The Learning Curve

Exec SummaryThe learning curve is real. It maps how quickly task efficiency can be gained by repeating that task. This can be used to predict the cost of introducing a new task to a workforce for cost-benefit analysis.

Maybe it’s because I’m an engineer, maybe it’s because I’m just a little bit crazy, but I love assembling my own furniture! Ikea is like “big-boy Lego” to me. Opening the boxes, reading the instructions, putting the pieces together, swearing as I drop the side of a wardrobe on my foot, etc. – it’s all part of a process of creation. I feel a lot more attachment to furniture in which I have taken part in creating.

In fact, when I had moved home from Germany and was looking for a job, my parents’ new bed was delivered to the house. It was a complicated bed with remote controls for raising and lowering the head and legs. I opened the boxes and assembled the bed in about an hour. An hour after that again, the doorbell rang. It was the bed-assembly guy. I had to explain that I’d done his work for him.

Having just moved to a barely furnished flat in London, I’ve been assembling quite a bit of Ikea furniture this week. One of the pieces of furniture was a sideboard for the hall with four drawers. These drawers were the easiest to assemble while sitting down, so I started with them. The first drawer was a bit slow, because I had to decipher which screws, etc. to use. For the second drawer, I had the pieces of wood lined up in the correct places, and the bags of screws to hand. By the third drawer, I had all of the required screws out of the bag up front, and was motoring along quite happily.

Learning Curve” is a phrase that we use in everyday language. If we say that something has a steep learning curve, we mean that it is difficult to learn, or takes time to learn. However, the learning curve is a concept used in management accounting and economics for describing the efficiencies gained by people who are doing the same task over and over again. The curve itself is a mathematical model that graphs some measure of productivity vs time (or the number of times the task has been performed).

What the learning curve boils down to is how quickly your efficiency in doing a task rises as you repeatedly do that task. On the job learning, so to speak. Simpler tasks, like building Ikea drawers, are a lot faster after only one or two iterations of the task. More complex tasks, such as partitioning a hard-drive in order to install a computer operating system, require more learning and, therefore, it will take longer to see the same efficiencies.

This relationship between productivity and time is the learning curve for that particular task.

But why is it interesting?

One reason that it is so useful in management accounting is that it can be used to predict the productivity of a workforce when a new task is introduced. This productivity information can, in turn, be used to see if profits will outweigh costs in the long run and, ultimately, if that new task is worth introducing in the first place.

In other words, it can be used to avoid costly mistakes – and if you’ve every worked in sales, you’ll know that the primary concern of most managers is to not be seen to make a mistake (especially a costly one).

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