As a Learning and Development professional, you probably get asked to justify the cost of your eLearning expenses. While you can leverage assessments to measure the knowledge or skills that employees gain after completing an eLearning module, it can be more difficult to demonstrate how that training improved productivity or positively impacted the company’s bottom line. For those of you who are tasked with quantifying your training program’s return on investment, this post will show you how to leverage your eLearning investment for business growth.
Before you even get to the point of needing to explain ROI, you might need to justify with business partners why you want to use eLearning in the first place. Don’t forget to mention these benefits. For starters, it’s a practical and cost-effective way to replace or augment your instructor-led training. eLearning saves your organization money by eliminating travel, meals, and other expenses associated with face-to-face training. It also makes organizations more efficient by reducing the amount of ‘seat time’ needed to train employees, maximizing the potential for on-the-job productivity.
In addition to that, you can count on the training that you deliver via eLearning to be consistent in tone and content. You never have to worry about different trainers in different locations staying on message; eLearning ensures that all learners receive the same information in the same sequence with the added benefit of providing an option to track completion and assess what employees learned. Organizations with distributed workforces benefit the most by being able to deliver eLearning anywhere, at any time, and at any pace.
Skilled practitioners know how to make eLearning interactive, which results in making your training materials “stick.” eLearning that appropriately leverages animation, games, stories, or other interactivity engages—and, in some cases, entertains—learners, which increases the employee’s retention of the training content and satisfaction with the training experience.
eLearning Use Cases
After you establish with business partners the value of eLearning as a training method, you can make a use case for eLearning in your organization. For example, you can leverage your eLearning investment by delivering an online curriculum that incorporates topics that impact your organization’s bottom line. These topics typically fall into one these categories: new products or product enhancements; technology; compliance; and HR, leadership and supervision.
eLearning is a great way to not only provide employees with new skills and knowledge, but also to update skills and knowledge they already have. You can deliver it in just-in-time chunks—such as microlearning—to fill skill gaps and provide the practice needed to become competent on the job.
eLearning can support a diverse workforce at different stages of their careers. eLearning provides performance support to seasoned employees who must learn how to work with new and emerging technologies as well as also leverage it to quickly train entry-level customer service representatives on product features and benefits, so they can handle customer questions and answers. Whether seasoned or new, you can use it to update your geographically distributed sales reps on product changes or enhancements.
eLearning can play a significant role in your business strategy. If your organization wants to grow and gain market share, you may see your employees as a key differentiator and invest in their professional development. eLearning is an affordable way to offer a wide range of continuing education topics for employees to consume as their schedule allows. By selecting eLearning topics that align with employees’ professional growth goals and your business growth goals, you enable employees to exceed performance targets for themselves and your business. This low-cost learning approach helps you retain talented employees and limit expenses related to employee turnover.
Maybe the business case for eLearning makes sense to you, but you want to know in literal dollars and cents what your return on a given eLearning investment will be. Here are three questions you can ask to determine if an eLearning module—or an entire online curriculum—will give you a return on your investment:
- How much is the initial cost of the eLearning investment?
If you haven’t begun researching costs, ask a colleague in the industry how they leverage online training and what they budget for it. You can also contact firms like ours to help you diagnose your learning challenge and price a solution that fits your audience. For a quick estimate, click here.
- Will the employee productivity resulting from this eLearning improve cash flow?
If the answer is no, consider whether this training helps you achieve other goals; e.g., compliance. If the answer is yes, gather data that will help you quantify employee productivity in dollars.
- How much will it cost each year to maintain the eLearning investment?
To figure this out, consider whether you will host courses on a learning management system or some other platform. If so, determine the cost associated with using that platform. Also consider how often the eLearning needs to be updated, and factor in those potential hours.
When you’ve answered these questions, use this formula to determine whether the eLearning will support business growth; that is, provide a return on investment:
You can see that if the cash inflow minus the outflow is a positive number, then the eLearning investment will support business growth. If this results in a negative number, it will not support growth.
Let’s look at how this works using a real-life example.
ROI for New Hire Training
Let’s say XYZ Company plans to hire ten new employees each year. The company’s total cost for each new hire is $96,000/year (or $8,000/month). The ramp-up period for new employees at XYZ Company is equal to the time it takes them to reach 100% productivity.
The cost of the custom new hire eLearning curriculum they want to invest in is $50,000. They estimate their annual cost to maintain this training will be $1,000. In this scenario, with no online training program it takes employees three months to reach 100% productivity. With eLearning included in the curriculum, the XYZ Company estimates it takes one month to reach 100% productivity. Therefore, the eLearning creates two months of productivity per new hire for XYZ Company.
To keep our example simple, let’s estimate that two months of productivity equals two months of salary, or $16,000. If XYZ company delivers this training to ten new hires, the annual cash flow from employee productivity will be $160,000.
When we plug these numbers into our formula, we discover that even with the $50,000 price tag for eLearning, XYZ Company still comes out $100,000 ahead in year one.
If they hire ten new employees next year, this number will be $150,000 because they already paid for the eLearning.
Gathering the data for these formulas can be challenging, depending on the size of your organization; however, it’s worth the effort if that data helps you achieve a positive result and sets you up to successfully justify the investment to business leaders.