, management need the ability to pursue flexible employment strategies. In most sectors of the hotel and catering industry practitioners will be familiar with the use of numerical flexibility. Management vary both the number of staff employed and the amount of hours worked by staff in order to tailor staffing levels to fit demand. Business fluctuations are frequently short term and consequently management may need to vary staffing levels on a weekly, daily or even shift basis. In order to do this employers rely upon what Van Ham et al. (1987) refer to as 'on demand' contracts of employment, where staff are only taken on as and when an employer has work and are dispensed with when this decreases. The jobs for which employers generally use numerical flexibility tend to be at a low skill operative level (e.g. waiting, housekeeping, kitchen portering) and consequently training for additional staff is usually minimal. Employers who frequently require additional staff on a short-term basis tend to develop their own 'pool' of temporary employees who are familiar with the organisational practices and who can be called upon as needed. Furthermore many of the skills possessed by temporary workers are 'industry' as opposed to 'firm' specific and consequently a pool of temporary staff has developed for the industry. Employment agencies have developed to act as the point of contact between firms requiring temporary staff and those in the peripheral labour market. Perhaps rather surprisingly we do not see the level of functional flexibility that might be expected in an industry with varying demand levels. With the exception of smaller establishments, employers in the hotel and catering industry do not in general opt to formally move employees from function to function according to business requirements. Some informal inter-departmental functional flexibility may take place, but this as often as not is staff helping each other out rather than a management directive. Staff tend to build up specialisms in departmental areas and even within departments; rarely do we see staff crossing the functional boundaries, for example, between food preparation and service, although in the past a number of companies have experimented with 'multi-function staff', who could be moved from job to job depending upon business demands. This approach has implications for both recruitment and training. Staff required to carry out a number of tasks may need to be of a higher calibre than those simply carrying out one task. Equally, employers will need to invest considerably more in the training of these staff, in order to enable them to reach effective performance levels in a variety of areas. Pay flexibility is a commonly used and well-established practice in the industry to regulate labour costs. Employees, particularly those in customer contact have their pay
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levels linked directly or indirectly to business activity via commission, service payment or a 'tronc' system of tip allocation. With little or no collective opposition to management decision-making in most of the commercial sectors of the industry, management have considerable freedom to alter pay levels in line with level of business activity, productivity or market availability of skills. The 'secret' nature of employment contracts in the industry as described by Mars and Mitchell (1976), allows management to offer different reward packages (including both formal and informal elements) to different employees depending upon their 'value' to the organisation. Employers' discretion is however limited (at least in a downward sense) by the minimum wages set by the Wages Councils covering large parts of the industry. However given the low levels at which they are set in comparison to average wages and the poor enforcement mechanism, in reality their effect may be limited. The flexible practices used by employers in the hotel and catering industry would appear to fit into the general model of flexibility developed in the NEDO report on Changing Working Practices. The NEDO (1986) survey found that firms tended to choose different types of flexible employment practices according to certain criteria. The results show that organisations tended to use methods of numerical flexibility where the skills of the workforce were low and non-firm specific. Functional flexibility on the other hand tended to be used by organisations where skill level was both high and firm specific. This model helps to explain the predominance of numerical flexibility and the relative lack of functional flexibility in the hotel and catering industry. As noted earlier numerical flexibility is used mainly for low skill jobs, however in those jobs where the skill level is high, employers do not so commonly pursue functional flexibility, because in this case the skills are 'industry', rather than 'firm' specific. In other words because the employee's skills are not firm specific, the relationship between the employee and the organisation is not so binding and consequently employers are less likely to be willing to invest in multi-function training, where there is no certainty that they will reap the benefits.
Introducing flexibility into public sector catering The primary motivation of firms introducing flexible working practice has been to improve or maintain their competitive position (NEDO, 1986). By being able to use their labour in a more flexible manner they feel in a better position to react to changing, often unforeseen, business requirements. The NEDO summary found that in manufacturing firms in particular, the impact of the recession was the catalyst for introducing flexibility. The effects of the recession, increased unemployment and weakened trade union bargaining power, on the industrial relations climate made it easier for firms to introduce new practices without significant employee opposition. The possibility of job loss or further job loss was a powerful negotiating weapon. The survey also found flexible working practices frequently being introduced as part of a broader package of changes brought about by the introduction of new technology, allowing for the rearrangement of work and amalgamation of a number of tasks. Flexibility has been brought about in the public sector services in a not dissimilar manner by exposing the management of ancillary services to competition from private sector operators.
