How to calculate the ROI of your eLearning courses?

Gary Wilber, CEO of Drug Emporium, Inc. said:

“The expense isn’t what it costs to train employees. It’s what it costs not to train them. You realize that as you grow.” 

This statement aptly explains ROI, Return on Investment. When developing an eLearning course from scratch to its periodic maintenance phase, an organization has to allocate a certain budget. Depending on the nature of the eLearning training, the cost varies from a few hundred to a few thousand dollars per course. ROI is demanded by senior managers who sanction this budget. This is measured in both tangible as well as intangible terms.

Tangible terms are the profits and revenue generated through the improved performance of the learners in the work environment. Intangible terms are the improved communication and execution of business protocols by these learners. Senior managers need reports with such details to appreciate the efforts behind an eLearning course.

Justifying an ROI is important, in order to continue developing eLearning courses for your organization’s learning management system. ROI, when demonstrated properly, leads to a definite intellectual learning organization.

Why is it important?

Organizations determine clear profit margins before investing in a venture or a project. Investing in organizational learning through e-learning training development is a significant investment. ROI for eLearning is measured in short-term as well as long-term basis.

The true effects of learning are seen over the years when knowledge is internalized, realized and shared down the corporate chain. ROI on e-learning enables the senior managers to successfully implement business strategic and operational goals. Any new development, research, patent, copyright or business practice needs to be disseminated through e-learning. The benefits derived from this knowledge generation can be seen in the form of currently implemented business strategies.

According to an article in eLearning industry: “In conclusion, it is important to understand that all eLearning programs must be measured in terms of ROI. Not only should eLearning specialists take into consideration the investments such as personnel, technology, content, and hidden costs, but they should also look at benefits associated with eLearning such as flexibility and reduction of travel costs. By accurately calculating the cost of a training program, eLearning professionals will be able to easily justify the investment in the program and decide if eLearning is ultimately a viable solution.”

What to take into consideration while calculating the costs

• Personnel

  Personnel costs calculation deals with calculating the internal and external costs associated with e-learning development. Personnel costs are unpredictable. As the project proceeds, you may hire programmers and graphics artists to complete some scenarios or pages. You may also need copyright permissions of some resources.

• eLearning Technology

  With a plethora of innovative tools, organizations need to select learning solutions that are broadly classified as, Application tools, Virtual Classrooms, Learning Management Systems and Remote Learning Infrastructure. Apart from purchasing new infrastructure and tools, existing systems may need to be refurbished to support the new one, for example, replacing existing laptops/tablet devices and networking/collaboration devices. If the organization has an upgraded communication and collaboration system and network in place, new applications would only need custom coding for a seamless integration.

• eLearning Content

  Converting pdf and ebooks into eLearning content is relatively easier and less time-consuming than building content including multimedia (audio, video, images, diagrams). For every layer of scenario-building and interactivity, you are looking into more development time. Also, if off-the-shelf eLearning programs do not integrate with your existing learning management system, modifications and coding might be required, which will lead to more effort and time.

• Hidden Costs

  When deciding to cross-over from conventional learning to eLearning, be prepared for hidden costs like personnel disruptions, resource reallocations, existing project deferrals, (short term) team realignments.

What to take into consideration while calculating the benefits

• Travel savings

  Let’s start with the most aggravating travel experience: driving in snow/sleet or rain to get to the organization’s training site. Now, this is not a very motivating thought. If anything, driving in inclement weather is a prime precursor to procrastination! Imagine the relief when your trainees learn that the course is mostly online with a few on-site meetings. Did we mention the escalating gas prices? And what about the home-career balance ratio? Your eLearning course is guaranteed to eliminate travel expenses, as well as the associated emotional turmoil.

• Trainer cost savings

  Have you ever been in a situation in which you were attending a lecture, perhaps in college and were so distracted that you had a small voice recorder record your instructor’s lesson? Were you struggling to catch on lost sleep? Were you working on another assignment? Such is life. And with current times, this phenomenon is more common. As an instructional designer, you have the opportunity to save time and effort of facilitators who would need to work in shifts to repeat sessions at different times. Weather-related cancellations or other unavoidable reasons can also waste time and effort as well as money invested in administering a course in a live environment.

• Logistics and facilities

  Live training can be fun but it’s expensive too. Consider adding the “fun” element in the on-site meeting sessions of your eLearning course. Not only will you save your organization power and data resources, you will also be able to engage learners in a more meaningful and constructive way. Other exhaustible stationary used to demonstrate learning materials in a live environment can be replaced by interactivity and multimedia in an online learning environment. Audio, video and graphics utilized in a live environment can be used effectively in an online training environment. What’s more, your learners can repeat the session as many times as they want, just like you could play your instructor’s voice when you were ready to listen!

When it comes to investing in training, some employees and managers still demand justification. There may be some resistance and hesitation to purchase new training, especially if the previous one failed to impact employee performance or behavior. This attitude highlights the lack of a training strategy. Developing and establishing a training strategy for your organization will create fewer setbacks and roadblocks for you. When you have a training strategy in place, selecting or building the desired course is a breeze.

However, calculating the ROI (return on investment) requires a bit more planning. When deciding to buy off-the-shelf training or building custom training, use these pointers to justify your ROI:

• If leaning on off-the-shelf training material, ask yourself: we are in the same business as our competitor. If we use generic training materials we may lose our edge.
• If you have a certain way of doing things, consider custom building training materials.
• You can also purchase off-the-shelf training and add your examples and case studies.

Building your own training usually saves money.