Problem Statement: Capacity management and the use of variable labour

The term cacpacity management refers to the management of the limits of an

organization's resources. This involves managing labor force, manufacturing and office
space, technology and equipment, raw materials and inventory. Managing organizational
capacity is one of the most undervalued, and, therefore, unproductively performed,
activities in the management of organization. One of the biggest problems faced by many
organizations today is that of managing its labor or people performing the task associated
with completing work. With regrad to labor capacity, it represents the amount of labor
that an organization employs to cary out work. The labor will comprise the traditional
definitions of direct labor and indirect labor. Traditional definitions of both types of labor
are not to the point as being considered from a macro level but become more connected
with a more micro level. From the perspective of a macro level, since an organization
finds to understand the all-inclusive size of its labor capacity, what an individual does is
not relevant. This view merely provides a snapshot that allows one to understand
essentially the relative sizes of organizations. On the other hand, labor is obviously the
most variable resource of any organization and labor capacity is managed in different
ways basing on the time scope. With regard to the context of UK, although zero-hours
contract recently accounts for a small proportion with less than 5% of the UK, it remain
controversial in term of managing (CIPD, policy report 2015). A factor that creates the
current issue is probably related to the limited quality and coverage of much of the
available data. This is reasonalized basing on the fact that refuting claims made about
zero-hours contracts from relevant parties on all sides of the debate is pretty challenging
if the relevant evidence is incomplete or inconsistent. This paper aims at providing a
comprehensive picture on the issues relevant to capacity management with regard to
labour in UK
Literature Review: Provide a literature review covering the latest thinking on
the management of capacity
This section reviews the literature on capacity management from perspective of
healthcare sector. Capacity is a measure of processing abilities and limitations and is

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represented as a vector of stocks of various processing resources. Despite the fact that
capacity management has been an essentially organized part of mainframe operations for
many years ago, only recently have people paid fully attention and been actively trying
to manage capacity in the workstation arenas. In work of Jack & Power (2009), it was
stated that the requirement to coordinate with exceedingly fluctuating demand with
current and available capacity is obviously one of the most significant challenges facing
most senior managers in any service industry. In healthcare sector, capacity management
is comprised of decisions related to the distribution of major resources such as facilities,
equipment, and workforce (McCaughey et al., 2015; Jack et al., 2009). Jack et al (2009)
affirmed that Capacity Management strategies can result in a crucial positive influence on
organizational performance in health care as measured by quality-of-care outcomes,
efficiency and financial performance. Capacity Management has also been recognized as
a critical component to retaining and improving healthcare quality and patient safety
(Trzeciak & Rivers, 2003). According to the Agency for Healthcare Research and
Quality (AHRQ), the management of capacity relevant to healthcare sector has been
facing many challenges. One of them is to manage the overcrowding which makes a deal
of the community trust and may result in significant drops in payment reimbursement
(McHugh, 2011). Management of capacity in healthcare also deals with managing
workload distribution to reduce pressure on staff. Pressure has displayed as major reason
leading to lessened employee satisfaction and higher turnover proportion (McCaughey et
al., 2015). With proper capacity management, all side effects existed within healthcare
firms can be remedied or avoide completely, regardless of the fact that hospital markets
are characterized by a small number of companies(Bazzoll et al., 2003). Capacity
management if performed appropriately can help organizations in healthcare sector get
great benefits from adopting world-class supply-chain management practices (Jack et al
2009). Going forward, better management and utilization of fixed costs and existing
resources, which are compoment of managing capacity will be critical for the survival of
many healthcare systems from a financial and patient care perspective (Jefferson, 2012).

