The use of non-traditional working arrangements in firms in Latvia

BSc. Thesis First Draft

Stockholm School of Economics in Riga

November 23, 2009

1. Introduction

Providing solutions to work-family conflict has been a serious concern of managers and governments during the last decades. Many executives have comprehended that reducing working hours, resigning from traditional working weeks or providing other kinds of non-traditional (flexible) working arrangements benefit both for the company and its employees. A serious stimulus to introduction of non-traditional work arrangements has been the increasing number of women in the workforce (Scandura and Lankau, 1997). Average female employment rate in the European Unions 27 countries in 2008 was 59.1 per cent, but in Latvia it was 65.4 per cent (Eurostat, 2009). The corresponding rise in number of dual-career families has resulted in a more positive attitude toward family-friendly policies by men because now they often need to take part in child care or dependent-elderly care in common with their spouses (Scandura and Lankau, 1997).

Some companies, especially in the European Union, are forced to change their working schedules due to requirements of governments or regulations of the European Union, regarding health, safety and social security. It especially relates to work of women and older workers (Study on the impact of working time, 2006). Many companies introduce flexible work arrangements on the ground of the need to deal with more flexible markets and short product cycles, as flexible work schedules allow continuing firms operations even for 24 hours, 7 days a week (Wirtz, Giebel, Schomann and Nachreiner, 2008). Other firms offer flexible work programs to increase employees motivation, morale, and loyalty (Scandura and Lankau, 1997), or to attract and retain young, talented professionals who nowadays demand not only high remuneration, but also good working conditions and enough free time for their personal life (Huff, 2005; Ostermann 1995). Annual survey conducted by International Communications Research on behalf of Robert Half International has found that problem of finding qualified staff has increased, as well as time spent on recruiting. Therefore, 63% of employers surveyed confirmed that they offer flexible working schedules in order to prevent qualified workers from leaving the company (Robert Half International, 2007).

A growing body of literature investigates the gains and losses from using flexible working arrangements. A research done for the European Commission has shown that flexible working time arrangements result in increased employee job satisfaction, lowered absenteeism rate and lower levels of overtime (Study on the impact of working time, 2006). Eventually those arrangements might lead also to improved productivity (Scandura and Lankau, 1997).

Although there are many recognized benefits from the use of flexible working time arrangements, Latvian companies are characterized only by intermediate level of flexibility (Chung, Kerkhofs and Ester, 2007). Moreover, no previous research has explored the impact from use of flexible working schedules in firms in Latvia. This research aims at getting an insight in use of flexible working schedules in companies in Latvia, and their influence on worker commitment to the company and their job satisfaction. Therefore the authors of this paper propose a research question: (How) does existence of non-traditional working arrangements in companies in Latvia affect employee organizational commitment and job satisfaction? The hypothesis to be tested is: Employees who work in companies that provide non-traditional working arrangements have higher (a) organizational commitment and (b) job satisfaction, compared to employees who work in companies with traditional working schedules.

In order to test the hypothesis, a survey of employees, measuring job satisfaction (by Minnesota Satisfaction Questionnaire) and organizational commitment (by using Organizational Commitment Questionnaire developed by Porter and Smith in 1970) will be employed. The results from companies that have non-traditional working arrangements will be compared to companies that have traditional working arrangements; further on results will be discussed (outlining the advantages and disadvantages from use of flexible work arrangements, as well as suggestions for management) and conclusions drawn.

