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Free Range Business

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Table of Contents

Executive summary .......................................................................................................................................................................... 3

Methodology..................................................................................................................................................................................... 4

Mid-market boardroom buzz............................................................................................................................................................. 5

Working smarter and harder ............................................................................................................................................................. 6

Influx of flexibility .............................................................................................................................................................................. 7

Free Range businesses.................................................................................................................................................................... 8

From barriers to benefits .................................................................................................................................................................. 9

Free Range workers ....................................................................................................................................................................... 10

Free Range Directors ..................................................................................................................................................................... 11

Conclusion ..................................................................................................................................................................................... 12

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����������� � � �� The Microsoft Free Range Business research was commissioned to investigate how mid-market businesses are addressing flexible working. This study aims to look beyond the endorsement that businesses are giving to flexible working at a rhetorical level to explore how mature the mid-market really is in terms of flexible working. The momentum behind flexible working, the drive of the Board, the provision of technology and employee uptake can be seen as indicative of a growing maturity in flexible working. However, in this study, the extent to which flexible working is seen as a characteristic of the working culture provides the most insightful measure of how flexible mid-market businesses really are. This report seeks to establish the differences between those businesses that are actively embracing flexibility, defined as ‘free range businesses’ and those that do not, aptly coined ‘battery businesses’. Mid-market boardroom buzz

• Productivity dominates the boardroom agenda in 77% of mid-market businesses • Flexible working is a board level issue for 51% of businesses whilst 43% are discussing

mobile technology and its impact on the workforce Working smarter and harder

• Only 36% of mid-market businesses would now claim to have a 9 to 5 culture • Long hours are a reality for 58% of businesses, whilst 43% support the notion that it is

important to be in the office. • Despite this, 59% state that flexible working is a characteristic of their work culture – half

of UK mid market businesses can therefore be defined as ‘Free Range’ businesses Influx of flexibility

• 49% of businesses claim that the ability to work flexibly in their organisations has increased in the last five years

• Where flexibility has increased, in 82% of businesses so too has productivity. Improvements have also been witnessed in employee morale, knowledge sharing, stress levels, staff turnover and absenteeism

‘Free Range’ businesses

• 85% of mid market businesses offer some form of flexible working to their employees • Whilst 6 out of 10 businesses offer part time working options only 4 out of 10 offer

working from home, arguably the ultimate flexible option • 79% of businesses offer employees some sort of device to support mobile working, most

notably laptops (76%)

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From barriers to benefits

• Only 13% of Free Range businesses believe that employees are prone to abusing flexible working arrangements, and even amongst Battery businesses this figure is 22%, suggesting lack of trust is not prevalent in the mid-market

• A third of Free Range businesses (34%) think flexible working necessitates a new set of management skills

• Free Range businesses report a number of positive outcomes of flexible working – employee retention (76%), increased productivity (74%) and better staff morale (70%) figure most highly

Free Range workers

• London/ South East and Scottish businesses have the highest proportion of people working flexibly (35%)

• On average, 42% of finance staff work flexibly, compared to 27% of manufacturing staff • Management is the most likely group to work flexibly (81%), followed by sales (54%) and

then finance (46%) Free Range directors

• 73% of all directors consider themselves to work effectively between 9am and 12pm, only 26% work well between 12pm and 4pm

• Finance Directors are most effective outside traditional working hours with 30% working effectively before 9am and 38% after 6pm

• Finance Directors and CEOs are the most mobile directors, spending on average ten weeks per year out of the office

Further details about the flexible working habits of UK mid-market businesses are highlighted in the report and the gulf between Free Range and Battery businesses exposed. In the continual quest for productivity and the well publicised ‘war for talent’, half of mid-market businesses are missing out on key commercial benefits that flexible working has been found to deliver. ������������ The research petitioned 300 managing directors, finance directors, operations/ sales directors, IT directors and HR directors in UK businesses with 100-1000 employees. Incorporating finance, retail, manufacturing and business services sectors, respondents were interviewed by telephone during May 2006. The research was undertaken on behalf of Microsoft, by Loudhouse Research, an independent market research company based in the UK.

