The ROI of Learning Part 5: The True Costs of Learning
In my last article I went over some actual examples of how to calculate both a benefit/cost ratio and an ROI for a learning initiative that was focused on boosting retention (reducing turnover). I mentioned in that article that it’s important to make sure you cover your bases when determining the cost of learning. In this article, I want to spell that out a little more clearly because there’s a lot to account for.
Below is a list of cost categories that you should be considering when figuring out the cost of learning:
- Needs assessment
- Design and Development (if done in-house)
- Salaries/benefits (prorated for time spent on project)
- Overhead (office and computers, prorated)
- Materials and other miscellaneous expenses
- Acquisition (if purchased)
- Salaries/benefits (instructors/facilitators)
- Program materials/fees
- Salaries/benefits (participants)
- Lost productivity
Do you find anything a little odd about that list? I adapted it from the classic book by Jack Phillips called Return on Investment in Training and Performance Improvement Programs, which was published in… 1997! The Internet had only been widely available to the public at that point for a few years. If eLearning has become a major delivery method for your learning efforts, then many of the delivery costs listed above simply won’t apply, since they are geared more towards traditional instructor-led classroom learning. Just keep that in mind as you sort through your learning costs.
The other thing you might have noticed in the list was the item called salaries/benefits of participants. Why would that be on the list? Because when your people spend time taking your learning programming, they aren’t working or being productive in their normal day-to-day routines. Of course, you’re aiming for increased productivity after the learning, but participation does come at a cost.
In fact, to really do this right, you should also count the impact of lost productivity for the business as well. It gets even more complicated if you hire a temporary worker to fill in while the regular employee is engaged in the learning program. Because the temporary worker doesn’t know the ropes as well, they’re less efficient and therefore less productive, so that must be adjusted as well, usually by a factor in the range of 1.2-1.5 to make up for the lower productivity.
eLearning helps to minimize all of these costs, usually because of the fact that people seem to master whatever they’re learning much faster in the eLearning delivery method. How much faster is going to depend on a host of factors unique to the company and the content, but various companies have reported that their learning takes anywhere from 40-70% less time than more traditional methods, and that translates into significant savings on learning costs.
It’s also worth noting that whether you’re talking about eLearning or traditional learning, there are a variety of potential “intangible” benefits that are probably impossible to quantify, but which contribute to the overall value of learning. These include higher job satisfaction, increased commitment to the organization (employees like it when their employers care enough to invest in their learning), better/more collaboration and teamwork, improved customer service, reduced conflicts, and lower volume of customer complaints. All from your learning efforts!
Keep in mind that just because you can whip out an accurate (as possible) ROI for any given learning initiative doesn’t mean your higher-ups will jump up and sing your praises. There tends to be three different views of learning from a company’s leadership.
- The first view is that learning is a necessary evil. When that’s the view, your positive ROI calculations may make the bitter pill slightly more easy to swallow, but learning will still be viewed as cost center draining resources away from the “real” business.
- Then there are business leaders who at least recognize that any particular major business initiative is probably going to require some learning. They’re a little more supportive of learning, but only as a means to an end in a very specific situation.
- If you’re really lucky, you’ve got the kind of business leaders who understand that investing in learning is essential to the company’s future. That kind of leader probably won’t even ask about ROI for your learning efforts, but have it ready just in case!
Here are all 5 parts to this series: The ROI of Learning Part 1: Barriers,The ROI of Learning Part 2: Where to Begin, The ROI of Learning Part 3: Additional Considerations, The ROI of Learning Part 4: Learning/Training ROI Methods, The ROI of Learning Part 5: The True Costs of Learning