Frequently Asked Questions
8. How should the issue of ROI (return on investment) be approached?
In thinking about e-learning ROI it is useful to have two perspectives in mind: operational and strategic. Generally speaking, the operational returns are much easier to quantify. But it is in the less quantifiable strategic domain that the really major payoffs can occur. The challenge in making your case for e-learning is to lever as many strategic opportunities as possible while demonstrating operational benefits at every stage of your project. Many organizations driven by short-term cost pressures tend to develop an exclusive focus on operational issues, usually at the expense of developing longer-term capacities that may be crucial for adaptability, survival and new growth.
To illustrate, here are some examples of operational and strategic benefits that need to be calculated as part of the ROI equation.
- Operationally, the introduction of e-learning can usually be shown to deliver a short-term demonstrable return, e.g. as new forms of education and training are introduced in place of more expensive classroom-based instruction, with major time savings for participants and associated travel costs. In many instances it is possible to demonstrate major productivity gains from the introduction of an online learning process that leads to improved customer service, faster decision making, reduced R&D cycles etc.
- Strategically, well designed e-learning projects based on performance learning principles can do much to increase the capabilities and adaptability of employees, leading to reduced stress, higher competence and effectiveness and improved work satisfaction. The trick in demonstrating tangible ROI is to be able to link specific competence development to individual or team action projects, using e-learning to provide just enough, situation based learning at the point of need, assessing results in terms of improved individual and team job performance. The process cannot be made an exact science based on causal evidence -- e.g. that an x% increase in capability has led to y% increase in performance because so many contextual variables are likely to influence final outcomes. But, if one is using an action-driven performance based approach to competence development, general results are clearly demonstrable, making this kind of strategic investment in people and capability a sound business decision, not just an act of blind faith.
One of the key means to ensure a positive and clearly demonstrable ROI on e-learning is to have the right balance between infrastructure and direct project application costs so that one can seek a relatively short-term payback. Many organizations fail to do this because they allow technology, learning management system and other infrastructure costs, including the side costs associated with the planning process itself, to escalate out of control, making it virtually impossible to demonstrate a positive return in a reasonable period of time. This makes the ultimate financial decision-makers extremely nervous, and justifiably so. Some vendors argue that a long-term view is essential and that it is unrealistic to expect returns on e-learning in less than 5 years. NewMindsets disagrees. With appropriately constructed e-learning projects based on performance leaning principles that are deliberately constructed to provide operational as well strategic ROI, a positive return within a one or two-year period can be reasonably expected. By piloting with high leverage projects that can demonstrate a clear return and then driving out to the larger organization, implementation can be scaled and the investment-return calculation made extremely attractive.
See the NewMindsets white papers "Blended Learning Models: Four Levels of Integration and Impact"
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