|
|
 |
 The Ivy League of Online Learning
Online education, or e-learning, is revolutionizing training and
development at companies of all sizes in all industries. Analysts expect
businesses to continue to pour money into new learning management systems, and
finance executives are going to the blackboard to calculate the e-learning
payoff.
By Eric Krell
September 2002 - BusinessFinanceMag.com - "Make new friends; save millions." What sounds like an e-mail marketing
scheme could actually serve as a business plan for companies eager to measure
the mind-boggling returns of new online learning systems. "I always work with
cost accounting — they're my best friends," says Peg Maddocks, Ph.D., senior
manager in the Internet learning solutions group at Cisco Systems Inc., the $19
billion network products and services company in San Jose, Calif. "They measure
the business, and we always let business set our e-learning metrics." As A'isha
Ajayi, e-learning development manager in Atlanta for Global Crossing Ltd., a
telecommunications company, notes: "You cannot develop an e-learning strategy
that is not linked to a business plan."
Healthy relationships between finance and training have paid off. Global
Crossing, Cisco and other companies report saving tens of millions of dollars by
transforming various portions of their classroom-based curricula into e-learning
offerings. These "returns," which more accurately fall under the heading of cost
avoidance, cover significant reductions in travel and entertainment (T&E)
expenses, personnel training costs, training facility costs and learners' time
away from the job.
This savings potential sparked the initial surge of computer-based training
(CBT) technologies about five years ago. "Up until early 2000, e-learning was
fairly new, and only early adopters were digging in," says Brandon Hall, lead
researcher and CEO of e-learning consulting and research firm Brandon-Hall.com
in Sunnyvale, Calif. "Now, though, we see e-learning touching a majority of big
business, and their leadership is requiring measurement." E-learning has
graduated from CD-ROMs and PowerPoint files to "learning management systems"
with a global (and multilingual) reach that can simultaneously educate
employees, customers, suppliers and partners about new policies, services and
products. These systems, which commonly offer streaming media, tracking and
reporting tools, and authoring capabilities, come with much higher price tags
than early training software — anywhere from several hundred thousand dollars to
several million dollars — and the promise of more strategic benefits.
"E-learning allows companies to push learning to employees much more
quickly," says Mike Havill, senior vice president and CFO of ThoughtWare, an
e-learning company based in Memphis, Tenn. "For example, staff accountants I
hire have probably worked on several different general ledger packages. For them
to learn to be productive on our unique system may take 30 days to 45 days. When
you get the training in front of them much quicker — in a format that allows
them to do it on their time — people can cut their time to productivity in
half." Other strategic payoffs include reducing time to market on new products
and services and generating revenue through the training function's external
reach to customers and partners.
Heidelberg USA, a printing and publishing company in Kennesaw, Ga.,
transformed its print media academy training function from a cost center into a
profit center by integrating a learning management system from Pathlore Software
and streaming video content from Media1st into its customer-training offerings.
"E-learning has helped us become a more efficient profit center," says
Jacqueline Edwards, administrator of e-learning systems for Heidelberg USA. "The
cost associated with training is bundled into the sale of the product, so that
number comes back to us." Software companies like Hyperion and OutlookSoft also
have transformed their external training programs from cost centers into
profitable operations.
Yet measures of strategic e-learning benefits generally are not as advanced
as metrics that focus more on cost avoidance. Vendors, often with the help of
e-learning and knowledge management consulting firms, are scrambling to develop
more strategy-focused metrics. (A solid white paper from KnowledgeNet,
"Determining the ROI of E-Learning," is available at
www.knowledgenet.com/pdf/roi.pdf.) At the same time, companies with leading
e-learning capabilities are developing and tweaking measures to capture the
tactical and, increasingly, the strategic value of their online-training
investments.
High Marks for Dow
Dow Chemical Co.'s e-learning system has conjured some golden returns, but
the company's e-learning manager insists that her ROI formula is far less
complicated than alchemy. "We established four measurements in our project phase
that we used to get approval," says Lyn Hamilton in Cohutta, Ga. "And we report
against those same four measurements every year for the first five years the
system is in place."
|
An Industry Primer The American Society for Training and Development (ASTD) and the
National Governors Association (NGA) published a report that examines the
impact of technology on work force learning. Among the findings:
- Currently a $1.2 billion market, corporate e-learning is projected
to swell to a $7 billion market by 2003.
- The global e-learning industry consists of 5,000 vendors (most of
which are private) with no single supplier claiming greater than a 5
percent market share — a condition expected to spark significant market
consolidation.
