The choice between hosting face-to-face meet-ups or creating a virtual learning environment was easy for the founders of The Hive. They chose the online option, so the organization could deliver business topics, forum discussions, and regular Blab chats (www.blab.im) to small business executives throughout the country rather than only those near its New York offices.
The greater geographic reach of virtual learning was a potent benefit for Pamela Herrmann and Patty Dominguez of CREATE Buzz, who developed The Hive. It is equally powerful for corporations with far-flung offices. Aside from the obvious logistical benefits of helping employees learn in place—thus eliminating the expense of airfare, hotels, meals, and meeting space—virtual learning offers an immediacy and customization that face-to-face classes can’t deliver.
Additionally, “you can react to issues quicker, gaining access to an expert and swiftly developing a half-day training program that people can fit into their schedules without the need to coordinate with others,” says Lee Arthur, managing director of the New York Institute of Finance and ExecSense, an online learning business for the C-suite. This lets organizations adjust course almost immediately, rather than months later, and, therefore, supports revenue flow.
Virtual training also provides access to world-class business leaders. ExecSense’s monthly subscription, for example, offers hour-long classes from the head of marketing at TDAmeritrade and the CIO of J.P. Morgan, among others, in collaboration with the Columbia University Center for Technology Management. “For the first time,” Arthur says, “small business owners can get these lessons from Columbia’s Master’s program without attending Columbia University.”
Measuring ROI
Throughout business, “return on investment (ROI) for training often is discussed but rarely measured,” Arthur says. A recent ExecSense survey reports that although 90 percent of respondents acknowledge the link between learning and organizational performance, 60 percent of learning organizations don’t track the return on training investment.
ROI for The Hive is measured in two ways. Volume is the most obvious. Many small businesses paying a small subscription fee each month can generate profits. The Hive’s other purpose is as a lead generator. “Small businesses have the courage to monetize their passions, but often can’t afford five-figure consulting contracts,” Herrmann says. The Hive provides “Business 101” discussions that may lead to individual coaching and, eventually, to full-fledged consulting projects for its parent company, CREATE Buzz.
Quantifying the ROI for participants is more variable and depends on whether and how they used their learnings and contacts developed during training.
In determining returns, “Learning & Development (L&D) leaders often wrongly focus on the end metric rather than the levers—the tools and strategies—to help meet their objective,” says Jeff Carpenter, CEO, Caveo Learning. As an analogy, he asks, “If your goal is to lose 10 pounds, but you lose eight, did you fail?”
Rather than just measuring outcomes, he recommends identifying and teaching people to use the levers necessary to achieve specific goals and basing success on whether they were used. The objective is to drive specific business metrics in the right direction, regardless of whether the learning is virtual or in person, Carpenter emphasizes.
Use Standard KPIs to Measure ROI
“Nobody in the business is twisted up over ROI,” Carpenter continues. “They approximate it, using metrics others accept. Tangential metrics may not be considered valid. Therefore, use the metrics the business unit leaders use.”
According to the ExecSense survey, the most common key performance indicators (KPIs) used to link training to business outcomes are, in order: customer satisfaction, speed of growth, employee turnover, reduced cost, and accelerated innovation.
To identify the metrics that resonate with your business, “talk with stakeholders to identify their goals. Then use existing metrics to measure results,” Carpenter says. For example, “identify a topline metric. If it increased or decreased a certain percentage, what does that mean monetarily?” Determining that may require talking with the finance department, he notes.
Both before and after training, collect hard data regarding output, quality, cost, and time, and soft data such as work climate, work habits, and attitude. Include a control group in the training, if possible, to isolate the effects of training. Otherwise, effects may be estimated based upon performance monitoring; follow-up surveys; and conversations with learners, supervisors, and senior leaders.
Monetize the Total Cost and Value of Training
ROI (as a percentage) equals the monetary value of net benefits divided by the program costs, times 100, Carpenter says. To monetize the value of the training, calculate the cost savings or profit contribution directly caused by the training.
Another option is to link quality to costs, using the premise that improved quality in manufacturing reduces rework, scrap, and returns, and in service industries generates return business. Experts, both internal and external, also may cite historical costs and industry and government databases to help determine the relative value of improvements to further hone your calculations.
Include opportunity costs, too. Organizations often fail to include such things as the cost of removing learners from their usual activities in their ROI calculations. This includes their salaries and lost productivity for the duration of the training.
For business owners, Herrmann says, “the two most valuable assets are time and money. Virtual training lets employees access information on their own schedules.” Consequently, they can learn without taking time away from the business, thus enhancing their ROI. The New York Institute of Finance classes are a good indicator of the perceived value of virtual training. Its ratio of digital to classroom students is now 9:1, Arthur says.
Omitting opportunity costs from the ROI determination is partially a factor of L&D’s ability to gather and interpret metrics, the lack of actionable metrics, and the overall maturity of the L&D organization, Carpenter says.
To gather the data needed to calculate ROI of training, L&D leaders typically have several possible sources. Carpenter advises choosing the one that delivers the best insights into the data as your single source of truth.
As part of the ROI determination, also conduct a cost/ benefit analysis of the training program, Carpenter advises. This includes all the direct and indirect costs associated with developing, teaching, and monitoring the program (including materials), prorated throughout the program’s expected life. Include salaries and benefits of staff and facilitators, travel, lodging and meals, and the cost of the training facilities.
Consider Technology Last
“Training ROI comes from reaction speed,” Arthur emphasizes. Technology should be the last consideration in determining the ROI of training. In fact, he says the initial costs of virtual development may be comparable to classroom training. After the initial equipment costs, however, the expense drops.
Equipment needn’t be expensive. Effective virtual training can be developed by subject matter experts in the field using only a smartphone and the Internet. Open technologies such as YouTube and GotoMeeting are examples of other low-cost technologies, Arthur says, along with Coursera, edX, and Lynda.com courses.
When calculating the ROI of virtual training, remember that virtual development programs have value to learners, as well as to their organizations. Learners can adjust the pace of a virtual presentation and can go back to cover concepts as often as needed in private, often on their own schedules. These benefits make virtual training ever more compelling, and the ROI even higher.