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When discussing the hotel and catering industry so far, we have very much concentrated on the commercial sectors of the industry and little attention has been paid to the employment practices operating in the public sector. We now turn our focus to the state sector and in particular the catering services in the National Health Service (NHS). Unlike the private sector, up until the 1980s flexible working practices had not traditionally been a feature of public sector employment. The industrial relations environment which had developed in public sector catering was a very different one from the private sector counterpart. As a result of the commitment of successive governments to act as a 'good employer' and recognise trade unions for collective bargaining purposes, a highly structured system of joint-regulation had developed and consequently management did not have the same level of discretion over employment matters as did private sector managers. It was against this background of structured, formalised industrial relations that competitive tendering for public sector ancillary services was introduced. The primary purpose of opening-up areas of the public sector to external competition was to try and bring about greater efficiency and cost savings. Due to the labour intensive nature of many ancillary services, greater flexibility in the utilisation of labour was a prerequisite for such changes. Contracting out is a useful means of making an organisation more flexible since a commercial relationship with a contracting organisation is substituted for a set of employment relationships. Van Ham et al. (1987) comment 'there is little need to invest either in fixed assets or people, the company has great flexibility and can spend more money on what it does b e s t . . . ' Contracting out of ancillary services (e.g. catering, cleaning, security, etc.) and making them 'someone else's problem' allows the organisation to become more flexible in a number of ways. From the employment perspective contracting out can be an effective means in achieving flexibility in the utilisation of human resources. This can be particularly useful for organisations who would encounter difficulties introducing human resource flexibility themselves, for example, if there is active trade union opposition. Where the contractor operates in an industrial relations climate of greater managerial freedom, they may be able to achieve a level of employment flexibility which would be very difficult or even impossible in the contracting organisation. Given the Government's intention to bring about cost savings in the provision of public sector services, the contracting option for ancillary services is particularly attractive. Catering like many other services opened up to competition is highly labour-intensive and consequently contracting companies looking to make cost savings will inevitably look for the most effective utilisation of labour. Due to the different industrial relations environment which private firms operate in, contractors have been able to bring about increased flexibility, which would not have been possible for the public sector to pursue. However the decision to go for a policy of competitive tendering (i.e. where the existing in-house operators are permitted to submit a tender for the service, alongside external contractors), rather than contracting out p e r se, has brought about some interesting developments in flexibility in the public sector itself. Results from the research carried out into the employment implications of competitive tendering in the public sector indicate a significant trend towards more flexible utilisation of labour in NHS catering (see Kelliher and McKenna, 1988). Although the changes which have taken place vary considerably between District
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Health Authorities, some general observations can be drawn. Evidence from the research shows that as part of the process of developing a competitive tender, managements (both in-house and external tenderers) have sought to introduce more flexible working practices, in order to allow them to align or realign usage of labour with the level of demand. We turn now to look at some examples of flexibility in NHS catering.
Numerical flexibility Numerical flexibility has been used widely by both in-house and external tenderers. The most significant trend in this area has been the reduction of staffing levels. Prior to the tendering exercise there was a general feeling that NHS ancillary services were over-staffed and consequently contractors and in-house management have looked for ways of rationalising staff numbers in the catering operations. The extent of reductions in staffing levels has varied considerably between authorities, but as a general rule has been markedly greater where the contract has been awarded to an external contractor. The research identified one contractor who had succeeded in reducing staffing by almost a third of the previous level. However figures of 10-20% decreases were more common, even where the method of production had been altered. For example, in one health authority, where the contractor introduced a cook-chill system, the decrease in staffing was initially in the region of 10%. Where the in-house bid has been successful, some reductions in staffing have normally occurred, but have generally been at a lower level, often involving only a very few staff. In-house management have shown a reluctance to make staff redundant and instead have looked to alterations in working time and rearrangement of tasks in order to make savings. Reduction in working time has been a common feature in post tendering operations. The working hours of both full- and part-time staff have been reduced in order to match supply of labour more closely to demand and in many cases this has involved making full-time staff part-time. In one case an external contractor employed 50% of the workforce on a part-time basis, as compared to a previously largely full-time NHS workforce. In another hospital where the contract remained in-house, the hours of unskilled staff were reduced from 35 to 25 per week. The use of part-time staff has considerable benefits for in-house renderers, since it not only allows them to tailor their staffing more finely to requirements, but also allows them to avoid paying full-time staff the nationally-agreed, enhanced payment rates for overtime and weekend working.
