McKinsey: 20% of CEO’s job can be outsourced

By | November 28, 2015

Routine work is going away. It always has been. Technology as old as the wheel, letter typeset, and the cotton gin have freed people from mundane and repetitive tasks. The market has a wonderful way of arbitraging work (thank you Adam Smith) to the least expensive person who can most reliably finish the job. That precisely is what leverage means. As one of my clients says, “make the computer work harder.”

Consultants understand automation. Whenever we help to implement an ERP system, we know that it (thankfully) reduces the wasteful work of an army of clerks who process papers with inter-office mail, faxes and phone calls.  Whenever we help client gain synergies with their acquisitions, there are economies of scale from their larger network of factories, stores, technologies, and products. Consultants understand Schumpeter; technology drives creative destruction. Fact.

Automation is good (usually). Automation allows educated and empowered people to do more value-added things with their time. It takes the mundane away. Even China – where so many things are still made by hand – is automating.  Economist article here.

Terry Gou, Foxconn’s boss, claims that within five years the 30% of his labour force doing the most tedious work will be replaced by robots, releasing them to do something more valuable. The highly inventive firm, which holds many American patents, is building all its automation in-house.

Small problem. Not everyone is in a favorable position to change, pivot, and re-invent themselves. 6 billion people in the world are not necessarily like you. Not everyone is educated, connect with a network of professionals, has access to capital and the skills to capture new opportunities. Let’s not sugarcoat the fact that macro-economic change can be painful on a micro-economic level. People lose jobs. Change hurts.

McKinsey: Four fundamentals on workplace automation. It’s a boring title here, but provocative point. They argue that 45% of work activities can be automated with current technologies. Yes, an enormous amount of work has already been taken out of the hands of people, replaced with bytes and bits, 1s and 0s. No, it is not the end. There is a lot more automation on the horizon.

Consultantsmind Workforce Automation

Service industries are safe right? No, not really. McKinsey noted that once technologies can “understand” natural language at a “median human performance”, another 13% of work activities in the US could be automated. Yikes, 45%+13%=58%.

“Although we often think of automation primarily affecting low-skill, low-wage roles, we discovered that even the highest-paid occupations in the economy, such as financial managers, physicians, and senior executives, including CEOs, have a significant amount of activity that can be automated.” – McKinsey

Apparently, this is just a teaser because the full report is coming out next year, but the effort is unsurprisingly McKinsey-like in its rigor. They analyzed 800 occupations as defined by the US department of labor decomposed those jobs into 2,000 activities. Then those activities were clustered into 18 capabilities. This is how I was taught to do organizational design when I worked for a Big 4 consulting firm, and this is how McKinsey did the analysis for this article. Like I said, consulting is about bucketing.

You can see the logic in the diagram below:

Consultantsmind McKinsey capabilities

Only 5% of jobs will disappear entirely. Instead, it is a massive re-sorting of processes, responsibilities and scopes of work. . . making the computer work harder. Less tedium and more synthesis. Whether it is loan processors, doctors or lawyers, we will all be doing more (volume) and higher value work. Some will relish this change and others, I guess, will hate it. The graph below shows a scatter plot of the % of the jobs that will be automated; unsurprisingly, filing clerks are at the top with 80% of their job at risk.  Even CEOs can have 20% of their jobs automated away.  Not surprised by that.

Consultantsmind McKinsey roles

Automation is pervasive.  Sometimes we just don’t see it. For example, they note that airline pilots – on average – only manually fly the plane between 3-7 minutes total. That level of automation will only increase. In fact, newly minted college graduates born after 1993 have never lived without the internet. To me – a generation X – born in the early 1970s, the world will always be of information convenience, creative destruction of office jobs, and re-invention. Even this website – powered by WordPress – is as easy to publish as writing a letter on MS Word. That was not the case in 1993. All automation.

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4 thoughts on “McKinsey: 20% of CEO’s job can be outsourced

  1. Tomm

    Don’t even get me started on this one… Based on my expierience I can say that in reality automation is overhyped.
    Consultants brag about it, but in most cases automation is a ‘long term target’ that looks good on a slide but it’s rarely translated into concrete, tactical actions that need to be undertaken in order to automate parts of processes. Obviously in most cases we won’t be around the client in the ‘long term’, and even if we are the focus will be placed on something else.
    On the other hand clients would like to ‘automate things’ but they’re simply clueless what exactly they want and what are the consequences. What’s more they don’t even want to invest their own time into brainstorm this subject, ideally the magician should show up on a one fine day, and just get it done.
    Btw I just realized that I don’t know a single consultant in my company that has an understanding of the subject that goes beyound compiling a slide with a list of potential benefits that automation could bring. Obviously that wouldn’t stop the consultancy from sending them to handle an automation project 🙂

    1. consultantsmind Post author

      I hear you. Clients too often want an “easy button” when in reality, if it were easy. . it would have been done.

      Also for automation, there is a cost of changing. . .every time you change a product, vendor, process, performance goes DOWN first, then back to par, then improved.

      Perhaps to your point – the definition of automation is crazy broad. After all, it implied a reduction of variability so the exact same task can be repeated. For instance that doesn’t really apply very much to our consulting lives. Today will look very different from yesterday I imagine. Thanks for the post Tomm.

    1. consultantsmindadmin Post author

      Thanks for reading.

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