Exploring internal labour market ‘churn’

Analysing employees’ experience of internal redeployment

Chris McLachlan, University of Leeds
Robert MacKenzie, Leeds University Business School

Employees who are subject to organisational restructuring processes typically experience a range of social and economic effects, whereby the loss of employment has implications for future employability, future earnings and disruption to career trajectories. For employees displaced through redundancy, the transition to new employment typically involves retraining for a new job and engaging with institutional support mechanisms externally. In this sense, displaced employees face a period of employment instability and the experience of labour market ‘churn’ (Brand, 2015; Jolkkonen et al, 2017). One organisational approach to limiting the impact of restructuring and avoiding compulsory redundancies has been through the implementation of internal redeployment processes. This paper thus explores the consequences of the implementation of internal redeployment processes for affected employees, provoking a wider debate around the function of internal labour market systems and the notion of internal labour churn in relation to organisational restructuring.

The rationale for organisations implementing internal labour market systems is traditionally understood as a means of protecting job security and job instability through employer-led solutions (Grimshaw and Rubery, 1998; Grimshaw et al, 2001; Capelli and Neumark, 2004). The organisational practice of internal redeployment has therefore sought to insulate employees affected by restructuring from the vagaries of the external labour market by offering them alternative employment internally. Rubery (1994) notes the importance of organisational contingencies on determining the condition of the internal labour market yet remains critical however of a tendency to over emphasise the organisational focus at the expense of neglecting the firms relationship with the environment in which it operates. Therefore, defining the existence of an internal labour market in terms of its distinction from the external labour market raises the question of the effect of the state of the external market upon the operation of the internal market. The point is to demonstrate the need to go beyond the tendency for asserting the dichotomy of the internal and external labour market and adopt an integrated approach in recognition of the interplay between the internal and external markets. As argued by Grimshaw and Rubery (1998), internal and external competitive pressures mutually interact to shape employer’s strategy and the labour market status of employees.

The paper hence builds on ideas of external labour market churn, viewed as the volatility caused by the voluntary or involuntary turnover of employees for organisations and employees alike, and the consequent impact on employment outcomes and career trajectories. We develop the notion of internal labour market churn and suggest this represents an analogous phenomenon, focusing attention on the way employees’ experiences and outcomes are shaped specifically by internal labour market systems such as through the practice of internal redeployment. Whilst employees can experience such churning due to the vagaries of the external labour market, this paper argues that churn may also be evident, and equally negative, within processes such as internal redeployment. Exploring redeployment process also connects to recent policy developments at European Union level, with the European Restructuring Monitor (2018) emphasising the need to anticipate the consequences for ‘stayers’ – those that remain employed post-restructuring such as through internal redeployment – in order to more effectively manage organisational change.

With regards to methodology, this paper seeks to further conceptualise the notion of internal labour market churn by building upon empirical research conducted at the UK subsidiary of a multinational steel firm (SteelCo). Based on a qualitative case study of an internal redeployment process the findings revealed the challenges faced by redeployed employees. Data was collected as part of a wider case study where 1700 jobs were lost at SteelCo between 2011-2015 over the course of two restructuring programmes. The focus on establishing an internal redeployment process meant employees moved between jobs in the internal labour market. The findings highlight how redeployed employees experienced similarly negative effects of ‘churn’ to those faced in the external labour market. Such effects included career scarring, feelings of displacement, underemployment and poorer terms and conditions. These effects are also often compounded by the external labour market environment, with a paucity of alternative employment opportunities and relative wage levels place constraints on employees and oblige them to engage with internal redeployment processes. Crucially, however, this brings into focus the role of HR in managing redeployed employees. Thus, the paper also points to the wider structural tensions in HR’s implementation of restructuring, highlighting the specific challenges faced by HR in relation managing internal redeployment. Structural tensions emerged in relation to the timing of the process, the availability of internal vacancies and the provision of retraining for redeployed employees. The paper concludes with some reflections on the changing role of internal labour markets and future implications for the management of restructuring processes.