Functional flexibility Functional flexibility, as is the case throughout the catering industry, has been the least common development in flexibility in post competitive tendering operations. Industry traditions, backed up by trade union organisation eager to defend job demarcations, has meant that traditionally there has been little functional flexibility in NHS catering. Perhaps because of the relative lack of experience in this field, contractors have not, in the main, made extensive use of functional flexibility in developing competitive tenders. Instead where functional flexibility has been introduced it tends to be as a by-product of other
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processes. For example, where the in-house tender has been successful, functional flexibility and rearrangement of working tasks have often been used in order to avoid staff redundancies. Functional flexibility has also been used to 'compensate' in-house staff for 'losses' they have incurred as a result of decreased working hours or reduced remuneration. In one hospital a supervisor, whose 'normal' level of overtime was reduced, took on additional, non-supervisory duties in order to lessen the impact of the lost overtime on her wage packet. Some degree of functional flexibility has also been implemented in those units where new technology has been introduced in the form of cook--chill production. In line with the findings of the NEDO survey, catering management have used the opportunity of technical change to rearrange tasks and consolidate job categories in order to allow more functional flexibility and thereby more effective use of the technology. The research found instances where the distinction between job categories (e.g. cook and assistant cook) had been removed and all staff were expected to cover a wider range of duties. Although to date only relatively minor use of functional flexibility has been observed, it is interesting to note that one major contractor used 'ability to be sufficiently flexible' as a selection criteria when recruiting former NHS staff.
Pay flexibility Pay flexibility has been used to a certain extent, by both contractors and in-house management. External contractors have often brought about considerable adjustments in pay and payment systems. Contractors have been keen to substitute the NHS Whitley council rates of pay and conditions for what they consider to be more realistic employment packages. They have preferred to set rates of pay more closely in line with the local labour market and pay the 'going rate for the job'. In practice this has not tended to lead to cuts in the basic rates of pay, but rather in the conditions of service offered to employees. Contractors do not tend to offer pay enhancement for unsocial hours or weekend working, instead staff are rostered over a 5°day week and are paid the same whether or not this covers a weekend. Equally sick pay and pension schemes tend to be less beneficial than those formally offered by the NHS. The in-house contractors have less scope for pay flexibility, since they are bound by the nationally-agreed rates of pay and conditions of employment, however some flexibility has been introduced into payment by means of altering the locally agreed bonus schemes. In some authorities the bonus scheme, described by one caterer as the 'liability of the in-house bid', has been abolished or more commonly has been reduced. (Ironically bonus schemes were first introduced as an element in NHS ancillary workers pay in order to combat low pay.) Despite a highly unionised workforce and a rather inflexible climate of industrial relations prior to the competitive tendering exercise, catering management have faced little real resistance to introducing the changes outlined. In many ways NHS catering workers were in no position to oppose management plans to introduce more flexible working practices. Employees and their unions are effectively placed in a 'no-win' situation. They are faced with the choice of resisting change and almost certainly facing
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redundancy or accepting changes in an attempt to maintain their jobs, albeit on an altered basis. In this light the public sector trade unions have tended to adopt a strategy of'damage limitation', becoming involved in the drawing-up of the in-house tender in order to attempt to minimise the damage to their members' terms and conditions of employment.
Conclusions Although the recent interest in growing flexibility in organisations has been centred around the manufacturing industries, there is clearly relevance for parts of the service sector. Despite widespread existing flexibility in many service industries, some parts have not traditionally operated in an industrial relations environment conducive to flexible utilisation of labour. The public sector services have a history of a high level of trade union involvement and a centralised system of industrial relations with little opportunity for management to introduce more flexible working practices. However, at the same time as the interest in flexibility was developing, substantial changes were being brought about in the climate of the public sector. Opening up the management of public services to competition presented managers with pressures not dissimilar to those being experienced by managers in private sector manufacturing. Perhaps not surprisingly these managers looked to broadly similar strategies in order to meet the challenges of change. Given the labour-intensive nature of catering, managers have found the introduction of more flexible employment practices a vital element in meeting the forces of competition. As outlined above, use of all three types of employment flexibility has been made, although in line with the industry tradition, greater emphasis has been placed on numerical and pay flexibility, rather than functional flexibility. Thus, although the fluctuations in demand levels in public sector catering may be less extreme, what the increasingly competitive environment has done, has been to move the nature of employment practices found in the public sector more closely to those traditionally found in the private sector of the industry.
