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April 13, 2009

The ROI Of eLearning

by Claire Schooley for Information & Knowledge Management Professionals

Making Leaders Successful Every Day

For Information & Knowledge Management Professionals


Includes a TEI April 13, 2009

The ROI Of eLearning

A Total Economic Impact Analysis Uncovers Big Benets From Learning Online
by Claire Schooley with Matthew Brown, Jon Erickson, and Sara Burnes

EXec Uti V e S U mmarY


Online learning earns companies a positive return on investment (ROI) in less than a year. If you have a business that is spread across many locations, it makes good business sense to implement an online learning program as a replacement for some face-to-face learning and as a complement to other instructor-led training in the form of blended learning. Whether employees take compliance training, desktop skills development, or leadership training, online learning is flexible, consistent, and repeatable with minimal travel costs. The keys to success in attaining the 69% ROI that we show in this document include excellent eLearning content that engages the learner; good change management plans for this new way of learning; and technology that is scalable and easy to use to manage the learning.

ta Ble of Co N te Nts
2 The New Model For Corporate Learning 5 Shift Approaches Without Losing Learning Eectiveness 5 Use Three Factors To Determine The ROI Of Your eLearning Decisions 10 Calculating ROI For A 5,000-Employee North American Insurance Company 13 eLearning Adds Big Benets For Learners And The Company
recommeNDatioNs

N OT E S & RE S O U RCE S
Forrester interviewed ve user companies that wished to remain anonymous, and talked with dozens of users and learning management system (LMS) content and service vendors about costs and benets over the past six months. We used this information to create an ROI model based on our TEI analysis framework.

14 Put Components In Place To Ensure A Positive And Rapid eLearning ROI 15 Supplemental Material

Related Research Documents How To Maintain Your Learning Program In A Down Economy February 12, 2009
How To Create A Comprehensive, High-Impact Learning Strategy May 6, 2008 The Forrester Wave: Enterprise Learning Management Suites, Q1 2008 February 12, 2008

2009, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com.

The ROI Of eLearning


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THe new Model For Corporate LearninG Smart companies provide employees with learning opportunities to keep skills and knowledge razor-sharp so employees produce quality work. In the past, employees typically learned in classrooms led by expert instructors. But this scenario has changed, and companies are struggling to decide how they should approach learning given the varied expectations of employees, the amount of information that employees must know or be able to find quickly, the increasing globalization of business, and the growing number of remote workers all of which dramatically affects learning approaches for the workforce.1 Face-To-Face Learning Used More Selectively While face-to-face instruction offers the opportunity to interact in-person with the instructor and classmates and may be the first choice of most people, that scenario is not realistic in todays fastpaced global environment (see Figure 1-1). But classroom instruction is not disappearing. Situations in which bringing people together physically are critical to quality learning and well worth the investment include:

Developing soft business skills. Learning negotiation skills, practice in group facilitation, and
discussion of diversity issues are three examples when face-to-face instruction is the preferred modality. Facial expressions and body language are important components of the learning experience.

Creating personal and team trust. Once people meet face-to-face, they often develop a special

connection that facilitates future learning, especially when the learning involves teamwork and working through issues and problem scenarios as part of the learning experience. Participants have a closer affinity to work together virtually when they have some emotional ties to their team.2

Blending face-to-face and online learning experiences. The term blended learning means

teaching using multiple formats according to whats most appropriate for particular content. For example, a leadership course might start with a self-paced eLearning module on leadership basics with some instructor-led virtual classroom sessions to discuss concepts, followed by a two-day classroom session to practice leadership skill scenarios and get feedback.

Technology Opens Up New Learning Options Self-paced learning, virtual classroom, videoconferencing, informal learning through social networks, and virtual worlds make up a dizzying array of environments for learning. Some are more instructor-led and others are totally learner-driven. They are also cost-effective once the technology is in place and the company culture embraces other learning patterns. As with classroom learning, the format must enhance the learning need. Examples include:

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Information, policies, and procedures. Presenting this kind of material in a classroom lecture

is a waste of quality instructional time when learners can read these on their own and then refer back to the materials as they need to implement a particular practice. The key is information that is accessible when the worker needs it.

