Metrics & ROI
Internet Time Group helps companies get the most out of eLearning.
eLearning infrastructure decisions are climbing up the corporate ladder. A few years ago, eLearning was pigeonholed as a cheaper, faster way to train employees. By default, eLearning decisions fell to the director of training or HR.
Recently, functional managers have begun using eLearning to meet business objectives. Managers look beyond employees to customers, suppliers, and distribution channels -- everyone benefits from seeding eLearning throughout the value chain. This is where we are now, with eLearning decisions seesawing back and forth between can-do functional managers anxious to get on with it, and CIOs/CLOs who want to go the next step to enterprise solutions. Still rare but perhaps the next step in this evolution is the CEO who looks at eLearning as a competitive weapon, the way to create a nimble organization, improve customer service, move quickly, and stay ahead of the pack.
Traditional ROI has suckered corporations into evaluating learning initiatives on a project-by-project basis, and this has lead to supporting each new approach as if it existed in isolation. The Meta-Learning Lab is developing ways to improve the overall learning process.
Take the old cliché of "Give a man to fish and he won't be hungry today. Teach a man to fish and he will never be hungry again." (Excuse the sexism; this dates back several thousand years.) The Meta-Learning Lab's goal is to teach fishermen how to improve their catch.
Scientific rigor: The Baloney Detection Kit
How to draw boundaries between science and pseudoscience, or between useful metrics and pure hype. From Scientific American
1. How reliable is the source of the claim?
6. Does the preponderance of evidence point to the claimant's conclusion
or to a different one?
eLearning and Cost-effectiveness
In the June 2001 issue of T+D magazine, Samantha Chapman writes, "The fact is, as thousands of people around the world including myself and my boss learned the hard way, there are few claims as outlandish and as unsubstantiated as eLearning being a money saver." I couldn't resist sending this reply:
1. COSTS ARE NOT THE WHOLE STORY.
Costs are only part of the eLearning equation. The primary advantage my clients attribute to eLearning comes from increasing the top line, i.e. enabling organizations to do things they couldn't do with traditional training.
The cost of eLearning is relative. So long as the bottom line is increasing, organizations shouldn't worry too much about costs.
2. IT'S eLEARNING + ILT, NOT eLEARNING *OR* ILT.
Your article suggests that eLearning is an either/or situation. This is a fallacy. Think of eLearning as supplementing traditional learning rather than replacing it. Only apply e-technologies when the benefits are obvious.
Take prework as an example. Traditionally, prework might take the form of reading material on paper. In today's fast-paced world, the material is often out-of-date before it's read. And whether anyone reads it -- and gets it -- before a workshop is anybody's guess. The eLearning alternative is to post the prework on the web, where it's always current, and require a passing pretest score for admission to the workshop.
3. THE PAST IS A SUNK COST.
When making an incremental decision, count only incremental costs. Most of my customers already have desktop computers, local area networks, and Internet access in place. The money already spent on these resources shouldn't be toted up as an expense of eLearning.
4. THE LARGEST COST OF ALL IS FOREGONE OPPORTUNITY.
Again and again, I've found the largest overall cost of any corporate learning endeavor is the cost of people's time. I'm not talking about salaries and benefits; I refer to the value they would have created had they not been tied up in training. Opportunity cost per hour is not a fixed amount. A salesperson's time during working hours in peak buying season is worth much more than the same individual's time after closing time in non-peak season. eLearning often enables the employee to shift learning to those non-peak hours.
Technology-enabled learning creates value by speeding things up. Business-school professors compare making big corporate changes to turning around the Queen Mary. Turn the rudder and in a few miles, the ship changes course. These days, organizations that lack the agility to turn on a dime can only go about as far as the Queen Mary (which is moored in cement alongside a pier in Long Beach, California.)
Often an e-Learning initiative pays for itself right off the bat by eliminating travel and facility costs, but that misses the point, because in comparison, upside gains dwarf cost savings.
A Fresh Look at ROI -- ROI is relative. Where you stand depends upon where you sit.
