Friday, September 15, 2006

Budget Blues: Get it Right the First Time

This is the time of year that people may be faced with drafting budgets for their eLearning initiatives. A key challenge is that they may have not completed any significant eLearning to date, and therefore are a bit in the dark on how to go about budgeting.

eLearning differs from face-to-face learning in that it is new and therefore involves new fixed costs. But over time, successful eLearning more than recoups these initial costs because it is far more cost effective than face-to-face at reaching people and greatly saves on their time. So the budgetary trade-off is between relatively high costs today to produce better and lower cost access over time.

We always advocate a conservative and controlled approach to budgeting; conservative in that the projected returns are likely to be realized, and controlled in the sense that the budget is manageable. Anyone can fill in a spreadsheet and generate a theoretical return, but the actual return is determined by how you manage eLearning, not how you filled out the spreadsheet.

It makes sense, therefore, to start with what you know and budget from there. You might already have a budget for some classroom learning that could be delivered more economically online. Or you could see a portion of your training budget as being like research and development where you pilot an approach to eLearning. There is no one way of doing eLearning and the real value is how it is customized to generate a measurable benefit in your context.

The biggest mistake that we see in budgeting for eLearning is a matter of sequence. There is a tendency to purchase the eLearning tools before one has a clear idea of what they want to do with the tools. People end up with tools that they don't use effectively and this has the effect of wasting resources while not generating the concrete experience that might serve as the basis for future budget estimates. It's a little bit like starting to build a house before you have poured the foundation.

It makes more sense to budget a bit of time up front to figure out how your eLearning will make an impact and then to develop the eLearning product. As the saying goes, time is money. But if you don't spend a bit of time building the foundation, you are more likely to waste money, which has the effect of reducing the budget available for eLearning over time. (We hear: "eLearning doesn't work," which is code for "We don't budget for it because we had a bad experience."). Theoretical ROI calculations will never replace real metrics based on real experience as a basis for budgeting.

My colleague, Michael Grant, and I will be exploring many of these issues in a webinar on September 21st titled Budgets Paint a Picture: How to Use the Budgeting Process to Set Your eLearning Strategy. We hope you will be able to join us.