Diminishing Returns

(File size: 19 Mbs, Show Length: 20 minutes)

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Show Transcription:

You’ve been staring at your computer screen for so long you can see your presentations, spreadsheets and documents when you close your burning eyes.  These tasks take forever.  You know there’s a better way, but how?  You want to improve your presence in meetings, but how?  Stop working so many hours.  Become the authority for reporting at work.  Fix work problems before they happen.  This is THE Business Intelligence Podcast.   Plug into the business intelligence reporting community at www.getreporthelp.com.  You’re not alone, and yes, you need help.

So I had one of the rare opportunities that most people don’t get very often.  And that was – I got a chance to talk with a guru – someone I have really looked up to for a long time, appreciated their content, used it, fully vested in what they provide and how they do it and just look at them as the gold star for what they do.  I had this great opportunity to exchange an e-mail and Twitter and even go so far as to be on the phone with him for five minutes and it just blew my mind.  You don’t get those opportunities very often.  Think about whom you look up to in terms of content, like a movie star or something like that and to actually get the chance to talk to them and ask them questions related to what you do.  It was very enlightening and I was amazed at how nervous I was which is weird because normally I’m not nervous.  I have had no problems reaching out and talking to CEOs and speaking in front of large groups and all that.  But on this one I was like, “This is a guy I really look up to for a lot of stuff and I’m going to talk to him on the phone?”  I had that kind of hesitation and wondered if I should really do this.  That’s kind of one of my mottos is that you don’t want to live life with regrets and so the things that you are hesitant to do and you don’t do them you’re going to wonder about for a long time.  When the opportunity arose I was thinking, “Yeah, I’m going to call.  I am going to reach out and try and talk to my guru on this and it was awesome – it was really cool.   I am still kind of buzzing about it as you can tell.  His information and his comments back to me I could really feel a sense that he has that drive to just help – to want to help people.  That’s certainly what I’m doing with this podcast and with my content is that I’m just trying to exude as much help as I can to people that I know that struggle and need the extra help and want it.  To actually get the chance to have that in return was just a major milestone, it was a highlight and I’m still geeking out about it.

And now the feature segment.

So, I’ve got this great term – it’s a concept and it’s just fun to bust out and more importantly you are going to use it, without using the term, but you are going to see this thing happen all the time.  I’m going to give you some examples and you are going to go “Oh my gosh – this has been around the whole time!  How come I have never observed or been able to label this thing?”  The term is “the law of diminishing return.”  And of course if you take each of these words separately you can kind of get the idea of where this is going.  A law is something you can test and prove and see that it’s the case.  Diminishing goes down and return is what you’re getting.  But when you think of the definition what I want you to do is think about this:  You get fewer results with each additional effort.  That’s it.  That’s really a great way to summarize the law of diminishing returns.   So you get fewer results with each additional effort that you put into it.  Now an easy example of this is when you are working on a project very late at night – now everybody’s got a point at night where they hit their buzz and it works.  I can remember working on projects and at midnight you know, I am doing pretty good and at 1 o’clock, man, juice is flowing and I am rolling with this thing.  But when you hit 3 or 4 o’clock in the morning and you’re still working on your project you see the law of diminishing returns because your same effort is not getting you the same amount of results at that point.  You are fighting sleeping no matter what and the work that you are getting done is not as good as the stuff you did at midnight so as hard as you are trying, you’re putting that effort in, it’s getting a diminishing return and so you can really see that.