2. Background of the study

2.1 Non-traditional working schedules

To better balance life and work, many companies in Europe and the U.S. offer non-traditional (flexible) working arrangement. McGuire, Kenney and Brashler (n.d.) define it as any spectrum of work structures that alters time and/or place that work gets done on a regular basis; including 1) flexibility in the scheduling of hours worked, and arrangements regarding shift and break schedules; 2) flexibility in the amount of hours worked; and 3) flexibility in the place of work. Flexibility in the scheduling of hours worked (often referred to as flexi-time or flex time) imply that all employees have to be at work during some core business hours, but they can choose when to start and end their working day, providing that their number of daily and/or weekly hours worked stays constant (e.g. 40 hours a week). Flexibility in scheduling refers also to work in shifts, compressed working weeks (i.e. when employees work more hours a day (e.g. 10 hours instead of 8) but fewer days a week than usually (4 instead of 5)), and leave arrangements (e.g. maternity leave, parental leave or career break) (Devisscher, 2005). Flexibility in the amount of hours worked refers to part-time work and job sharing. The later term denotes an agreement for two employees to share one job position so that both could spend more time outside an office and, for instance, care for their children (Newell, 1995). Flexibility in the place of work relates to working at home and telecommuting that allows employees, for instance, to stay at home and do their job while simultaneously taking care of their children, or working from any other place than an office. The majority of employees in the US who have flexibility in their working hours, report having it on informal, rather than formal basis (McGuire, Kenney and Brashler, n.d.).

2.2. Job satisfaction and organizational commitment

According to Johns (1996), job satisfaction refers to a collection of attitudes that workers have about their jobs. Johns distinguishes two aspects of satisfaction: facet satisfaction (having different attitudes towards several aspects of job, as the work itself, management, compensation, colleagues etc.), and the overall satisfaction (a combined indicator that accounts for the attitudes towards all facets). People tend to spend a major part of their life in work, and previous research has showed that up to one quarter of variation in overall adult life satisfaction is determined by satisfaction with work. Moreover, meta-analysis in research has revealed a positive link between job satisfaction and individual performance (Harter, Schmidt & Keyes, 2002). Therefore, employers also in Latvia should be concerned about the well-being of their subordinates.

Organizational commitment stands for an individuals identification with the goals of the organization, how much the individual values membership in the organization and the degree to which they intend to work to attain organizational goals. In previous research organizational commitment has proved to be positively correlated with job satisfaction (Scandura and Lankau, 1997), meaning that satisfied employees are also more committed to their job and devote extra energy to fulfill their duties, compared to unsatisfied employees. Therefore employers have to give their subordinates the chance to build up their full potential (Newell, 1995). According to Chung, Kerkhofs and Ester (2007), workers are constantly searching a balance between work and private life, and thus also bigger flexibility. Flexible work arrangements could be a good solution in this case. According to Hewitt (1993), the best result can be achieved if a flexible work arrangement program is implemented in such a way that it benefits both: the employer (reducing unit costs and improving the return on capital) and employees (achieving a balance between work and private life).

2.3. Current situation in Latvia

Establishment Survey on Working Time and Work-Life Balance (ESWT) 20042005 results show that 25% of companies surveyed in Latvia offered varying start and end times, but no accumulation of hours (i.e. an employee might come to work later or earlier but he still has to work for a constant number of hours each day), 12% of companies offered to accumulate hours, but gave no compensation by full days off (i.e. employees could work longer hours on some working days and accordingly leave work earlier on other days). However, 15% of companies surveyed allowed using accumulated hours for full days off, and 13% offered compensating for accumulated working hours by granting additional days for yearly vacation. Although the results for Latvia in all categories, except the last one, are higher than the EU average, Latvia is still lagging behind countries as Sweden and Finland (Riedmann et al, 2006).

About 50% of companies surveyed in Latvia had at least some part-time workers, and 39% of companies report having spontaneous on demand part-time work (the second highest result from the EU countries). It means that workers often have to be flexible for the benefit of the company, not themselves. According to ESWT 2004-2005, 59% of employees in Latvia work as much as before when returning back form a parental leave and only 18% ask for reduced working hours. Moreover, Latvia had the highest frequency of Saturday (56% of establishments) and Sunday work (48%) in the European Union, as well as night work (32%) (Riedmann et al, 2006). According to Eurofounds annual report (2008) on working time developments across the European Union, Latvia has the second longest working week (41.7 hours) in Europe, worked by full time employees in their main jobs. Thus, the work-life balance of Latvians might be distorted. And, not surprisingly, the Fourth European Working Conditions Survey (2007) shows that Latvians have one of the lowest rates of work satisfaction in Europe.