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����� � ������� � ��� ������ Mid-market boardrooms in the UK are filled with talk of maintaining and improving productivity. At a general economic level, poor productivity is estimated to cost Britain at least £88bn annually – around 7.46% of GDP and there is much media attention surrounding the productivity lags between the UK and the US, as well as other European markets. It is not surprising therefore, that productivity has been prominent on UK business agendas in recent years and tops the list of board issues in this survey [Figure 1] For two-thirds of companies, employee satisfaction is a hot boardroom topic [Figure 1]. It has always been assumed that a happy workforce is a more productive workforce and recent research by the Centre for Economic Performance (CEP) proves that collective job satisfaction is related to both productivity and profitability. The fact that knowledge management is now on two-thirds of mid-market board agendas and the prevalence of the term ‘knowledge worker’ shows just how much this domain has matured over the past few years and its importance in competitive advantage. This also suggests that businesses are beginning to look beyond increasing automation of processes to other means of enhancing productivity, such as knowledge sharing, collaboration and social networking. It is widely accepted that changing the way people work and their work environment has the potential to significantly enhance morale and productivity. Flexible working appears as an agenda item in its own right in half of mid-market businesses, and four out of ten businesses are discussing mobile technology and its impact on the workforce [Figure 1] The presence of flexibility as a Boardroom agenda item varies by both region and by sector. Its presence may signal either a continual focus and therefore be indicative of best practice or conversely, an awareness of a need to urgently respond to market forces or legislation. Businesses in Leeds and Manchester are most likely to be discussing these issues at Board level [Figure 2], together with finance companies, where two-thirds of businesses are talking about flexibility. In theory then, businesses are waking up to the notion that flexible working makes good business sense and are keen to ensure that it is managed effectively to benefit both the business and the individual. This report explores how this strategic imperative translates into real cultural change and evaluates the factors that set apart Free Range businesses from those less enthusiastic about flexible working. ��������

43%

43%

51%

65%

66%

77%

0% 20% 40% 60% 80%

Employee churn

Mobile technology/ impact onworkforce

Flexible working

Knowledge sharing/ mgt

Employee satisfaction

Employee productivity

Fig 1: % of companies where issue is discussed at

Board level

42%

36%

42%

46%

58%

44%

46%

54%

56%

62%

0% 20% 40% 60% 80%

Glasgow /Edinburgh

London/ SouthEast

Newcastle/Tyneside

Manchester /Greater

Manchester

Leeds / WestYorkshire

Flexible working

Mobile technology/impact on workforce

Fig 2: % of companies, by region, where flexible working /

mobile technology are discussed at Board level

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� � ������ � �� ������� �� � Only 36% of mid-market businesses now define their working culture as 9 to 5, probably a good thing as the associations this conjures up are not exactly inspirational to a new generation of workers [Figure 3]. Instead, businesses are embracing a number of other ways of working. UK businesses are no longer focused on the outdated concept of time as the core measure of worker productivity and commitment. Mid-market businesses are now looking at more sophisticated ways of measuring productivity, with two thirds looking at outputs rather than hours worked [Figure 3]. Whilst this signals a positive sea change for UK business and a shift in how success is defined, there clearly remains a culture of long hours with more than half of businesses stating that employees work as long as it takes to get the job done. Furthermore, in four out of ten businesses, directors believe that their employees work longer than their contracted hours. [Figure 3]. It seems therefore that in some cases 9 to 5 has been replaced by the non-too-healthy 9 to 5 plus. The growth of the services economy together with job insecurity, along with a host of other factors, have conspired to create a flexibility that could be considered unsavoury if not managed properly by management teams. Interestingly, 43% state that being IN the office is important, suggesting that in some businesses there is the view that unless employees are at work and visible they cannot be doing their job or showing commitment [Figure 3]. There are marked differences by region with businesses in Newcastle or Tyneside particularly adamant that employees should be in the office (56%) whilst those in London and the South East demonstrate much more of a laissez-faire attitude, only 33% asserting that office presence is important [Figure 4]. Such findings add fuel to the debate about what actually constitutes ‘hard work’. On the one hand, businesses are focusing on output – achieving something that is of value to the business, whilst on the other hand there is clear evidence that long hours and being seen to be at the office are still deep rooted elements of business culture. Flexible working is one way of tackling the hours culture and finding the ever-elusive work-life balance. Indeed, 59% of businesses state that flexible working is now a characteristic of their work culture, suggesting this has gone beyond just compliance and box-ticking to become firmly embedded in the psyche and processes of the organisation as a whole. [Figure 3]

