How to Train Entrepreneurs? Don’t Overload Their Cognitive Bandwidth

Less is more when it comes to business training for entrepreneurs, especially for women whose cognitive bandwidth is already overtaxed by business and household demands.

How to Train Entrepreneurs? Don’t Overload Their Cognitive Bandwidth

Fifty years ago, the Apollo 11 moon landing captured the world’s attention. Monumental events like this aside, it is hard to catch and maintain our undivided attention amid competing tasks, thoughts, and tweets. In fact, our brains naturally have limited bandwidth for attention-demanding activities.

Here’s a quick example. Have you ever been driving and had to pause a conversation with a friend in the passenger seat in order to focus on merging onto a busy highway? This was your brain’s attention budgeting in action. Because the two activities requiring attention interfere with each other, it is challenging to successfully complete both simultaneously, that is until you stop talking and focus on the task at hand.

In other instances, this interference is more subtle. Take small business owners, for example. They make constant decisions, such as how much inventory to purchase or where to get better terms for a loan. They may also worry about things like power outages and paying bills, while also dealing with the everyday issues of family life. Their cognitive bandwidth is likely to be overtaxed. In general, our attention selectively focuses on only the most pressing needs, often ignoring important tasks and decisions to be made.

Putting simple rules to the test

With these limitations in mind and inspired by the work of Drexler et al. (2014), IDB Lab, together with IDB Invest, tested a business training approach with 2,400 microentrepreneurs in Ecuador that imparted simple rules of thumb requiring minimal cognitive effort to learn. For example, instead of teaching entrepreneurs how to calculate cash flows, they were taught basic rules that led to the same result—an understanding of how to track their cash movement and the ability to plan accordingly.

The results of the pilot are very promising. Entrepreneurs who were invited to participate in this training increased their sales by 7 percent and profits by 8 percent on average, compared to the group of entrepreneurs who did not receive any training. These gains are due to entrepreneurs adopting the few simple rules they were taught in large proportions, including tips about how to better manage inventory.

Women drive positive results

Surprisingly, we found that women adopted best practices more than men, and consequently saw larger gains in both sales (10 percent) and profits (10 percent), compared to women in the group that was not offered any training.  We suspect that these results are due to women carrying heavier cognitive loads than their male counterparts, making it easier for them to adopt the rules of thumb..



This intuition bears out in the data we collected. Women in the sample reported dedicating just as much time to their businesses as men did, and more time to unpaid work such as childcare. It is also likely that the lion’s share of daily household planning and management work, from organizing birthday parties and grocery lists to making doctor’s appointments, falls to women, further loading their mental bandwidth. Despite advances in recent decades regarding gender equality, women are still expected to take care of most unpaid household work. For example, in select Latin American countries, women spend between 1.7 and 3.5 times more hours per week on unpaid household work than men.

Why do gender differences in cognitive load matter?

These gender-driven results are striking because most training programs, at least those that have been rigorously evaluated, have difficulties generating positive impacts on entrepreneurs’ sales and profits, especially in the case of women entrepreneurs.

A solution to this problem may be very simple: be mindful about gender differences in cognitive load and act on them when designing interventions. Our pilot was limited to training, but we can see how cognitive load can affect women’s interactions in a world that offers more paid work opportunities, but still expects them to be responsible for the bulk of unpaid household work.

For financial institutions seeking to reach more women-led SMEs, companies trying to attract and retain more female employees, and for gender mainstreaming efforts more broadly, this is something worth paying attention to.■

For more information, see Less is More: Experimental Evidence on Heuristic-Based Business Training in Ecuador, part of IDB Invest’s Development through the Private Sector Series, or a brief summarizing this study.

Authors

Irani Arraiz

Irani Arráiz es economista en la División de Efectividad en el Desarrollo de BID Invest. Sus áreas de experticia incluyen evaluación de políticas y

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