Business management training: A matter of impact

“I would prefer to start a business even if I could make the same amount of money in a job,” said Sanjay, a participant at a recent training session of CREAM (Certificate in Rural Entrepreneurship, Administration and Management”.  Ever since some friends and I created this course, I have volunteered as faculty.

Last week I was in Bihar, delivering the “Strategy and Planning” module over a period of 5 days together with a friend.  This particular module was part of the program being delivered for Jeevika, Bihar’s Rural Livelihood Mission and focused mostly on business planning and starting a business.  It was the culmination of several months of business management training, which covered Overview of Business, Financial Management, Operations Management, Sales and Marketing, and Strategy and Planning.

The participants had already been exposed to the concept of opportunity cost back in March.   So when I asked the question, “Which would you do: a business or a job which earns you the same amount of money?”, I was gratified to have someone use the words “opportunity cost” in his response.

For numerical concepts, such as break-even analysis, we had participants come up to the board, do the calculation and then explain it to the rest of the class.  Here’s an example:

Measuring impact

Every time I teach this program, I end up asking myself about its impact.  Finding out the impact of education and training is always a difficult matter.  It is presumptuous to attribute the success of an individual squarely on her education.  Yet, we need to keep trying to figure out the impact in some way.

We’ve tried collecting data about the business the participants own or advise.  But the data is often incomplete or inconsistent and it is difficult to claim with certainly that any success in the business is due to the program.

In one of our previous batches, when we had delivered a very targeted program for branch managers of a social enterprise, we got definite feedback from the senior management (unprompted!) that they saw a clear impact within a few months.  Apparently, their branch managers were now asking the headquarters staff many more detailed questions about their branch’s financial statements and performance.  The senior management felt that as a result, most of their branches were better managed.  They also felt that the participants now understood the implications of their operational decisions on finances of the business.

This time around in Bihar, I got another glimpse into the impact of CREAM.  Three years ago, we had delivered a program for Kudumbashree, Kerala’s state poverty eradication mission.  It was a train the trainer program, where we trained 31 people who went on to become master trainers and consultants.  People we trained had trained yet others.

So this time in Bihar, 2 people I had taught directly, and 3 others whom they had taught, acted as mentors to the training participants in Bihar.   This group of 5 had learnt Hindi in a few months and were speaking almost fluent Hindi with Biharis from rural Muzzaffarpur and Gaya!  One of them spoke without any discernible accent which was quite fun to see – but I digress…

From an impact perspective, I got to observe the depth of understanding of this group of 5 from Kerala.  I was quite impressed.  All of them clearly understood the concepts they had learnt 3 years ago.  So much so that they could correctly solve all exam problems and coach their Bihar counterparts effectively during the evening assignments.

Admittedly, Kudumbashree must have chosen their best to send to Bihar as mentors.  But still it is really heartening to see the impact first hand.

Secondly, I spoke with several training participants, especially those who already own and run their own businesses.  All of them were adamant that this program has helped them tremendously.  I played the devil’s advocate – claiming that they must know all this already since they have been running their businesses for years.  Here are some of the responses I got:

“I was running my business, but not in a systematic manner. This training has helped me run it more systematically.”

Participants working on a group assignment

“Before, I used to write down only my sales and expenses, and tracked credit transactions in a separate register. Now I understand how to calculate my profit and loss correctly, and how cash and credit are related.”

“Earlier I didn’t realize that depreciation is a cost of my business. Now I know why it is important to think this way.”

“Learning about how much stock to order at one time was very useful for me.”

Statements like these are heartening to hear and provide a glimpse into the impact of the program.

This group of participants will go on to train another larger set, creating a larger number of people trained in proper business management.  They will act as business advisors to the thousands of businesses that Jeevika plans to create and foster in Bihar over the next few years.

Impact like this, especially its multiplicative nature, is what makes my own opportunity cost of developing and delivering this program worthwhile.

[A version of this blog appeared on on August 26, 2013]

“I learnt how to talk to a security guard”

This was the response a 12-13 year old gave me when I asked her what she had learnt from the agriculture vocational training program at her school.

This answer was as unexpected as it was insightful.

I was visiting rural schools near Pune which participate in a program launched by Ashoka Fellow Sunanda Mane through her organization Lend A Hand India. The vocational training program covers four streams: Agriculture, Energy & Environment, Engineering (e.g. welding, drilling), Home/Health.

