The benefits of flexible workplaces: From intuition to evidence

At workplaces across Australia, employees and employers are sitting down to have some difficult conversations.

Many employees are seeking flexible work opportunities as they juggle work commitments with caring responsibilities, volunteering commitments or the transition to retirement. For these employees, the prospect of part time work, varying start and finish times or working from home is very appealing.

But some employers are reluctant to offer that flexibility, fearing it may hurt productivity. We know from the Federal Workplace Gender Equality Agency policies on flexible work and family and caring responsibilities, only 13 per cent have a strategy for implementing policies.

At the heart of the disagreement is a lack of data about the financial implications of flexible work practices, meaning the dispute is often driven by anecdotes and personal preferences. Until now.

Recently we at Nous took on a project to model for employers flexible work so that we could better quantify the impact. The work was undertaken on behalf of the Victorian Government, which wanted to encourage the uptake of flexible work, but the research has much broader implications.

Our model – Felix: The Nous FlexiWork Savings Calculator – is the first in Australia that enables employers to easily calculate the comprehensive return on investing in flexible work for their own organisation.
 

Flexible work brings significant bottom-line benefits

Here’s what we found.

Taking into account the benefits and costs that result from greater flexibility, we established that organisations can experience a net benefit of as much as four per cent of their revenue, which in some organisations can amount to tens of millions of dollars each year. Replicated across the entire economy, the net benefit could be in the billions.

When we talk about flexible work, we factor in 10 arrangements: part-time work, purchased leave, unplanned leave, parental leave (beyond statutory requirements), flexitime, compressed working hours, time in lieu, job-sharing, flexible career management and working from home (telecommuting).

To calculate the net benefit, we identified categories of benefits attributable to flexible work and quantified them as cost savings to the organisation:

• Direct labour productivity: working more efficiently and effectively due to greater engagement and working in ways that suit individuals’ work styles.
• Recruitment: being able to fill vacant positions with the best quality candidates more quickly and consistently.
• Retention: retaining experienced talent.
• Absenteeism: reducing the frequency of absenteeism as employees have the option to telework.

Of these benefits, direct labour productivity accounted for the lion’s share of the benefit, at more than 80 per cent in some organisations, followed by retention and recruitment.

The model also identified six costs resulting from workplace flexibility, such as increased management burden due to more part-time staff, costs associated with implementing flexible work requests, and the costs of a larger workforce due to the uptake of part-time work.

For each benefit and cost, we used the organisation’s administrative and survey data, supplemented by assumptions derived from a literature review, to assign financial proxies. The net impact is a simple calculation of benefits less costs.

Victorian organisations are putting flexible work into practice

We used this model to estimate the impact of flexible work on three organisations in Victoria. For each one, we observed a strong improvement on bottom-line performance as a result of flexible work. These findings are robust to sensitivity analysis in which we substantially varied some of the model's underlying assumptions.
 
Flexible work saves Victoria’s Department of Environment, Land, Water and Planning $31 million each year, which is 2.25 per cent of its output appropriation. More than half of staff, which includes policy developers, scientists and even firefighters, use flextime and nearly a third work from home some of the time. Most of the Department’s savings are due to direct labour productivity: employees working smarter as a result of being able to work in the ways that suit them best.

Flexible work saves Mercy Health $23 million each year, which is 3.9 per cent of its total operating revenue. As a major healthcare provider, Mercy Health relies on a large nursing workforce. Given labour shortages among qualified nurses, being an ‘employer of choice’ is a strategic imperative. That makes flexible work so important for the organisation as it seeks to improve recruitment and retention.

Flexible work saves Wannon Water $150,000 each year, which is only 0.2 per cent of its total revenue, in part because the utility is still early in its implementation of flexible work. Its staff travel to and from work is much quicker than in metro areas, reducing the impact of work-from-home policies.

These three examples give us some clues about the types of organisations that have lots to gain from flexible work and which organisations will find the net benefits only marginal. Employers in a highly competitive contest for employees will find the reduced staff turnover that results from flexibility will have a substantial bottom-line impact. Employers in which staff have a significant commuting time will find greater productivity benefits. And employers for whom many staff are juggling caring responsibilities will find outsized benefits.

Experience shows benefits of incremental adoption, supportive leadership

These case studies revealed some common lessons.

• Flexible work is best implemented incrementally – a staged approach enables organisations to test what works and allows the organisation’s culture and work practices to catch up with its policies.
• Flexible work need not compromise customer service – each organisation emphasised the importance of meeting customer expectations and noted that this required people to be available to work in certain places, in certain ways and at certain times. But flexibility over start times, for example, allowed one organisation to provide support to its customers across a longer work day.
• Supportive leadership is critical to ‘normalising’ flexible work arrangements – the case study organisations emphasised the importance of supportive leadership for turning a flexible work policy into an organisational reality. Leaders who work flexibly themselves and who openly support flexible work can set the tone for a whole organisation.
• Managers need support to manage flexible teams – leading a flexible team presents new challenges for managers. They must first be able to properly weigh up requests for flexible arrangements, noting that granting flexibility to some staff may have consequences for others or for broader team solidarity.

Research like this inevitably relies on assumptions. Wherever possible, we have grounded the assumptions in evidence gathered through our literature review and validated through our interviews and workshops. However, there is inevitably a requirement in any model to make judgements and to generalise from either limited samples or from analyses done in different contexts. This is the case for our model, while some of the assumptions are grounded in strong evidence, others are less robust. Where evidence is more limited we have generally used more conservative assumptions.

Ultimately, for those people who have caring responsibilities or other commitments, flexibility is essential to undertaking work. Our research shows that workplace flexibility also makes good business sense.