TEXT ANNI MANSIKKAOJA
Please introduce yourself.
Back in the day, I studied technology in University of Joensuu, but then became an entrepreneur and like many of us, never finished school. Eventually, I found myself in London where my family and business brought us. This is where I started to think about finishing school: get a closure and maybe also learn something new.
Soon I started at London Business School. While it was wonderful to simply concentrate on studying again, I could not help but wonder how taking time for your own learning brings fresh thoughts and ideas. Ones that are potentially greatly of use in business, development and innovation.
What does the concept Economies of Learning mean?
Most businesses have a strong expense-focused mindset when it comes to learning. Sounds like a cliché but it’s all about cutting costs, and the influence of L&D is often weak. One of the main reasons is that the results of learning investments are difficult to predict and measure hence there are so few. On the other hand, a great number of organizations are facing the challenge of talent mismatch. While one side of the operations is closing and people fired, other ones can be overheated. This is the situation, as we know, with for example technology. Firing and rehiring is however extremely expensive and potentially unethical.
I wanted to do something about this. Find a way to encourage companies to invest in learning the right way and decrease firing-rehiring. For that I had to make the results more predictable and measurable. Soon I found myself discussing microeconomic theories that could be applied in organizational learning.
There is a known microeconomic concept of marginal cost = marginal benefit. To put it simply, marginal cost should ideally equal marginal benefit because their equality is a characteristic of the maximum of net benefits. On the other hand, there are different levels of competences and incompetences based on the level of consciousness. To put it in a simple work context, we tend to do the things we know both faster and better than the ones we don’t. To reach a level of such competence requires learning.
Economies of Learning stem from these theories. The whole idea was to create a tool to not minimize costs but rather help investing in learning the right way. And of course ease it by making the results clearer. The underlying thought is that the better the quality of learning, the faster it takes place. So, when a company invests in learning, the quality of it increases. This then causes the time to reach a certain level of competence to decrease and retention increase. This way the overall economic benefit is greater the more a company invests in learning. For you microeconomists out there, MC=MB.
How can economies of learning help to pitch learning in organizations?
The key is that it helps to predict both retention and time-to-competence which will help to get the C-suite or board onboard. There are however certain characteristics to learning that are quite different from many other investments. Whether we call them human factors or not, some people learn faster than others. The reasons can be vast from personal situation to motivation, challenges or anything else really. The ones responsible for L&D can then bring in their insights on these matters to complete the data.
To conclude, economies of learning is a tool to provide data and calculations to support the right decisions in terms of learning. We already see the trend of combining data science with creativity and other human factors in marketing. Economies of learning brings this to organizational learning.
Interested in learning more? Here are some useful links around the subject!
White paper by Valamis:
Fire/hire or Reskill:
Learning Curves / Experience Curves, incl. a case from Boeing:
Boeing-NASA-MIT Cooperation in learning investments & intro to their course: