12 May The Manufacturing Paradox (....far more...with far fewer...)

[Paul Terlemezian]

This is probably a "fact of life" that we want to apply to everyone except ourself!

 

The "world" needs more output from each of us per unit of work. The opposite would create inflation.

 

The key is to measure the right outputs. In the training world we could measure contact hours per instructor.

 

For example - if one teaches a 5 day class with 6 contact hours per day and 20 attendees we could count this as 5x6x20 = 600 contact hours. If this happens 30 weeks a year then the instructor generates 18,000 contact hours per year. If the fully loaded cost of the instructor (salary, benefits, resoures, materials, travel) is $200,000 then the cost per training contact hour is $11.11.

 

Some would assert that this measure of productivity is not measuring the right output. We should instead be measuring the outputs of the attendees.

 

For example: A relevant measure might be the increase in sales yields. If the average sales person is generating $600,000 in sales and the goal is to increase this to $700,000 and we had 500 sales reps we would be focused on producing $50,000,000 in incremental sales. Conversely, we might not increase sales at all but reach the "yield" number with a smaller sales force. A reduction in the sales force to 429 reps would yield the same amount of revenue and reduce expenses by 71 x $150,000 (assumed full load for the rep) or $10,650,000.

 

We would also need to measure the cost of the attendees (let's say $75 per hour fully loaded).

 

This adds $1,350,000 (75 x 18,000) to the $200,000 cost of the instructor.

 

The training (manufacturing) department would be given a budget of $1,550,000 and asked to produce either the $50,000,000 in incremental sales or $10,650,000 in reduced costs (whichever option the sales VP agreed to produce.)

 

The success and productivity gains of the training department would then be measured based on revenue gains (or cost savings) per dollar of training (including the cost of the attendee's participation.)

 

 

[Paul Terlemezian]

A focus on internal metrics wiil drive/reward the wrong behavior and the eventual demise (or perhaps the acceleration of the existing demise) of the corporate training function.

 

The future of the training industry will be dependent upon our ability to credibly accept and deliver external metrics.

 

We buy pharmaceutical products - because they can prove that their clients benefit and our own experience is consistent with the promise benefit.

 

What external metrics do you think our industry can credibly deliver upon?