The problem of aging population in the world, Latvia included, will put pressure on standard working arrangements as older people have higher level of health problems and will be more concerned with health issues. Heart problems as well as joint pain will make workers more unwilling to spend full day in the crowded workplaces. Moreover, they will require more time for taking care of health problems visiting medical facilities. This problem will pull productivity down substantially, therefore the need for alternative working schedules arises that would allow for balancing work with personal life of ageing population more effectively (Personnel Today, 2009)

According to recent research done by Personnel Today (2009) existence of flexible working options has increased substantially in UK during the last 5 years. It is shown that working from home is offered by 65% of employers, comparing to 36% in year 2004; flexi-time has risen from 38% in 2004 to 51% in 2009 and compressed working hours are offered by 39% in comparison to 23% in 2004. The research also shows that flexible working has improved retention and job commitment of employees. Empirical results have showed that non-monetary incentives can be strong motivators for employees to improve their performance at work (Sorauren, 2000). Yet, full use of flexible work arrangements in Latvia is still limited.

Companies are often reluctant to introduce flexible working schedules, because it is perceived to be costly in terms of management time, for instance, and because people are used to working in traditional office hours (Schaefer, 2005). However, many well-known companies (e.g. Ernst & Young, Procter & Gamble) have once successfully introduced flexible working arrangements in some parts of their organizations and now phase these practises to branches in other countries as well (Mohan, 1998). If those solutions are effective, local companies in Latvia could adopt similar strategies. Therefore we would like to investigate firms in Latvia, find out the opinions of employers and employees about non-traditional working arrangements, and examine the influence of flexible working schedules over job satisfaction and organizational commitment.

3. Review of literature

Along with several studies on employment and job satisfaction done by the European Union, and governmental institutions, a lot of research is done about work-life balance, flexible work arrangements and their link to job satisfaction and productivity. Cohen and Gadon (1978) suggest a framework underlying greater employees commitment to work coming from harmony of time spent for job and personal matters. They argue that flexible working schedules help to achieve greater balance between working time and non-work activities, which contributes to favourable employees attitude to work. Ronen (1981) suggests a complementary model arguing that fulfilment of needs in both work and outside work domains influences quality of life. Employees with flexible working schedules have greater opportunity to react to personal time demands, thus contributing to better quality of life. Moreover, Ronen argues non-traditional working schedules provide greater autonomy and flexibility, satisfying needs of self esteem. Golembiewski, Yeager and Hilles (1975) find that both employees and employers see benefits in use of flexitime. More precisely, flexitime is believed to improve the quality of life at the worksite. Recent studies from Taiwan (2009) also suggest that non-standard work arrangements are positively related to work satisfaction, commitment and devotion to job.

The work of Jay Kim and Anthony Campagna (1981) investigates the impact of flexitime on the employee absenteeism and performance efficiency. The results suggest that flexitime reduces the worker unpaid absenteeism significantly. In particular, the effect of decreased short-time unpaid absenteeism (two hours or less) is stronger than the one of long-term absenteeism. Therefore, it can be stated that flexitime is used as a substitute for short-time unpaid absences as employees can adjust their working schedule to have necessary hours for their private purposes instead of taking unpaid hours. The results of this study also suggest that the positive impact of flexitime on employee performance is not constant and depends mainly on the nature of tasks performed (quality of performance decreases if extensive supervision and communication is needed between managers and their subordinates in completion of everyday tasks; however work results improve for employees whose work is not very task interdependent and who are given large autonomy) (Kim, & Campagna, 1981).