References Atkinson, J. (1985) Flexibility: planning for an uncertain future. Manpower Policy and Practice 1, 26-29. Kelliher, C. and McKenna, S. (1987) Contract caterers and public sector catering. Employee Relations 9, 10--13. Kelliher, C. and McKenna, S. (1988) The employment implications of government policy: a case study of public sector catering. Employee Relations 10, 8--13. Mars, G. and Mitchell, P. (1986) Room for Reform? Open University Press, Milton Keynes. National Economic Development Office (NEDO) (1986) Changing Working Patterns. Report prepared for the Department of Employment. Piore, M. (1971) The dual labour market: theory and implications. In Problems in Political Economy: An Urban Perspective, Gordon, D. (ed.). Heath, Lexington. Pollert, A. (1987) The 'flexible firm': a model in search of reality. Warwick Paper in Industrial Relations no. 19.
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Van Ham, J., Paauwe, P. J. and Williams, R. (1987) Human resource flexibility--some necessary conditions for success. Personnel Review 16, 27-30.
About the Author Clare Kelliher, B.Sc. (Hons), M.A. M H C I M A is Senior Lecturer in Human Resource Management in the Faculty of Hospitality Operations and Management, Ealing College of Higher Education and is currently studying for a Ph.D. at the London Business School.
0278-4319/89 $3.00 + 0.00 ~ 1989 Pergamon Press plc
Flexibility in employment: developments in the hospitality industry Clare Kelliher Faculty of Hospitality Operations and Management, Ealing College of Higher Education, St Mary's Road, London W5 5 R F , U.K.
The debate which has been developed in recent years around the trends towards introducing more flexible working practices into organisations has spawned a literature which is largely centred on the manufacturing industries. Shwe the labour force in the service sector tends to be generally less organised and management have greater control over industrial relations matters, it has been assumed that the flexibility debate has little relevance for this area. This article examines one area of the service sector, public sector catering, which does not conform to this model and reports on the recent developments inflexibility which have taken place here.
Key words:
employment
flexibility hospitality industry
Introduction In recent years there has been considerable debate about developments towards a model of the 'flexible firm' and management journals have been full of reports on the introduction of flexible employment practices in a wide variety of organisations.* In the face of an increasingly competitive environment, organisations have sought ways of making themselves more responsive to changing market demands, whilst at the same time making more effective use of labour and technology. One strategy of attempting to achieve this balance has been to introduce flexible systems in the utilisation of labour. Flexibility in employment allows firms to adjust and readjust their labour costs in line with fluctuations in the level of their business activity. Labour costs may be adjusted by altering the number of staff employed, the level of hours staff work, the nature of the work carried out or the payment system used. The aim is to employ only the required number of staff in the required capacities at any point in the business' life. The purpose of this article is to examine the relevance of the trend towards flexibility in employment for the hotel and catering industry. Much of what has been written about flexible employment practices has focused on the manufacturing industries. There has been a general assumption that flexibility is far more widespread in the service industries and therefore that the debate is not relevant to the service sector. The NEDO (National * See, for example, Personnel Management, Manpower Policy and Practice, Management Today. 157
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Economic Development Office) (1986) survey on Changing Working Patterns found that flexibility 'was not generally reckoned to be an important priority for service sector firms. They either had it by tradition or they could get it relatively easily.' However, while this may at least in part be true, to suggest that employment throughout the service sector is characterised by a high level of flexibility would not be a wholly accurate reflection of the current situation. Certain parts of the service sector and in particular the public services, have historically operated in a highly regulated employment environment, with little option for management to make short-term variations to the amount or nature of work carried out. Therefore, any attempts by organisations in these areas to introduce more flexible working practices are likely to be of equal significance and interest to those in the manufacturing industries. The focus of this article is to look at one such case: the introduction of flexible employment practices into public sector catering. As a result of the increased pressure on public sector caterers in recent years to be more cost-effective and with the introduction of competitive tendering for catering services, management have been forced to re-examine the ways in which they utilize their labour. Recent research carried out by the author (see Kelliher and McKenna, 1987, 1988) on the employment implications of competitive tendering in public sector catering, shows that notable developments towards flexibility have taken place. External competition and the threat of possible job loss have in many situations enabled management to overcome existing restrictive practices and introduce more flexible working systems. The term 'flexibility' has been used widely and in a number of different contexts, therefore before attempting to examine the implications for the catering industry, it is important to be clear about what is meant in this context. For the purpose of this article the IMS (Institute of Manpower Studies)/NEDO definition will be used. The N E D O report on Changing Working Patterns suggests that the use of flexible