16%

36%

42%

43%

58%

59%

65%

0% 20% 40% 60% 80%

Doesn't matter where/ whenemployees work

Standard 9 to 5 hours

Employees work longer than theircontracted hours

Being IN the office is important

Employees work as long as ittakes to get the job done

Employees work flexibly

Success is measured by outputs,not hours worked

Fig 3: Characteristics of working culture in

mid-market businesses

38%

40%

48%

54%

36%

33%

42%

42%

50%

56%

0% 20% 40% 60% 80%

London/ SouthEast

Glasgow /Edinburgh

Manchester /Greater

Manchester

Leeds / WestYorkshire

Newcastle/Tyneside

Being IN the office isimportant

Employees worklonger thancontracted hours

Fig 4: % who consider being in the office/ working longer than contracted part of their working culture

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���������������������� In the last 5 years, half of businesses (49%) claim that the ability to work flexibly in their organisation has increased. Some of this growth is likely to have been a direct result of changing legislation. Most momentum is seen in Manchester and Newcastle where 54% of businesses have witnessed flexibility growth Amongst those companies where there has been an increase in the ability to work flexibly, business performance measures have shown more dramatic improvement than in those businesses where flexibility has not progressed. Most notably, improvements in productivity, knowledge sharing and distribution as well as in employee morale are particularly marked. For example, 82% of businesses with increased flexibility have witnessed improvements in productivity, compared to 66% of businesses where flexibility has remained static. Even areas where businesses report less improvement generally over the last five years, such as employee stress, staff turnover and absenteeism, those with greater flexibility are still experiencing more significant improvement in these measures. [Figure 5] Whilst it may appear that flexibility is good for business, the ways in which businesses implement flexibility are wide ranging and suggest that there is a certain reticence to fully embrace the opportunities that flexible working can offer both businesses and individuals.

6%

12%

21%

34%

53%

66%

17%

21%

34%

54%

73%

82%

0% 20% 40% 60% 80% 100%

Employee stresslevels haveimproved

Staff turnover/churn hasdecreased

Employeeabsenteeism has

improved

Employeemorale

Knowledgesharing/

distribution

Productivity hasimproved

Flexibility increased

Flexibility static

Fig 5: Changes in business measures in last 5 years in line with

increased flexibility or static flexibility

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� ���������������� When businesses are presented with a range of options that can be encompassed under the umbrella of flexible working, 85% of mid-market businesses claim to offer at least one of these options to their employees [Figure 6]. This is not surprising given that since April 2003, parents of children aged six or under or disabled children aged under eighteen, have had the right to apply to work flexibly and their employers have duty to consider these requests seriously. More revealing, however, are the differences between businesses that are offering flexible working in response to legislation and those where flexible working is actively encouraged and is embedded in the very fabric of business life. Looking at the extent to which different flexible working options are offered within UK mid-market businesses starts to unearth factors that differentiate those businesses that are truly Free Range and those that are simply going through the motions when it comes to flexibility. Not surprisingly, part time working is the most common form of flexible working, offered by 59% of mid-market businesses. Indeed, the UK is one of Europe’s front-runners when it comes to numbers of part-time workers and some parties would argue that part-time working is so commonplace that this no longer constitutes the label ‘flexible working’. The ability to work ‘flexible hours’ is offered by 58% of mid-market businesses. [Figure 6] It appears that businesses are more predisposed to offering flexibility in terms of hours rather than flexibility in terms of location. Only 4 in 10 businesses offer employees the option of work at home suggesting that the ‘where’ of flexible working is more important than the ‘when’. [Figure 6] Critical to the ability to work away from the office, is the need for good communications and the provision of devices that enable people to work as effectively outside the office as they do in it. Almost eight out of ten businesses offer some device to support flexible or mobile working, the most popular being the laptop. Mid-market businesses appear slow, however, to offer other technologies to support flexible working in practice. [Figure 7] Director usage of these tools lags behind the general provision of these tools to flexible workers, suggesting that Directors are not exactly leading by example when it comes to flexible working.