Compliance training. Sexual harassment training, financial accounting requirements, medical


disclosure procedures, and safety policies are some examples of required learning for certain jobs where eLearning is effective for both initial compliance fulfillment and renewal. The technology provides tracked and audited test results of large numbers of workers over a short time period.

Social learning. Blogs, wikis, instant messaging, podcasts, online discussions, communities

of practice, online mentoring, and virtual worlds are informal learning methods that are gaining traction especially with technology-savvy employees who are familiar with these kinds of technologies in their personal lives. Generally inexpensive to set up, these resources allow learners to share information, get answers to questions quickly, and drive their own learning.

Simulated learning. The more senses used during a learning experience such as reading,

seeing a demonstration, explaining concepts to others, and practicing the skills learned the stronger the learning. A role-play sales encounter with customers, or learning about and performing simulated medical procedures are examples of simulated eLearning experiences.

Classroom And Online Self-Study Prove Equally Eective Outside of subject areas where face-to-face interaction is necessary, recent research indicates that no significant differences exist in the effectiveness of learning through classroom, online, or self-study.3 But choose your communication media and tools carefully, to ensure that:

Carefully developed graphics and visuals help explain new concepts. Visuals, graphics, simple
simulations, and even short videos contribute to a more visual approach to understanding concepts. This, combined with instructors audio help, ensure good learning. In fact, some animated sequences in eLearning would be difficult to duplicate in the classroom.

Interaction through blogs, wikis, and discussion boards help learners see other points of view.
The danger of isolation of online learners is mitigated by a plethora of interactive tools used to reinforce the learning. Although these tools are just beginning to be wrapped around existing formal learning, expect future informal learning to play an important role in corporate learning.4

Content is available to review multiple times. The opportunity to access specific sections of
the learning content as many times as necessary to grasp key concepts provides for a better overall understanding of the topic. Also, choosing the best time to learn puts the learner in a better frame of mind to learn.

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Online learning effectiveness depends on course quality and good technology as reinforced by a quote from Tallent-Runnets research (see Figure 1-2):5 Overwhelming evidence has shown that learning in an online environment can be as effective as that in traditional classrooms. Students learning in the online environment is affected by the quality of online instruction. Not surprisingly, students in well-designed and well-implemented online courses learned significantly more, and more effectively, than those in online courses where teaching and learning activities were not carefully planned and where the delivery and accessibility were impeded by technology problems.
Figure 1 eLearning Goals And Challenges
1-1 A successful eLearning program People Content Technology

Develop knowledgeable

Employees 1-2 eLearning challenges are many

Partners

Customers

For a successful eLearning initiative, you will need: Executive support Learning sta Learning format Engaging content Technology Find a champion to support your eLearning initiatives. Hire smart educators who understand business. Youll want to have a mix of online, live virtual classroom, face-to-face classroom, blended, and informal learning. To keep learners interest, eLearning should be as multimedia-rich as appropriate, to enhance content aligned with business goals. Tools should be easy-to-use, scalable, and robust and able to handle content management, learner management, and content creation.
Source: Forrester Research, Inc.

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SHIFT APPROACHes WITHOUT LOSING LEARNING EFFECTIVENESS It may be tempting to assume a shift to eLearning is only about cutting costs. Yet, over-reliance on financial ROI justification risks compromising your current learning programs effectiveness. Thus, Forrester first recommends a full assessment of indicators like employee content evaluations, instructor quality ratings, employee test results, manager analysis of learner performance, and valueadd to the business.6 Examples include:

Learner evaluations. Most often, employees are honest about their perception of the

effectiveness of their learning experiences. They want to learn skills and concepts that will help them do their job or allow them to grow professionally. Learning leaders should take results seriously so that employees know that their comments are valued.

Assessment results. Tests, quizzes, group projects, and so on, all contribute to determining how
well employees met the course objectives. This data shows the effectiveness of course design, learning activities, and materials. Assessments also show if learning staff must tweak or revise course components to ensure better understanding.

