Do temporary workers disrupt productivity?: results from a case study in the food processing industry under the knowledge based perspective.

• Author: Sune, Albert
• Position: Report

1. INTRODUCTION

   From a knowledge based view, people in organizations form collective entities, or social networks, that serve as repositories of organizational knowledge -its memory (Simon 1991). These networks of individuals store and retrieve the knowledge an organization has gained through experience (Olivera 2000).

   When the labor force is permanent, the productivity of the organization is expected to increase progressively along a learning curve or progress function (Dutton et al., 1984). But, is learning maintained when the staff is mainly composed of temporary employees? At a macro level, Diaz-Mayans and Sanchez (2003) and Rodriguez-Gutierrez (2007) found that the rise in the proportion of temporary workers leads to a fall in labour productivity. To what extent this decline in productivity could be attributed to a knowledge depreciation at organizational level?

   Empirical research on knowledge depreciation has been conducted in various industrial settings. Argote et al. (1990), Benkard (2000) Shafer et al. (2001), analyzed the effects of learning and forgetting in manufacturing companies. However, this field of research has not considered manufacturing systems that make massive use of temporary workers.

   An analysis of the existing literature leads to two questions: 1. Does massive use of temporary workers disrupt group experience? and 2. Does changes in group experience affect productivity? Prompted by these questions, we collected empirical data for one production line and attempted to assess firm productivity associated to group stock of knowledge while changing the proportion of temporary workers.

2. METHODS

   We attempt to establish a causal relationship between the stock of available knowledge in a manufacturing team and its associated productivity. So, we established a longitudinal baseline productivity measure and an associated baseline group experience measure. This experience was altered at a particular point in time by a treatment, the addition of temporary employees, which hipothetically alters the knowledge stock. After some time, all temporary employees added to the payroll were fired, and the organization returned to its initial state. Thus, we were able to longitudinally track the effects of the treatment variable on the stock of knowledge and, in turn, determine the effect that changes in the stock of knowledge have on productivity.

   2.1. Research site selection

   This methodological choice required a setting adequate for doing quasi-experimental research. Since we wanted to longitudinally observe the effects of turnover on learning and forgetting, we needed a setting in which turnover could be accurately assessed over a sufficiently long period. Thus, we sought labor-constrained production environments--that is, settings in which capacity was primarily regulated by additions (and subtractions) of labor. A second and equally important requirement was to avoid research settings that allowed inventory build-up. Thirdly, we wanted all other factors that could affect the variable of interest to remain as constant as possible. Finally, it was important that, at least within an ample range, the addition of workers did not incur in diseconomies of scale.

   Our empirical data comes from an in-depth study in a food-processing production setting that follow these general requirements. We observed and carefully recorded detailed information for a period of 10 months, shift by shift. The case we analyzed have certain characteristics that allowed us to isolate the phenomenon in question. Firstly, the raw material was fresh fish which is perishable and therefore cannot feasibly be stocked for more than one week. Secondly, the demand for the derived product-smoked fish- is highly seasonal. These two features make it impractical for the firm to produce at a level rate and make it necessary to respond to demand with sharp increases in production capacity during peaks. The firm hire temporary workers during demand peaks. Thus, the payroll is stable for most of the year, but punctuated by relatively large...