Even if e-learning initiatives are well-aligned with the business goals, there is no guarantee that they will have a real business impact unless this is explicitly considered during the initial considerations when developing an e-learning solution. Business impact shows up as revenue, earnings, growth, and sustainability, and can appear as hard and/or soft benefits.
Hard Benefits: Benefits are easy to quantify in dollars, such as a reduction in expenditures for:
Travel
Classroom instructor
Facility and equipment
Training administration and course logistics
Course documentation
Training function
Course development and maintenance
And there can be improved bottom-line results, through increased:
Productivity because of reduced time away from the job
Sales volume because of reduced time away from the job
Revenue from customers who are take e-learning, or who enjoy and purchase more products due to e-learning available to them from the company
Soft Benefits: These benefits are more difficult to quantify in dollars, for example:
Faster time-to-market than competitors with new products and services, with a related impact on revenue and market share
Increased sales volume
Strengthened brand identification
Just-in-time training for global workforce
Reduced costs because of improved risk and project management
Improved employee morale and reduced turnover rates
Enhanced usage of implemented technologies and processes
Improved level of customer service, satisfaction, and retention
Better teamwork
Better educated employees, customers, and suppliers
Expanded access to learning and development of new skills
Leverage of pre-meeting time through virtual learning and collaboration
Help sales and marketing workforce quickly acquire common knowledge of semiconductor technology, processes, and company solutions (STMicroelectronics)
Provide critical methodology skills for all practitioners in a globally consistent matter (Deloitte & Touche Tohmatsu)
Increase customer value by providing quality service and information (The Prudential)
Reduce cost of training by decreasing the number of total instructor hours, while maintaining coverage on the sales floor (The Home Depot)
Provide excellent customer service in an increasingly complex financial services market (American Skandia)
Maximize and leverage meeting results by developing knowledge of corporate participants prior to the face-to-face event (INSEAD OnLine)
Give veterinarian more time for field calls (The Iams Company)
However, our new digital world demands different measures and produces different results. Companies have found that the application of successful e-learning is not necessarily driven solely by cost savings, but by the business impact of the dollars spent, as is illustrated Figure 2-2.
Figure 2-2: Business Impact of an e-Learning Solution
This example shows that for the same dollar investment, the number of employees benefiting from the training is 10 times higher, and everyone globally has immediate access to a large and varied learning library that can be utilized at any time and from any place.
Both hard and soft benefits gained through e-learning initiatives improve stakeholder value. Research has provided evidence that companies who invest relatively more in training and learning than their competitors enjoy higher share valuations. Although it is difficult to prove a direct correlation between these two factors, there is definitely a link between the support of a learning culture and share value. In addition, as demonstrated by the case organizations in this Fieldbook, e-learning has been accepted by these leading companies as an integral component of a viable learning strategy.
In most organizations, e-learning has moved beyond the pilot or infancy phase, and significant investments are needed to build and strengthen the e-learning infrastructure, courseware, and other e-learning solutions.
Increasingly, the decision-makers for e-learning are members of the C-Suite, the CEO, CIO, CFO, CMO, and CTO. As a result, these executives will be engaged in assessing the investments, benefits and business impact of e-learning. This places an increased emphasis on accurately and explicitly measuring the impact before and after the e-learning investments are made.
The effects of learning can be measured at different levels. The best known learning evaluation framework comes from the work of Donald Kirkpatrick and Jack J. Phillips. They describe five levels of evaluation important to all learning investments. Jack J. Phillips’ Level 5 Evaluation, Return On Investment (ROI) will be discussed in this chapter. The entire framework and the other levels of evaluation are described in detail in Chapter 6.
Reduced the learning duration for each learner from 8 hours to 2.5 hours
Increased learner retention and/or exceeded the knowledge gained from the current program
Eliminated travel
Reduced the number of days the sales force was out of the field
Gained additional time for training in advanced topics
Improved the bottom line through related efficiencies
*See Chapter 16,The Iams Company
An e-learning ROI can be calculated by dividing the net program benefits by the e-learning program costs. (See Figure 2-3) When an estimated ROI evaluation for learning has been established, it can be compared with other investment options.
Figure 2-3: Calculating ROI for e-Learning Investments
Although, there is significant value in applying ROI calculations, it is found that in most companies it is not applied to learning investments. The most important reasons for lack of ROI calculations in human resource development initiatives include:
Lack of experience with ROI calculations, with a related lack of skills and/or insufficient staff to conduct ROI
Lack of ROI standards or methodology for learning
A business case that includes hard dollar savings alone, combined with the expected soft benefits, has been sufficient so far to gain executive buy-in and investment approvals
Difficulty in assigning dollars to soft-business benefits
Assumption that estimating ROI is time-consuming and expensive
Executives have not requested a ROI because is has been a traditional aspect of the investment/budget process for education and learning.
Among publicly traded firms, those in the top half (who spend proportionally more on training) have a total stockholder return 86 percent higher than firms in the bottom half.
A firm's employee investment in education and learning is an important predictor of its stock price in the following year. The investment is at least as important a predictor as traditional values, such as R&D expenditures
Sales per-employee in firms that invest an above average amount in education and learning are 58 percent higher than firms that make lower investments.
Source: From e-Learning to Enterprise Learning, Deloitte Consulting Research 2001
The most important benefits of using ROI are that this approach[1]:
Demonstrates the contribution of selected programs
Earns the respect of senior management
Gains the confidence of clients
Improves learning and the performance improvement process
Develops a results-based approach
Alters or eliminates ineffective programs
"The fears and misconceptions may often act as barriers, but they do not have to inhibit ROI application and implementation. The ROI methodology will require additional time, costs, and new skills to bring change to the design, development, and implementation of solutions. But when the payoff is considered, the benefits exceed the investment, usually by large amounts."
Patricia Philips,The Bottom Line on ROI, 2002
Rapidly, the competitive and cost-focused business environment is demanding increased accountability from all learning functions, requiring them to address both the business impact and the ROI of learning in their organization. Organizations that want to change from the expense/cost mindset to an investment mindset must make the effort to quantify the soft-business benefits and measure and explain the ROI for important e-learning initiatives.
[1]Philips, P. P, The Bottom Line on ROI, Atlanta: CEP Press, 2002.