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

Authors

  • Philip B. Whyman,

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    • Philip B. Whyman is professor of Economics and Director of the Institute for Economic and Business Research (LIEBR) at Lancashire Business School, University of Central Lancashire.
  • Alina I. Petrescu

    Corresponding author
    • Address correspondence to: Alina I. Petrescu, Lancashire Business School, University of Central Lancashire, Preston, PR1 2HE, UK. E-mail: apetrescu@uclan.ac.uk.

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    • The authors are grateful to the Lancashire Business School, UCLan (UK) for the financial support given to this research project (Report Award Number LBS-080922). Moreover, we acknowledge the Preston City Council as the originator and the distributor of the Central Lancashire Business Directory 2009 data, and we wish to thank the North and Western Lancashire Chamber of Commerce, and the Central Lancashire branch of the Federation of Small Businesses, who supported the research by name and logo. None of these organizations bears any responsibility for the authors’ analysis and interpretations of the data. Furthermore, we thank Michael Bowerman who worked dutifully as intern student assisting this project. The authors also wish to acknowledge the two anonymous reviewers who commented on a previous version of this paper. We thank them for their valuable suggestions.
    • Alina Ileana Petrescu is research fellow in Labour Economics and member of the Institute for Economic and Business Research (LIEBR) at Lancashire Business School, University of Central Lancashire.

  • Topics of Small Business Research: Small Business Strategy and Organization; Small Business Policy and Economics.

Abstract

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

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