- Companies participating in an ASTD benchmarking study project a 117
percent increase, on average, in the use of e-learning technologies
(Web-based, computer-based, CD-ROM, etc.) between 1999 and 2002.
|
The metrics focus on efficiencies gained by moving a significant portion of
training activities from a traditional, classroom-based setting to an e-learning
environment. Dow's consistent use of metrics indicates the progress some large
companies have made in the past 18 months in attaching reliable financial
measurements to Web-based training.
The $30 billion chemical company launched an enterprise wide e-learning
system, which combines software from WBT Systems and an internally developed
solution, with 20 course offerings in January 1999. Twelve months later, Dow
offered 90 e-learning classes and had tallied just under 25,000 course
completions. By the end of 2000, those figures climbed to 426 course titles and
208,464 course completions. The classes, which are accessible in multiple
languages to all of Dow's 50,000 employees worldwide through a single system,
focus on safety, manufacturing and operations, finance, and IT.
The four metrics Hamilton uses, which were approved through the company's
controller function, are:
- Manual vs. automatic recordkeeping. This metric captures savings
from the reduction in administration time, via online tracking and reporting
capabilities, that result when a company moves from classroom-based training
development and delivery to e-learning development and delivery. In 2000, Dow
quantified this benefit at $844,279.
- Reduction in delivery cost. This metric compares the cost of
classroom facilities and facilitators with the cost of delivering similar
content on the Web. In 2000, this reduction resulted in $3.1 million.
- Reduction in material cost. These savings result mainly from the
elimination of printed training materials. In 2000, Dow realized $5.2 million
in this area.
- Reduction in learning time. Hamilton says Dow uses the conservative
end of a standard range that pegs the time savings per learner achieved
through online training at 40 percent to 60 percent. The company estimates it
saved $20.8 million in 2000 by reducing learner time spent on training by 40
percent.
These savings add up to a total cost benefit of about $30 million in 2000.
Dow originally invested $1.3 million in its e-learning system, a cost
distributed among the company's four largest e-learning users: human resources
development, IT, manufacturing, and environmental health and safety. The company
allocates $600,000 per year to keep the system running. Hamilton says the bulk
of that annual allocation, which is charged back to each business unit that uses
e-learning, goes toward licensing costs; the rest covers administration and
technical support.
Unlike many other companies, Dow does not include travel costs in its
e-learning metrics. "We elected not to," Hamilton notes, "because we found
travel costs to be a very difficult measure to track. Our employees often fit
several needs, like meetings, in addition to training, into their travel
schedules. Plus, much of our classroom training took place on-site."
Smarter Metrics
The downside of comparing the costs of e-learning and classroom-based
training is that cost-avoidance opportunities lessen as companies fully
integrate e-learning systems into their training functions. "You can't just look
at e-learning as a way to cut training costs," says Jack Rochester, e-learning
analyst for The Delphi Group, a Boston-based consulting firm. Rochester helps
clients understand the positive effect e-learning can have on productivity,
employee retention and the supply chain, but he admits that reliable ROI systems
to measure those benefits are not yet very sophisticated. "Ideally, you want to
define a productivity cycle — how long it takes to complete a task, whether it's
processing one order or producing one product or service," he notes. "If you
could satisfactorily measure the time and cost of that cycle and then monitor
e-learning's effect on the cycle, that would be a heck of a metric. It would be
a lot more meaningful than 'We saved 27 hours of lost productivity because we
didn't have to send anyone to a training class.' "
Maddocks currently is developing this type of metric at Cisco, where roughly
90 percent of initial sales calls involve more than one person (e.g., two
salespeople and a systems engineer) due to the technical nature of the company's
products. The e-learning initiative seeks to reduce the percentage of initial
sales calls that require more than one Cisco salesperson. Maddocks' group
designed an intranet site, through a solution from OutStart, where account
managers can bone up on a specific technology (e.g., IP telephony) by walking
through sales scenarios with a specific audience (e.g., a CIO). "When a systems
engineer has to accompany an account manager on a sales call, he's not
fulfilling his own productivity quota on the job," says Maddocks. "By reducing
the percentage of multiperson initial sales calls, we increase productivity. And
when business picks up, we should be able to increase revenue quickly without
increasing our sales force."
In addition to tracking the percentage of initial sales calls with more than
one Cisco employee, Maddocks will measure time to competence — how long it takes
for an account manager to feel confident enough to conduct initial sales calls
alone. "So," she adds, "we'll measure the effectiveness of the learning with
actual tests."
Many e-learning systems contain tracking and reporting capabilities that
identify which employees learned the content and to what extent, a key measure
that can link e-learning to business metrics. "CFOs should ask for information
that links the knowledge that employees are learning with performance," says
Richard Close, senior vice president of business development with ThoughtWare.
"Too many e-learning systems don't really track what the learner really knows.
