Question

Deciding Whether to Use Flexible Staffing

The Kaiser Manufacturing Com pany (KMC) has been in existence for over 50 years. Its main products are specialty implements for use in both the crop and the dairy herd sides of the agricultural business. Products include special attachments for

Transition Probabilities (2014–15) Current (2016) Job Category Level SF SP ASM RSM Exit No. Employees Sales, Full-time (SF) 1 .50 .10 .05 .00 .35 500 Sales, Part-time (SP) 1 .05 .60 .10 .00 .25 150 Ass’t. Sales Mgr. (ASM) 2 .05 .00 .80 .10 .05 50 Region. Sales Mgr. (RSM) 3 .00 .00 .00 .70 .30 30

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tractors, combines, and discers and add­on devices for milking and feeding equipment that enhance the per for mance and safety of the equipment. KMC has a small corporate office and four manufacturing plants (two in the Midwest and two in the South). It has a core workforce of 725 production workers, 30 clerical workers, 32 engineers and professional workers, and 41 man ag ers. All employees are full time, and KMC has never used either part­ time or temporary workers. Those in charge of staffing feel very strongly that the strategy of using only a core workforce has paid big dividends over the years in attracting and retaining a committed and highly productive workforce. Sales have been virtually flat at $175 million annually since 2012. At the same time, KMC has begun to experience more erratic placement of orders for its products, making sales less predictable. This appears to be a reflection of more turbulent weather patterns, large swings in interest rates, new entrants into the specialty markets, and general uncertainty about the future direction and growth of the agricultural industry. Increased unpredictability in sales has been accompanied by steadily rising labor costs. This is due to KMC’s increasingly older workforce, as well as shortages of all types of workers (particularly production workers) in the immediate labor markets surrounding the plants. Assume you are the HR man ag er responsible for staffing and training at KMC. You have just been contacted by a representative of the Flexible Staffing Ser vices (FSS) Com pany, Mr. Tom Jacoby. Mr. Jacoby has proposed meeting with you and the president of KMC, Mr. Herman Kaiser, to talk about FSS and how it might be of ser vice to KMC. You and Mr. Kaiser agree to meet with Mr. Jacoby. At that meeting, Mr. Jacoby makes a formal pre sen ta tion to you in which he describes the ser vices, operation, and fees of FSS and highlights the advantages of using a more flexible workforce. During that meeting, you learn the following from Mr. Jacoby. FSS is a recent entrant into what is called the staffing industry. Its general purpose is to furnish qualified employees to companies (customers) on an as­ needed basis, thus helping the customer implement a flexible staffing strategy. It furnishes employees in four major groups: production, clerical, technical, and professional/ managerial. Both full­ time and part­ time employees are available in each of these groups. Employees may be furnished to the customer on a strictly temporary basis (“temps”) or on a “temp­ to­ perm” basis, in which the employees convert from being temporary employees of FSS to being permanent employees of the customer

after a 90­ day probationary period. For both the temp and the temp­ to­ perm arrangements, FSS offers the following ser vices. In each of the four employee groups it will recruit, select, and hire people to work for FSS, which will in turn lease them to the customer. FSS performs all recruitment, se lection, and employment activities. It uses a standard se lection system for all applicants, composed of an application blank, reference checks, drug testing, and a medical exam (given after making a job offer). It also offers customized se lection plans in which the customer chooses from among a set of special skill tests, a personality test, an honesty test, and background investigations. Based

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on the standard and/or custom assessments, FSS refers to the customer what it views as the top candidates. FSS tries to furnish two people for every vacancy, and the customer chooses from between the two. New hires at FSS receive a base wage that is similar to the market wage, as well as close to the wage of the customer’s employees with whom they will be directly working. In addition, new hires receive a paid vacation (one week for every six months of employment, up to four weeks), health insurance (with a 25% employee co­ pay), and optional participation in a 401(k) plan. FSS performs and pays for all payroll functions and deductions. It also pays the premiums for workers’ compensation and unemployment compensation. FSS charges the customer as follows. There is a standard fee per employee furnished of 1.55 × base wage × hours worked per week. The 1.55 is labeled “markup”; it covers all of FSS’s costs (staffing, insurance, benefits, and administration) plus a profit margin. On top of the standard fee is an additional fee for customized se lection ser vices. This fee ranges from .50 to .90 × base wage × hours worked per week. Fi nally, there is a special one­ time fee for temp­ to­ perm employees (a finder’s fee of one month’s pay), payable after the employee successfully completes the 90­ day probationary period and becomes an employee of the customer. Mr. Jacoby concludes his pre sen ta tion by stressing three advantages of flexible staffing as provided by FSS. First, use of FSS employees on an as­ needed basis will give KMC greater flexibility in its staffing to match fluctuating product demand, as well as movement from completely fixed labor costs to more variable

labor costs. Second, FSS provides considerable administrative con ve nience, relieving KMC of most of the burden of recruitment, se lection, and payrolling. Fi nally, KMC will experience considerable freedom from litigation (workers’ comp, EEO, torts) since FSS and not KMC will be the employer.

After Mr. Jacoby’s pre sen ta tion, Mr. Kaiser tells you he is favorably impressed, but that the organ ization clearly needs to do some more thinking before it embarks on the path of flexible staffing and the use of FSS as its provider. He asks you to prepare a brief preliminary report including the following:

1. A summary of the pos si ble advantages and disadvantages of flexible staffing

2. A summary of the advantages and disadvantages of using FSS as a ser vice provider

3. A summary of the type of additional information you recommend gathering and using as part of the decision­ making process

Answer 1

1. Many organizations have success with flexible staffing due to all the advantages that come with it. Using flexible staffing for KMC can cut costs during slow seasons/times for the organization. Rather than employing 828 full time employees, FSS can provide temps or temp-to-perm during the busiest of times and place the employees elsewhere once it is slow allowing KMC to employ less permanent full-time employees. Possible disadvantages to using flexible staffing is a higher turn-over rate, lack of industry knowledge, and losing legal rights to the temp employees.

2. One advantage is the current employees of KMC can focus on their job duties rather than worry about having to set time to recruit, interview, and hire new employees.One of the biggest disadvantages to having temps from FSS is the employees will be dedicated to FSS not KMC. Also, KMC will be paying a reasonable amount to FSS to employ the temp hires for KMC, which if an employee quits on the spot shortly after training, KMC will be out more money from taking time and dedication to training.

3. Kaiser Manufacturing Company should acquire a sample of the type of Knowledge Skills ability and other (KSAO) questions used to choose the best candidate to fill position. As the Human Resources Manager responsible for staffing, a review of the KSAO should determine whether they meet the company standards. Kaiser Manufacturing Company should also be given the opportunity to add its input to the KSAO’s to obtain the best qualified candidates.Other concerns for Kaiser Manufacturing are, as the environment changes will the KASO’s change? If so, who will train current flexible employees? Kaiser manufacturing is aware that FSS is new to the industry and should research its success rate. Although FSS sales pitch was impressive KMC is in dire need of revamping its company and should acquire the assistance of a successful agency in the industry, preferable one with the experience in staffing employees for manufacturing firms like KMC. It is highly recommended that KMC review it states laws as it relates to temporary workers and cross reference such laws with Flexible Staffing Services Staffing policies to avoid negative public reviews as in the case of Wal-Mart. According to Allison Horton and Michael Lansu of the Chicago Sun-Times (2012), Temp Workers filed a class-action Against Wal-Mart over wages claiming, “Wal-Mart and its staffing agencies failed to follow federal minimum wage and overtime laws when they required temporary workers to appear early for work, stay late to complete work and work through lunches and breaks” .