15%

41%

43%

53%

58%

59%

0% 70%

None / we don't encourage flexibleworking

Work from home

Work offsite (at partner, supplier,customer site)

Provide mobile technology tosupport remote working

Work flexible hours

Work part time

Fig 6: % of companies offering various flexible working

options to employees

32%

9%

10%

14%

26%

61%

21%

15%

15%

27%

39%

76%

0% 20% 40% 60% 80% 100%

None of these

PDA for accessing financial/operational systems

Smartphone

Wifi / mobile datacard

PDA for accessing email/ calendar

Laptop

OfferPersonally use

Fig 7: Technologies offered to employees/ used by directors themselves to support mobile working

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� �� ��� �� ������������ A lack of trust in employees has often been highlighted as a barrier to flexible working. The survey shows some striking differences between different director types and the extent to which they trust their employees not to abuse flexible working arrangements. Encouragingly, MDs/ CEOs are the most trusting (64%) whilst IT directors are the most suspicious with less than half (48%) trusting their employees. Only 20% of Free Range businesses are prepared to tolerate potential abuse of flexible working in order to reap the benefits. Another barrier to flexible working is considered to be the need for new management skills. Only a third (34%) of Free Range businesses, where flexibility is a part of the working culture, consider new management skills are required to facilitate successful flexible working. However, half (51%) of Battery businesses see new management skills as a barrier to adoption. This is not to discount the importance of management in flexible working, but to highlight that this may be presented as an excuse not to go down the flexibility route and that in reality, it is not a new set of management skills that is needed rather an evolution of skills coupled with an atmosphere of trust. This study also goes someway to dispel myths that flexible working can lead to communication breakdowns. Free Range businesses, where flexible working is intrinsic to the working culture, are seen to be greater promoters of most forms of communication than Battery businesses. Not surprisingly, many of these are technology based, such as communication via Intranets and instant messaging (IM) but it is also encouraging to see that face to face communication is also widely fostered. [Figure 8] Free Range businesses report a number of positive outcomes of flexible working policy, many of which mirror the focus in mid-market boardrooms today. Three quarters of Free Range businesses consider that flexibility improves employee retention and increases productivity. Employees are also felt to be happier in seven out of ten Free Range businesses [Figure 9] The list of benefits goes on with more than half of Free Range businesses reporting reduced absenteeism, better customer relationships, being able to attract new employees and improved collaboration.

19%

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40%

44%

77%

85%

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55%

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94%

0% 20% 40% 60% 80% 100%

Hot desking

Knowledgemanagement

task force

Communicationthrough IM

Knowledgesharing through

an Intrane t

Cross functionalteam structure

Communicationthrough email

Face to facecommunication

Free rangeB attery

Fig 8: % of businesses promoting to encourage information sharing – Free Range versus Battery

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Reduced overheads/ office costsavings

