Today’s discussion about the competitiveness of an organization or a whole economy is much less concerned about personnel costs than it was years ago. Personnel costs means costs of direct manual labor here. This type of costs is a critical factor only in very few industries nowadays, or only in those organizations that failed to act appropriately in time. In some industries, costs of direct labor are less then 10% of total costs now. They have been replaced by a new type of costs, that will gain even more importance as technology continues to progress – this is knowledge work. Costs of brainwork take a higher and higher proportion of total costs in an organization.
Paradoxically, the number of employees that perform manual work has been reduced remarkably due to automation and digitalization. Nevertheless, total personnel costs have rarely been reduced. Prior to automation, there were many employees with relatively low qualifications at a relatively low wage level. Today it takes much less people to perform the same tasks. However, these are highly qualified specialists and accordingly, their compensation level is higher. Another cost factor with the potential for further growth are costs of qualification and training, which is needed to keep these specialists up to date in times of ever faster innovation cycles.
This leads to a new question: how to manage knowledge workers and how to measure their productivity. It starts with the question how to define productivity of knowledge workers and which elements of creativity and ability to innovate to include.
The most important resource of the future will be knowledge. Knowledge, however, needs to be transformed into value. Knowledge or information in itself is useless. It is the task of the manager to transform knowledge into value for the organization.
Due to soft factors like motivation, information exchange, and communication, successful management of knowledge workers requires a new set of leadership capabilities. The management of specialists differs from the management of manual workers because of the different characteristics of their work.