76 SITUATING HUMAN RESOURCE MANAGEMENT
‘organizational flexibility’ (Osterman 1987). The word ‘organizational’ is
used here because employers typically seek forms of flexibility which extend
beyond, but encompass, their employee relations (Streeck 1987).
In thinking about goals for organizational flexibility, it is useful to dis-
tinguish betweenshort-runresponsiveness andlong-runagility (Boxall and
Purcell 2003). Short-run responsiveness includes financial flexibility (attempts
to adjust the price of labour services) and numerical (or ‘headcount’) flexibil-
ity (which also has financial objectives). Thus, firms engaged in very cyclical
activities often relate their permanent staffnumbers to their calculation of the
troughs in business demand rather than the relatively unpredictable peaks,
seeking to offer overtime and bring in temporary staffif, and when, the work-
load surges. In other cases, firms seek to pay workers a mix of wages and profit-
related bonuses, with the latter fluctuating in line with company fortunes.
Long-run agility, however, is a much more powerful, but rather ambiguous,
concept (Dyer and Shafer 1999). It is concerned with the firm’s ability to learn
in an environment that can change radically. Does the firm have the capacity
to create, or at least cope with, long-run changes in products, markets, and
technologies? Can it learn as fast or faster than its major rivals?
Like the productivity arena, the problem of creating desirable types and
levels of organizational flexibility involves the management of strategic ten-
sions (Adler, Goldoftas, and Levine 1999; Brown and Reich 1997; Osterman
1987). There is often a major tension between actions taken to support short-
run flexibility and attempts to build long-run agility. To illustrate the difficult
choices involved, suppose a firm’s management decides (and manages) to
place most of its operating staffon temporary employment contracts provid-
ing short-term flexibility in payroll costs. This reduces the level of fixed cost
but is likely to create problems with employee turnover as skilled workers,
who are generally capable of attracting a range of employment offers, move
to more secure jobs elsewhere. Over time, the firm is likely to find that it fails
to build the kind of learning process that underpins long-term growth and
makes it more adaptable to radical change in technology. Too much emphasis
on short-term flexibility may mean the firm is eliminated by competitors who
learn faster and capture its market share. A firm, on the other hand, which
employs all labour on secure permanent contracts to build a stable, long-term
labour supply (traditionally called ‘labour hoarding’) may find that it faces
a cash crisis in a short-term recession that actually threatens its viability. The
firm may have excellent long-term prospects but greater flexibility is needed in
its staffing structure to ensure it can weather short-term variations in demand
for its products or services. A firm with excellent long-term prospects may fail
in the short-run for want of financial prudence.
The most resilient firms, then, are those which evolve a clever balance
between short- and long-run requirements for flexibility. But, as we have
illustrated, this is much easier said than done. In Hyman’s memorable phrase