Optimising financial processes

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Solow and the Productivity Paradox

I read a fascinating short article from Tom Goodwin, which introduced me to the Solow Paradox” and got me thinking.

This is something that I am sure we have all thought about at some point in time.

When I first started work, I had a conversation with an elderly finance director (I don’t know why he was talking to me, and he was probably only 45, but everyone seemed old then).

He shrugged and smiled wryly at the news that we were implementing a new system for month end accounting.

“When I started out” he said, “we would deliver the monthly accounts on the evening of the last day of the month, the quarterly accounts after 2 days and the annual accounts after a week”.

“Now, with these new computer systems, we are lucky to have our accounts out within 10 days.”

I thought he was barking mad.

The productivity paradox, also referred to as the Solow paradox, refers to the slowdown in overall productivity growth despite rapid technological advancement over the same period.

The term was first coined  in 1970’s but it seems we are going through a similar period now, but we are encouraged to call it Productivity Paradox 2.0, which sounds so much more significant.

We can all point to technology initiatives that have done nothing to benefit how we work.

Tom comments “I think it’s that we’ve fallen in love with making things more tricky than they are. We are terrified that things may be simple. We are sabotaging our efforts to progress by forgetting the basics and getting distracted.”

It is certainly worth thinking about our transformation programs and CI initiatives to work out what the true levers of progress are.

Are we making a difference?

A positive difference!

You can read Tom’s short post on this here . . .

It turns out that McKinsey also wrote about this recently, here . . . 

Thanks for reading . . .