The work Absenteeism and Flexible Work Schedules by Jean McGuire and Joseph Liro aims to investigate not only the effect of flexible working schedules on the employee absenteeism but also the differences of the chosen flexible scheduling on absenteeism in particular. Two types of flexible scheduling were chosen in order to examine the effect on short-term and long-term absenteeism as well as to track difference between the two. The results showed that the group working staggered work hours had significantly lower rate of absenteeism comparing to the groups working fully flextime or fixed hours. The authors indicate that making a schedule for a quarter ahead makes employees feel greater commitment to the schedule than during fully flexible schedule. Moreover, the schedule planned ahead may encourage employees to appoint personal activities outside the working time in order they do not possibly conflict with work. However, the authors found no impact of fully flexible schedules on employee absenteeism. Therefore, the work suggests paying larger attention to the qualitative differences between the types of flexible working schedules (McGuire, & Liro, 1987

Wirtz, Giebel, Schomann and Nachreiner (2008) have studied the consequences from adaptation of flexible working hours on employees health and working rythms. They have found that such arrangements might cause desynchronization between biological, social rhythms and working time. As a result, employees might experience deterioration of their social life. Therefore, the researchers emphasize the importance of regularity of working hours, as well as a need to supply emoployees with enough free time.

Dalton and Mesch (1990) have used a natural field experiment in order to examine the impact of flexible working on employee attendance and turnover. The decision of the large public utility company to implement flexible working schedules in one of its large divisions for one year gave an opportunity to observe the differences between fixed and flexible working schedules for the same group of people tracking their absenteeism during both schedules were implemented as well as to use control group to compare results to. The results of the experiment showed that employee absenteeism decreased greatly when flexible working was introduced and increased back subsequently after the program was removed. Therefore, the authors conclude that flexible work schedules have a positive impact on employee attendance; however, the effect on turnover was insignificant (Dalton, & Mesch, 1990)

Pierce and Newstrom (1983) have studied the relationship between dimensions of flexible work schedules and variables of employee attitude and behaviour. They found that work schedule flexibility positively affects employee performance, as well as decreases absenteeism; however, they found no significant connection between work schedule flexibility and job satisfaction. The authors conclude that the later is caused by intervention of perceived time autonomy, as respondents feel higher job satisfaction after increased time autonomy, and do not relate it to schedule flexibility.

Konrad and Mangel (2000) found that work-life programs show significantly bigger positive results in organizations that employ a high proportion of professional employees or high proportion of women, as well as those companies that have made substantial investments in their employees to build company-specific skills. Scandura and Lankau (1997) have investigated relationships of gender, family responsibility and flexible work hours with respect to job satisfaction and organizational commitment. Their study revealed that women who perceived their companies offered flexible work hours had higher levels of job satisfaction and organizational commitment, compared to women who did not. Similarly, employees having family responsibilities showed higher commitment and were more satisfied with their work.

Bloom, Kretschmer and Reenen (2006) studied 732 medium sized manufacturing firms in the US, France, Germany and the UK. Their results show that the quality of working arrangements is positively affected by the quality of management. However they found no systematic relationship between work-life balance and productivity, once the data is accounted for good management.

Haserot and English (2002) study motives why many people argue against flexible work arrangements. They propose that those are not only the intended costs, but also stigma, unfamiliarity and resistance to change that restrain firms and managers from introducing FWA. However, not all researchers find flexible work arrangements as being positive. Almer, Cohen and Single (2004) study the use of FWA in public accounting and found that participants of FWA, especially males, are being viewed as less committed and less willing to make sacrifices in their careers.

