ROI for E-Learning
By John V. Moran

For a more accurate look at e-learning's ROI, think speed and efficiency.

I frequently talk to learning professionals who face the daunting task of determining e-learning's ROI. The conversation almost always has an either/or tone, with such questions as "If I replace my traditional classroom training with Web courses, how much will I save?" As a strong advocate for e-learning, I find that logic flawed. People fail to recognize many non-cost related benefits of e-learning solutions, such as reach, consistent messaging, and flexibility.

Despite those factors (and many others like them), proving a business case for e-learning still means being able to demonstrate a reduction in cost. At first blush, the comparative cost analysis between e-learning and traditional classroom training appears straightforward with quantitative variables.

Classroom Deployment	E-Learning Deployment
Facility costs Room rental or overhead allocation Refreshments Training materials Teaching aids	Incremental desktop computer costs Web-enabled LMS costs Course development costs Learner costs, including time away from work MIS support Hosting costs (if any)
Instructor costs Instructor salary and benefits (if internal) Instructor fee (if contracted) Travel and meals
Learner costs Time away from workplace Replacement labor Travel and living
Course development costs

But does that breakdown of costs account for all the pieces of the ROI puzzle? Of course not. At least two additional factors have an impact on ROI: efficiency (E ) and speed (v).

If learning is defined as knowledge or skills acquired by instruction or study; learning efficiency (E) can be defined as the sum of knowledge and skills gained that improves performance divided by the sum of all the information delivered during the learning process.

Perfect learning efficiency--where all of the information delivered leads to learning that improves performance--is achieved at a rate of 1.0. Unfortunately, most classroom events are inefficient within the context of the E equation due to the following factors:

• single course design. Learners vary in skill level, but classroom events assume a single target skill level. Learners with mastery levels that are higher or lower than those of the target audience will have a low learning efficiency.
• poor course description. Once the learner arrives at the classroom, it's too late to conclude that the course doesn't apply to his or her job, particularly when travel is involved.
• extraneous information. Courses, whether classroom-based or online, will include chunks of learning that aren't useful.
• quality of instructor. Some instructors simply stray from the objectives of the course.

To illustrate the frustrating experience of a low-E classroom environment, consider the following example: A friend worked for a company that required executives to attend four outside learning events per year. The spring session was a one-day classroom event titled "Advanced Financial Principles." The course description was nebulous, and my friend had a strong background in finance and an MBA. The first four hours of the course covered very basic financial principles he had mastered long ago, resulting in four wasted hours. The last three hours covered advanced principles that he couldn't use in his present job, resulting in three additional wasted hours. Only one hour on the topic of company valuation was useful. In this instance, E calculates to 1/8 or 12.5 percent--only one hour in eight could he use to improve his job performance.

Contrast this classroom event with a properly designed online course. With minimal navigation skills, my friend skips the non-useful first four and last three hours and focuses exclusively on the one hour of useful learning. Discounting the minimal time required to navigate around the non-useful parts, his E = 1.0 or 100 percent. In other words, the useful skills and knowledge transferred in one hour of classroom delivery can be effectively transferred in half an hour online.

In comparison, speed (v) is a concept that's relatively easy to understand. For example, a classroom event needs to be scheduled weeks in advance, but online learning can enable instant access to knowledge at exactly the point in time it's needed.

Consider Mary, a factory operator working in a plant that produces high quality potato chips. Nearly six months ago, Mary attended a training course where she learned how to identify out-of-spec potato chips, the root causes that attribute to the out-of-spec condition, and how to correct out-of-spec chips. However, she's currently producing out-of-spec chips and can’t remember the appropriate protocol to identify and correct the problem. Mary needs the course knowledge now, not six months ago or six months in the future. If the course is online and accessible, there's a good chance she can identify the appropriate module and get help quickly.

This increase in speed actually increases the value of the course content simply because of its improved availability to the learner. Speed, in this case, has a clear value. Taken to a logical conclusion, a properly designed Web course should have more value than its classroom counterpart--all things being equal.

Unfortunately, efficiency and speed are rarely accounted for in ROI calculations. Yet, in a very real sense, they have a significant impact on bottom line performance. So, the next time you need to figure out e-learning's ROI, don’t forget E and v. Those factors--more than dollars--may produce the most compelling argument to move to e-learning.

Published: February 2002