Performance transfer. Employees and supervisors provide good feedback on learning

effectiveness as it relates to job performance. This is especially clear in areas like sales, where sales training has a clear impact on sales results. But even in softer measurement areas like leadership development skills or internal process training, managers see changes in employee performance.

Business results. High employee performance leads to greater business success. Learning that

is aligned with business goals and creates more effective sales and marketing, customer service, or company processes can have a direct impact on a companys bottom line. After all, continual business improvement is one of the goals of employee training.

Apply the same evaluation levels to your online learning with particular emphasis on performance improvement. And ensure that learning online is becoming more closely integrated with work.7 USE THree Factors to Determine tHe roi of your elearninG decisions Companies must objectively evaluate the financial impact on business when considering the adoption or avoidance of eLearning. eLearning can help address many critical business problems like supporting global employee learning, decreasing travel and expenses, and increasing productivity in a competitive environment. But companies need to do a careful assessment of the nature of internal and external learning at all levels of the business. How? Companies can use a simplified version of Forresters Total Economic Impact (TEI) model to systematically consider:

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The ROI Of eLearning


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1. Benefits. How will your company benefit from eLearning? 2. Costs. How will your company pay, both in hard costs and resources, for eLearning? 3. Risks. How do uncertainties change the total impact of eLearning on your business? Key Benets: Competency Speed, Flexibility, Consistency, Repeatability, Travel Reduction Organizations implementing eLearning can expect several benefits that help drive business forward due to knowledgeable and well-skilled workers. Learning directors can quantify the scale, timing, and duration of these benefits by considering one or more key metrics and then calculating the value to the organization of improving those metrics over time (see Figure 2). Benefits include:

Faster employee competency, which means increased productivity. Self-paced eLearning

allows learners to assimilate content at their own speed often 20% to 50% faster than in a classroom. If they understand a concept well, they can skim online material. If a module is difficult, learners can slow down, review material a second time, or access online help. Search allows employees to find just the content section they need to reach competency faster and start producing sooner. Employees in global offices can fulfill course requirements in days rather than months using eLearning because of the reach and scalability of the technology.

Flexibility of learning provides accessibility anytime, anywhere. Employees can learn at home,
in a coffee shop, on an airplane, or at any spot around the globe. Because of the ubiquitous nature of the Internet, they can access learning any time that fits into their schedule. For many employees, determining their own study time makes learning possible because their life circumstances dont allow a traditional classroom approach. In fast-paced environments, learning on-the-go even from handhelds gives learners the flexibility they need.

Consistency of eLearning delivers uniform content. Subject matter experts and instructional

designers create content using adult learning principles, graphics, and interactive media to provide the best learning experience and achieve learning objectives. Theres no question as to whether a group at one location received the same learning as those at another location. All learners receive the same consistent content. Translations also provide content in learners native languages. With eLearning there is less content variance than with instructor-led learning.

Repeatability provides opportunity to review material. Although eLearnings upfront costs

are high depending on production values, content reuse makes it very cost-effective. Even with updates, XML technology enables developers to change specific learning objects, leaving the rest of the content untouched. Learners download course material, eliminating hard copy duplication. Self-paced learning and recorded virtual classroom sessions are under user control, so learners can repeat sections they did not understand. This wouldnt be possible in a classroom lecture where learners hear content once and hope they have taken good notes.

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Travel reduction provides additional savings. Auto and air travel with hotel and meal

expenses for instructors and participants are prohibitive. Facility rental, technology connections, and materials costs add more expense to face-to-face training. Some travel is necessary depending on circumstances, especially in a blended training, but the travel is less frequent and for shorter durations. Many companies realize the cost benefits of reduced travel in the first two or three years of the implementation and then focus more on the business improvement benefits as online learning becomes more integrated into business processes.

Figure 2 Key Benets Of eLearning


Dimension Faster time to competency eLearning helps by Learners assimilate content at their own speed. Employees quickly locate learning content they need to review. Scalability means more people get up to speed in less time. Learn from any global location. Learn at any time. Learn using dierent devices including mobile devices. Uniform content across employee base, even when localized for other languages. Less content variance than instructor-led training. Once produced, content can be reused with no additional costs. Updating content requires only a change to a learning object instead of an overhaul of the complete course.
Source: Forrester Research, Inc.