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Capacity management of healthcare systems also concerns healthcare organizations being
uniquely challenged to develop resource management strategies that enable them
continuously to bring high quality services, regardless of the fluctuations in the level of
demand for these services (Jack et al., 2009). Since the healthcare sector is characterized
with such a complex system of supply and demand, it’s a bit challenging to determine the
specific causes of healthcare capacity issues and pinpoint effective solutions without
significant trial and error. Good capacity management has been proved to increase
technical efficiency, decrease patient no-show rates, raise provider productivity and
lessen the rates of mortality (McCaughey et al., 2015). When capacity management
strategies are utilized to its great effectiveness there should be a corresponding
increase in the overall performance of the health-care organization, and everyone will
get benefits (Jack et al., 2009). With more than 90% of hospitals reporting emergency
deparments of healthcares operating at or over capacity, there exists numerous
pressure on everyone in healthcare system to promote strategies for capacity advance
of capacity and attempt application (Trzeciak et al., 2009)
Analysis: How have companies benefitted from the use of zero hours and short
hours contracts?
From the employer’s perspective:
From the an employers’perspective, zero hour contracts has proved to be beneficial,
especially for employers who have a business with unpredictable day-to-day outcomes.
To illustrate, employers working in the area of healthcare service industry, might not be
able to predict that on certain days they will have numerous patient waiting to get the
service in dealing with various health problem. If this happens in the case they will
certainly be in need of some extra staff to work in a short time, zero hour contracts in
such situations are evidently a great option.
In addition, there is also another advantage of using zero hour contracts in term of
managing full time employees. To be more specific, in many situation, employees may
want to change from their full time working to part time working pattern, employers can

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keep hold of these employees by using zero hours or short hours contracts. If a business
owner is very keen on a particular worker then they might be no need to replace them if
they are no longer impossible to commit to long hours.
In brief, from the perspective of employers, it is easy to see why zero-hours contracts can
bring much benefits to them. These kinds of contract allow for maximum flexibility to
meet changing demand. Emlpoyers can facilitate risk management, reduce the expenses
on recruiting and training, and they can, in certain situations, enable employers to avoid
particular employment obligations. Indeed, the benefit of engaging its employees on zero
hour or short hour contracts is obvious: It offers a natural flexibility to staffing levels.
This is evidently necessary in today’s competitive economy and to meet the demands of
customers and service users.
From the employee’s perspective:
Zero-hour contracts can work effectively as they satisfy and are not forced by an
authority or law, which make it obligatory to work an amount of forty hours a week and
pay taxes. The zero-hour contracts characterized by its flexibility allows employees to
make their own decisions, if applicable of when they would start their work. Furthermore,
zero-hour contracts allowed employees to gain an increase income where they were able
to be flexible on chosing suitable hours. Bloisi (2007) stated that flexibility in working
hours, in the longer term, can have possitive impact on job fulfilment and reduce
employees’ need for absence. Hence, this could motivate the employees to work harder
while working through the appreciation of the flexibility being offered. Another benefit
of zero-hour contracts was that the employee did not have a set tax rate. The employee
was able to earn in some months where they would not be taxed on their income. When
relating back to a totalitarian state, employees are unable to make these choices as these
are administered by the government.
From perspective of customers
Althought the zero or short hour contracts creates a ‘win-win’ situation, where employees
receive stability in term of professional and financial aspects, and the employers can
manage costs and navigate the business’ needs on an ongoing, these kinds of contracts

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may sometimes results in unhappiness of customers. This is because, those contracts are
normally associated with poor customer service due to a high staff turnover within a
business. On the other hand, in some situations, the customers may view the situation as
abuse of workers. In some instances, as with all forms of employment, customers may
regard workers as being poorly managed. Therefore, customers may expect an absolute
clarity around what zero-hour or short-hour contracts mean and how they should operate.
Evaluation: How do you see the situation developing over the next five years?
From my personal perspective, a zero hours contract can still be a valuable tool used
favourably by many businesses. Therefore, within the next five years, there is still room
for those kinds of contract to be prosperously develop. And it is unlikely beyond the
belief that the UK government will be able to ban the use of zero-hours or short hours
contracts. Businesses particularly in healthcare sector will certainly keep using them en
masse, or as a fall-back.
On the one hand, the zero-hours and short-hours contracts remain a relatively small
phenomenon, however the prediction goes that they have been growing more prevalent in
Britain even since the labour market has recovered from the financial crisis in the last
years (Sarah O’Conno, 2016). Those companies that use zero-hours contracts may be
under pressure of reputational damage if they use zero-hours contracts in an inappropriate
way. Regardless of some inevitable downsides of those patterns of contract, I personally
believe that for the next five year some business industries, healthcare among these, will
still continue to depend on zero hours contract with regard to temporary labour as a cost-
effective way to manage their workforce. More and more firms will also raising building
non-permanent workers into their workforce, providing fairer treatment, pay and benefits
(Adams et al, 2014),. This is regardless of the unfavourable opinions of public and
politicians concerning zero-hours contracts, as long as businesses need temporary and
shift workers they will continue to be used.
On the other hand, it is believed that a prolonged economic downturn will likely to be the
key driver of increased use of zero-hours contracts in next 5 years. In addition, there is
recently an uncertainty in demand due to the economic crisis, and the pace of recovery is

