Flextime vs. Compressed Work Week: Reducing Absenteeism

Introduction

Workplace absenteeism is a major problem costing American businesses hundreds of millions of dollars per year. There are a number of underlying issues that lead to elevated absenteeism rates, and any company wishing to reduce absenteeism should design a program that takes these multiple causal factors into account. Several viable alternatives exist for addressing this issue. The alternatives examined here are limited to those dealing with childcare and eldercare responsibilities — a reasonable focus, given that budget constraints may not permit addressing multiple causal factors simultaneously. The two main alternatives considered are the creation of flextime and the creation of a compressed work week. This report outlines both alternatives and concludes with a final recommendation.

Problem Statement and Report Overview

Workplace absenteeism is a chronic issue that costs American businesses $3,600 per year for hourly workers and $2,650 per year for salaried ones. Productivity declines are especially to blame: either work goes undone, or it must be completed by others who are not as effective as the person normally assigned to the task. Thus, absenteeism is a significant productivity killer. There are many causes of absenteeism, and a number of these are preventable (Investopedia, 2015). The variety of causes makes the problem more challenging to address — it is not one problem but many different problems. However, no manager can solve all problems at once, so the focus must be on solutions most likely to produce the greatest change. Furthermore, since any solution should preferably be measurable, it is best to adopt one solution at a time so that its results can be properly evaluated.

This report focuses on alternatives to the problem of absenteeism in the workplace, with alternatives flowing from an analysis of the underlying issue of employees taking time off for childcare or eldercare responsibilities. The report first establishes criteria to guide the evaluation, then outlines the different alternatives. A methodology description is followed by analysis and conclusions that highlight the most effective means of limiting absenteeism in the workplace.

Evaluation Criteria

The alternatives are judged against five criteria: productivity, cost, company image, worker morale, and ease of implementation. Productivity is included because the entire purpose of this exercise is to improve productivity by lowering the absenteeism rate — it effectively measures the success of each alternative. Cost is the second factor. Together, the first two criteria focus the evaluation on a cost-benefit analysis. Given that the cost of absenteeism is approximately $3,600 per year per hourly worker, any proposed solution must cost significantly less than that in order to be justifiable.

Company image is the third criterion. Management does not want to take any action that could create a backlash — either among workers or among other stakeholders. The company is concerned with its image and wants to protect the brand it has built over time. All solutions must therefore be, at a minimum, neutral with respect to their effect on company image. The fourth criterion is worker morale. The rationale is straightforward: poor morale is correlated with higher rates of absenteeism. If a proposed alternative would reduce worker morale, it could offset any structural benefits the change might otherwise deliver.

The fifth criterion is ease of implementation. The implementation of a strategy can be difficult, and that difficulty carries both direct and indirect costs. The company does not want the solution to be harder to manage than the problem it is meant to solve, so implementation must be reasonably smooth.

Research Methods

There is a fair amount of academic research on absenteeism, making it feasible to identify studies that provide evidence of the cost and efficacy of different alternatives. The approach taken here is a scan of the relevant literature to determine which alternative is most likely to succeed. As many studies as possible are examined, and the conclusions drawn from those studies are analyzed to understand the strengths and weaknesses of each option.

Flextime as an Alternative

Flextime allows employees to have flexibility in their schedules. As long as they work the requisite number of hours or complete the requisite amount of work, they are not bound to a specific, company-mandated schedule. Flextime came into vogue in the 1980s as a means of reducing absenteeism and turnover. It accomplishes this by providing employees with a means to reduce work-family conflict — the absenteeism driver that these proposals seek to address.

Productivity: Flextime has been shown to reduce absenteeism, though not necessarily turnover (Ralston & Flanagan, 1985). By reducing absenteeism, it is logical to conclude that flextime successfully increases productivity, since the link between absenteeism and lower productivity is well established.

Cost: Flextime should not come at a significant increase in cost. Workers still work the same number of hours, and modern technology makes it relatively easy to work from home or at off-peak hours without incurring substantially increased costs. There may be some minor cost increase associated with flextime, but this would be negligible. Flextime does not necessarily increase profitability (Lee & DeVoe, 2012), but it is not associated with significant cost increases either, and is generally viewed as cost-neutral (Christensen & Staines, 1990).

Company image: The effect of flextime on company image is negligible to most external stakeholders, but there is evidence that potential employees value flextime when evaluating prospective employers. Companies that offer flextime can therefore be said to have a stronger employer brand than those that do not, which assists with recruiting and enhances the company's perception among key stakeholder groups — including current and prospective employees (Tumasjan, Strobel & Welpe, 2011). Anecdotal evidence from the widely publicized case in which Yahoo canceled its flextime policy suggests that the general public holds a favorable view of flextime and thinks less of companies that eliminate it.

Worker morale: Worker morale appears to be higher when there is less work-life conflict. This is evidenced by the enhanced employer brand associated with flextime-offering companies and by the reduced absenteeism linked to flextime arrangements. A reduction in work-family conflict would reasonably be expected to produce higher worker morale, though it is worth noting that flextime does not appear to have a significant effect on turnover (Ralston & Flanagan, 1985).

Ease of implementation: Flextime is relatively easy to implement for most jobs, particularly office jobs. There was some concern in the 1980s when the concept was introduced that implementation might be difficult; however, the Internet and modern communication technology have since given rise to entirely virtual organizations, making a degree of schedule flexibility straightforward to manage.