Training exibility

Training consistency

Repeatability

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Key Costs: Technology, Content, Learning Employees, Learning Culture Development Organizations that implement eLearning can expect several costs, especially as they begin to ramp up the eLearning program. These include additional technology infrastructure and new applications, in-house course content creation, acquired content vendor courses, additional staff, and a PR/ training program for employees so they understand and feel comfortable using the new learning approach (see Figure 3):

The learning management system (LMS) is essential to manage eLearning. This ROI

analysis assumes a software-as-a-service (SaaS) eLearning implementation.8 This means the company pays a yearly fee for the LMS based on the number of users. The LMS resides with and is managed by the vendor. The yearly LMS cost includes maintenance and most upgrades. Organizations configure rather than customize their business processes since extensive LMS customization is not part of a SaaS strategy. The IT department should still be involved to ensure a smooth implementation.9

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Virtual classroom technology integrates with the LMS. Each organization selects from a

handful of virtual classroom vendors.10 In some cases the LMS vendor or content vendor offers a virtual classroom application. Your organization may also use its existing Web conferencing provider if the application offers enhancements for virtual learning. The cost is based either on a fee for each named organizer (instructors) or on the number of concurrent users who will receive virtual classroom instruction at any given time.11 This ROI study uses the named organizer option. The virtual classroom application and the SaaS LMS connect through APIs.

Production tools allow in-house content development. In-house content production includes

repurposing existing classroom content for online use and authoring new content specifically for eLearning. A potpourri of Sharable Content Object Reference Model (SCORM)-conformant authoring tools provides eLearning authors flexibility in the depth and variety of content they can create. These include the easy-to-use, rapid eLearning development tools and the more traditional tools that require more in-depth knowledge and authoring experience.

Off-the-shelf content comes from special eLearning content vendors. Content vendors

provide off-the-shelf eLearning content that organizations license on a yearly or multiyear basis. Generally, organizations choose to license libraries of content like IT, business skills, or desktop skills. They decide how many employees will access specific libraries and contract for that number of users. These vendors also provide customizable print materials, mentoring, and the ability to customize some of the eLearning course components. In this ROI document we focused on the off-the-shelf eLearning content and did not include the other services these vendors offer.12

Special content needs tap custom content developers. Organizations engage a custom

eLearning content development company for courses with content features beyond their inhouse staff capabilities, courses that require more advanced tools for activities like simulations and branching, or learning that requires extensive concept development and course execution. Custom content organizations have creative architects, instructional designers, and content developers highly skilled in planning and developing learning experiences.

Learning and development employees to develop, deliver, and mentor. Typical learning

staff include titles like learning and development director, online trainer, curriculum writer, instructional designer, Web designer and developer, graphic design specialist, and LMS administrator. Some of these positions will be new hires; others will be role changes for existing learning staff. For example, some classroom instructors may develop skills as virtual classroom instructors. Especially in an organization with some decentralized learning, a learning specialist may become a consultant assisting lines of business in planning their eLearning.

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Help desk staff must be knowledgeable and ready to assist users. User assistance is generally

the responsibility of specific employees within the organizations help desk. Learning directors must ensure these employees are well trained on the applications and tools. During the initial weeks of the rollout, ensure that these LMS help desk people are available during extended hours to allow easy access to help for employees. Help desk should prepare FAQs to post online with the most frequently asked questions and prepare other do-it-yourself troubleshooting aids.

Creation of an eLearning culture is critical to success. Special informational and rollout

programs determine the success of getting employee buy-in to eLearning. Involve internal marketing people to create LMS awareness during the program planning and launch. Create traveling road shows where employees can use the application, ask questions, and begin to understand what an LMS is, why its important to the business, and how to use it effectively. Give employees opportunities to participate in pilots and give feedback. Finally, continue providing updates and latest information after the rollout.13

Figure 3 Key Costs Of eLearning


Project phase Technical Key costs LMS as SaaS implementation is a predictable yearly cost. Virtual classroom requires additional leader seats. Purchase of content development tools. Contract for o-the-shelf course content. Contract with custom developer to create company-specic courses. Director to manage program and align with business needs. Staff for creation, development, and deployment of content. Administrator/help desk to ensure day-to-day success of program. Special rollout informational and training sessions. Marketing activities to inform employees.
Source: Forrester Research, Inc.