strategies in employment falls into three basic categories: numerical flexibility, functional flexibility and pay flexibility. Numerical flexibility is defined as 'the ability of firms to adjust the number of workers, or the level of worked hours, in line with changes in the level of demand for them' (NEDO, 1986). In other words numerical flexibility allows management to minimize the gap between the supply of and demand for labour in the organisation at any one point in time. In this way both staff 'idle time' and staff shortages can be reduced. Numerical flexibility can be implemented in a number of ways: increased use of temporary and part-time workers, increased use of overtime, changes in shift patterns and use of variable working times (e.g. annual hours contracts). The extent and nature of business fluctuations will vary between industries, from daily or even shift variations in the hotel or retail industries, to longer term product cycle variations in manufacturing. As a result different strategies of numerical flexibility will be appropriate to different organisations. Clearly this type of flexibility is of most use to organisations who experience significant and predictable fluctuations in their business activity. Where fluctuations are unpredictable it may be difficult for management to act sufficiently quickly to tailor staffing levels to
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changes in demand. Equally strategies of numerical flexibility are of most use where skill levels are low and little training or induction is required, since to be effective it is important that additional staff attain acceptable levels of performance in a short time period. Functional flexibility is defined as 'the ability of firms to re-organize the competances associated with jobs, so that job holders can deploy such competances across a broader range of tasks' (NEDO, 1986). Using functional flexibility organisations can deploy staff in different ways according to business demands. This may involve employees taking on a broader range of tasks at a similar level (horizontal) or taking on additional tasks at different levels (vertical). A common example in manufacturing industries has been to incorporate maintenance into machine-operators' jobs. Functional flexibility can be usefully implemented where there are predictable changes in the nature of the work in line with changes in business activity. Staff can therefore be re-deployed in line with these changing activities. This type of flexibility however cannot be implemented as easily and simply as numerical flexibility, since it requires some level of prior investment in the employee. Employees who are to switch from task to task, clearly require greater levels of training than employees who simply carry out a single task. They also need to be familiar with different working environments if they are to transfer easily and reach appropriate performance levels in the shortest time period. Pay flexibility is defined as: 'the ability of firms to adjust pay structures to encourage functional flexibility, match market rates for scarce skills and/or reward individual performance' (NEDO, 1986). Pay flexibility allows organisations to adjust payment levels in line with business priorities. For example, employees may be paid according to merit, productivity or the current value of their skills to the organisation. Where strategies of functional flexibility are being pursued, staff may be encouraged to train for additional tasks by paying enhanced rates for 'multi-function' staff. In certain industries pay flexibility may be more difficult to implement than other types of flexibility. Pay tends to be a rather more sensitive area and may require considerable managerial freedom to implement. For example, management discretion on pay is limited in the Wages Council Industries, equally amongst unionised workforces there may be considerable opposition to pay flexibility, particularly where it challenges traditional earnings differentials or security of earnings.
Flexibility in the hotel and catering industry Critics of the recent interest in flexibility argue that flexibility in employment is not new, but has traditionally been used by employers as a means of matching the nature and level of staffing to their business requirements. Pollert (1987) argues that 'managerial concern with labour flexibility is not new' and that '"Dual" and "segmented" labour market theorists have long pointed to the link between competitive labour market conditions and employers' strategies to exploit a cheap and variable labour force.'
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Certainly, flexible employment practices are not new developments in many sectors of the hotel and catering industry. In those sectors of the industry where demand is erratic, employers have customarily adjusted their utilisation of labour in line with the peaks and troughs in demand. As long ago as 1976 Mars and Mitchell (1976) wrote of employers using a variety of strategies of flexible employment in the industry. Clearly, in any industry where significant changes in the level of demand occur, the ability to use labour in a flexible manner is of prime importance to management. Unlike the case of manufacturing firms who can use 'slack' periods to stockpile for times of heavier demand, service firms who cater to the incidence of demand have only very limited possibilities for this option. For example, if there are no customers in a restaurant, there is little the food service staff can do to prepare for a rush later. The problem is accentuated by the labour intensive nature of much hotel and catering work. Thus in order to control labour costs effectively, management need the ability to pursue flexible employment strategies. In most sectors of the hotel and catering industry practitioners will be familiar with the use of numerical flexibility. Management vary both the number of staff employed and the amount of hours worked by staff in order to tailor staffing levels to fit demand. Business fluctuations