Now I’ve got some other definitions of this thing – the law of diminishing returns – I’ll give you some more examples.  So here is another definition:  The additional production starts to progressively decrease as the additional production is increased.  Alright I am going to repeat that again so you can kind of wrap your mind around that.  So the additional production starts to progressively decrease as the additional production is increased.  Now a great example of this is if you ever plant a garden.  You can take a plot of land and you can put some seed on it.  Say you put one handful of seed down, chances are, depending on the size of the plot – but we’ll just say that this plot is two foot by two foot or something like that.  You put a handful of seeds down.  You start tilling it, you do your gardening stuff, bada bing bada bang.  Your garden bed is full of plants.  So you are thinking, “This is really good.”  So next year you say, “Hey, I did one handful of seeds but this year I’ll do two handfuls of seeds.”  So you dump two handfuls of seeds, you go through the gardening stuff and guess what?  You got a little bit more but you didn’t get double the amount of output.  Right?  You get less than the double amount, but you put in double the amount of seed.  The third year goes by and you think, “Hey maybe I’ll try three handfuls of seed.”  Well you get to a point where it doesn’t matter how much seed you add – you’re only going to get so much output.  And so that is really what you are talking about.  With each additional production it starts to progressively decrease with the additional production that you put into it.  You know, you might have gotten fifty percent yield on double the amount of effort and then the next time you triple the amount of effort and you only get another 25 percent return.  You can only have so many plants in that garden bed.  Dumping extra seed on there over and over, it diminishes; it becomes less and less effective the more you keep adding that same thing over and over.  So that law of diminishing return happens in everything.  You see it over and over and over.  If you think about it, we will get less and less output when we add additional doses of an input while holding the other inputs constant.  It happens over and over.

Thinking about it in terms of a business example – you might have a product that you are going to do some marketing efforts for.  So you say, “Hey I am going to do these 10 marketing efforts to promote this product.”  Okay, great!  Things take off and they do great and you go, “Okay, that’s awesome!  Let’s double our marketing this time!” Well, you know, you get some returns and stuff.   “Okay, well let’s triple it.  Okay well let’s 10X it.”  You get to a point where all this effort, even on a product that you are trying to promote, at some point it just doesn’t turn the dial anymore.  It doesn’t ramp it up.  Now a lot of people spend a lot of time trying to figure out how much they need to dial a marketing effort for a product, but what you want to be aware of is that there is this law of diminishing return.  It happens all the time.

It happens in your own efforts.  For example, just today I was raking leaves and I was putting them in a bag.  Here I am picking up a scoop of leaves and dumping them in a bag.  Then I go to pick up another scoop of leaves and the leaves are not piled up anymore.  Right?  Because I just took a scoop out and I dumped it in the bag?  So my second scoop, it’s the same effort but I’ve just now doubled my effort but got less leaves than I did the first time.  That diminishing return happens over and over and over.  You want to be aware of it just from an efficiency standpoint.  When I put my effort into stuff I want to make sure I am not wasting any of my effort because there is that law of diminishing returns.  I could go on with more examples but the point is to be aware that the law of diminishing returns happens all the time and when you look at it and you see it in action you can start catching yourself earlier and earlier in your efforts because you don’t want to try and keep doing more and more and wondering why those results are not matching the amount of effort you put in.

And now the actionable information you’ve desperately needed.

So I read this article from McKinsey and I will cite the article in the show notes so you can look at it and stuff and it was just fascinating information and I thought it was so relevant for the context of what we have covered here.  It starts by saying things like the companies around the world spend up to $100 billion a year to train employees in the skills that they need to improve corporate performance, but training typically doesn’t have much impact.  Oh my gosh.  Think about how much money that is being spent all across the globe and then there aren’t good results.  Well, you know why – if we are spending money to send people to trainings, why is it not really helping?  I, myself, have gone to trainings before and I’ve found them extremely helpful, but I have noticed that some of my colleagues have gone and they just don’t seem to use that information.  What is going on here?

