Technology Advancements and Financial Accountability: The Automation Alternative

Technology Advancements and Financial Accountability: The Automation Alternative

This article was updated on July 6, 2018.

Labor automation is coming. According to McKinsey & Company, 45 percent of all activities people are paid to perform could be automated by current technology advancements. Further, 60 percent of all occupations could see 30 percent or more of their constituent activities automated. What's more, jobs that include "predictable physical work" — such as those in manufacturing — are among the most susceptible to automation. For finance leaders this raises an important question: When does ROI tip in favor of robots rather than human counterparts?

Robotic Revenue?

So which jobs are on the chopping block for automated alternatives? Some positions come as no surprise. As Fast Company notes, construction workers, inventory managers and manufacturing staff are all in the line of fire as robotic technologies become more affordable and adaptable.

But there are some interesting careers on the list — insurance agents, bank tellers and even journalists may eventually be replaced by device-based labor. For financial leaders, however, the decision to move from staff to software is about the potential profit involved. The easiest metric? Comparing the purchase price of a manufacturing-line robot (over its lifetime) against the wage of a human worker. But it's also worth considering speed and error rates — while machines may cost more up-front, their ability to complete timely and error-free work may offset this price imbalance.

Hidden Costs

Beyond revenue and cap-ex numbers, however, finance executives also need to consider the larger impact on their workforce. As noted by Reuters, while robotic technology is currently more expensive than medium or low-skilled labor, prices will likely drop as manufacturing costs come down and automation enterprises streamline their process.

What happens to workers who lose their jobs to computerized counterparts? On a small scale this might not impact your bottom line if low-skilled workers are out of jobs but at large your customer base starts to suffer — who's going to buy your product or service if the majority of able-bodied citizens don't have jobs? While this shouldn't preclude automation investment, it brings up an important point. Where possible, it makes sense to pair workers with machines rather than pull them apart.

Paired Profit

So where does this leave finance leaders? According to American Banker, robots offer real benefits by helping workers with day-to-day operations or to "assist human employees during periods when workloads get large," such as during the holidays or periods of significant corporate growth. There's also an upper limit on exactly what automated assistants can do, even with technology advancements.

Robots excel at predictable tasks, since it's relatively easy to program for a limited set of potential conditions. But machines don't do well with sudden changes or unexpected events because the conditions that precede these events are often too unlikely to cost-effectively code. As a result, human oversight remains a critical component of manufacturing industries for the foreseeable future, even as robots take over the factory floor. Farming is another good example, since the varying needs of animals and unpredictability of harvests and weather limit the scope of robotic work.

The bottom line is that there's a place for automation, especially in manufacturing. But fiscal accountability doesn't end when finance leaders identify cost benefits to pruning people positions. To profit from robotic replacements, organizations must consider both the downstream effects of software substitution and potential benefits of pairing staff with automated systems.