are frequently short term and consequently management may need to vary staffing levels on a weekly, daily or even shift basis. In order to do this employers rely upon what Van Ham et al. (1987) refer to as 'on demand' contracts of employment, where staff are only taken on as and when an employer has work and are dispensed with when this decreases. The jobs for which employers generally use numerical flexibility tend to be at a low skill operative level (e.g. waiting, housekeeping, kitchen portering) and consequently training for additional staff is usually minimal. Employers who frequently require additional staff on a short-term basis tend to develop their own 'pool' of temporary employees who are familiar with the organisational practices and who can be called upon as needed. Furthermore many of the skills possessed by temporary workers are 'industry' as opposed to 'firm' specific and consequently a pool of temporary staff has developed for the industry. Employment agencies have developed to act as the point of contact between firms requiring temporary staff and those in the peripheral labour market. Perhaps rather surprisingly we do not see the level of functional flexibility that might be expected in an industry with varying demand levels. With the exception of smaller establishments, employers in the hotel and catering industry do not in general opt to formally move employees from function to function according to business requirements. Some informal inter-departmental functional flexibility may take place, but this as often as not is staff helping each other out rather than a management directive. Staff tend to build up specialisms in departmental areas and even within departments; rarely do we see staff crossing the functional boundaries, for example, between food preparation and service, although in the past a number of companies have experimented with 'multi-function staff', who could be moved from job to job depending upon business demands. This approach has implications for both recruitment and training. Staff required to carry out a number of tasks may need to be of a higher calibre than those simply carrying out one task. Equally, employers will need to invest considerably more in the training of these staff, in order to enable them to reach effective performance levels in a variety of areas. Pay flexibility is a commonly used and well-established practice in the industry to regulate labour costs. Employees, particularly those in customer contact have their pay
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levels linked directly or indirectly to business activity via commission, service payment or a 'tronc' system of tip allocation. With little or no collective opposition to management decision-making in most of the commercial sectors of the industry, management have considerable freedom to alter pay levels in line with level of business activity, productivity or market availability of skills. The 'secret' nature of employment contracts in the industry as described by Mars and Mitchell (1976), allows management to offer different reward packages (including both formal and informal elements) to different employees depending upon their 'value' to the organisation. Employers' discretion is however limited (at least in a downward sense) by the minimum wages set by the Wages Councils covering large parts of the industry. However given the low levels at which they are set in comparison to average wages and the poor enforcement mechanism, in reality their effect may be limited. The flexible practices used by employers in the hotel and catering industry would appear to fit into the general model of flexibility developed in the NEDO report on Changing Working Practices. The NEDO (1986) survey found that firms tended to choose different types of flexible employment practices according to certain criteria. The results show that organisations tended to use methods of numerical flexibility where the skills of the workforce were low and non-firm specific. Functional flexibility on the other hand tended to be used by organisations where skill level was both high and firm specific. This model helps to explain the predominance of numerical flexibility and the relative lack of functional flexibility in the hotel and catering industry. As noted earlier numerical flexibility is used mainly for low skill jobs, however in those jobs where the skill level is high, employers do not so commonly pursue functional flexibility, because in this case the skills are 'industry', rather than 'firm' specific. In other words because the employee's skills are not firm specific, the relationship between the employee and the organisation is not so binding and consequently employers are less likely to be willing to invest in multi-function training, where there is no certainty that they will reap the benefits.
Introducing flexibility into public sector catering The primary motivation of firms introducing flexible working practice has been to improve or maintain their competitive position (NEDO, 1986). By being able to use their labour in a more flexible manner they feel in a better position to react to changing, often unforeseen, business requirements. The NEDO summary found that in manufacturing firms in particular, the impact of the recession was the catalyst for introducing flexibility. The effects of the recession, increased unemployment and weakened trade union bargaining power, on the industrial relations climate made it easier for firms to introduce new practices without significant employee opposition. The possibility of job loss or further job loss was a powerful negotiating weapon. The survey also found flexible working practices frequently being introduced as part of a broader package of changes brought about by the introduction of new technology, allowing for the rearrangement of work and amalgamation of a number of tasks. Flexibility has been brought about in the public sector services in a not dissimilar manner by exposing the management of ancillary services to competition from private sector operators.
