solution

Case Analysis- IVEY Method

Periphelor (PI)
Corporation’s
Contingent Workforce

Periphelor
(PI)Corp.
Page 2
Periphelor (PI) Corporation’s
Contingent Workforce*
In 1995, Periphelor (PI) Corp., a large manufacturer of computer printers and other
peripherals, established a task force to determine the most appropriate use of contingent
workers throughout the company. The company had started to rely on contract, part-
time, and temporary help agency people to fill temporary jobs. At the time, this
represented less than one percent of Periphelor (PI)’s workforce, and the company
wanted to review these practices to ensure consistency and effectiveness.
After reviewing current ad hoc practices, the task force concluded that Periphelor (PI)
needed contingent workers when demand for the company’s products expanded rapidly
or a new product is launched. Periphelor (PI) needed this workforce flexibility because
of uncertain production demand beyond the short term. At the same time, the task force
warned that treating contingent workers the same as permanent employees would
undermine the benefits of flexibility, create false hopes of permanent employment
among contingent workers, and possibility create feelings of inequity between the two
groups. Thus, policies were introduced treated contingent workers differently from
permanent employees.
Periphelor (PI)’s task force established two contingent worker categories: on-call and
on- contract. On-call people are employed by Periphelor (PI) as part-time staff. They
work a full day, but only up to two-thirds of the hours of a full-time permanent
employee. Their managers can alter their work schedules at will to suit production
demands. On-contract people are employed full-time by Periphelor (PI) for a fixed
period, usually six months. Their contract may be renewed up to three times for a
maximum employment of two years.
On-call and on-contract employees received no employee benefits other than the
government mandated minimum vacation and holiday pay. Benefits therefore
represented approximately 10 percent of their total pay, compared to nearly 40 percent
for permanent employees. However, contingent workers earned the midpoint of the pay
grade for their job group, which represented 15 percent above the entry rate. This rate
was paid even when the contingent worker lacked experience in the job.
Periphelor (PI)’s Contingent Workforce Problems
In 1998, three years after Periphelor (PI)’s task force recommendations, the contingent
workforce policy was in trouble. Current practices succeeded in creating a more flexible

Periphelor
(PI)Corp.
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workforce, and there was some evidence that using contingent workers increased
profitability. However, these practices created unanticipated problems that became
apparent as the percentage of contingent workers increased.
One problem was that few people who wanted only contract employment. Most were
seeking full-time permanent work and were using their contingent position as a stepping
stone to those jobs at Periphelor (PI). The result was that many contract workers
remained for the entire two year maximum period and beyond. The company was
reluctant to apply the task force’s recommendation of not renewing contracts beyond
two years because of the perceived arbitrariness of this action as well as loss of
knowledge to the organization. Several contract staff members asked the company for
an employee-paid benefit package (benefits are mainly employer-paid for permanent
employees). However, Periphelor (PI) rejected this because it would add further
permanence to their employment relationship.
Periphelor (PI)’s managers also began to complain about the company policy that
contingent workers could not be offered permanent employment. They appreciated the
opportunity to select permanent employees based on observations of their performance
in on-contract or on-call positions. Periphelor (PI)’s task force had warned against this
practice because it might create inequities and raise false expectations about the
likelihood of permanent employment. Managers acknowledged this risk, but the
inability to permanently hire good contract staff was frustrating to them.
The third problem was that Periphelor (PI)’s treatment of contingent workers was
incompatible with its organizational culture. Periphelor (PI) had a strong culture based on
the philosophy of employee wellbeing. The company had a generous benefits package,
supportive leadership, and a belief system that made employees a top priority in corporate
decisions. The company did not treat contingent workers in a way that was consistent
with this philosophy. Yet if Periphelor (PI) treated contingent workers the same as
permanent staff members, then flexibility would be lost. For example, managers would
continue renewing contract workers even when their employment was not essential, and
would be reluctant to schedule on-call people at awkward times.
Periphelor (PI)’s team orientation was also incompatible with its use of contingent
workers. Permanent staff members frequently gathered to discuss organizational and
group decisions. Contingent workers were not invited to these team activities
because they might be working at Periphelor (PI) for only a few more months. This
barrier created some awkward moments for managers as contingent workers
continued working while permanent employees went to meetings and team sessions.
As these problems intensified, senior management formed another task force to re-
examine Periphelor Inc. (PI)’s contingent workforce policy. The company needed
contingent workers, but it was increasingly apparent that the current practices were
not working