How accountants can combat inefficiencies

Philip Maguire, CPA, CA, is a principal at Glenidan Consultancy Ltd. Read his first article in this series: Why accountants should recognize the bias in accounting standards and use it to our advantage.

AS I noted in my last article one of the biggest impediments to success is inefficiencies in the workplace. How can companies in Europe, with six weeks staff holidays, be more productive than their peers in North America with their “round-the-clock” work culture? If 50% of the top one hundred companies on the Standard and Poor’s index have gone bankrupt since 1980, is there not an epidemic of incompetent performance in North America? Why have we become so ineffective and what can be done about this? 

Why are organizations hiring so many staff 

In the 1950’s a British civil servant named Cyril Parkinson observed that the British Home Office, despite no colonies to administer, was none-the-less at its peak number of employees. He studied this contradiction and coined Parkinson’s Law, which states that “work expands according to the time available for its completion”. He also observed that managers will hire subordinates, and not other managers, so as to avoid competition. Mr. Parkinson argued that a 6% growth rate of administrative body will eventually kill any organization. The workforce will be focused on bureaucracy to the detriment of productivity. 

Parkinson’s Law in action 

Let’s examine some examples of Parkinson’s Law in action. In 2004 Professor Stefan Thurner oversaw the newly created faculty of medicine at the University of Vienna. The Medical University of Vienna was assigned 100 scientists and 15 administrative staff. Two years later there were still 100 scientists and no increase in the courses offered to students. However the administrative staff had ballooned to 100 staff. "I wanted to understand what was going on there, and why my bureaucratic burden did not diminish — on the contrary it increased," he says. So he turned to Parkinson’s Law and concluded that non-essential requirements were driving increased administrative burden. 

Since 2018 the Senate in Canada has not had a full complement of Senators. In January 2023 the Senate was 12 members short of the required 105 members. However, the number of civil servants supporting the Senate has risen dramatically. In 2017 the Senate had 372 staff which had since grown to 493 staff, or a 33% increase. Yet from 2015 to 2022 the government had increased outsourcing of services by over 40% — services that were supposed to replace staff supporting Senators. 

In August 2022, a series of articles by the Globe and Mail addressed abandoned oil and gas wells in Ontario as a result of an explosion in the town of Wheatley — not far from Windsor. The explosion happened after three evacuations of Wheatley in the prior three months. Since the 1960’s Ontario has allocated $1 million per year to plug wells that pose a threat to the public. By 1997 the province’s Petroleum Resources Centre had 11 full-time staff. Of the 11 staff there was one field inspector and one enforcement officer with the remainder of nine back office/head office staff. 

In December 2023, the Auditor-General had announced a “fresh review” of the Canada Revenue Agency (CRA) call centre performance. Since 2017 both the wait times, and contradictory answers provided to tax-payers, has increased significantly. For example, complaints to the federal Taxpayers’ Ombudsperson had increased 45% since pre-pandemic levels. In 2015-2016 the budget for the CRA call centre was $149.1 million. This had grown to $368.6 million in the current fiscal year. In 2015-2016 the budget for the CRA call centre staff was 2,651; in 2024 it was 5,610 staff. Parkinson’s Law would argue that bureaucracy is overwhelming, and replacing, productivity. 

What are business leaders doing about Parkinson’s Law 

Some business leaders recognize the effects of Parkinson’s Law upon their organizations. When Mark Carney was appointed Governor of Bank of England in 2013 one of his first directives was that all meetings must have an agenda that was to be written in plain English and limited to one page. All participants were to read the agenda and decline the invitation if the agenda did not pertain to them.  

In a memorandum to staff in the summer of 2022 Tobias Lutke of Shopify stated “Across the company we’re also eliminating overspecialized & duplicate roles, as well as some groups that were convenient to have but too far removed from building product.” He followed this up in early 2023 by banning recurring meetings with three or more fellow staff members noting that meetings are useful, for example conveying complex processes to a large number of people, but not if management loses sight of productivity. 

What can you do to address Parkinson’s Law 

It is so tempting, when faced with more work, to request additional staff or an extension to deadlines. However, Mr. Parkinson would recommend the following:   

• Identify the business drivers or raison d’etre of the role, department and organization. There will seldom be more than three critical drivers in any organization. Every employee should be focused on these drivers only. 
• Do not allow deadlines to be extended. Rather, complete the assignment before the deadline. This will make you focus on the pressing issue(s) rather than every issue. 
• Do not delegate anything until you understand the duties and, ideally, have performed them yourself. If you must hire, do so sparingly and only because existing staff are too busy focusing on the key drivers. 
• Encourage individuals to communicate face to face. Limit email to one hour per day. In that hour, staff either respond immediately to an email or delete it. 

Insist on concise communication. There is a correlation between ignorance and the volume of words in a report. Lengthy reports puts the onus on the reader to ferret out what is relevant while allowing the author to bumble along. For example, never justify an expenditure because the new system “will allow us to become more efficient and effective." This demonstrates that the author is lazy or does not understand the proposal. 

If you are focused on the business drivers you will be able to respond immediately to legitimate requests. Furthermore, you can explain why you are discarding irrelevant requests. 

Applying the lessons learned from Parkinson’s Law can result in a disciplined approach to managing your organization. Employees appreciate the clarity that arises from focusing on business drivers. But before you delegate these principles to your staff, make sure you can explain this proposal to your boss. Succinctly. 

Our next article will discuss spectacular examples of business drivers that auditors, bankers, regulators, analysts, financial advisors and shareholders missed. Thank goodness for the whistleblower.   

Read Philip Maguire’s first and second articles in this series:

Part One: Why accountants should spend less time on the numbers and more time explaining the results.

Part Two: Why accountants should recognize the bias in accounting standards and use it to our advantage.

Philip Maguire, CPA, CA, is a principal at Glenidan Consultancy Ltd. His practice focuses on internal controls over financial reporting for a number of publicly listed companies on the Toronto Stock Exchange. Philip teaches a number of CPD (continuing professional development) courses in Canada, England & Wales and Ireland. Author photo courtesy Philip Maquire. Title image: iStock ID 2222347899.