Thursday, September 21, 2006

Painting Your Value Picture

My colleague Michael Grant led an interesting webinar today titled Budgets Paint a Picture: How to Use the Budgeting Process to set Your eLearning Strategy. Twenty-nine participants from a range of sectors (telecommunications, financial services, legal, medical, pharma, entertainment, software, business services, government and education) heard Mike describe how eLearning budgets should be more than just a collection of figures in a spreadsheet. Budgeting, done properly, paints a picture of your strategy to use eLearning to create value for your organization. It is not just a case of "here's what it costs," but "here is the difference we will make."

When we asked webinar participants what their big eLearning budgeting challenges are, we heard the following:
  • "identifying what will be required ahead of time"
  • "making realistic estimates"
  • "people don't appreciate all that goes into eLearning (especially development costs)"
  • "forecasting requirements for coming fiscal"
  • "justifying costs for management"
  • "'run overs' of time estimates"
  • "determining proper staffing levels"
These comments are fairly typical of what we hear from clients all the time. But they also show a fixation on the cost side of the equation. Notice that no one said that proving value was a challenge (although it could be argued that "justifying costs" is another way of putting this).

Mike laid out four ways of budgeting for eLearning that exhibit value.

1. Mode Comparison

Compare the development, delivery and opportunity costs of face-to-face training with eLearning. Although initial development costs are higher for eLearning, great savings can realized over subsequent years in lower delivery and opportunity costs.

2. Hurdle Rate of Return

Some organizations may have already established "hurdle rates" that any internal investment must clear in order to be approved. eLearning budgets in such environments must be able to show that investments in eLearning can realize these minimum returns via providing net benefits to the organization.

3. Incremental Links to Organization Metrics

Target your eLearning at improving a key metric important to the organization (e.g. perhaps part of its balanced scorecard). These metrics can be around things like improved customer satisfaction, better processes, etc., and are not necessarily strictly financial in nature. You measure your effectiveness in using eLearning to move this metric in a positive direction and use this experience to drive future approaches.

4. Joint Budgeting

This is where you work with a line department (e.g. manufacturing, sales, etc.) to create eLearning that addresses a particular challenge within that department. You work closely with them in defining what is of value to them. The department shares in the budget and the risk for the initiative. Again, you measure the effectiveness of the eLearning intervention in creating value for the department and use this to demonstrate value to other possible joint funders.

Bottom line? Make sure your budgets paint a picture of value, not just cost. It's more likely that you will get what you ask for this way.

Here is a recording of the webinar.


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