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unclear. Therefore, it is likely that many private sector employers have tend to rely more
on zero-hours contracts to manage their businesses through a difficult economic period.
Similarly, increasing pressures on the public purse have also urged public sector
employers search for ways to reduce costs. This is perhaps most marked in the healthcare
sector where reductions in formula grant from central government have witnessed local
authorities redistribute unit rates for care. At the same time as they have been moving
away from purchasing guaranteed volumes to buying through framework contracts. By
dismissing warranted block volumes of paid care to suppliers, framework confirmations
will encourage the use of zero-hours and short-hours contracts among suppliers to
manage risk. Consequently, there is evidence to propose that the application of such
agreements is a significant factor in ensuring that all healthcare workers are employed on
zerohours contracts. It is not difficult to see why a majority of employers are turning to
zero-hours or short hours contracts, and this is probaly last until the next five years,
particularly in today’s difficult economic climate. While allowing for maximum
flexibility, employers are allowed to more successfully adjust to a great variation in
demand, manage risk, reduce the expenses on recruiting and training and, in several
circumstances, avoid particular employment obligations.
REFERENCES
- Adams, Z. and Deakin, S. (2014), Re-regulating Zero Hours Contracts. Liverpool: The
Institute of Employment Rights.
- Adams, A., Freedland, M. and Prassl J. (2015) The Zero Hours Contract: Regulating
Casual Work or Legitimising Precarity. University of Oxford Legal Research Paper
Series, Paper No 00/2015
- Bazzoll, G. J., Brewster, L. R., Liu, G., & Kuo, S. (2003). Does U.S. Hospital
Capacity Need To Be Expanded?. Health Affairs, Vol 22, No 6, pp 40-54
- CIPD (2015), Zero-hours and short-hours contracts in the UK: Employer and
employee perspectives, Policy report
- Jack, E. P., & Powers, T. L. (2009). A review and synthesis of demand
management, capacity management and performance in health-care services.
International Journal Of Management Reviews, Vol 11, No 2, pp 149-174.

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 - Jefferson, J. (2012). Why capacity management is critical to hospitals’ ACA-era
success. Health Affairs Blog.
- McCaughey, D., Erwin, C. O., & DelliFraine, J. L. (2015). Improving Capacity
Management in the Emergency Department: A Review of the Literature, 2000-
2012. Journal Of Healthcare Management, Vol 60, No 1,pp 63-75.
- McHugh, M., Van Dyke, K., McClelland, M., & Moss, D. (2011). Improving
patient flow and reducing emergency department overcrowding; A guide for
hospital, Vol 11, No 12
- Schafermeyer, R. W., & Asplin, B. R. (2003). Hospital and emergency department
crowding in the United States. Emergency Medicine, Vol 15, No 1, pp. 22-27.
- Sarah O. C. (2016), UK workers on zero hours contracts increase by a fifth,
Finacial Times. [ Online] Access from https://www.ft.com/content/4555ae68-
75a5-11e6-bf48-b372cdb1043a
- Trzeciak, S., & Rivers, E. (2003). Emergency department overcrowding in the
United States: an emerging threat to patient safety and public health. Emergency
Medicine Journal, Vol 20, No 5, pp 402-405.

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