Student practicing welding

In Energy & Environment module they were learning about electrical circuits, switches and different types of wiring when I visited. One girl said she now felt confident that she could install a new bulb holder for her home.

In Engineering module, I saw girls practicing welding. One was quite nervous, but another (photo) handled it quite confidently. Apparently the kids have made some of the benches for their own and other schools.

In Home & Health, they had just finished making ‘chikki’ (peanut brittle), which they were all very excited about.

Farming as a business

In the Agriculture module of the training, the kids were in the process of planting marigold plants in preparation for the Dussehra season demand for these flowers.

Students field of marigold

The children were learning how to prepare the field, creating nurseries, how to plant etc.  But equally important, they were learning how to do backward planning – knowing when the flowers will be in demand and counting the cultivation period backwards to plant accordingly.  If the flowers bloom too early or too late – the crop wouldn’t earn much.

The children were learning how to keep proper accounts of purchases and to calculate total input costs. They were also learning how to calculate gross profits from the crop, by figuring out how many seeds were in the seed packet, what percentage actually generated plants, how many flowers did each plant give on an average and how much they could sell these for.

None of the children wanted to grow up to be farmers.  One boy admitted that “I want to be a doctor, but if I can’t become a doctor, I will have to be a farmer. And this training is useful – I will know how to do cultivation and selling of produce.”  Many other boys nodded in affirmation.

Children’s perspective 

Mini greenhouse

Most kids said that the most important thing they learnt through the vocational training program was ‘how to sell’ and how to calculate price – precisely the kinds of things the next generation of farmers need to become much better at.  Two girls said that they learnt how to talk to customers.

It was then, that another girl stood up and said, I learnt how to talk to a security guard so that he will let me in [to the industrial complex, instead of sending me away]”.  According to the instructor, the kids go in groups of 3-4 with one adult to sell flowers to the managers running the factories in the industrial complex nearby.

When asked which of the four modules they find the most fun, one boy (maybe 11) answered with Home & Health. His reason was that he enjoyed making chikki.  A girl stood up and said she enjoyed welding and making things.  The rest of the kid’ answers, predictably, followed more stereotypical gender roles.

Poster about soil testing

When I asked the kids if any of them had applied their agri-learnings on their family farms, most said that their parents wouldn’t listen to them. But one girl responded that she learnt about proper spacing of plants and told her parents, but they ignored her the first year. However, she persisted her father is now experimenting with the new plant spacing technique on their plot in this year’s crop.

The program seemed well designed and the instructors enthusiastic. The kids seemed to take away different things from the programs depending on their individual inclinations — learning some useful life-skills along the way.


Program Design

One day per week is dedicated to the LAHI curriculum.  Each day covers one of the four streams.  So the children come back to the first topic after a gap of 3 weeks.

The instructors are local farmers and entrepreneurs who are better educated. They are trained by LAHI in teaching and other program activities. I met several of the instructors — one agri instructor stood out in particular.  I could see he was really enjoying teaching the kids.

Perspective of School Teachers

I asked the school teachers: “Doesn’t this increase your burden”?  “Yes, but we enjoy our work more. We get to break the class room routine. It is interesting work.  The children also like the program for the same reason. They get to do different things that they can talk about at home.  Our school’s attrition  rate has dropped.” This last comment she added triumphantly. She seemed genuinely excited about this program as were the LAHI instructors.

The existing school teachers take responsibility for one program.  For example a math teacher had taken up the energy stream.  Another was responsible for the entire LAHI program.  The teacher coordinators have  to coordinate various activities with the instructor for her program, and also coordinate with other teachers and instructors for the remaining 3 streams.  In addition, many of the activities require trips outside of the school (to buy marigold seeds or ingredients for chikki, to sell the flowers, etc.).  The teachers escort the students on such trips.

Classroom ceiling decoration

Note: Program Design section updated March 2013

Building the energy industry sector

Every time I come across a new social enterprise, I find myself eyeing them with a healthy dose of skepticism because some of them fail to understand the real needs of their target populations, some are inherently unviable businesses, and some hardly qualify as businesses with a social objective.

Several years ago when I first heard about SELCO Solar, which provides lighting solutions to rural households, I had wondered about similar questions.

Last October, I happened to meet SELCO’s founder Harish Hande at an Ashoka workshop on rural innovations and farming.  Within an hour it was clear that he was someone operating on a different plane than the typical entrepreneur (social or otherwise).