Content People

eLearning culture change

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Risk Analysis: Vendor Relationships, Technology Costs, Content Quality No change or avoidance of change is without risk. Factoring this uncertainty into the analysis converts an optimistic and potentially unachievable plan into one with higher accuracy. Refine initial estimates by factoring in three key risks:

Maintaining strong relationship with vendors. Because of the SaaS deployment, the LMS

and the virtual classroom implementations are significantly easier than installed applications. However, you must maintain strong relationships with the vendors and address any application issues immediately. Ensure that vendors provide adequate support for learners who may struggle with issues of system uptime, ease-of-use, and access to course content.

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Managing high startup costs. The SaaS LMS is a predictable yearly cost so the upfront cost

of the LMS and virtual classroom technology is not as significant as installed applications. However, the organization must hire new staff and retrain some existing staff to mentor learners, develop eLearning content, and teach online. The organization must purchase new authoring tools or upgrade existing ones for content development. Communication messages must start before the applications are launched and continue during the implementation until the technology becomes an integrated part of employees daily work.

Ensuring excellent, engaging content. Both repurposed and new eLearning content must

provide engaging learner experiences. The statement content is king is true. You may have wonderful technology but without excellent content, eLearning fails. Spend the time to repurpose classroom content with graphics and activities appropriate to the objectives and expect that the eLearning course will look very different from the classroom version. Carefully select off-theshelf content. From some vendors you will select libraries; from other vendors you will select individual courses. Preview these to make sure they fit with your objectives and are well done.

CalculatinG ROI For A 5,000-Employee NortH American INsurance Company I&KM professionals who are considering implementing eLearning need to have a firm plan in mind. Most organizations start with the division or unit with the most pressing learning needs and then add other groups. By keeping the projects scope manageable you are more likely to deliver some value in a shorter period of time at a reasonable cost. To arrive at a quantitative assessment of the economic implications of eLearning, Forrester evaluated the key drivers of benefits, costs, and risks for a hypothetical organization considering an eLearning implementation. Establish Company Baselines And Assumptions For the purposes of conducting the analysis of a typical eLearning implementation, we established a set of baseline values and assumptions that learning directors can adapt to match many individual organizations. Based on numerous conversations with end users, we chose to use the following parameters:

A public insurance company with 5,000 employees in the US and Canada. Employees

are located in different geographies, 12 locations in the US and three in Canada. Although they spend time sharing information and data through the telephone and Web conferences, classroom training classes have been the primary way of conducting formal learning, especially in regulatory compliance areas. Training in other areas has been haphazard and dependent on needs that arise.

Accustomed to classroom training held regionally. All employees are familiar and comfortable
with classroom learning. The company has not developed any specific learning courses online. Employees are hesitant about eLearning and wonder if they will learn as much online as in the

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classroom. Employees are computer savvy since much of their work is online but they have not experienced online learning in a business setting.

A multigenerational workforce with various levels of technology expertise. The average

age of the workforce is 45 with many Baby Boomer employees nearing retirement and a large number of new hires in the Millennial and Gen X age groups.14 Even though many in the workforce are older, they are quite skilled using the technology related to their work and have seen the time savings that technology has brought to their work.

Need for training in compliance, desktop, and professional development. Employee training

needs cover all business areas. Executives are most anxious to convert compliance training to eLearning. From the experience of other organizations, these executives know how quickly large employee groups meet required compliance regulations and the benefit of having an audit trail of data on employee compliance completions.

Conversion of some existing classroom content to online. Business units, working with the

learning and development unit will identify the courses appropriate for eLearning conversion. Many classroom courses have extensive manuals and workbooks that will assist with this repurposing effort. Other training will retain some face-to-face components with other components converted to online learning to make a blended learning course.

