Management expert Peter Drucker coined the term “knowledge worker” decades ago. Then in the late 1990s, he said, “The most important…contribution of management in the 20th Century was the fifty-fold increase in the productivity of the manual worker in manufacturing. The most important contribution management needs to make in the 21st Century is similarly to increase the productivity of…the knowledge worker.” He dedicated the latter part of his career to studying knowledge worker productivity.
Corporate management, including and assisted by management accountants, bears the responsibility of driving these productivity improvements. And while information technology spending worldwide is estimated to reach $4.8 trillion in 2023, an 82% increase over the $2.65 trillion spent in 2005 (see Figure 1), data from the U.S. Bureau of Labor Statistics indicates an average annual productivity improvement of 1.4% over the 2007-2019 period, half of the rate over the period that Drucker highlighted as times of manual worker productivity improvement (1947-1973).
Then leading into and during the pandemic, productivity improved as leaders responded to the challenges. So perhaps this is a pivot to driving productivity with technology? Fortunately, current technology combined with planning and some innovative management thinking can help improve internal controls, reduce cost, and retain and develop talent.
NEW TECH AND COMPLIANCE
The increase in compliance requirements coupled with rising staffing costs makes it vital to realize Drucker’s challenge for management to increase the productivity of the knowledge worker. Technology can bridge the gap, making procedures an integral part of activities. Cloud and/or browser-based technology can transition written procedures into assigned and time-bound online tasks. Internal controls tasks can be executed within the software and formally documented by electronic sign-off and time/date stamps.
Managers have significant opportunities to document these procedures and execute them consistently, and in so doing improve the detail and clarity over time. Organizations can provide them to auditors and cosource partners at the beginning of engagement, which will reduce costs and productivity drain from working with these entities.
With standardized, specified control procedures, less experienced employees can perform the tasks. A staff accountant can easily execute more complex tasks with step-by-step procedures that reference specific sources and reports. College interns or management trainees can execute tasks currently assigned to staff accountants, not only lowering costs but “building a bench” and resource pipeline for the future.
Specificity of tasks also eases cosourcing with international offices to reduce cost. Doers become reviewers, and everyone moves on to more challenging work previously performed by more experienced employees. Challenging employees with more complex tasks at every level positively impacts employee satisfaction and retention.
Innovative management teams will deliver a future with fewer managers and more workers executing internal control procedures through the strategic introduction of technology. The quality of the work can easily be assessed within the technological solutions themselves. Managers are then free to assign their more senior or skilled employees to strategic initiatives targeted at growing or further improving the business. Beyond reducing compliance costs, freeing up talent can also alleviate a turnover threat through task enrichment. The best and the brightest become easily frustrated by mundane tasks.
Specificity of online tasks supports using employees from one function to perform compliance testing on another function. For example, payroll department employees can test accounts payable controls.
In my experience, this strategy broadens the experience of employees while making their job more interesting and helping them build a résumé. Cross-functional testing leads to a better understanding of the organization, an appreciation of the activities of these other functions, and a deeper understanding of internal controls. This can also lead to an interest and pursuit of future opportunities that develop in that other function, expanding the pool of internal candidates for open positions. Finally, most functions have busy and slow times. Scheduling compliance testing of other functions during these slow times, even for a week at a time, will lead to a more effective utilization of your workforce.
Technology can actuate procedures so that they aren’t just pages in a binder, can link the control procedures directly to performance and review, and can enable the knowledge worker productivity Drucker emphasized as critical to sustained success.
Economist Robert J. Gordon argues in his book The Rise and Fall of American Growth that the future economy won’t be nearly as bright as its past mainly because the great improvements in productivity and living standards (e.g., electrical power, transportation, indoor plumbing) achieved in the 20th Century have no such counterpart to improve productivity in the 21st Century.
Drucker’s challenge to unleash the productivity of the knowledge worker presents an opportunity to counter this claim and achieve such productivity and lifestyle improvement gains. Executing financial, compliance, operational, and strategic objectives in a consistent manner with accountability, documentation, and accessibility is one such knowledge worker productivity opportunity.
The best productivity comes from good technology that supports consistency, clear communication, and ease of tracking, thereby supporting moving the work to lower-skilled workers and increasing productivity per dollar spent. Let’s use technology to deliver on Drucker’s call to action.