Ability to collaborate acrossdifferent teams/ geographies

Attracting new employees

Better customer relationships

Reduced absenteeism

Help staff manage their workloads

Better staff morale

Increased productivity

Employee retention

Free rangeBattery

Fig 9: Positive outcomes of a flexible working policy – Free

Range versus Battery

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� ����������� �� �� Just because flexible working is widely available, this does not necessarily mean it is widely adopted by employees. Clearly, flexible working is not simply a case of ‘pick and mix’ and arguably, there are some types of employee who, by virtue of their role or and the needs of the business, are not suited to flexible working. Across the UK mid-market, uptake of flexible opportunities is somewhat limited and variable. Businesses based in London and the South East as well as Scotland boast the highest proportion of flexible workers with over a third of the workforce working flexibly. Newcastle/ Tyneside currently has the lowest uptake with 27% of the workforce working flexibly [Figure 10]. In terms of industry sector, finance businesses are forging ahead in terms of flexibility with an average of 43% of staff working flexibly compared to just 24% in manufacturing companies. The extent of mobile working, defined as the proportion of employees that do not work at a business site all day, every day, also varies by region and by business sector [Figure 10]. The fact that in 81% of mid-market businesses managers are by far the most likely group to work flexibly suggests that flexible working is still something of a ‘perk’ rather than standard working practice. Following managers, sales and finance staff are the most likely to work flexibly. Ironically, HR personnel, often the most ardent promoters of flexible working are relatively unlikely to work flexibly themselves [Figure 11]. Evidently, HR is a role that requires a strong in-house presence. The cascade from management down also underlines the issue of trust and abuse of flexible working patterns. The fact that managers have greater flexibility can in some part be attributed to that fact that they are ultimately more accountable for company performance than their subordinates. In most cases, responsibility engenders trust by default.

Fig 10: Average % of workforce who are mobile, or

work flexibly by region

14%

15%

25%

30%

35%

46%

54%

81%

0% 20% 40% 60% 80% 100%

Factory/warehouse

HR

Operations

Administrative

IT

Finance

Sales

Management

Fig 11: Employee types most likely to work flexibly

17%

21%

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12%

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27%

29%

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35%

35%

0% 10% 20% 30% 40% 50%

Newcastle/Tyneside

Manchester

Leeds/ WestYorkshire

Glasgow/Edinburgh

London/ SE

Average % offlexible workers

Average % ofmobile workers

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� ��������� � ���� � Working flexibly often suits individuals for a number of reasons. One issue, less often explored, is the fact that just because an office is open from 9 to 5, this does not necessarily mean that workers are at their most effective during these hours. This study asks directors at what times of day they personally work best. Encouragingly, 73% of all directors claim to be effective between 9am and 12pm. Directors are, however, highly susceptible to the post-lunch lull – with only 26% acknowledging they work well between 12pm and 4pm. Working outside traditional office hours is fairly commonplace amongst directors, with some interesting differences emerging between different director types. Finance directors are the most likely to embrace flexible hours, with 30% working effectively before 9am and 34% after 6pm. IT Directors show the strongest ‘early bird’ tendencies with 38% working best before 9am, whilst HR Directors seem most entrenched in traditional office hours with little preference for ‘after hours’ working. [Figure 12] In terms of location, Finance Directors and CEOs are the most mobile director types, typically spending one day a week out of the office, which can be averaged out to ten weeks per year. [Figure 13] There are some surprises in here when played against director stereotypes. IT is more strongly associated with burning the midnight oil than the early bird status expressed in the research findings. It is also interesting to note that most directors do not consider that they spend a great deal of time out of the office. At director level, the burden of senior status appears to anchor most business functions to the office.

6%

20%

20%

23%

34%

18%

38%

25%

26%

30%

0% 50%

HR

IT

MD/ CEO

Ops/ Sales

Finance

Before 9amAfter 6pm

Fig 12: % of directors considering before 9am or after

6pm to be a time they personally work best

3%

4%

7%

6%

90%

85%

82%

81%

78%

2%

5%

3%

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4%10%

5%

6%

8%

5%

9%

HR Director

IT Director

Operations/Sales Director

FinanceDirector

MD/ CEO

In the officeOn the moveWith associatesAt home

Fig 13: Working time spent on average by different director types in different locations