Technology infrastructure is robust without major network building needed. The companys

infrastructure will accommodate an installed LMS. However, because of SaaS success with large companies and the need to keep IT staff on other company critical applications, this organization chose the SaaS LMS model. The organization will use its existing Web conferencing vendor that has some specific learning features and it will purchase eLearning content authoring tools.

Develop An Evaluation Timeframe This insurance company has a timeline of three years to implement eLearning throughout their global organization starting from January 1 of year 1 until December 31 of year 3. The experiences of organizations initiating this type of project indicate that the following phases are likely to occur:

Planning and preparation phase. These efforts are not accounted for in this ROI document but
they are essential to a successful eLearning deployment. This includes developing a governance team representing all lines of business that oversees content selection and development, technology selection and implementation, culture change and employee training, and that ensures learning is in strict alignment with company goals. Without effective governance and support from a C-level executive, the eLearning initiative could easily fail.

The technology investment phase. The LMS will manage employee learning. Selection requires
careful analysis of LMS needs, evaluation of vendor offerings, and selection of a SaaS vendor

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through an RFP process. Course authoring tools will include both traditional eLearning content authoring tools and rapid eLearning development tools. The selection of a synchronous eLearning vendor will allow virtual classroom training. Depending on the LMS vendor, informal learning may be built into the formal learning or act as an accompanying module to handle podcasts, wikis, and general documents.15

The staff investment phase. Often, learning directors must hire staff who have expertise

in online learning. This includes an instructional designer, a Web developer, and an LMS administrator. The training director must be a proponent of online learning and encourage thinking of simulations and gaming as appropriate approaches for engaging learners. Some face-to-face instructors will continue their role but others will become instructional designers, subject matter experts, content developers using rapid eLearning tools, online virtual classroom instructors, and consultants who work with different lines of business helping them create learning content. These instructors need training for their new roles and need to work with a knowledgeable director who knows the companys eLearning vision, business goals, and strategy for execution.

The content investment phase. Staff will begin content conversion from classroom course to

online learning content. An online approach will not be appropriate for all content. Choose and design content carefully to drive engagement and interaction online and leverage built-in instructional design. Simply putting content from a page of a computer screen with some visuals and a periodic test will fail as eLearning. During this phase, content is converted to self-paced, synchronous, and blended forms of online learning. This phase also includes acquiring content from off-the-shelf vendors and producing content in-house. Discussion of informal content and the use of blogs and wikis within the program may not be an initial investment but it must be in your learning plan.

Ramp-up phase. During ramp up, employees are kept informed about the movement of

learning to an online format with learning events throughout the development and preparation phases. Employees need opportunities to try out the technology in small groups and get comfortable using technology for learning since it may be new and unfamiliar to many. Provisions are also made to access learning from home or other locations whenever possible. This provides flexibility of both time and location.

Go-live phase. Once eLearning is launched and the process is running smoothly, the staff

can look at developing individual learning plans, adding more content from vendors, and developing more custom content. Organizations that have integrated eLearning into their learning and development find 60% to 70% of learning is online in some format (totally online or blended), with 30% as face-to-face instruction. Rolling go-live dates work well and make it easier to address issues that arise in one location before adding additional users. Many LMS providers also provide performance management and compensation applications as well as the informal learning, all through a SaaS implementation.