A paper by Kelliher and Anderson examine the effect of flexible working practices on employee perception of several dimensions of job quality that include autonomy and control, job satisfaction, work-life balance, and stress level. Conclusions were drawn from a case study of a UK based company, along with interviews and survey data. The general results suggest positive overall impact on perceived job quality, however there are also costs perceived to it. A strong positive relation was found from flexible working to control and autonomy of employees as one of the job quality dimensions. Working from outside the standard workplace as part of flexible working gave much greater autonomy which was reported by 90% of employees. Positive effect on job satisfaction was observed resulting from the possibility to work less hours if needed rather than leaving the job (e.g. for maternity). Workers also found an increase in efficiency due to possibility to choose time and place most convenient for each individual, which also resulted in greater job satisfaction. In addition, more than 80% of workers are convinced that flexible working positively contributes to work-life balance, making it easier to adapt to personal issues. The impact of flexible working on employees stress level is more ambiguous. Only 59% of workers reported that stress level was reduced due to possibility of flexible working. Some mention that the possibility to take a break anytime eases tension. Flexible working is viewed by employees to have largely negative impact on opportunities for learning and advancement. Employees that work outside the office report to be less visible by managers, which makes harder to move up in career path. Working less than full time hours put restrictions to exploit competitive advantage of skills as most of such kinds of jobs were offered full time only. Generally, employees with flexible working arrangements report lower opportunities for advancement (Kelliher, & Anderson, 2008)

4. Description of planned fieldwork and data accessibility

As non-traditional working arrangements can be more often found in international rather than local companies, we plan to survey employees and managers of international companies that operate in Latvia and currently use some of non-traditional working arrangements. However, for comparison, we would survey also some companies that currently do not use non-traditional working arrangements. It is planned to distribute a survey to employees in both types of firms to find out their attitude towards non-traditional working arrangements, and the impact of those arrangements on job satisfaction, organizational commitment and perceived work-life balance. To assess job satisfaction, the short form of Minnesota Satisfaction Questionnaire (MSQ) will be used; however organizational commitment will be measured by using the Organizational Commitment Questionnaire (ORQ) developed by Porter and Smith in 1970. An opinion poll that combines both previously mentioned questionnaires will be developed and distributed by email during December to human resource managers in selected companies. No particular arrangements with managers have yet been made.

After these data are gathered, quantitative analysis will be made by using statistical tools (e.g. STATA). The research aims to test hypothesis that non-traditional working arrangements have a positive impact on job satisfaction and organizational commitment of employees in Latvia. Conclusions will be drawn by comparing the results from this research to similar researches done in the past (e.g. Scandura and Lankau, 1997; and Kelliher and Anderson, year). Moreover benefits and pitfalls from use of non-traditional working arrangements in companies in Latvia, as well as implications for managers will be outlined.

Dalton, D., & Mesch, D. (1990, June). The Impact of flexible scheduling on employee attendance and turnover. Retrieved from https://findarticles.com/p/articles/mi_m4035/is_n2_v35/ai_8621140/pg_10/?tag=content;col1

Kelliher, C., & Anderson, D. (2008). For Better or for worse? an analysis of how flexible working practices influence employees' perceptions of job quality. The International journal of Human Resource management, 19(3), Retrieved from https://web.ebscohost.com/bsi/pdf?vid=1&hid=7&sid=0618271a-749a-40fd-a381-6808aeaaa70f@sessionmgr12

Kim, J., & Campagna, A. (1981). Effects of flexitime on employee attendance and performance: a field experiment. Academy of Management Journal, Retrieved from https://web.ebscohost.com/bsi/pdf?vid=4&hid=106&sid=466c556f-797e-45c2-9492-483e2cdc417e@sessionmgr112

McGuire, J., & Liro, J. (1987). Absenteeism and flexible work schedules [Public personnel management Vol.16, No.1]. Retrieved from https://web.ebscohost.com/bsi/pdf?vid=4&hid=106&sid=14e83650-5489-4332-861b-c231e7b6e800@sessionmgr104

Personnel Today (2009). The Ageing workforce. Business Source Complete, Retrieved from https://web.ebscohost.com/bsi/detail?vid=2&hid=106&sid=8388b383-1a45-4a73-871b-7424a5c52a4b@sessionmgr113&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=bth&AN=39234630

Robert Half International (2007). Employment Dynamics and Growth Expectations Report. Retrieved (2009, November 20) from https://www.rhi.com/downloads/RHI/rhi-us/InvestorRelations/pdf/EDGE_REPORT_2007.pdf