Time to Change eZine

(Or how to use your staff development budget effectively)

Note: This article gets a little 'mathy' and technical...so please forgive.

There's really nothing new under the sun.  But from time to time someone can focus a light on a topic and it seems new and fresh. I found this while reading P.J. O'Rourke's book "Eat the Rich", as he discussed non-intuitive economic principles...

So for your enlightenment let me introduce to you "Ricardo's Law of Comparative Advantage" and how this can help you with managing your staff development budget.

The English economist David Ricardo (1772-1823) postulated that if you can do X better than you can Y but are capable of doing both X and Y, and there is another person that can do Y better than they can do X who likewise can do both but better than you can, then an economy should not encourage that second person to do both things.  You and he (and society as a whole) will profit more if you each do what you do best.

You may want to re-read the last paragraph!

Using Benefit to Society (BTS) as our measure of 'value' or 'productivity' lets walk through a scenario to see how this principle works out.

John is a software developer, that when his time is fully spent coding software develops 20 BTS's, and when fully engaged as a team leader generates 10 BTS.   Sarah is a better coder and manager and while coding full can develop 40 BTS and when managing the team develops 60 BTS.

If John and Sarah split their time equally between developing code and managing teams then the overall BTS produced by John would be 15, while Sarah would produce 50 - giving a total benefit to society of 65..

However if Sarah and John ONLY did what they were best at - Johns productivity would increase to 20, and Sarahs to 60.  Thus the benefit to society would be 80 overall (a 19% increase in overall productivity).

By not doing what she was best at Sarah lost  17% of her productivity, but John lost 25%.  Therefore in economic terms John has the greater comparative advantage in each doing what they are best at.

How can this help you with how to use your staff development (SD) budget - John is not a natural leader, but say by spending development budget on developing leadership his potential output increases by 5 BTS, while the same budget increases his coding to 35 BTS.  For Sarah investing in her coding skills increases her output to 50 and if the budget was allocated to her leadership her output could be raised to 80.

Keeping both of them working at coding and leading for 50% of the time and splitting their staff development equally.  The new productivity would look something like this...

So by investing in leadership and coding for John and Sarah we get near to the productivity of them 'doing what they do best'... hardly a stellar performance... but what if we solely invested in what they do best and had them specialise in that...

Productivity has gone up by: 33% over training John and Sarah in both areas.

The result is clear - by investing in the strengths of both John and Sarah, and not trying to fix their less strong areas, creates significantly improved productivity. But that's not all...

It also does something culturally - John is not as good as Sarah in both leading and coding: however by specialising in what they are personally best at John will not feel in competition with someone he can never be as good as, and Sarah will not feel she's constantly having to 'carry' John.

It also clarifies roles and responsibilities - you end up with precise understanding of who does what, with no fudging of boundaries.

This premise is borne out by the research into 'Strengths' based organisations carried out by Gallup and published in the books of Marcus Buckingham.

Here's the punch line - use your staff training budget selectively, invest in the best your people can offer. Don't try to make them something that they are not.  By doing this you will increase productivity of your people and your organisation.

If you don't know what the best your people can offer is - then talk to us.  Our coaching programmes discover the best that people can offer, develop strategies to develop them and see individual talents and skills refined and honed to be the best they can be. Productive, engaged and satisfied.

Andrew Gregg, May 2007

If you would like to discuss anything that this article brings to mind please feel free to contact me.

References:

"Eat the Rich", P.J. O'Rourke

"First Break all the Rules", Marcus Buckingham

"Now Discover your Strengths", Marcus Buckingham