eLearning: Costs

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In the Real World Examples post we looked at Problems and Goals. It would be really wonderful to be able to create training that turns every Problem into an achieved goal.

However, creating training costs money, and training needs to pay for itself, and you need to know that the training will pay for itself BEFORE you invest in it. You can do this with Return On Investment (ROI) or Cost Benefit Analysis (CBA) formulas.

Training costs money internally: in the production hours that a staff gives to the training program. 

Training costs money externally: in creating, distributing, and maintaining the training program.

I’ve looked all over the place for a simple way to examine training costs. The best examples I have seen are Michael Mercer’s, from his 1989 book Turning Your Human Resources into a Profit Center. However, most of his examples only cover what I call the internal cost.

I’m going to combine two of Mercer’s examples so that both internal and external costs are factored into the Cost of Solution.

What follows is my version of Mercer’s EEO example, complete with nostalgic 1989 numbers.

The Story (direct from Mercer): “A division of a major oil company found itself bogged down in a costly, yet quite avoidable, business problem as a result of quite a few sexual harassment complaints… The company seldom doubted the accuracy of the claims.  They 'spent a great deal of money' to pay off the complainants. These charges were avoidable; therefore, the decreased profitability was unnecessary.”

Let’s project this out 5 years:

·         - Before implementing the training program, the 5-year cost of your Problem was going to be $722,000 x 5 = $3,610,000.  Over THREE MILLION DOLLARS (in 1989).

·         - After implementing the training program, the 5-year cost of your Problem is projected to be $67,600 x 5 = $338,000.  Still less than the 1-year cost of your original Problem.

Of course this model does not account for raises, various salary levels, etc. etc. etc.  It is simple.

And remember, I am looking at web-based, eLearning style training, not a crew of live trainers descending on an office suite to hold sessions.

I use the EEO example because it clearly illustrates costs that you might not immediately consider:

• Your Problem might be sexual harassment, but the costs of this problem spill over to other areas, including turnover; involving the cost of hiring and training new employees.
• Maintenance of the training program; updating the training program for changing times. 
• Cost of bad press in the community.
• With EEO in particular, cost of your reputation.
• Cost of getting on the governments radar.

Nothing is static.  What we need to learn changes, as do the ways that we learn.  Businesses expand or pull back.  New mission statements roll out.  Health care benefits and companies change.  People change.

Nobody likes to be surprised by costs.  Examine your costs from every angle, and make sure you partner with a training professional who does the same.

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Tomorrow’s Topic:  Ensuring Training Effectiveness