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Continued
Effort to Reduce Costs and Improve ROI
Another key driver, and
one that is especially important to businesses of all sizes, is the
return on investment. Technologies within e-Learning are beginning
to measure the impact that learning has within an organization.
Fred McCrea, R. Keith Gay, and
Rusty Bacon from Thomas Weisel Partners have compiled considerable
information about e-Learning, how it can be used in targeting
business objectives and how to realize a significant return on
investment.
Reducing Delivery Costs and
Increasing Organizational Efficiency. As
the reach of global corporations continues to expand, learning
organizations must cope with delivering learning to employees who
are scattered around the world. At Ford, for instance, 120,000
employees visited the Fairlane Training Center in Dearborn, MI
during 1998. With training hours doubling every three years, Ford
can no longer justify the expense of bringing people to one
centralized location and keeping them from their job functions for
extended periods. Instead, new solutions must be found to deliver
the learning experience remotely.
Validating Outcomes Directly with
Increased ROI. More and more, corporate universities are
no longer viewed as cost centers but instead are given profit and
loss status within the company. As a result, managers need as many
tools as possible to aggressively sell learning across the
extended enterprise. One of the key focuses is demonstrating the
direct benefits of learning implementations. University managers
need measurable performance data from each engagement or
investment in order to show a meaningful return on investment.
Therefore, we believe the most successful e-Learning solutions
will provide reports that demonstrably prove the link between
learning investments and improved business outcomes.
"Of all the
initiatives we’ve undertaken at Chevron during the 1990s, few
have been more important or as rewarding as our efforts to build a
learning organization by sharing and managing knowledge throughout
our company. In fact, I believe this priority was one of the keys
to reducing our operating costs by more than $2 billion per year,
from about $9.4 billion to $7.4 billion, over the last seven
years."
– Kenneth
T. Derr, Former Chairman and CEO, Chevron Corp.
Changing
Perception of Training from a Cost to an Investment
Education and training are beginning to be viewed as an enhancement
for productivity, as indicated in the following chart:
The perception of training is
changing from one of "cost center" to one of
"revenue-generating investment." The shift in perception is fueled by the
emergence of solid conclusive evidence correlating training with
productivity improvements. Motorola, for example, calculates that
every $1 it spends on training translates to $30 in productivity
gains within three years.
A recent study found that
corporations that employed a workforce with a 10%
higher-than-average educational attainment level enjoyed 8.6%
higher-than-average productivity. In contrast, capital investments
that were 10% higher than the average capital investment only yielded
a 3.4% higher payoff than average. This illustrates the clear shift
our economy has made to favor human capital over physical capital.
Thomas Weisel Partners
also points out the power that e-Learning can have in expediting the
business cycle of releasing and selling a product. This could be
true for any size business. The greatest factor is how distributed
the workforce is and the timing by which training must occur, as
indicated in the following case study:
A company launches a new
product and, in the process, must train its 100-person sales team
in the merits and other details of the product. ETA is used to
reduce the time it takes to train the sales staff. This reduced
time is materially valuable and is equivalent to the value of ETA.
This scenario shows the value of reducing the training time it
takes to get a sales force 100% capable of selling a new product.
|
Business Objective |
Reduce
product-launch training times by one-third to allow sales personnel
to hit the streets sooner. |
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Performance
Objectives |
Number of days it
takes to get 100% of sales force fully trained on new product.
Traditional training: 90 days
Enterprise Training Automation: 60 days
|
|
Revenue/ Profit Metrics |
Number of sales
personnel: 100
Average sales volume per day per salesperson: $5,000
Life span of new product: One year or 200 selling days
|
|
Value of Business
Objective |
Number of
salesperson days saved using ETA: lOOx3O=3,000
Multiplied by
Average sales volume per sales person day: $5,000
Equals
Value of reducing product launch times by 33%--$15 million
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The product's expected
life span is only one year, or the equivalent of 200 days of
selling. If the sales force consists of 100 people, then there are
a total of 20,000 salesperson days available during the life of
the product to sell it.
Using traditional training media,
9,000 sales person days (90 days x 100 sales persons) would be
devoted to training on the product, leaving only 11,000
salesperson days left in the product's life to sell the product.
Using ETA, training requires only 6,000 salesperson days, leaving
14,000 salesperson days left to sell the product. The 3,000 extra days resulting from an ETA
approach potentially delivers $15 million in sales revenues =
(3,000 salesperson days x $5,000 per salesperson).
If the total investment
in the sales force product launch was $500,000, then the first
year's return on investment would be:
Return on
investment =
(Value of Realized Gain/Investment Required for Gain)
m($15,000,000/$500,000)
=3000%
Source: Granada Research
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