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When discussing the hotel and catering industry so far, we have very much concentrated on the commercial sectors of the industry and little attention has been paid to the employment practices operating in the public sector. We now turn our focus to the state sector and in particular the catering services in the National Health Service (NHS). Unlike the private sector, up until the 1980s flexible working practices had not traditionally been a feature of public sector employment. The industrial relations environment which had developed in public sector catering was a very different one from the private sector counterpart. As a result of the commitment of successive governments to act as a 'good employer' and recognise trade unions for collective bargaining purposes, a highly structured system of joint-regulation had developed and consequently management did not have the same level of discretion over employment matters as did private sector managers. It was against this background of structured, formalised industrial relations that competitive tendering for public sector ancillary services was introduced. The primary purpose of opening-up areas of the public sector to external competition was to try and bring about greater efficiency and cost savings. Due to the labour intensive nature of many ancillary services, greater flexibility in the utilisation of labour was a prerequisite for such changes. Contracting out is a useful means of making an organisation more flexible since a commercial relationship with a contracting organisation is substituted for a set of employment relationships. Van Ham et al. (1987) comment 'there is little need to invest either in fixed assets or people, the company has great flexibility and can spend more money on what it does b e s t . . . ' Contracting out of ancillary services (e.g. catering, cleaning, security, etc.) and making them 'someone else's problem' allows the organisation to become more flexible in a number of ways. From the employment perspective contracting out can be an effective means in achieving flexibility in the utilisation of human resources. This can be particularly useful for organisations who would encounter difficulties introducing human resource flexibility themselves, for example, if there is active trade union opposition. Where the contractor operates in an industrial relations climate of greater managerial freedom, they may be able to achieve a level of employment flexibility which would be very difficult or even impossible in the contracting organisation. Given the Government's intention to bring about cost savings in the provision of public sector services, the contracting option for ancillary services is particularly attractive. Catering like many other services opened up to competition is highly labour-intensive and consequently contracting companies looking to make cost savings will inevitably look for the most effective utilisation of labour. Due to the different industrial relations environment which private firms operate in, contractors have been able to bring about increased flexibility, which would not have been possible for the public sector to pursue. However the decision to go for a policy of competitive tendering (i.e. where the existing in-house operators are permitted to submit a tender for the service, alongside external contractors), rather than contracting out p e r se, has brought about some interesting developments in flexibility in the public sector itself. Results from the research carried out into the employment implications of competitive tendering in the public sector indicate a significant trend towards more flexible utilisation of labour in NHS catering (see Kelliher and McKenna, 1988). Although the changes which have taken place vary considerably between District
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Health Authorities, some general observations can be drawn. Evidence from the research shows that as part of the process of developing a competitive tender, managements (both in-house and external tenderers) have sought to introduce more flexible working practices, in order to allow them to align or realign usage of labour with the level of demand. We turn now to look at some examples of flexibility in NHS catering.
Numerical flexibility Numerical flexibility has been used widely by both in-house and external tenderers. The most significant trend in this area has been the reduction of staffing levels. Prior to the tendering exercise there was a general feeling that NHS ancillary services were over-staffed and consequently contractors and in-house management have looked for ways of rationalising staff numbers in the catering operations. The extent of reductions in staffing levels has varied considerably between authorities, but as a general rule has been markedly greater where the contract has been awarded to an external contractor. The research identified one contractor who had succeeded in reducing staffing by almost a third of the previous level. However figures of 10-20% decreases were more common, even where the method of production had been altered. For example, in one health authority, where the contractor introduced a cook-chill system, the decrease in staffing was initially in the region of 10%. Where the in-house bid has been successful, some reductions in staffing have normally occurred, but have generally been at a lower level, often involving only a very few staff. In-house management have shown a reluctance to make staff redundant and instead have looked to alterations in working time and rearrangement of tasks in order to make savings. Reduction in working time has been a common feature in post tendering operations. The working hours of both full- and part-time staff have been reduced in order to match supply of labour more closely to demand and in many cases this has involved making full-time staff part-time. In one case an external contractor employed 50% of the workforce on a part-time basis, as compared to a previously largely full-time NHS workforce. In another hospital where the contract remained in-house, the hours of unskilled staff were reduced from 35 to 25 per week. The use of part-time staff has considerable benefits for in-house renderers, since it not only allows them to tailor their staffing more finely to requirements, but also allows them to avoid paying full-time staff the nationally-agreed, enhanced payment rates for overtime and weekend working.
Functional flexibility Functional flexibility, as is the case throughout the catering industry, has been the least common development in flexibility in post competitive tendering operations. Industry traditions, backed up by trade union organisation eager to defend job demarcations, has meant that traditionally there has been little functional flexibility in NHS catering. Perhaps because of the relative lack of experience in this field, contractors have not, in the main, made extensive use of functional flexibility in developing competitive tenders. Instead where functional flexibility has been introduced it tends to be as a by-product of other
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processes. For example, where the in-house tender has been successful, functional flexibility and rearrangement of working tasks have often been used in order to avoid staff redundancies. Functional flexibility has also been used to 'compensate' in-house staff for 'losses' they have incurred as a result of decreased working hours or reduced remuneration. In one hospital a supervisor, whose 'normal' level of overtime was reduced, took on additional, non-supervisory duties in order to lessen the impact of the lost overtime on her wage packet. Some degree of functional flexibility has also been implemented in those units where new technology has been introduced in the form of cook--chill production. In line with the findings of the NEDO survey, catering management have used the opportunity of technical change to rearrange tasks and consolidate job categories in order to allow more functional flexibility and thereby more effective use of the technology. The research found instances where the distinction between job categories (e.g. cook and assistant cook) had been removed and all staff were expected to cover a wider range of duties. Although to date only relatively minor use of functional flexibility has been observed, it is interesting to note that one major contractor used 'ability to be sufficiently flexible' as a selection criteria when recruiting former NHS staff.