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eLearninG adds biG benefits for learners and tHe company In our hypothetical insurance company, we estimate that implementing eLearning in 15 North American locations over three years will produce an expected return on investment of 69% and a net present value (NPV) of approximately $4,537,177 (see Figure 4). This ROI depends on the success of a company in preparing and supporting employees to make the change to eLearning and to recognize direct benefits of having learning available anytime in an easy-to-access format to take at ones own pace. We chose a three-year ROI period because change management takes time and each phased rollout is a learning experience, which contributes to the next phase. To implement eLearning, our sample insurance company must invest $2,762,104 course content, training and retraining, hardware and software, and new staff in the first 12-month investment phase. Additional investment of $4.8 million during years two and three will complete eLearning implementation companywide, reaching an eLearning to classroom ratio of 70/30. The eLearning costs are exceeded by expected business benefits: speed to competency, training flexibility and consistency, content repeatability, and travel savings for employees and staff. According to our model, these benefits will provide payback within 12 months. An eLearning investment can pay off in many areas throughout the organization. For sales, eLearning will allow employees to learn about new products and services at convenient times without extra travel or taking time away from the sales process. For mandatory and compliance training, an audit trail provides proof of completion and information on the time that learners spent on each phase of the training. For professional development and processes, procedures, and business practices, eLearning means employees become knowledgeable about their job more quickly and are able to contribute sooner. No longer do they have to wait for a class to start learning. A critical success component is the change from classroom to eLearning as a way of learning productively. The more successful a company is in change management, the faster the payback and the better the ROI.
Figure 4 Model: Total Economic Impact Analysis Summary eLearning
Year 1 Benet Cost Net cash ow NPV ROI Payback
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Year 2 $4,325,955 $3,356,322 $969,634

Year 3 $4,325,955 $1,481,700 $2,844,255

Total $12,977,866 $7,600,126 $5,377,740

Present value (PV) $11,148,406 $6,611,230 $4,537,177

$4,325,955 $2,762,104 $1,563,851 $4,537,177 69% Within 12 months

Source: Forrester Research, Inc.

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R ecomme N D atio N s

Put components in place to Ensure a positive and rapid eLearninG ROI


Nationally and globally dispersed companies reap the most benet from eLearning. This scalable technology provides strong benets that outweigh the costs. In starting an online learning program, follow these guidelines:

Identify and recruit leadership. Identify a learning leader who has strong business acumen,
is an excellent communicator, is respected by both business and learning leaders, and who understands the components of a vibrant learning program.

Plan your move from face-to-face to online learning. If you have instructor-led training,
explore blended learning with some training components in a self-paced online format and others in a virtual classroom or shorter face-to-face sessions.

Target low-hanging opportunities: compliance courses and basic skills. Start with the
obvious and easier learning to show immediate benet: compliance and regulatory courses that require an audit trail and excellent reporting. Examine o-the-shelf vendor oerings and select discriminately appropriate courses that t your business needs.

Select your LMS provider and delivery approach. Identify a learning management system
to track, manage, and report on the learning. Explore a SaaS model, which oers a consistent monthly cost and a congured rather than customized application to streamline costs and reduce in-house personnel.

Pilot your eLearning tactics before go-live. Provide employees with opportunities to try
your online learning and to get comfortable with it before the launch. Have mentors in all sites as the go-to-people during the rollout.

Master rapid eLearning development toolsets. Develop appropriate company content


quickly and inexpensively using rapid eLearning development tools that require no technical expertise. For content with long shelf life and more sophisticated content, use more formal development tools or outsource it for custom development.

Measure the impact of your eLearning strategy and execution. Evaluate results of learning
with the emphasis on the employee performance improvement. Carry out employee surveys and manager evaluations around perceived success of the learning. Identify some courses to carry out formal evaluations with pre-and post-learning assessments.

Complement more formal courseware with informal learning tactics. Wrap informal
methods like discussion boards, online help, blogs, and course ratings around the formal courses for more cost-eective interaction and engagement.

