The productivity puzzle: A case for integrated thinking in the professions
Posted by Dr Iwi Ugiagbe-Green
As we move through the 21st Century, much of our activity as workers and professionals leads towards the production of economic output and the generation of wealth that are the signs of a prosperous society. Our inputs (and other resources such as land, materials and technology) that lead to the creation of wealth are organised and managed in organisations across the globe. However, the performance of such organisations, particularly in the UK, are often the subject of much economic debate (see for example the Chief Economist of the Bank Of England) in terms of the extent to which they innovate, efficiently allocate resources, and use them to improve productivity.
Adopting an accounting perspective provides cause for reflection on such economic analyses that rely on the ideal of a universal market and simplified ideas of competition, perfect information and rational decision-making as the context in which scarce resources are used and output is generated. The principles of economic theory, in which free markets are efficient, or that regulation can address the dystopian imbalances of the market, now apply within a modern social context of post-truth coupled with high degrees of transactional self-interest amongst the different individuals, stakeholder groups and ordered systems that operate within it. Human activity is built on individual values and it is decisions by humans associated with how resources are deployed and used, which leads ultimately to collective market-based notions in terms of, for example, cost and price. Output is generated on the basis of need and utility, which again are grounded in concepts relating to individual preference, behaviour, motivation, affordance and value.
Current research in the Business School seeks to discern value creation in different social contexts, whether it be education, the accounting profession, business, the third sector, communities or wider society. Given that, this reflection on market systems and the context in which they operate, in researching value, the focus is on individuals within different systems operating in different social contexts (e.g. organisations, professions, networks etc.) and mediating factors/disruptors (e.g. technology, user-generated content), within the systems in which output is generated. Of particular interest is the formation, measurement and recognition of non- financial capitals and their links with value creation within different systems. Significantly, it is important to remember that the transformation of non-financial capitals to create value does not happen in a vacuum. The societal context and the organisation in which this transformation happens can work as an enabler or a disruptor to value creation, and is significantly important.
In evaluating productivity, our research focuses on intellectual capital and social and relationship capital generation in a range of contexts, and their links with value. Value is a complex concept, often difficult to measure and which, like beauty, can be ‘in the eye of the beholder.’ One of the challenges in evaluating value creation is that, regardless of the social context in which it is being created, it means different things to different people, i.e. different stakeholders. There is no doubt that the longer-term sustainability of any system involving production and output is linked to value creation. The way in which value creation is effectively and coherently communicated to the range of stakeholders to whom it is relevant is also integral to long term sustainability.
In the modern era, there is a focus on more joined-up thinking and management, on more transparency and communication of business issues and performance, in order to gain competitive advantage through efficient use of scarce resources. In evaluating performance, there is often an emphasis on the bottom line, that is, financial capital. However, increasingly, the ongoing sustainability agenda has led to an increased awareness that there is a need to understand the capitals that are transformed in delivering that value which is important for long-term competitive advantage and efficient use of scarce resources. It is the hidden capitals, the intangible capitals of intellectual capital and social and relationship capital, that are so often not identified, understood, measured, reported on or evaluated within this context. This is in part because legislation, standards of recognised practice, accounting standards etc. do not require them to be - although this is changing with the contemporary practice of integrated reporting, which is mandatory for large companies and is increasingly being adopted by SMEs. Integrated reporting recognises that output measures such as GDP fail to take into account social inclusion, environmental sustainability etc. It seeks to address these issues by requiring an integrated evaluation of business performance that is meaningful to the stakeholders to whom performance is reported.
It is clear that the long-term survival of any ordered system of human activity seeking to make efficient use of scarce resources requires an integrated thinking approach. This is an approach in which those using inputs to create output need to both understand and manage value drivers effectively and create synergies and value integration which serve a range of important stakeholders and use scarce resources efficiently.
The current economic, social and environmental crises we face (e.g., recession, the income gap, climate change) are forcing us to think differently about the world and business. Our research seeks to investigate how to identify, measure and manage intangible capitals (given that there are often disruptors impacting on their generation and management), so that producers (e.g. SMEs, organisations, the accounting profession, communities of practice etc.), understand the significance and importance of intellectual, social and relationship capital as value drivers and their potentiality in increasing productivity.
Dr Iwi Ugiagbe-Green worked as a management accountant, financial accountant and tax accountant for more than a decade before entering academia. She is currently Course Director of Postgraduate programmes in Accounting and Finance and an impassioned advocate of research-informed teaching.