Recently I read an article from Barron’s titled “The Labor Shortage Hits Home.” Policymakers and employers are pinning their hopes on two key September events to bring more workers off the sidelines. They stand to be disappointed. In the context of inflation, wage-price spiral and labor marketplace impacts, my eyes were connected to those advisory services Withum provides and they’re worth calling attention to.
Automation is increasing. Productivity gains sparked by shortages are something of a shock absorber when it comes to inflation, and rising productivity inevitably leads to new jobs. Such productivity gains threaten to eliminate a swath of currently unfilled jobs. The faster dash toward automation puts nearly half of the seven million jobs yet to be recovered from the pandemic at risk-potentially leading to permanent labor-demand shortfall over the next three to five years Lydia Boussour Economist at Oxford Economics
My opinion along with results at our clients are that automation supports modernization, causing opportunity for the workforce to learn new skills and hopefully attract new talent who want to work at companies investing in technology and innovation around digitalization.
Boussour goes on to say, “Most industries have responded to the pandemic by urgently adopting productivity-enhancing technologies, and we don’t expect firms to abandon these labor-saving tools.” I can also see the disruption aspect that automation and modernization can cause. I will comment later about how change management programs are intended to drive user adoption and hopefully faster return on investment (ROI).
At the start of the pandemic, I wrote about how it was time To Rethink How Work Gets Done and provided the key pillars to shape any company’s plans. Those pillars are REMOTE, SECURE, COLLABORATIVE, and PRODUCTIVE. Still truly relevant to me as I read Barron’s article.
Many companies adapted to support a remote workforce with technology and process changes. We enabled many of our clients for REMOTE work through various technologies and services. Tools in Microsoft 365, including Microsoft Teams fueled more ways to be COLLABORATIVE. The remote work shift supports operating in a digital economy.
Besides supporting the many breaches, our cybersecurity team inserted their recommendations to improve defenses by conducting thorough assessments to shore up quickly. I hope that many now believe that cybersecurity is no longer considered a fad and will go away. It is real and very devastating to those unprepared or who choose to ignore it.
We see a shift to outsourcing more operational tasks, namely for the back office, accounting process and information technology services.
The increased attention to security has caused customers to ask their providers to provide confidence about protecting their data. The outsourcing economy created new companies who also must demonstrate confidence quickly. Withum’s SOC (i.e., System and Organization Controls) team provides an attest service to comment about an organization’s controls in the following categories: security, availability, processing integrity, confidentiality and privacy. More requests have been logged asking for help to review financial accounting controls. As fewer people are asking more of the current team, the ideal segregation of duties becomes increasingly difficult, giving increased risk to fraud, theft and misappropriation of assets.
With the expected decrease of baby boomers coming soon and the sliding scale of younger generations, it should become clear that decades of knowledge and experience will disappear unless addressed in a meaningful, purposeful way. Withum’s change management services focus on driving user adoption, education and training to make the anticipated change/disruption manageable and measurable to expected outcomes.
Let’s not forget about productivity. Just because we have fewer people should not mean we succumb to ineffectiveness and inefficient processes. Quality ranks right up there with safety. Possessing both should protect operating margins.
We have seen significant investment in business systems for accounting/back office, inventory management, warehouse management, sales and marketing, especially from companies that have stayed committed to server-based, soon to be not supported or even unsupported. The evidence in front of them is compelling. They realize to operate in a digital economy, it is past post time to modernize and innovate. For some companies, the hole they have dug for themselves can be profound.
There is good news though. If you find yourself in this hole – we have a ladder for you. Withum’s Management Consulting team demonstrates the art of the possible via their customer journey approach and ability to distill down into plain speak the software and services marketplace. This team also shares innovative service ideas that complement their software implementations. For example, unbelievably, the volume of paper checks to pay vendors, suppliers and others remains a significant percentage of total payment methods. We were introduced to Finexio, a company that improves the last mile of accounts payable. Their service is not only an incremental innovation but an evolutionary idea. For us, incremental is defined as a slight change in process, service and technology making things better. More productivity! Evolutionary is a significant advancement to operations and creates new services and revenues. Depending on annual spending, conversions away from paper checks can generate a revenue stream.
Barron’s article calls attention to “productivity being a wild card on which policymakers are relying to cool inflationary pressures. The trouble, though, is balancing the short term with the long term – especially when the former helps determine the latter. Investing in technology takes time, and there are immense pressures to meet demand now,” says Markowska of Jeffries. That means firms will largely remain focused on hiring in the more immediate future. No disagreement from me as I’m deeply rooted in a philosophy that talent wins the day. I agree that investing in technology takes time but shouldn’t be viewed as an all-or-nothing proposition. When we plan our technology projects, these projects are designed to be digestible and part of an overall plan. We convey to our clients that technology strategy can be a daunting first step when moving the company to operate in a digital economy.
Our Transaction Advisory team has been greeted by many suitors looking to grow through acquisition and others on the opposite spectrum looking to sell and cash out. We’re indifferent whether you are the buyer or the seller as Withum supports quality of earnings and information technology due diligence.
At this point, I hope I have stirred interest whether you are like-minded and supportive or possess a contrarian view. Either way, let’s talk about your background, situation and complications or your views about how to tackle the labor shortage. I am a practical businessperson and have advised clients not to invest or spend money to fix a business problem.
Thanks for reading, I would like to close with a quote.
“Someone's sitting in the shade today because someone planted a tree a long time ago.” Warren Buffett CEO of Berkshire Hathaway