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!����������Businesses have been striving to create a flexible working environment for some years now. Many sources will site the advent of the mobile phone as a critical point in the flexible evolution. Perhaps a stronger contender for truly flexible business has been the standardisation and mobilisation of the internet? What about the pager? Ask a doctor, or sales rep about the impact that device had on the ability to work productively? Flexible working is an evolutionary component in the working ‘machine’. The critical point to digest is that flexible ‘success’ is people driven. Technology has played a pivotal role in what has been coined in this report as ‘Free Range Business’, but gizmos alone will not deliver real business value. It is encouraging to find that companies with greater flexibility experience greater productivity, morale and knowledge sharing and that absenteeism and stress levels also appear to be reduced. However, because a Free Range Business is comprised of a number of different things, no single business process, corporate policy or IT implementation will achieve these benefits in isolation. The Free Range business report shows as that productivity is at the top of the boardroom agenda and flexibility in the workplace is considered by many as a means of increasing output. More importantly, when looking at businesses that have increased flexible working in recent years, the ability to provide choice for employees in when and how they work shows demonstrable benefits in many areas. Despite this enthusiastic thrust to expand flexible working processes and influence the bottom line, are businesses still reticent to the ‘Free Range’ approach? For many, as the survey shows, there is a concern about the level of change required in terms of management skills to bring flexible benefits to bear. Also, employee abuse of flexible working terms and mobility keep the issue on the boardroom agenda, but off the action plan. Evidently, “Working from home,” is a phrase that can still raise a suspicious eye from an employer in the mid-market. Though there may be employer concern on one hand about the liberty created by flexible working culture, there are also aspects of flexible working that employees should note. Most importantly, the ‘death of the 9 to 5 working day’ cited by 64% of respondents should not, in theory, lead to excessive working hours across the week. However, with 42% of respondent also stating that employees work longer than their contracted hours, it must often be the case that one results in the other. Further insight from the report shows that flexible working is undoubtedly ‘management territory’. Managers are more likely to work flexible than any other group. This casts some doubt on the altruism of flexible working in that it may sometime simply be a perk of management status, rather than a tool at the disposal of employees across the company to improve productivity.

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When looking at the Directors specifically, a wider understanding of flexibility shows that it is far from a luxury item. Firstly we have to separate flexibility into two parts: the ‘when’ and ‘where’ of working. Many directors exceed the 9 to 5 working day, with early mornings and late nights being a matter of routine, many stating that these quieter times create productivity peaks for personal output. In terms of location, the survey shows that most directors in mid-market businesses spend a great deal of time in the office (on average 80%). Though the role requires a great deal of external communication and liaison, the reality is that most directors ‘work long and stay put’. A ‘Free Range’ business approach provides flexible processes, hours and tools to the workforce to enhance productivity. The Free Range research provides a number of points for these businesses and their ‘Battery Business’ counterparts to consider when either undertaking or advancing a flexible working strategy. Taking into account some of the key findings in the survey, Microsoft has provided the following 5 recommendations to help inform business decision around a free range approach to working.

Agendas to action plans With productivity on the agenda of 77% of businesses and flexible working having an evident influence on output, mid-market business should ensure that an evaluation of potential flexible options is factored into strategic productivity action plans. The when and where of free range business In taking an action plan forward, it is important to define what flexibility means for your business and also what it means for your employees. For many companies, PDA access to corporate networks and working from home are irrelevant, but flexi-time working patterns, increased flexibility with free-time and holidays may be significant motivational tools for the workforce. Trusting free range workers Flexible working is unlikely to create a dishonest workforce. Employees that exploit autonomy will do so in any environment regardless of flexibility allocated to them. The survey also shows that increased flexibility has a positive influence over issues such as absenteeism. Flexible skills for free range management Creating a free range environment should not require extensive management re-skilling. The most effective measures for greater flexibility are based on practical, common sense tactics. Before rejecting flexible working through concerns surrounding change, assess what inroads into flexibility can be made without significant reengineering or cost. Free range tools: Batteries included There are a plethora of technology solutions that help enable a free range business, but it is critical that free range working is not defined by IT. Flexible tools today are less complex, more efficient and integrate better than ever before. But, to realise this value, you must first understand how flexibility will benefit your business with a people-first approach as this will lead to a better return on any IT investment made.

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