So McKinsey did some studies on this and they found there are these five pieces to it.  They said, “Here are the things that are the main issues.”  So, first of all (you are going to laugh at this) but they have to recognize that their own performance is weak in that area and that they actually need to choose to learn it.  Which is silly to say, but when you think about it, there are people that go to these trainings and they think, “I am just going to this training because I need to go to this training” without recognizing that, “Hey, I don’t know everything about this and I need to actually learn it.”  I think if companies send people to trainings before they are ready and before they realize that they need that training then it is wasted money and this was what the results were showing was that people actually had to choose to learn.  They needed to actually recognize that they had a weakness in that area and then they are ready to actually learn.  The second thing they found is that even when employees do learn the information that they are taught, they very often don’t apply it.  Now a lot of this can be directly tied, I think, to the content.  If you’re not taking your content, when you are training somebody, and apply it directly to what it is they do day in and day out then they are just going to blow it off.  It is not going to resonate and not going to sink in.  So I have seen this over and over.  When you try to train somebody and use generic terms or you use ambiguous phrasing or you just use whatever the default examples are in the textbook or whatever, it just doesn’t resonate.  People don’t get it.  So you’ve got to get them to internalize that information that they are taught so that when they do learn it, those that do learn it, they can actually apply it in their job.  I think part of this is also in the trainee in this situation because you need to be trying to apply it to what you are doing and reaching out to the instructor in that way.  Anyway, they found that the second biggest issue is that they just literally don’t apply it to what they are doing at their jobs.  The third thing is they said that many training programs stall when leaders agree with the program’s goals and principles and yet fail to reflect them in their own behavior, thereby signaling to the employees that change isn’t necessary.  Part of this that they were talking about is that you were using this training to try to bring something new into the business.  “We’ve never done SEO, so we are going to train you guys on how to do SEO.”  And then the CEO or whatever says, “Ah, you know, the SEO thing, it’s important but it’s not that important.”  You have just killed the motivation of the people that you have just sent to that training to do SEO.  “Well, he’s not valuing it so I’m not going to value it.”  You have got to have management on board with that.  So that was the third thing – management just has to be there.

Now, you need to reinforce the new skills in the workplace.  The way I adapted this to internalize it was that when you have these new skills and you use them in the workforce you’ve got to promote that.  You have to say, “Hey, this is the new thing and this is how it’s done – see what it did?”  If they can’t see what the new stuff is – the new training and what the effectiveness of it is than you’ve lowered that interest level in getting that training and that information spread throughout the company.  Some of these trainings you are training somebody so they will go back to their office and train other people.  And if they can’t see those results, if they aren’t aware of it and you are not promoting it and saying “Hey, look at that new thing” then the information just doesn’t disseminate.  They were talking about people that would, well you would hire somebody in that had all of this information and skills and tactics and strategy and they have done it and then they go into their work and they just do it and don’t tell anybody how they are doing it. That stuff just doesn’t get disseminated, it doesn’t get spread across the company so it doesn’t create that lasting change because if that person leaves, it’s just done –it’s over.

The last thing is they said (and these numbers just blew me away, but, you know, just blew me away but I’m validated in my assumptions as well) research has found that only 50% of organizations even bother to keep track of participants feedback about training programs and worse only 30% use any kind of metrics at all.  So you send somebody to a training and then what?  How do you know that they actually did their training?  How do you know that they are going to do it?  Why did they want to go again?  You have no tracking; you’ve got nothing in place.  We took some very literal steps at the company where I was working to address this.  And that was before you went on a training, what were you expecting to learn?  And then when you came back there was a debriefing where you presented what it is you learned.  Lo and behold, those initial objectives that you had, those were the ones you had to address.  Did you learn what you thought you were going to learn?  Yes or no?  That’s okay if it’s different, but man, you had to back it up.  We found that we had some very good results with that because it’s amazing how many people can go to these trainings – like they said – they don’t learn it or they don’t internalize it and then they don’t share it.  It just breaks down.  In order to really bring in that information you’ve got to take these steps.  In this case, I am saying steps because I have offered some solutions here, but this article did a great job outlining these major flaws people have when trying to go through this training and when you think about all the money spent on that, as a business owner, you definitely want to see some results from your spend there.  It was a great article and I encourage you to read it.  I’ll have a link to it in the show notes.

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