Not a Technology Company

One of the first things that struck me about Harish’s approach was that from the beginning he insisted that SELCO is not a technology company.  He focused on the household and its needs rather than the technology.

He asked the question: what are the kinds of things that a rural household is willing to spend money on? Clearly, they spend money on family functions, pay for bus and train fares to attend weddings, and on buying household assets, however small they may be by urban standards. So what is the thing that makes a household spend on X but not on Y?

To answer this question, Harish lived in a village in Sri Lanka for six months as part of his Ph.D. work.  Later in India, he tried to answer the same question for households in rural Karnataka. He realized that one of the main reasons for households to spend on lighting is to enable them to continue income-generating activities such as weaving during the night.  Other households wanted lighting to enable their children to do homework.

Such insights into the purchase decisions were critical for not only the design of the product, but also its price and financing, as well as the business model he created for SELCO Solar.

Participant at CREAM training at SELCO, explain’s her team’s marketing poster to the whole class

Recently my TREE Society colleagues and I conducted a business management training (“CREAM”) for the managers of SELCO branches. This program focused on Finance, Sales and Marketing (For more about this program, see here and here).

This gave me a fantastic opportunity to meet the operations team of SELCO and develop a deeper understanding of their business.

We discovered that the pricing of the product was calculated based on substitution cost.  SELCO had calculated that the average spend per household on candles and kerosene for lighting was around Rs. 5 per day and estimated the current lighting budget of rural Karnataka households to be Rs. 150 per month.  Keeping this in mind, they designed lighting systems whose monthly installments would roughly match this amount.  By the way, I am not giving away any company secrets here – these calculations have been covered in previous case studies.

Why sell four lights when you can sell two?

The way any company goes about conducting its business says more about it than any amount of press coverage or awards.  At SELCO, while financial incentives for sales staff are tied only to total revenues, performance metrics also include the number of small power systems sold such as two-light systems (as opposed to the large value systems of 4 lights or more).  This discourages the sales staff from straying too far from the original mission of the company.

SELCO is now a 17 year old company with annual revenues of about $4 million and about 125,000 customers across Karnataka.

Along the way, they worked hard to get banks to recognize lighting as a sector worthy of bank loans.  Convincing the first bank was hardest, but the next few weren’t exactly easy either.  A big part of the sales process now involves helping the customers with the documentation process for securing a loan and building relationships with local bank branch managers for financing.

Growing the sector, beyond the business

The reason that SELCO wanted upskill their Branch Managers was because SELCO was undergoing a transition where the founders and other key members of the original team are leaving SELCO to start a sustainable energy incubator.

Over the last year or so, the company has been undergoing a planned succession from the original team to the next generation of leaders. This is very rare sight even in most large companies where founders remain closely involved with the business even after giving up formal positions.  At SELCO, both Harish Hande and Ashis Sahu (erstwhile COO) have handed over their responsibilities and have turned their attention to launching a pre-incubator in the sustainable energy sector.

Harish explained their thinking:  He believes that the growth and expansion of SELCO beyond Karnataka borders is best handled by the experienced senior managers of SELCO.  He himself will focus on identifying, encouraging and supporting entrepreneurs around the country to create many more sustainable energy enterprises.

In particular, they plan to focus on those entrepreneurs who do not have IIT/IIM degrees and international experience (who seem to constitute the vast majority of incubatees/investees of Indian incubators and venture funds). They want to reach out to non-English speaking entrepreneurs, help them create sound business plans, embed them in SECLO operations for several months to give them a clear idea of what running such an enterprises entails.  The first batch of entrepreneurs has started their journey.

And now they have embarked on their search for the next generation of entrepreneurs (read more here).

I will be watching them closely in the hopes of applying learnings from their efforts towards the agri-sector platform that I’m launching.

Another study on entrepreneurship – from the US

Quoting from David McKenzie’s Development Impact blog:

Rob Fairlie, Dean Karlan and Jon Zinman presented preliminary results from a long-term evaluation of the Growing America through Entrepreneurship (GATE) business training program in the U.S. This is a quite large randomized experiment, with 4200 participants getting randomly allocated into equal groups of treatment and control – with the treatment groups getting classroom training and individual counseling on setting up and running a business. A very nice feature of the study is that follow-up surveys were conducted at 6 months, 18 months, and 60 months, allowing short and medium-term outcomes to be measured.  The program seems to have sped up the rate of business start-ups, especially among the unemployed, but by 5 years those who participated in the program were not any more likely to be owning a business, and the program showed no significant impacts on sales, employment, or other business outcomes. Fairlie at all look carefully at heterogeneity of impacts, attempting to test whether particular market failures might justify the program for particular groups, but don’t find much in the way of heterogeneity of effects.

