Dear Negotiation Coach: A Flexible Approach to Flextime

An emerging form of online dispute resolution can help organizations manage disputes among employees.

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Q: I’m the head of human resources at a medium-sized company. We are piloting a program in which we will offer employees increased ability to self-schedule their hours and work from home. We’re trying to figure out whether this is something that employees really value and, if so, whether we should bring this up in our compensation negotiations.

A: Giving employees more flexibility about when and where to work has the potential to cut commuting time while also allowing employees to get to the doctor or pick up their kids from school more easily. Advocates argue that this might also increase employee productivity, helping to attract better employees for any given wage.

But although there are many proponents of increased workplace flexibility, there has been relatively little evidence on whether employees actually value it. With that in mind, economists Alex Mas of Harvard University and Amanda Pallais of Princeton University recently partnered with a national call center to understand how much employees actually value the ability to make their own hours and work from home.

Working with the call center, the researchers implemented a simple experiment during the hiring process. Instead of offering one standard contract to potential hires, the company offered two and let the applicants choose between them. Every applicant had the option of a standard 9-to-5 job. The second choice was either (a) a contract with less flexibility (i.e., they might have to take additional shifts at the last minute) and a higher wage than the standard job or (b) one with more flexibility and a lower wage than the standard job. The expectation was that if potential employees value flexibility, they would be willing to take a slightly lower wage in exchange for a more flexible job.

The results were striking. It turns out that employees were willing to take large pay cuts to avoid giving their employer the ability to make last-minute scheduling changes (that is, by adding shifts); however, applicants placed considerably less value on flextime. About 60% wouldn’t take even a small pay cut in exchange for increased flexibility in the number or scheduling of hours. About 25% were willing to take a pay cut for increased flexibility in the number of hours worked, and about 25% were willing to take a pay cut for increased flexibility in when they worked. The applicants who did value flexibility were disproportionately women with young children.

Two lessons immediately jump out from these findings. First, employees may be averse to unpredictable work schedules. For example, if you want to have the ability to give employees last-minute work on a whim, you may have to pay a premium for it (in the context Mas and Pallais studied, a whopping 25% more, on average). And if you are willing to give additional flexibility, some people will be willing to take your job over a slightly higher paying but less flexible one.

Second, allowing employees to choose between two or more contract options can help you figure out those who value flexibility and how much they value it. Your dilemma as a hiring manager is clear: If you ask potential employees whether they want more money, they obviously will say yes. And if you ask them if they want more flexibility, they also will say yes. This makes it difficult to figure out how much of each to offer during a negotiation. In general, giving people multiple options is an important component of the negotiator’s toolkit, and this strategy can work well in this situation. Letting the applicant choose allows her to pick the option that is most valuable to her, given her preferences and needs.

Of course, all this rests on some very important assumptions. First, it assumes that employees are good at making decisions about when and how much to work. But psychology research suggests that people may undervalue the happiness they will get from more time, relative to more money. Second, it assumes that people feel comfortable actually taking advantage of the flexibility being offered to them. (We’ve all heard of “flexible” jobs that aren’t all that flexible in practice.)

These forces suggest that people may undervalue flextime, which puts the Mas and Pallais results in a different light and suggests two more lessons. First, even when people don’t seem to value flextime, they (and, by extension, you) may benefit from a nudge in that direction. Second, you need to make sure that flextime is offered not only in principle but also in practice—without stigma or penalty.

Michael Luca
Associate Professor
Harvard Business School

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