DDBA 8582 Week 6 Contingent Labor Mix Analysis Example

What Each Contract Buys, Role Family by Role Family: A Labor Mix Analysis for a Health Insurer Comparing Permanent and Agency Staff on What They Deliver and Fully Cost, Recommending a Different Mix and Counting the Effect on the Permanent Staff Who Stay

Student Name

Walden University

DDBA 8582: An HR Plan for Organizational Agility

Instructor Name

Month Day, Year

What Each Contract Buys, Role Family by Role Family: A Labor Mix Analysis for a Health Insurer Comparing Permanent and Agency Staff on What They Deliver and Fully Cost, Recommending a Different Mix and Counting the Effect on the Permanent Staff Who Stay

The Current Mix

The composite Iowa insurer uses agency staff in four role families and none in the rest. The table sets out the current contingent share, what each arrangement provides in that family and its full cost.

[after]

Full cost includes wages, benefits, the agency's margin and, for agency staff, onboarding time and supervision. In claims, agency staff's error rate of 4.8 percent against 1.9 percent for permanent staff adds rework, which is included in the hourly figure.

Table 1

Labor Mix and Full Cost by Role Family

What Each Side Buys

Agency staff buy speed and reversibility: the insurer can add 30 phone representatives within three weeks and release them in January without severance. That is the numerical flexibility Kalleberg (2001) described. Permanent staff buy accumulated knowledge, lower errors and, according to research on employee-organization relationships, more discretionary effort. Tsui et al. (1997) compared employees in different relationships with their employers and found that those in mutual-investment relationships, where the employer offered broad and long-term inducements and expected broad contributions, performed better and showed more commitment than those in short-term, narrowly defined exchanges. Neither side's case should be dismissed: agency labor is not merely cost-cutting, since it protects permanent jobs from seasonal layoffs, and it is not merely exploitation, since some agency workers prefer short assignments.

Spillover

Broschak and Davis-Blake (2006) studied work groups that mixed standard and nonstandard employment arrangements and found that greater heterogeneity was associated with poorer relationships between standard workers and their supervisors and coworkers and with stronger intentions among standard workers to leave. In the insurer's member services unit, permanent representatives report spending time correcting agency staff's errors and training each new wave. In the 2025 engagement survey, member services had the unit's lowest score on coworker cooperation.

Recommendation

Claims adjudication should drop agency use to near zero: the error premium makes agency staff more expensive than they appear, and the shared core designed in Week 4 offers a cheaper route to backlog relief through enrollment specialists after their season ends. Member services should cut its agency share from 22 to about 12 percent by hiring eight permanent part-time representatives who work full schedules in peak months. Enrollment and print and mail should keep their current shares, where work is seasonal and simple enough that agency staff perform well.

Effects of the Change

The change raises fixed labor cost by about $260,000 a year but reduces claims rework and should improve member services cooperation. It also commits the insurer to keeping part-time staff employed in slow months, a commitment the Week 8 model will price.

Why Not Cut Agency Use Everywhere

Cutting agency staff in enrollment and print and mail would raise fixed costs for work that peaks sharply and briefly. Enrollment's volume triples for ten weeks each fall; permanent staff hired for that peak would be underused for the rest of the year, and the shared core can absorb only part of their time in claims. In print and mail, the work is simple to learn and errors are caught by automated checks, so the commitment argument for permanent staff is weakest there. The recommendation keeps numerical flexibility where its advantages are clearest.

How the Change Will Be Judged

The insurer will compare claims rework hours, member services cooperation scores and total labor cost in the year after the change with the year before.

Agency Workers' Perspective

Agency representatives interviewed for this analysis said they valued the flexibility but disliked being released each January without notice; giving them two weeks' notice costs little and may improve retention of the best for the next season.

Timing

Changes take effect after the next open enrollment season, so current agency agreements run their course.

Limits

Error rates for agency staff come from one year's audit sample, and engagement scores may reflect causes other than the labor mix.

References

Broschak, J. P., & Davis-Blake, A. (2006). Mixing standard work and nonstandard deals: The consequences of heterogeneity in employment arrangements. Academy of Management Journal, 49(2), 371-393. https://doi.org/10.5465/amj.2006.20786085

Kalleberg, A. L. (2001). Organizing flexibility: The flexible firm in a new century. British Journal of Industrial Relations, 39(4), 479-504. https://doi.org/10.1111/1467-8543.00211

Tsui, A. S., Pearce, J. L., Porter, L. W., & Tripoli, A. M. (1997). Alternative approaches to the employee-organization relationship: Does investment in employees pay off? Academy of Management Journal, 40(5), 1089-1121. https://doi.org/10.2307/256928