STRATEGY & ORGANISATION

DIGITALISATION

Who should reap the benefits when we become more productive?

We are constantly being provided with new technological tools that enable us to achieve more in less time. The widespread adoption of generative AI, in particular, has had a significant impact on many people's workdays, raising the question of whether it is time to rethink our work routines and capitalise on the advantages of technological innovation.

By CBS Executive Education

"When we now have these productivity gains that everyone is talking about, who should benefit? Should it be the owners, who will become wealthier, or should it be that more people can enjoy a 4-day working week?" asks Michael Pedersen, Associate Professor and PhD at CBS, who has conducted research on the 4-day working week.

The 4-day working week has been widely discussed since the concept was first implemented in Denmark in 2017. Since then, the debate about a reduced working week has mainly focused on work-life balance and overall wellbeing, which are also highly relevant given that Danes consistently report feeling more stressed than in previous years.

The fact that the discussion now includes questioning some classic capital structures could have a significant impact on how widespread the phenomenon might become. So far, a reduced working week has mainly been adopted in smaller, owner-managed businesses, while municipalities have experimented with a 4-day working week, but without reducing the overall hours worked, which, according to Michael Pedersen, should not be compared directly.

The new debate

The primary cause of the debate about productivity gains lies in technological development, with generative AI as the central focus. Just over two years ago, ChatGPT was launched, and it has quickly become a collaborative partner in many offices around the country. For those working in knowledge-based roles, there could potentially be significant gains from using some form of generative AI, and it is here that the question arises: Should I just do more work for the same pay?

The reduced working week is an international phenomenon, and as such, the new aspect of the debate is also making headlines around the world. In the spring of 2024, it came to the forefront in the US after American senator Bernie Sanders went public, arguing that a larger proportion of Americans should work 32 hours a week instead of the current 40 hours. He referred to the increased productivity and argued that it should now also benefit the workers.

In Denmark, we have mostly seen the debate gain attention when parts of the public sector begin experimenting with working just 4 days a week. However, it is important to stress that these are primarily compressed workweeks rather than a reduced number of working hours.

The Best of Both Worlds?

The 4-day working week is known for having produced some remarkable results over the years. One striking example comes from 2019, when Microsoft tested the concept for 5 weeks by giving all its Japanese employees an additional day off each week. This time-limited experiment showed a 40% increase in productivity, which was noted worldwide, although it apparently was not adopted long-term by the company.

In Denmark, several private companies have also achieved good results after switching to a reduced workweek. One such company is Vest Administrationen, which provides property management and construction supervision services. According to Chief Financial Officer Morten Ahrendsen, it has been hard to see anything negative about the project:

"We’ve gone from number 16 to number 6 in our satisfaction survey since we introduced the 4-day workweek. We’ve broken several revenue records and, last year, also our profit record. In addition, we haven’t had a single resignation in the last 3-4 years. For us, these are numbers that indicate the 4-day workweek has made us more efficient in the tasks we do."

Morten Ahrendsen

While Vest Administrationen views the transition as a huge success, shifting working hours is also a demanding process, and there is no one-size-fits-all solution. They set up a steering group from the start to continuously evaluate, ideate, modify, and optimise workflows in the company. However, Morten Ahrendsen emphasises that, in his view, it’s a process of change that requires them to continue optimising and critically evaluating their workflows.

Michael Pedersen generally supports this view but points out that it is not guaranteed that such initiatives will succeed: "The companies that have implemented a time-reduced 4-day workweek have focused on finding new working routines that fit what they do. My research suggests that this is a key part of why it works."

It is worth noting that, alongside the introduction of reduced working hours, Vest Administrationen also introduced more automation into their workflows. For example, they implemented a robot that could handle a large part of the invoicing work for the more than 400 property associations they managed at the time. Instead of one of their employees spending an entire day on this, the bookkeeping could be handled with a single click.

Old Habits Creep In

One of the major questions about introducing a 4-day workweek is how it will function in the long term. When working hours are reduced, it feels like a great freedom for employees, which is a motivating factor to restructure work into more efficient systems. But over time, the reduced working hours become the norm, and the question arises: How do you maintain a focus on continuously improving even the smallest things during the workday?

"Some of the companies I follow up on experience that people easily fall back into old, ingrained habits they had before. Now they have a 4-day workweek, and they start taking it a bit for granted."

Michael Pedersen

Vest Administrationen continues its ongoing transformation process, and Morten Ahrendsen also expects that new technologies and generative AI will help the company become even more efficient in the coming years. It has already started making its way into the company, and Morten cannot remember the last time he sent an email externally without using technology to optimise his time spent on that front. However, he dismisses the idea of a 3-day workweek being on the horizon. Instead, the time optimisation they hope to achieve in the future means that the company can free up more time for larger projects, both internally and externally, or increase revenue.

Whether the current debate will lead to a widespread adoption of the 4-day workweek, both in Denmark and internationally, no one can say for certain. According to Michael Pedersen, there is still a long way to go, as we have yet to see large companies or public institutions adopt a reduced workweek on a more permanent basis. It is still hard to imagine a large, listed company cutting 20% of working hours across the entire organisation.

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Who should reap the benefits when we become more productive?

"Some of the companies I follow up on experience that people easily fall back into old, ingrained habits they had before. Now they have a 4-day workweek, and they start taking it a bit for granted."

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