Déja vu, 4/01/01
Return on Investment, The Measurement Conundrum, Institute for the Future, 11/99 [no longer on the web]
“Over the next few years, how well and how fast people learn will differentiate the successful from the unsuccessful companies. Past preoccupation with a narrow technical concept of return on investment (ROI) has interfered with the new way of thinking about organizational fitness. The learning effectiveness index of the future will emerge from integrating performance expectations with knowledge development.”
Déjà vu. Last week I was working with the Institute for the Future on what training and education may look like around the world circa 2007. My research led to a on the ROI of training. I was floored, for it felt as if the authors had been peering directly into my skull. These are my memes! I’ll intersperse excerpts from the article (in black) with my comments (in red).
For the past year, I’ve been ranting that knowledge will separate the winners from the losers, that traditional ROI measures the wrong stuff, and that business metrics are the only legitimate measure of the effectiveness of learning. See the transcript of the Return on Investment Roundtable.
“Traditional ROI models will continue to disappear in corporate and executive education and training. They have generally failed as measures of the effectiveness of education and training, except in some specific skills training.”
Sure. But often the education and training themselves have often failed, too. If your car’s gas gauge shows empty, you might have a broken gauge. On the other hand, you might be out of gas.
“Demand will rise for proof that education is a good investment, but measures and outcomes will be embedded in business results. Slowly, line managers will take over training and education, which will be aligned to business strategy, and effectiveness will be measured against results.”
At the end of 2000, astute executives were assessing the top-line strategic benefits of eLearning, e.g. transformation, entering new lines of business. In the current economic downturn, I’m seeing more emphasis on nuts-and-bolts cost-cutting and revenue generation. Either way, trainers are taking a back seat to line managers. See our recent article How to increase human capital, customer loyalty, and shareholder value on Internet time.
“ROI models work for particular skills when desired results are obvious. Trying to measure knowledge development the same way is the problem. Most companies – we estimate 75% -- have had so much difficulty that they have stopped trying to measure ROI.”
Yes! See our article A Fresh Look at ROI.
“It’s been clear for a long time that training for measurable skills is different than education for knowledge workers. Failure to recognize the split was one cause of the ROI conundrum.”
The term eLearning, popularized since the Institute’s article was written, has perpetuated the error of muddling skill (generally explicit) and knowledge (often tacit).
“The search for the Holy Grail of discrete measurement is fruitless for knowledge workers. Managers are realizing it’s better to spend nothing on ROI than to try to prove something you can’t measure.”
“It’s like email,” says Cisco’s Tom Kelly. “How much do you need?” You need enough to get the job done.
“Increasingly, training and education will be used as tools for employee recruitment and retention.”
Yes! See our white paper, Leveraging the People Value Chain.
“Businesses can no longer be historically focused, relying on old measures and indicators limited to what is already known and has been done. Business is changing fast. Training, education, and measurement models that seemed valid even a couple of years ago may be irrelevant now.”
Right on! See our screed, The eLearning Emperor Has No Clothes, further down this page.
“The new education model, the opposite of training someone to do what you want them to, helps people learn how to navigate for themselves. A focus on business outcomes will eliminate the quest for metrics to measure the “intangibles” of innovation, people skills, adaptation, and other qualities that fall into the “fuzzy-measurement” category.”
Go to any major conference for trainers and you’ll find many sessions on evaluating results and measuring performance. If you’re a line manager with no training background, you will at first be confused when participants make statements like, “We evaluate 100% at Level 1, 80% and Level 2, and 40% at Level 3. We’re going to shoot for some Level 4 next year.”
The only valid measure of training is business metrics, not training metrics.
As the Godfather said, "This is business." If you can't see a benefit, don't do it.
Jack Zigon's list of performance measurement sites
Excerpt from Ed Trolley's Running Training Like a Business
Jay's notes on making the business case, new ROI challenges
The trouble with the "four levels" is that they falter when they go outside of the limited context of training. What happens outside the box is what counts inside the box. See Measuring Training ROI & Impact (1999). You can guess how I see this.
Evolution of Management Accounting
Show me the ROI, Inside Technology Training 11/99
ROI For The Top Line Of The Business
BNH on ROI. Their software models simlify complex ROI calculations.
Discussion group: ROInet
Learning at home
Training magazine, the March 2000 issue: Train on your own time, not "during work."
This is so true and so short-sighted.