Pay flexibility Pay flexibility has been used to a certain extent, by both contractors and in-house management. External contractors have often brought about considerable adjustments in pay and payment systems. Contractors have been keen to substitute the NHS Whitley council rates of pay and conditions for what they consider to be more realistic employment packages. They have preferred to set rates of pay more closely in line with the local labour market and pay the 'going rate for the job'. In practice this has not tended to lead to cuts in the basic rates of pay, but rather in the conditions of service offered to employees. Contractors do not tend to offer pay enhancement for unsocial hours or weekend working, instead staff are rostered over a 5°day week and are paid the same whether or not this covers a weekend. Equally sick pay and pension schemes tend to be less beneficial than those formally offered by the NHS. The in-house contractors have less scope for pay flexibility, since they are bound by the nationally-agreed rates of pay and conditions of employment, however some flexibility has been introduced into payment by means of altering the locally agreed bonus schemes. In some authorities the bonus scheme, described by one caterer as the 'liability of the in-house bid', has been abolished or more commonly has been reduced. (Ironically bonus schemes were first introduced as an element in NHS ancillary workers pay in order to combat low pay.) Despite a highly unionised workforce and a rather inflexible climate of industrial relations prior to the competitive tendering exercise, catering management have faced little real resistance to introducing the changes outlined. In many ways NHS catering workers were in no position to oppose management plans to introduce more flexible working practices. Employees and their unions are effectively placed in a 'no-win' situation. They are faced with the choice of resisting change and almost certainly facing
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redundancy or accepting changes in an attempt to maintain their jobs, albeit on an altered basis. In this light the public sector trade unions have tended to adopt a strategy of'damage limitation', becoming involved in the drawing-up of the in-house tender in order to attempt to minimise the damage to their members' terms and conditions of employment.
Conclusions Although the recent interest in growing flexibility in organisations has been centred around the manufacturing industries, there is clearly relevance for parts of the service sector. Despite widespread existing flexibility in many service industries, some parts have not traditionally operated in an industrial relations environment conducive to flexible utilisation of labour. The public sector services have a history of a high level of trade union involvement and a centralised system of industrial relations with little opportunity for management to introduce more flexible working practices. However, at the same time as the interest in flexibility was developing, substantial changes were being brought about in the climate of the public sector. Opening up the management of public services to competition presented managers with pressures not dissimilar to those being experienced by managers in private sector manufacturing. Perhaps not surprisingly these managers looked to broadly similar strategies in order to meet the challenges of change. Given the labour-intensive nature of catering, managers have found the introduction of more flexible employment practices a vital element in meeting the forces of competition. As outlined above, use of all three types of employment flexibility has been made, although in line with the industry tradition, greater emphasis has been placed on numerical and pay flexibility, rather than functional flexibility. Thus, although the fluctuations in demand levels in public sector catering may be less extreme, what the increasingly competitive environment has done, has been to move the nature of employment practices found in the public sector more closely to those traditionally found in the private sector of the industry.
References Atkinson, J. (1985) Flexibility: planning for an uncertain future. Manpower Policy and Practice 1, 26-29. Kelliher, C. and McKenna, S. (1987) Contract caterers and public sector catering. Employee Relations 9, 10--13. Kelliher, C. and McKenna, S. (1988) The employment implications of government policy: a case study of public sector catering. Employee Relations 10, 8--13. Mars, G. and Mitchell, P. (1986) Room for Reform? Open University Press, Milton Keynes. National Economic Development Office (NEDO) (1986) Changing Working Patterns. Report prepared for the Department of Employment. Piore, M. (1971) The dual labour market: theory and implications. In Problems in Political Economy: An Urban Perspective, Gordon, D. (ed.). Heath, Lexington. Pollert, A. (1987) The 'flexible firm': a model in search of reality. Warwick Paper in Industrial Relations no. 19.
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Van Ham, J., Paauwe, P. J. and Williams, R. (1987) Human resource flexibility--some necessary conditions for success. Personnel Review 16, 27-30.
About the Author Clare Kelliher, B.Sc. (Hons), M.A. M H C I M A is Senior Lecturer in Human Resource Management in the Faculty of Hospitality Operations and Management, Ealing College of Higher Education and is currently studying for a Ph.D. at the London Business School.