CPA’s Aren’t Knowledge Workers?

A man’s worth to an organization can be measured by the amount of supervision he requires.
—Jim Casey, Founder of UPS, 1947

In today’s intellectual capital economy, the obvious challenge is investments in tangible, physical assets can be counted and comprehended (kicked and ticked in auditor parlance), but those in people cannot. Human capital is like the dark matter of the cosmos, we know it’s out there but we can’t measure it. Yet economists estimate is comprises seventy–five percent of the wealth-creating capacity of any economy.

People Are Volunteers, Not Assets

Knowledge workers are not like workers from the Industrial Revolution who were dependent upon the employing organization providing the means of production (property, plant and equipment). Today, knowledge workers themselves own the firm’s means of production in their heads. This is a seismic shift in our economy since the 1960s, the ramifications of which we are still trying to comprehend. A knowledge worker can have an epiphany standing in the shower that is a multi-million dollar idea. How do we measure the output? Certainly not based on cost of the inputs, or the amount of time spent showering, even including drying off.

Yet firms do not seem to understand the worth of their people. They refer to them as assets, or resources. Stalin used to say the same thing—and acted on it. People deserve more respect than a phone system or computer.

There is a Chinese Proverb that teaches the beginning of wisdom is to call things by their right names. Like most investors, people will migrate to firms where they can earn a fair economic return—measured in wages, fringe benefits, and other pecuniary rewards—as well as where they are well treated and respected, the psychological return. In fact, your people are actually volunteers, since whether or not they return to work on any given day is completely based on their own volition.

This is not just an economic decision, it is a psychological and emotional decision. With all this evidence of human behavior, many firms still treat their people as if they will slack off if they’re not held accountable for every minute of every day. Is this any way to inspire people to be their best? Is this any way to instill a spirit of service and dedication to serving customer goals and aspirations? Or is this nothing but antiquated thinking about the nature of man being lazy and slothful unless forced to work?

So many leaders actually seem frightened at the thought of removing command-and-control hierarchies; they feel as if they would be relinquishing total control over their team. Worse, they believe the suggestion is the equivalent of giving the team members total freedom, which will create anarchy in the organization. But I am not suggesting freedom for people “to do their own thing.” That is not freedom, it is license. The flip side of freedom is responsibility. The moment a leader feels the need to micromanage a knowledge worker, they have made a hiring mistake.

Far Fewer Knowledge Workers Than We Think

My colleagues and I at VeraSage Institute spend the majority of our time working with knowledge workers. We educate them on the difference between manual (and service) workers, and knowledge workers. In a way, it is a compliment to be told you are part of a new wave of wealth creation in the economy by being described as a knowledge worker. People take pride and immediate ownership in the term; you can even see a demonstrable increase in their self-esteem.

But I can always count on at least one of my colleagues to cause some cognitive dissonance, and Dan Morris has not let me down. He thinks I’m wrong about most professional firms being filled with knowledge workers; he believes the majority of them are more akin to factory workers in the days of Frederick Taylor’s time–and–motion studies.

Now I know this is a heretical view, but Dan assembles a very powerful argument to support his assertion. He does not deny professionals have the potential to be knowledge workers. His argument is they are not, mainly because of the incentives and structures of the firms in which they operate, which function more like sweatshops of yore.

This is a powerful argument, and it made me pause to reexamine my core assumptions about automatically asserting that just because someone is a credentialed professional, or works with their head more than their hands, they are automatically a knowledge worker. There is no doubt they can contribute a certain amount of creativity and innovation to the jobs they perform and the customers they serve, but being a knowledge worker also requires that the leaders of your organization recognize and treat you like one. This is where Dan’s more constricted definition of a knowledge worker is compelling.

Necessary Conditions for Knowledge Workers

Stephen Covey writes about exactly this in his latest book, The 8th Habit: From Effectiveness to Greatness:…it’s the leadership beliefs and style of the manager, not the nature of the job or economic era, that defines whether a person is a knowledge worker or not. If he is not perceived as a knowledge worker, that is, if a janitor is not seen as the local expert on janitorial work, then he is a manual worker and not a knowledge worker” (Covey, 2004: 265-66).

I do not agree with this definition in its entirety. The major determinant of a knowledge worker is they own the means of production, and they apply knowledge to knowledge in order to create value. Covey’s requirement of the leadership’s beliefs and style of management may be necessary conditions, but they are not sufficient, in and of themselves, to define a knowledge worker.

Dan further supports his argument by stating that leaders of knowledge workers:

  • Don’t impose billable hour quotas;
  • Understand knowledge workers are paid for ideas, not hours, like union employees;
  • Allow at least 15% of team member time for innovation and creating better ways to add value to customers (this certainly destroys productivity under the old metrics);
  • Understand that judgments and discernment are far more important than measurements in assessing performance;
  • Are focused on outputs, results and value, not inputs, efforts, activities and costs;
  • Don’t require timesheets that account for every 6 minutes of their day;
  • Trust their workers to do the right thing for the firm and its customers;
  • Recognize that individuals, not jobs, have value;
  • Allow their workers to monetize the value of their output, through incentives that share the wealth created by minds, not machines;
  • Select workers who are passionate and self-motivated, and don’t need constant supervision.

If the above describes your firm, congratulations—you are a true knowledge organization. Perhaps nothing better illustrates the value knowledge workers can add to a business than the purchase of Pixar by Disney for $7.4 billion in Disney stock. Disney will have to respect Pixar’s culture and continue to let it make quality movies at its own pace, in its own way. Otherwise, if Pixar’s creative talent leaves, “Disney just purchased the most expensive computers ever sold,” according to Lawrence Haverty, a fund manager at Gabelli Asset Management. It remains to be seen if Disney can learn from Steve Jobs’ philosophy: “You cannot mandate productivity, you must provide the tools to let people become their best.”

Knowledge Workers of the World Unite!

There is an old military saying that instructs the soldier is entitled to competent command. Unfortunately, most professional firms we have come into contact with around the world do not fit Dan’s criteria, which is why he makes such a strong case they function more like manual laborers than actual knowledge workers.

I cannot count the number of times we at VeraSage have been asked by intelligent firm owners, “How would I know what my team members were doing if they didn’t complete a timesheet?” This is not a question demonstrating fear over lack of control; this is the illusion of control. Someone can look great on a timesheet, but do sub-standard work, have a poor customer service attitude, or disrupt colleagues, or a myriad of other poor characteristics that cannot be captured on a timesheet.

But because the leaders in these firms do not trust the judgment of the very people they hire, they feel they need to micromanage them. This is counterproductive. A knowledge worker cannot be told how to do their job, since many understand the job at hand better than their bosses. One cannot be held accountable for results if their methods are managed.

What we do know is that people are not machines you can program for greater productivity, or bags of cement you can move around to achieve your ends. It didn’t work for the Nazis or the old Soviet Union, and it certainly will not work in today’s knowledge organizations. Until leaders begin to treat their workers as outlined in Dan’s argument above, firms are far from reaping the true rewards of an intellectual capital economy, where minds—not matter—create wealth.

In the meantime, I think Dan’s argument trumps mine. What do you think?

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