Pathways from flexible work arrangements to financial performance

Abstract

Purpose: The purpose of this paper is to investigate the direct and indirect effects of flexible working arrangements (FWAs) on return on labour (ROL). Design/methodology/approach: Data from 4,204 employees and their employers were used to construct regression models to assess separately, the direct relationships between the FWAs and ROL and also the indirect relationships, with job satisfaction and staff turnover as mediating variables, applying Baron and Kenny’s (1986) mediation rules. Findings: Flexible work hours significantly and directly increased ROL and indirectly through reduction in staff turnover, while the negative direct effect of job sharing on ROL was indirectly reduced by its positive effect on job satisfaction. Time in lieu of overtime (TOIL) and working from home reduced ROL with the direct negative effects of TOIL on ROL worsened by a reduction in job satisfaction. Practical implications: The results suggest that not all FWAs increase ROL and that the direct effects of FWAs on ROL emanate from the efficacy with which work is reallocated in FWA negotiations. The indirect effects derive from employees’ reciprocation of FWAs through improved job satisfaction and turnover. The onus is therefore, on employers to maximise returns from FWAs through efficient work reallocation during negotiations. Originality/value: The study makes a contribution by examining the direction of effects of FWAs on ROL and the pathways (direct and indirect) by which the effects occur. Research in this area has hitherto considered subjective and qualitative performance measures. FWAs, such as job sharing and TOIL, which are rarely considered in the literature, are covered in the study.