Too often we've seen training professionals drone on about competency models and instructional-design theories while boring their nontraining audiences to death. Keep the focus of your content on business terms ”not training jargon ”and you'll hit a home run.
Much of our business case was dedicated to financials. Financials are a critical component of this step. The financial business case is the most important part of your sales pitch. It's the easiest part of the process to understand and the most attractive selling feature for executives. In our business-case document we included details about the necessary up-front investments, long-range expectations, savings to be realized, and comparisons with present costs. For example, in our "As Is versus Project Oasis" chart, we compared the costs of conducting business as usual for four more years ”roughly $73,000,000 ”with the cost of supporting our initiative ” roughly $41,000,000. These figures captured management's attention in a way that an explanation of instructional-design theory never could.
To craft your own budget comparison, begin with your assumptions about the state of learning and your strategy. Assumptions come from industry trends, benchmark studies, and observations of the current environment. They are at the base of your objectives and are your starting point for proving savings. For example, based on what you've read about the cost savings associated with e-learning, you may assume that if you replace classroom training with Web-based training your cost of delivery will drop by 50 percent. That assumption of savings is where you begin to build your ROI projections.
Be sure that your assumptions are useful, enticing, and provable.
If your assumptions are wrong, if your audience disagrees with them, or if your assumptions hold no appeal , you won't be able to sell your plan. For example, if you build your strategy around the idea that Web-based training can reduce the time to train by 50 percent but executives don't care how long employees spend in training, the proposal will be of little interest to them. Most important is that the strategies you choose have already been validated by the assessment and identification of the required learning objectives. If you make that connection, it's hard to go wrong.
Before you delve too deeply into the building of your financial presentation, get an outsider's opinion of your assumptions. This is a critical point in the transformation process where the expertise of an outside consultant is necessary. A financial specialist without ties to the company can give you a fresh perspective on your numbers , evaluating whether they are legitimate , provably valid, and tied to the needs of the organization. This person can also tell you if you have overlooked anything and affirm whether or not your project is on track.
If you are accurate, use your assumptions to create verifiable ROI formulas. For example, at Rockwell Collins our research of the training industry suggested that e-learning takes 20 to 80 percent less time than classroom courses. Taking a conservative approach, we estimated that the learning and development department would save 50 percent of classroom time, which translates to a reduction in hours of lost productivity. Based on that assumption, we built a simple ROI formula that showed what 50 percent less time spent learning was worth to the organization. For example: If an employee had to learn project-management skills, our classroom version took twenty-four hours of work time to complete. That meant the online custom course would take twelve hours and would also contain more content and skill building through simulation. To demonstrate the ROI, we used the average number of students who completed the instructor-led course in the benchmarked year.
This is another reason to gather accurate and complete baseline data. We realized that there would be more completions with the online course than with the instructor-led course, but we chose these comparisons to eliminate controversy over numbers and savings. That twelve hours of time savings is worth a fixed burdened rate multiplied by the baseline average classroom population minus the cost of development and continuous updating. Notice that we took credit only for the hours saved.
After calculating the saved hours, we factored in the elimination of travel time, which in this case was one hour per day times three days, again applying the burdened cost. The burdened cost is a figure you can get from your finance group . Burdened cost is an employee's salary plus benefits, vacation, facilities (brick and mortar), and a hodgepodge of other fixed business expenses. We had identified a number of high-cost core competency courses our team was going to convert to CBT. We used this same calculation for each one over the length of the three-year program. There were more than a hundred of them. For example, our first year the learning and development team converted more than fifty classroom courses to alternative delivery, and each one was factored into the plan. An important point to mention is that after calculating the budget required to accomplish this project, we gave 40 percent back to the organization up front, which meant the only money available for funding the initiative was contained in the execution. Simply put, if our team didn't execute the plan, we would not have the needed savings to funnel back into the project and would come to a grinding halt. Based on that proposition, the learning and development team began the first year of the project with a 40 percent smaller budget, so we never had the money to make mistakes. We promised to deliver significantly more with significantly less, and management took us up on the offer. It was a risky proposition and may not be a strategy you want to use; however, it did motivate us to execute the plan.