What do labor unions and CPA firms have in common?

An obsolete view of the economy.

Professionals no longer work in the Industrial or Service Era, but you'd never know it by listening to a labor union official, or a partner in a CPA firm. In the spirit of Labor Day weekend, I had the disconcerting experience of listening to both.

The first was a radio interview with Vic Camber, an AFL-CIO labor executive. I won't even mention his ramblings about the sorry state of today's economy, how the rich are getting richer and the poor poorer, and other such economic claptrap. What intrigued me the most was how he kept alluding to the fact that our manufacturing base (Industrial Era) has eroded, and now we live in a Service Economy, whose jobs are low-pay and low-skill—you know, we're all hamburger flippers.

Not once did he mention the knowledge worker; or how they are the fastest growing segment of the workforce—comprising some 30% of today's workers—and who are creating the majority of wealth in most organizations. It's as if they didn't even exist in his world.

Now, I expect this from a union official. After all, unions are going the way of the dinosaur (except in government), and they have not been at all successful in organizing knowledge workers. There's no such thing as the International Alliance of Computer Programmers and Investment Bankers, Local 317. I expect clichés and an obsolete view of the world from the likes of a Vic Camber.

I don't expect it from my professional colleagues, however. Yet the recent AICPA DVD, "Staff Retention: The New Face of the CPA Profession," touts a view of today's workforce that is as outdated as you'll find in any local union hall. (You can order the DVD by e-mailing educat@aicpa.org).

It starts out with banalities like this:

We have to listen more as a profession. Innovate and change. Think differently. Hear what our people are saying. Workplace flexibility. Balancing family and work. Providing opportunities to learn. Growth of our people. Everyone is an individual. We want to retain our best folks. Retention is key.

Who could disagree with these mom-and-apple pie sentiments? Not once in the 12-minute video does it mention the knowledge economy, or knowledge workers. It is as blind to the economic realities of today's intellectual capital economy as labor unions.

More insulting is the passage from Harris Smith, West Region Managing Partner of Grant Thornton, LLP:

Our firm is growing very, very rapidly. Yet our biggest limitation are our people, which are our resources.

How insulting, labeling employees resources—from the Latin resurgere, "to rise again," as if people were oil or timber to be harvested when you run out. Why do we insist on perpetuating this belief that people are resources to be mined rather than human capital to be developed?

Or equally insulting, "people are our greatest asset." Stalin used to say the same thing—and acted on it. People deserve more respect than a phone system or computer. And why use the word "staff?" It sounds like an infection.

There is a Chinese proverb that teaches the beginning of wisdom is to call things by their right names. Your people are not assets, resources, or inventory, but human capital investors seeking a decent return on their investment. 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.

Consider for a moment how people decide which volunteer organizations to contribute some of their talent. It's usually based on a desire to contribute to something larger than themselves. They work hard—some would say harder than at their job—for these organizations because they are dedicated to the cause and they have the passion, the desire, and the dream to make a difference in the lives of others. All for zero pay. Why?

Knowledge workers are not like workers from the Industrial Revolution who were dependent upon the employing organization to provide 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, the ramifications of which we are still trying to comprehend. It has tilted the balance of power to the knowledge worker, as Peter Drucker pointed out:

In the knowledge society, the most probable assumption for organizations—and certainly the assumption on which they have to conduct their affairs—is that they need knowledge workers far more than knowledge workers need them.

Like most investors, they will go 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.

The DVD points out that turnover of personnel averages between 20% and 30%, and that it costs two to three times an average salary to replace someone. More ominous, 16.5% of CPA firm members are retiring, while only 5.5% are entering the profession.

It exhorts us to think differently, innovate and change. It lists the following seven prescriptions in order to retain team members:

• Workplace flexibility
• Paid and unpaid time off
• Health and well-being
• Caring for dependents
• Financial support
• Community involvement
• Management involvement/Culture change interventions

These are merely table stakes—the minimum you need to play in the game—but in no way sufficient to retain and attract top talent. It's the equivalent of providing restrooms—not exactly a competitive advantage.

In order to recognize the realities of an intellectual capital economy, here is a partial list of genuine innovations firms can implement in order to reap the rewards of their knowledge workers:

• Get rid of the billable hour and price based on value
• Pay knowledge workers for ideas and creativity; not hours, like union employees
• Allow knowledge workers 15-20% of their time to be spent innovating and devising better ways to add value to customers
• Understand that judgments and discernment are far more important than measurements in assessing performance
• Let them select the Key Predictive Indicators on which they will be judged
• Focus on outputs, results and value, not inputs, efforts, activities and costs
• Don't make them account for every 10 minutes of their day—trash timesheets
• Trust them to do the right thing for the firm and its customers
• Recognize each knowledge worker has a unique contribution to make—based on her strengths—and that people have value, not jobs
• Allow them to monetize the value of what they create, rather than paying them like laborers
• Stop thinking you have to micromanage them

There's an old military saying that instructs the soldier is entitled to competent command. If the AICPA DVD is representative of the level of thinking among the profession's leaders, we are doomed. This is not just a semantic argument—not using the proper terms, or misusing others. It's indicative of the obsolete attitudes, behaviors, and expectations CPA firms have of their team members.

The firm of the future has to reject the status quo that is already dying and no longer applicable to an intellectual capital economy. It requires leadership and vision. It requires knowing you are doing the right thing (effectiveness), not just doing things right (efficiency). It requires focusing the firm on the external results it creates for customers and simultaneously building the type of firm people are proud to be a part of and invest their intellectual capital in. It requires an attitude of experimentation, not simply doing things because that is the way it has always been done. It requires less measurement and more trust.

Steve Jobs once said: "It doesn't make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do." This is the attitude firms must adopt if they want to adapt to a knowledge economy, and continue to retain and attract talent.

Peter Drucker coined the term knowledge worker in 1961, 45 years ago. Our profession has yet to recognize this inescapable fact of life. Is it any wonder that only 5-15% of existing CPAs have recommended the profession to a loved one? Who wants to be a resource? Who wants to be a union member?