Use of psychology to teach personal initiative

Billions of dollars have been spent by governments, microfinance organizations and NGOs to train small businesses. Traditional training programs are generally aimed at teaching owners to use best business practices such as register holding, actions control and simple marketing. But while
The use of more of these practices seems to improve the performance of the company,,
Most attempts to train business owners only lead a small change in these practicesThis makes it difficult to detect any impact on business performance. Thus, when we were approached at the end of 2012 to design an impact assessment for a training program to be offered in Togo as part of a World Bank loan program, we proposed that the training program they had planned to offer (the
IFC
Commercial advantage program) be tested against an alternative approach.

The alternative approach came from the partnership with the psychologist
Michael Fresewho had worked on the development of a
Personal initiative training program which aims to develop behaviors associated with a proactive entrepreneurial state of mind, rather than teaching basic commercial skills. The idea is to teach owners of small businesses to try to find ways to innovate and differentiate themselves from other businesses, anticipate problems and constantly seek new opportunities to exploit, overcome obstacles and to establish self-starting. By working with Michael, his doctoral student Mona Mensmann and his colleagues from the World Bank Francisco Campos, Leonardo Iacovone and Hillary Johnson, we conducted a randomized controlled test that tested these two approaches, with the
results released in
Science Today.

Random context and assignment

The World Bank’s project has launched a communication campaign in Lomé, the capital of Togo, to find companies in the informal sector interested in improving and developing their businesses. More than 3,200 companies applied, and these were selected to a sample of 1,500 companies which received a basic survey in the last quarter of 2013. Companies came from a wide mixture of industries (27% manufacturing, 48% trade, 25% of services), were almost also divided by the genus of the owner (53% women), and granted an average of $ 200 per month. Companies had an average of three employees and a median of two.



These companies were then randomly assigned to three groups, each of the 500 companies:

1. A witness groupwho has not received any commercial training.
2. A Traditional commercial training band Who received the Business Edge training program, which focused on four basic subjects: accounting and financial management, human resources management, marketing and formalization.
3. THE personal initiative training groupwhich has been offered this new program focused on teaching a state of mind of self-demarious proactive behavior.

The methods section of our
additional equipment Provides detailed examples of the action -based approach used in the training of personal initiatives, and how different subjects are taught from those of traditional training. But let's give an example that emphasizes how the same general subject, business financing, is taught very differently. Traditional approaches explicitly teach owners to hold commercial files, to explain what the different types of loan products are that banks are and to discuss how to request a loan. On the other hand, the training of personal initiatives teaches business owners to identify and tackle unusual money sources and not only banks (self-starting behavior), that they should do bootstrap so as not to need to rely on long-term external funds (future behavior), and that they should not abandon if they are confronted with financial problems, but to develop plan B and behavior persistent).

The two training courses were implemented in three sessions of half a day per week in April 2014, for a total of 36 hours, followed by a trainer visiting the company once a month in the next 4 months to strengthen the concepts. The cost of the supply of each training course was about $ 750 per participant, but it was offered at a very subsidized rate of around $ 10. The recovery rates were high, 84% of people invited to training participation in each treatment group.

What was the impact of these training programs on business growth?

We collected four series of follow -up surveys between September 2014 and September 2016, allowing us to follow the results of these companies for 2 years and 5 months after training. The survey attrition rates were low, with an average of 9%. Using the random assignment between groups, we can then compare how similar companies allowed over time when their owners were invited to one or the other training program, compared to the control group.

Figure 1 shows a title conclusion: personal initiative training has increased the benefits of companies by 30%, compared to a statistically non -significant 11% for traditional training, the difference between the two also statistically significant training courses. We show in the document that this increase is not motivated by a few truly prosperous companies, but occurs throughout the distribution. Companies participating in the training of personal initiatives also have a 17% increase in monthly sales compared to the control group.

Figure 1: Personal initiative training has increased monthly profits by more than traditional training

Note: vertical lines show 95%trusted intervals. Estimates are average effects on the four-training investigation cycles.

This increase in monthly profits is equivalent to $ 60 more per month; Enough to reimburse the cost of the training offer within one year. A lower boundary of the return on investment is 82%, the yield estimated at 10 years ranging from 140 to 393% depending on the duration of these services.

How does the training of personal initiatives stimulate greater growth in companies?

We explore a number of different mechanisms to help understand why this new training program goes beyond the traditional approach:

• The traditional approach leads to An increase in the use of standard commercial practices Like accounting, marketing and stock control. However, even without explicitly teaching these practices, companies that obtain personal initiative training adopts almost as much of these practices.
• Personal initiative training leads A much greater increase in personal initiative That traditional training, which we measure using both a seven elements agreement with questions such as “I actively attack the problems” and “whenever something is wrong, I immediately look for solutions”, as well as questions that are coded according to the answers to the questions open to the changes that the owner brought to the company, and how they had the idea of ​​this change.
• Those who receive training as a personal initiative under More innovationIntroducing more new products and being more likely to diversify into a new range of products than those in traditional training.
• After training as a personal initiative, business owners borrowed more and made greater investments.

Together, these different channels help explain the best performance of the training of personal initiatives. In addition, while a certain number of traditional training programs have not worked well for women (which is also the case for traditional training tested here), we find
The personal initiative approach works as well for owners of male and female companies.

These results highlight the promise to improve the standard approach to the training of entrepreneurs using ideas of psychology. Based on these results, the training of personal initiatives has already been integrated into new training programs in Ethiopia, Jamaica and Mexico, and we are impatient to see if he can also develop more prosperous entrepreneurs in these other contexts.