The “Temporary Option”

You are a small supplier, perhaps in the construction industry or in software development. You just won a project from a client, so large that you cannot fulfil it with your current resources.

Weekend celebrations are in order for all the work you put into the proposal. But on Monday, you will start thinking about how to move the project forward. You have two options.

You could think about this project as an opportunity to expand. You could hire skilled staff on permanent contracts and try to bid immediately for other projects to keep them busy.

Or you could think about this project as a quick gain. You could hire some temporary staff for the duration of the project. After all, you never know when the next opportunity will come.

Does the second option sound familiar? Many suppliers faced with the same choice will prefer to hire temporary staff until the project ends, which then leads to relevant problems both to the supplier and the employees.

As a supplier, you face the risk of not being able to recruit the right people for the job, which in turn affects your short-term productivity, while in the long term, this approach will affect your ability to innovate and grow. You also have very little incentive to train your temporary employees as you know that once the contracts are over they are no longer working for you.

What about the employees? Your temporary staff may continuously have to switch from one job to another with very little stability, in what has been branded the gig economy. This will affect their ability to gain the skills required for career advancement. Furthermore, once the contracts end, these workers are forced to find other temporary jobs or to receive help for the government which further impacts their families and their wellbeing.

Now, think about many suppliers like you, in many industries, all choosing to go with the “temporary option”. What seemed like a routine managerial decision for a small supplier may have relevant implications on the ability of companies to grow and innovate as well as on the wellbeing of the employees and their families.

With funding from Research England, and in collaboration with the North East England Local Enterprise Partnership and Energy Coast (The North East England Offshore Wind Cluster), we will investigate this problem with a specific focus on the energy supply chain. We will write a report to inform future decisions of companies and policymakers.

Problems for the suppliers

• Lack of opportunities for growth and innovation.
• Issues in finding the right
  workers.
  
• Quality problems which come
  from the lack of skilled labour
• Primary focus on short-term profitability. 

Problems for the employees

• Inability to progress and build a career as the duration of the contracts are fixed and short-term.
• Low-skilled without the ability to switch jobs.
• Negative impact on their wellbeing and those of their families.
  
  

Dr. Riccardo Mogre is an Associate Professor in Operations Management at Durham University.