First came the articles, then the books, and now I see that an entire conference is devoted to the ROI of training. Obviously we’re seeing a backlash against the orgy of IT spending of the late 1990s, and against e-learning initiatives that fell short of expectations. Personally, I think it’s all hype, and I’ve had enough.
First, many senior executives don’t care about ROI. In Jack Welch’s book, “Straight From the Gut,” he tells of his decision to invest millions in GE’s new Crotonville training facility, even while undertaking massive layoffs. He didn’t have an ROI spreadsheet to tell him training was a good investment; he just knew that investing in talent was critical to GE’s future.
Second, ROI is an imperfect science that often involves making educated guesses at potential savings and gains. Senior executives know this, and they also know that there are many variables that can’t be captured by a formula.
Third, ROI “guesstimates” are often a cop-out for tougher measurements of results. How about measuring employee engagement scores before and after management training, or doing pilot studies of sales training programs that measure closing ratios and time-to-close?
Making the CASE for e-Learning
E-learning at its best is closely aligned with an organization’s strategic objectives. And the more strategic it is, the harder it can be to measure its benefits. Rather than return on investment, the emphasis should be on “total business value added,” which includes likely but intangible benefits. C-level executives do care about cost savings, but they care just as much about sales, service, brand strength, speed, innovation, employee retention, access to information, innovation, safety and alignment.
I have to confess that I’m not really against cost-benefit analysis. However, different kinds of e-learning investments require different kinds of justification. When thinking about e-learning investments, remember CASE (content, automation of process, synchronous learning and experimentation).
Content projects typically involve the licensing of off-the-shelf courses or the development of custom courseware. For this type of e-learning investment, ROI is a good metric if it will really replace classroom-based training (due to elimination of travel, time away from jobs, etc.). However, the improved behaviors that result from the training, and the likely business impact, should also be part of the business case.
Automation projects are efforts to digitize manual processes. This includes learning management systems and testing systems that replace the manual scheduling, testing and tracking of learners. Often these projects require increases in head count rather than reductions, but executives will see value in improved access to information, ability to zero in on skill gaps and an improved employee experience.
Similar to the content argument, an investment in a synchronous learning system (e.g., Centra or Interwise) should be justified if it will really reduce travel associated with live meetings. However, improvements in communication, organizational alignment and speed are also high-value benefits of this technology.
Finally, experimentation includes projects like home-grown knowledge management systems, just-in-time learning objects, performance support tools or other things that don’t fit into classic “defined-problem” e-learning solutions. While this category will be hardest to justify, there are surprise results that might lead to competitive advantage.
ROI analysis effectively minimizes the risk of failures and financial waste, but it also reduces the chance for innovative breakthroughs and tough-to-measure results. By only focusing on ROI, CLOs may miss some tremendous opportunities to contribute to their organizations’ strategic goals. To gain project support, an e-learning plan should include ROI estimates as one dimension, while focusing on overall benefits to the company.
Kevin Kruse is a principal with Kenexa, a human capital management consulting firm. More information on “Making the CASE for e-Learning” can be found at www.e-learningguru.com.