There are interesting statistics collected by the Kaufmann foundation that I’ll dig up for comparison…

Does business training actually help? Results of a recent study

I have been involved in designing and delivering CREAM, a training course on business management for social enterprises in rural India. The participants in the course are entrepreneurs, consultants or NGO staff involved in businesses such as farming cooperatives, and smaller micro-enterprises such as tailoring garments, kirana shops (small provision stores), coconul oil extraction, etc.

So a recent study on the efficacy of training caught my attention.  The study measured the impact of (primarily) financial training on micro-enterprises in Bosnia.  Though the content of our CREAM course is broader than the topics covered in the study, it is worth looking at the results of the study and compare them with CREAM experience.

THE STUDY: “The Impact of Business and Financial Literacy Training for Young Entrepreneursin Bosnia-Herzogovina by Miriam Bruhn and Bilal Zia

Randomized evaluation of a business and financial literacy training program for young entrepreneurs aged 18-30 was conducted in Bosnia and Herzegovina. The sample consisted of 445 loan clients of a microcredit organization who either already owned a business or had taken out an exploratory business loan.  On average businesses in the study had ~2 employees, perhaps slightly larger than the typical single-person micro-credit initiated enterprises in India. The training course covered basic business concepts and accounting skills, as well as investment and growth strategies, with a particular emphasis on the importance of up-front capital investment.

RESULT 1: Financial literacy training does not seem to affect business start-up or business survival rates.

The authors conclude that: “Although training programs could form an important part of policies to promote firm growth, lack of access to finance, for instance, may be a much more important factor in business development.”

Based on my experience in training I would go a bit further:  Financial literacy focused training alone cannot not ensure that the entrepreneurs understand the viability of business ideas.  If you decide to start a subscale paper-cup production business, it will fail regardless of your ability to create a P&L or invest capital wisely.  So while financial literacy may be necessary, it is not sufficient to ensure firm survival.  Similarly financial literacy alone cannot increase the likelihood of starting a business by raising a would-be entrepreneur’s risk appetite or increase access to capital or help him/her identify a business opportunity.

In our course CREAM, we offer a module on business viability to help entrepreneurs understand the various factors that affect the likelihood of success of a business.  If the objective it to increase business survival rate, something like this should form one of the several critical building blocks in the training, shouldn’t it?

RESULT 2:  “Training clearly has positive effects on businesses that do survive, encouraging them to implement production processes and make investments that they otherwise would not have.”

In particular, the surviving businesses who received the training were more likely to:

  • implement new production processes;
  • inject new investment in business;
  • separate business and personal accounts;
  • refinance existing loans for more favorable terms, and negotiate a larger number of loan installments
  • exhibit greater improvements in sales and profits, though this was only the case for those with higher ex-ante financial literacy.

In our two years of running CREAM training programs, we have also gotten similar feedback from entrepreneurs about specific practices they have started implementing in their businesses.

The authors conclude that “Policymakers might therefore consider targeting business training resources towards existing firms, with an emphasis on particularly teachable behaviors.”

In light of what we see in our CREAM work as well as research like the above, it is surprising that so few of the entrepreneurship promotion programs in India make training an integral part of their programs.  What is even more surprising is that none of them measure success in terms of success of the enterprise itself, preferring to base their “impact assessment” purely in terms of # of enterprises initiated/financed or – in rare cases – increase in incomes of entrepreneurs (which includes income from all sources since typically micro-entrepreneurs don’t bother separating finances from multiple income generating activities).

More on models for measuring success of micro-enterprises in a later blog…

Interested in teaching business to NGOs and social enterprises?

I have written previously about my experiences in teaching business management to rural entrepreneurs.  This initiative is now growing and is looking to grow the faculty pool.  We are looking for experienced business professionals who are passionate about helping rural businesses succeed. If you would like to join our pool of faculty, please contact me and I can provide more information.

Converting Artisans to Producers

So far in my blogs I have highlighted some of the things that have been going wrong with enterprise promotion efforts at the base of the pyramid.  In this blog, I will discuss some of the things that need to be done to correct this.

For any enterprise to be sustainable (viable) in the long run, there are at least four things it must get right.


