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ROI of E-Learning

Companies looking to reduce costs and improve overall productivity are considering alternatives to traditional skills development programs. As broadband services become more ubiquitous and data storage costs decrease, the worldwide e-Learning market has expanded.

If you need to know specifically about e-leanring you can consult this article.

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Advantages of e-Learning

While cost reduction is often a key business justification for implanting an e-Learning program, online training offers several advantages, including:

Elimination of travel costs

Consistency – no bad instructor days

Scalability from a few users to a worldwide deployment

Flexibility to allow users to learn over a period of time

Modularity to provide customization options

Tracking capabilities to measure skills and confirm compliance

Reporting capabilities to identify skills gaps in an individual or department

As a e-learning products, content and services vendor, we are often asked to provide return of investment on e-learning, this blog post is designed to provide readers with an overview of e-Learning and to help you cost-justify an e-Learning implementation and/or determine the benefits, if any, e-Learning may provide your organization.

Market Insight

The worldwide corporate e-Learning market reached $17.2 billion in 2008. IDC forecasts that it reached at a CAGR (Compound Annual Growth Rate) of 8.0% to $25.4 billion in 2013.

Classroom training still represents the primary delivery choice for most training organizations, although it is now used less often. A significant number of organizations are also using formal on-the-job training as a key component of their overall education programs.

Cost Benefit

While considering the training expenses, following are the costs that are to be considered for classroom training;

  • Tuition
  • Employee travel (transportation plus unproductive salaried hours)
  • Lodging
  • Vendor costs
  • Instructor expenses
  • Administration
  • Real estate/room rentals (if any)

e-Learning significantly reduces all these costs, it is just one time cost which is rather an investment, as it shall be reused again and again for years to come. As per Clark Aldrich (Research Director, Gartner Group)

e-Learning is becoming a commodity. Companies are looking at E-Learning programs like a stapler or reams of paper– it’s just one item in their inventory.

According to Training Magazine (2002) 50% to 70% of the training cost can be saved by replacing instructor lead classroom trainings by e-Learning.

500M$ per year are saved by US Department of Defense by replacing 58% of their classroom trainings with e-Learning.

CLOs reported they opt for e-Learning because it is the most appropriate medium for the subject matter to be conveyed. Asynchronous e-Learning is preferred when needing to train a group with varied skill levels. With the global financial crisis putting budget pressure on training spending and, more importantly jobs, cost is the preeminent driver (IDC, Corporate Learning Buyer Survey Series 2010: Economy Influences Modality Choice, Doc # 222511, March 2010).

Improvements in Employee Productivity

Improvements in employee productivity can provide a measurable return for a training solution. An IBM training assessment and implementation at an energy company with 1,000 employees found that companies can save significantly on labor costs with minimal investments in employee skills development. The study concluded that training which produced an average productivity improvement of only three minutes per day would save the company at least US $240,000 per year.

Assumptions:

Annual average employee salary is US $40,000, or US $20/hr

Employees worked 50 weeks per year

1,000 workers saved three (3) minutes per day, or one hour per month

Table 1 IBM study measuring an energy company’s return on investment (ROI) for training based only on employee productivity gains*

Variable Value
Average salary per employee $40,000 USD
Hours worked per year 2,000
Number of employees 1,000
Time savings / productivity gains per day Three minutes per employee
Total Return on Investment $240,000 USD

*The study did not consider the ROI in categories such as reduced travel, reduced product failure, less-frequent and shorter help desk calls, improved customer service, compliance, increased employee morale/retention and revenue gains.

e-Learning Feasibility Essentials

 

Table 2: Merits and Demerits of e-Learning

Benefits Disadvantages
Reduced costs High upfront costs
Efficient Content may not fit the medium
Globally consistent Technology / bandwidth issues
regardless of location Diminished personal interaction / social cues
Track-able May not fit the culture / employee mindset
Convenient anytime scheduling Students who are techno-phobic may suffer
Scalable Requires motivation / self-starter mentality
Reduces travel costs and downtime

Source: IBM Training Recommendations, 2010

Table 3: Learners matched to appropriate training modality

Mode E-Learning Classroom
Learners are geographically dispersed
Learners are technologically savvy
Learners reside in a central location
Learners are inexperienced with technology
Learners live in different time zones or have staggered work schedules
Learners have varying levels of skills / knowledge

Source: IBM Training Recommendations, 2010

 

Summary and Recommendations

The training business is slowly shifting from traditional classroom instruction toward e-Learning. To fully capture the value and benefits an e-Learning program can provide, organizations must consider available content, user/cultural preferences for training modalities, specific training needs and their adaption to the e-Learning format, geographical dispersion of students and the total cost of ownership for the program versus the costs savings.

Contact Us

SecuruCon Systems Pvt. Ltd. is Management Technology Systems and Solutions provider, headquartered in Karachi, Pakistan.
  • 381, DOHS Phase-1, Malir Cantonment, Karachi 75070, Sindh, Pakistan
  • +92 333 312 6419