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Supplemental MATERIAL Online Resource The underlying spreadsheet detailing the model in Figure 4 is available online. The online version of Figure 4 is an interactive tool to allow the user to customize the benefit, cost, and risk data to fit your company situation. Methodology Forrester Research uses a defined methodology for analyzing and evaluating the costs, benefits, and risks of a proposed solution. This methodology, termed Total Economic Impact (TEI), provides a holistic view of the decision by including an analysis of costs, benefits, flexibility, and risk. By including an assessment of risk, TEI provides a realistic view of expected outcomes, rather than one shaded by early optimism and enthusiasm.16 Unlike a cost- or technology-based analysis, TEI does not rely on industry averages or factors that are applied to all organizations, but is a methodology for evaluating projects. The TEI methodology forces the determination and quantification of relevant metrics in light of an organizations current state and future goals. Firms can use the TEI model as a proactive and predictive tool. Endnotes
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Today, more than 34 million US adults telecommute at least occasionally. Fueled by broadband adoption, better collaboration tools, and growing management experience, telecommuters will swell to 61 million US adults by 2015. See the March 11, 2009, US Telecommuting Forecast: 2009-2015 report. In work settings, we process interactions analytically (resulting in cognitive trust) and emotionally (resulting in affective trust). As virtual distance increases, our trust becomes more cognitive because there are no personal ties and no relationship. When virtual distance is lowered, our trust becomes more affective. For excellent research on effects of virtual distance and how managers can decrease this distance see, Karen Sobel Lojeski and Richard R. Riley, Uniting the Virtual Workforce, John Wiley& Sons, 2008. Source: Ruth Clarke, Is eLearning Better? Media Comparison Research, Learning and the Science of Instruction, John Wiley & Sons, 2008. Learning management vendors like Mzinga (http://www.mzinga.com), Cornerstone OnDemand (http:// www.cornerstoneondemand.com), and Saba (http://www.saba.com) have announced Web 2.0-type applications that can be used to support more traditional learning. Source: M.K. Tallent-Runnels, Teaching Courses Online: A Review Of The Research, Review of Educational Research, Spring 2006. Kirkpatricks levels of evaluation are very helpful in developing different degree of assessments from simple I liked the course to pre-and post-data comparison showing the employee effectiveness improvement that

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helped drive company ROI. Source: Kirkpatricks Learning and Training Evaluation Theory (http://www. businessballs.com/kirkpatricklearningevaluationmodel.htm).
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Today, employees are working in a very fast-paced environment. They need learning that is immediate, relevant, and in the context of their work. See the February 14, 2007, Knowledge, Learning, And Work Unite! report. A SaaS implementation means that the application is hosted by the vendor. Different versions of SaaS exist today, but in learning this generally refers to multiple customers on the same iteration of the software with separate and secure databases. This allows easier upgrades and takes responsibility for the learning application off the shoulders of the IT staff. This kind of implementation, sometimes called on demand, is the fastest growing LMS implementation method. SaaS grows as an attractive technology implementation choice. See the February 12, 2008, The Forrester Wave: Enterprise Learning Management Suites, Q1 2008 report. Virtual classroom vendors that are used most often in business include WebEx, Microsoft Live Meeting, Adobe Connect Pro, Saba Centra, and iLinc. In higher education, Elluminate and Wimba are popular vendors. The choice depends on the number of people who will give instruction and how varied the learner base is in customers, channel partners, and employees. If you have a designated number of people who will serve as instructors, named users may be most cost-effective and averages about $16 per named user per month. On the other hand, if you have numerous presenters and many users inside and outside the organization, you should choose a concurrent license. For example, if you had 100 concurrent licenses, you could have two meetings of 50 people each or 10 meetings of 10 people each occurring simultaneously. Concurrent licenses cost about $85 per user per year and allow unlimited number of instructors and users. If you go over the 100 licenses, you are charged extra for those seats above your contracted number. Skillsoft (http://www.skillsoft.com), Element K (http://www.elementk.com), and Harvard Business Publishing (http://ww3.harvardbusiness.org/corporate) are examples of widely used off-the-shelf content providers.

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Select your LMS vendor based on the quality of the RFP responses, the success of the live scenario demonstrations, and the strength of financial and reference-check evaluations. See the October 24, 2007, How To Select A Learning Management System report. Todays workforce has four generations, each composed of individuals who approach work differently, influenced by the perspectives and values molded during their formative years. See the January 22, 2008, Generational Workforce Strategies: Suggestions For Coping report. The formal course with multiple lessons is still around and will always have a place in the learning hierarchy, but informal learning with knowledge on-the-go is already here and its getting stronger. See the November 12, 2008, Informal Methods Challenge Corporate Learning report. For an in-depth discussion of TEI and the individual elements within the methodology, please see the August, 4, 2008, The Total Economic Impact Methodology: A Foundation For Sound Technology Investments report.

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