Unlike a ‘craftsman’ or ‘artisan’ approach, a scale enterprise must have replicable products and operations, which means it must have processes.  This requires shifting our mindset away from an idealized notion of artisans creating one-of-a-kind products and towards a collection of skilled people producing 1000s of units of the same product.  In other words, this requires a process orientation – one of the biggest contribution of the Indian IT industry to software development was to take the “black-box” of software development and convert it into a repeatable process.

A garments stitching unit may take an assembly-line approach with one worker stitching all the sleeves, another the necklines, etc. A pottery unit may have one worker make handles for cups while another makes the cup.  Periodic rotation of these duties can ensure that all workers develop a complete set of production skills (and avoid boredom).  Being called a ‘producer’ or a production worker, may not be as glamorous as being called an artisan, but it may generate more income more steadily in the long run as the business grows.

And it goes without saying, the process orientation should be adopted together with proper production  management tools, record-keeping and improvement techniques that help the organization continuously improve productivity and quality of its products.  (More on this in later blogs.)


Social enterprise founders and proponents talk about providing market linkages.  And unfortunately, they do exactly what they say – provide market linkages, but often without market understanding.  They offer various means of selling products – exhibitions, single-brand retail outlets, multi-brand retail outlets, etc.  Many of them also help with product design inputs.  But in most cases, it is based on the personal likes/dislikes of the founders of these organizations. But hardly any of them have spent time to systematically understand the customers of these products.  Why does someone like me like to buy hand-made products?  Is it because of comfort, is it because of style? Is it because of some do-good-feel-good ideology?  Why do I buy niche brands instead of buying similar items in mainstream stores? Consumer choices are not an easy thing to study and understand, as any market research professional will tell you.  But at least there should be some effort to understand customers, if not by the producers, at least by the providers of the so-called “market linkages”.


During my first course in accounting, all the credit-debit stuff seemed contrived (after all, I was training to be a physicist).  When I started working with a small start-up and later with large corporations, I understood the real meaning and value of financial statements and financial analysis.  But we expect a newly formed ‘group enterprise’ start managing its finances with the help of a well-intentioned (but untrained and inexperienced in finance) NGO staff member.  The answer is obvious.  Social enterprises, whether the ones run by producers themselves or the ones that act as intermediaries (market linkages), need a crash course in financial management of their business.  Accountants can be hired. But using financial information to make sound business decisions is something the entrepreneurs have to become good at, if they want to survive in the long-run.


There are a few different models of how social enterprises are structured.  In some cases, the enterprise simply sources from individuals who produce merchandise at their homes.  In some cases, “group enterprises” are formed, where the producers are grouped into 5-10 people each, giving them the responsibility of running their own operations.  In other cases, groups are formed first and a production activity is assigned/decided later.  In rare cases, single-owner proprietorships are formed.  There are other models that are hybrids of various combinations of the above.  In some cases, the enterprise decides to do away with the headache of dealing with individual producers by working with NGOs who do the coordination of individual producers.

But regardless of the model of “enterprise promotion” rarely is the commercial activity accompanied with skill enhancement or infusion of new technology.  In fact, more often than not, there is perverse pleasure taken in talking about preservation of traditional methods of production or idyllic notions of production done at home.   In these cases, the only thing and really the only thing that the intermediary enterprise does is to act as a buyer of merchandize that may or may not have been sold otherwise.

Why am I talking about this in the context of people management?  Because people management is not literally about managing people but helping them improve their skills (and therefore their earning potential) over time.  In mainstream industry, any organization that doesn’t offer its employees to earn more and more with every passing year sees high attrition.  Generally, the higher income is earned through improved skills.  In handicrafts enterprises, in the absence of up-skilling through better process or technology or diversity of experience, the producers are left with the same skills they started with.

So the idyllic notions of preservation of traditional methods of home production run counter to the premise behind social enterprises – to increase incomes of the poor over time (not just once, but repeatedly).

The solution is obvious.  Invest in training for improving production skills, in financial skills (to help make better financial decisions), in market skills (so that they understand their customers and their needs better and know how to handle competitive situations), in business management skills (so they can run their own production centres and the well meaning social enterprises are no longer needed).  Invest in infusion of technology where appropriate.

If enterprise promotion efforts take these aspects account, they should go a long way in helping their enterprises become sustainable in the long run (assuming, of course, that the business opportunity they are pursuing is real and profitable in the first place – and not a micro-scale paper cups business!)