Mastering the CEO principle (Cost + Effort < Output)
The success of an organization is largely dependent on the quality of daily decisions, and these decisions a CEO must make. However, decision-making processes are not as straightforward as CEOs would like, especially when it comes to training employees, as the organization has to grapple with questions like whether employee training is worth it and if so what training is right? This can often lead to indecision triggered by uncertainty as to what the future holds especially when there are significant cost and effort going into the choice at hand.
Add in the fact that there are many other variables – working on a budget, personal growth plans, etc – that CEOs have to deal with, and the situation becomes even more complex. For this reason, CEOs need all the help they can get, a sort of CEO principle to constantly guide their decision-making. In this article, we focus on the CEO principle and how it specifically applies to making decisions about training.
Due to the natural tendency to focus on the cost and effort required to train staff, many CEOs are often fixated on this, when they can and should be focusing on the output that training can yield. For proper context, it is imperative to understand the CEO principle.
What is the CEO principle?
The principle is often expressed as: Cost + Effort < Output. In simple terms, it says whenever output outweighs the cost and effort, a CEO must lean in the direction of saying “yes” to the choice at hand. However, the process is not as easy as the definition suggests. This is because of a lot of thought, research, and proper analysis need to go into how the choice or problem at hand are peculiar to the organization. Let’s examine these three terms properly for starters.
Cost: is the monetary equivalent of the valuation of effort, raw materials, risk, human and material resources, and the time and utilities consumed to get certain results. Therefore, in terms of training, the total cost will include the cost of training materials, implementation, administration, promotional, refreshment, technology, training personnel, design and development, and different unexpected and indirect costs that rise up during the training period.
Effort: can be defined as the willpower required to bring a decision or project to reality. In terms of training, it takes an effort to convince yourself of the value of the training and your staff of the need to be at the training and of the benefits the training will accrue to them and the organization.
Output: Is the final result a decision or project will achieve at the end of the day. For a training exercise, the output will be employees learning new ways to simplify their processes and better ways to improve products and services. Sometimes, the output is difficult to measure because it might take longer to bear obvious fruits.
It is, therefore, imperative to not only focus on the effort and cost that will be required to complete a project or achieve an aim but to focus on what these efforts and cost can/will achieve. In terms of training, questions such as when to do training, who to facilitate the training, why is a particular training important, how to make the training work for the organization’s staff, and where the training will take place. These questions, when examined, will give a CEO a good picture of what’s on ground and the necessary next steps. Let’s examine these questions in details.
When to do training?
When thinking about these questions, sub-questions pop up like: “Do I wait for a need to become glaring before taking the necessary steps?” or “Should I always explore opportunities to add new skills for my employees”. Assuming a lot of managers understand the role training plays in improving their employees and creating and promoting an innovative culture, there are some instances when this question is readily answered such as:
- When an obvious gap exists in the organization, for example lack of innovation
- When our existing culture undermines our efforts at innovation and we need everyone on board to change the culture
- When long-term goals have been established and it is obvious a specific skill set is necessary to achieve the set goals
- When there’s a new technology
- When the organization is extending its products and service offerings
- When there’s leadership restructuring and much more.
Of course, the “when” instance is not limited to these aforementioned instances. Due diligence should be taken, and CEOs should be aware and constantly sniffing out situations that warrant training.
What is the end goal?
Perhaps this is the most important question you can ask as regards the CEO’s principle. The answer(s) to this question will help put your cost and effort into proper context. This means you have to mentally transport yourself to after the training has occurred and imagine it yielding results to the latter. For example, if you want to reduce the time it takes to get from idea to product, then it helps to have a specific figure at hand. This would help you measure the impact of the training going forward. Additionally, it helps you in choosing a trainer for your needs as you can measure what they can offer you with respect to what you need.
Who to conduct the training?
After identifying a training need, the next step is how to fill it and the critical question of whom. Can the solution be found internally or is there a need to outsource the training? These questions can help CEOs reduce the amount of effort and cost required to implement a training program. If you will be going with the internal solution, you should note the following:
- The person’s experience with respect to the current trends in the same skills domain
- How much respect another staff has for the trainer in charge
- The skill certifications the person has
Another thing to note is that when it comes to innovation and company culture, an internal person cannot be fully objective and will not have as much clarity about the needs, since they also are engrained in the company culture. Also employees often show a certain amount of laxity towards internal solutions. That said, external trainers shouldn’t also be taken on a whim. Certain key considerations must be borne in mind before hiring a training firm, such as:
- Years of experience in the specific domain you need training in
- The track record of the trainer the company will be sending
- Have they worked with other companies in the same industry as you?
- Can the company provide social proof of their past client?
- What specific results have the training achieved for their past clients? (Very important!)
- What resources are they bringing and what resources do you need to provide?
- Hope there are no hidden charges?
At Corporate Alchemists, not only do we tick all the right boxes, we understand that all training must yield results that justify the cost and effort put into it. We know that every cost and efforts put into any training must reflect the company’s processes, and ultimately impact the bottom line positively. Our extensive experience training companies in the areas of innovation and culture has equipped us to provide the right training solutions to various types of organizations.
Where will the training be held?
Another important question to ask when looking to minimize cost and effort is where the training will be held. Will the training be at the office or the staff needs to go to the trainer’s facility? The answer to this question might be hinged on the resources required for the training and to an extent the type of training. For example, there are certain Human Safety and Equipment (HSE) training that cannot be carried out in the office. That said, due diligence has to be carried out to ensure there’s a balance. This means that:
- The impact on the staff is taken into consideration such as closing time, duration of the training, and the toll time spent on training might have on their present responsibilities.
- What it will cost to provide resources internally rather than going off-site.
- The resources, cost, and effort required to take the staff off site.
Ideally, the office is the best location to host your training because:
- It’s easier for your staff
- Resources gotten for the training can help fast track the implementation of the learned skill(s)
- It helps your staff commit better especially for trainings that take time
Given these considerations, it is important to work with a trainer like Corporate Alchemists, as we are flexible and can accommodate your training venue requirements.
As implied throughout this article, measuring benefits is not straightforward; more so the financial benefits that arise as a result of improved performance. Therefore, it is imperative to find different ways to analyze and measure the output/benefits accrued after a training program. Some of the benefits that accrue from the training we provide can be put into four categories:
Income generation comes in different ways such as
- New ideas that can lead to new product launches
- New income streams from innovative application of existing products or services
- Increased productivity from reaching more customers than before
- Fewer staff turnover as a result of improved company culture which reduces the probability of them leaving and of course reducing recruitment and training costs
- Shorter time and less effort to take innovations from idea to product
Labor savings such as elimination duplicate efforts through the adoption of the right project management techniques, fewer times enforcing corrections and correcting mistakes, and reduction in bureaucracy that make employees spend more time than they should at work.
Productivity gains include a new or enhanced innovation culture, streamlined processes and methodologies that reduce effort expended, improved skills that make employees work faster and better, which in turn can lead to an increase in creativity, motivation and effort from your employees.
Before CEOs and management can successfully tout the mantra “people are our greatest asset,” they need to put their money where their mouths are. This is to say, deliberate and specific effort must be put in place to make sure these human capital is developed. Therefore, training should never be classified as an expense per se but as a capital investment. This would be put into proper perspective when CEOs and management can ask the questions outlined above and ascertain what their ideal output would be. And with a constantly changing world with increasingly different skills added daily, you’ll either prepare your staff or be blown off the market by the competition. Professional trainers like Corporate Alchemists provide the means bring your workforce up to speed so your company can compete in the global economy.
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