All they register is whether the person took the class." For Maddocks, the
metric linking e-learning to business can be a simple survey question. "If 2,000
salespeople are asked, on a scale of one to five, how much this training helped
them go out on a sales call alone and the responses average a 4.5," she says,
"then I'm going to take that as my metric."
Doug Willner, director of leadership and development in the consumer health
care division at GlaxoSmithKline, a research-based pharmaceutical and health
care company in Pittsburgh, sees how strategic measures can link e-learning
effectiveness more directly to revenue. Using an authoring tool in their
Vuepoint online-training system, Willner and his staff can quickly develop and
deliver content related to a new product. "If I can shave four to six months off
the time it takes to communicate to everyone in the organization the learning
and information surrounding a new product," he notes, "that's a good piece of
data to feed the ROI calculation. Getting a classical ROI calculation with
completely clean data is difficult, but speed to market is a big, strategic
issue. In my opinion, it is one of the most important future opportunities
within e-learning."
Making The Grade
To leverage the benefits of online training, managers must ensure that their
programs work. As any e-learning manager will tell you, an effective program
requires more than slapping workbook pages onto the company Web site. The
following tactics can help prevent the most common pitfalls that sap the value
of e-learning initiatives:
- Buy into a blended approach. "There exists a misconception that
Web-based training will totally do away with instructor-led training," says
Ajayi. "Most corporations are trying to address a complex set of skills, from
technical skills to leadership to customer care to network operations skills.
Doing so requires a mix of Web-based and instructor-led courses." Hall points
out that some training topics, such as team building, will always require a
personal touch. A blended approach also helps overcome employee reluctance
when e-learning initiatives are introduced. "People don't just start doing
e-learning and stop going to classroom training," says Maddocks, who first
introduced employees to e-learning in a classroom setting.
- Start simple. Three years ago, Cisco's e-learning program consisted
of posting white papers and PowerPoint presentations on its intranet. "So the
very first metric we ever used was Web site hits," says Maddocks. "I didn't
avoid e-learning just because I couldn't put interactive exercises on the
site. As the technology matured, I added more features to it."
- Don't be blinded by flashy capabilities. Invest in a system that
solves the business problem. Don't invest in a system because of its gee-whiz
appeal. "Don't use video on demand — which is expensive because it requires
infrastructure — for everything," says Maddocks. "Use it when you want to see
a person who is an expert talk about something. Too much video can clog
bandwidth, which leads to slower performance, disrupting the flow and
effectiveness of online delivery."
- Enlist IT employees as guinea pigs. Because corporate IT
professionals constantly need to upgrade their skills and knowledge, Rochester
says, they are perfectly suited to try out new e-learning systems. He says
that using IT students to break in new online training systems and tools is
"almost a sophisticated way of beta testing the e-learning tools, because IT
people are the fastest learners and assimilators." Plus, techies can quickly
identify where the learning technology falls short.
- Measure the total cost of the investment. Hall says that many
businesses are surprised by the time and costs involved with implementing an
e-learning solution. Companies sometimes invest in a system that cannot be
supported by their current IT staff. Or, notes Maddocks, "you buy an authoring
tool, but you can't deliver it over your network because it has the wrong
standards for your network. Training people are not used to thinking about the
total cost of ownership. They're used to thinking about classrooms, trainers
and books."
The CFO's Assignment
Finance often thinks about total cost of ownership (TCO) and other business
metrics, which position the function at the head of the class when it's time to
identify the value of e-learning. "CFOs should take the leadership role in
making sure that there is good due diligence in selecting e-learning providers,"
says Hall. "Training professionals aren't typically used to buying big-ticket
items such as learning management systems, which can run upwards of $100,000 and
even into the millions, depending on the number of users and sophistication of
the system. The IT professionals should be involved to make sure a big system
fits with the network and that it is robust, and the purchasing department
should work with the e-learning team to ensure good contract negotiations. The
CFO needs to oversee that all of these departments work together."
And finance needs to stay involved after the purchase. Too often, the CFO
walks away after the sale, notes Massood Zarrabian, president and CEO of
OutStart Inc., a provider of enterprise wide e-learning in Natick, Mass. When
CFOs take part in the implementation process and help track the system's ROI,
Zarrabian says, the return tends to be greater. That involvement also includes
addressing sticky issues, such as the challenge of accounting for the
development of in-house content and e-learning systems. "We take proprietary
systems and some off-the-shelf design and distribution software. When we put it
all together, e-learning often doesn't fit neatly into GAAP categories like
software or consulting," notes Ajayi. "It can be a mess when you try to figure
out how to capitalize it." Solving those and other challenges on the e-learning
curve requires the kind of arithmetic that resides in the finance
department.
|
