ROI Isn't Just Financial, It's About Collaboration
Return On Investment, or ROI, is a term either misapplied or misunderstood by many involved with workplace learning. While ROI isn't and should never be applied to actual learning activities, there's a need to apply ROI to tangible learning investments, and make a business case for learning technology. Those requests you make for any learning technology is one area that comes up repeatedly. It's also the one area practitioners overlook, where their decision-makers do apply a credible ROI calculation. But conducting an ROI calculation doesn't just rest on learning's shoulders, it should also involve others who can deliver value to the decision-makers who're expecting to see value.
Conducting a credible ROI calculation for any tangible asset isn't just about demonstrating its positive cash flow or profitability. It's about balance: the balance between meeting financial and qualitative objectives contributing to your stakeholders' financial expectations. The balance is also about involving those with a stake in the decision. In your mind this purchase may be a "learning requirement", but in reality, it's actually an organizational requirement and should include voices from the operational areas which have some implication in the learning/purchase or who have a vested interest.
ROI For Learning Technology
Let's begin with the application of appropriate ROI calculations for proposed learning investments. One issue with the term "investment" is it's often used liberally among practitioners. Many will say, "you're getting caught up in semantics!" But semantics count when communicating with operational decision-makers formally educated to discern between expenses and investments.
Semantics count, since an ROI's intended purpose is rarely, if ever, applied to cost center activities and operational line expenses. These activities don't demonstrate tangible long-term benefits and don't have a direct correlation to financial results. Don't take my word for it. Look it up in any managerial accounting text or in accounting standards.
Remaining with semantics, however, there's opportunity for learning to apply ROI to their learning requirements, specifically, to tangible items or even more specifically, to learning technology. Why so? Tangible assets are expected to improve organizational performance over time, usually over many years. And the value, or costs, of those items must be accounted for against the benefits they're expected to deliver. Naturally, the benefits of the asset must exceed overall costs, over time. If not, then why would you need or even consider purchasing it? This is where your stakeholders apply proper and recognized ROI calculations.
Simply, using the term investment within an operational context typically refers to a capital investment, expenditure, or purchase. Capital implies the use and/or application of the proposed asset over multiple periods and possibly for multiple purposes, indirectly contributing to the organization's growth or effectiveness. For learning practitioners casually tossing around "investment" within conversations with operational decision-makers, please take a moment to assess whether it actually qualifies as one if you intend on building any credibility with them.
Additionally, more than just semantics, there is also the issue of how ROI is calculated. For a financial assessment, a capital investment ROI calculation is more involved than any nonattributable and noncredible "training ROI" calculations that may exist. It requires a comprehensive understanding of the asset's impact upon the function (learning activity) and the overall cost-benefit to the organization. Again, please never show or even try to convince an operational stakeholder that your "training ROI" calculations are valid. If you do so, you do it at your own risk, and don't expect them to welcome your misleading insights.
But please don't panic. Your stakeholders don't expect you to calculate the financial assessment or the ROI for your proposed technology (tangible) investment. They didn't hire you for that. They do, however, expect you to be financially and business literate when it comes up to them for a decision. You're expected to reassure them that you understand the decision's impact on the business. Shrugging your shoulders and stepping back isn't an option when you're pitching to buy more learning assets, especially more technology. That would be the most irresponsible thing you can do.
Make A Business Case For Learning Technology: A Team Effort, Not A Solo One
Developing a convincing business case for any learning technology investment isn't supposed to be a solo effort. It's always a team effort, especially when you're looking to purchase complex items like technology. But for some reason, practitioners often believe a business case is unwarranted, try to avoid it at all costs, or attempt to do it on their own without input or support from those who can bring significant depth and value.
Doing it alone is never an option. Always involve those who need your learning (to gain their buy-in) and those possessing the relevant subject expertise, who'll deliver substance to your case. Yes, these partners will ask tough questions; you want this since the alternative is having decision-makers pepper you with questions you can't properly address and so leaving your credibility in shambles. You must include and draw upon four partner-experts to build a convincing business learning technology case (more partners may be required depending on your requirement): operations (internal/external client); finance department; IT department; and of course, your own learning team (which is the area you're responsible for or involved with):
1. Operations
Operations is usually your internal customer—you know, the ones seeking out your employee knowledge development expertise. Granted, you'll certainly conduct a thorough skills assessment and needs analysis, and hopefully align their needs with their budget and performance improvement expectations. You'll also need to design and implement proper learning infrastructure to support the learning effort. But this isn't your client's responsibility, it's yours. It's also a tangible investment for, and benefit to, the organization. This requires balancing the needs for your client, the organization (over the long-term), and of course, the impact additional assets will have on other operational activities. As you can see, your learning initiative doesn't stop with your courses, it's much more involved and intricate.
2. Finance Department
The finance team—those that understand how money and financing works—should be at the top of your list of people to help in building a business case for your learning technology. They'll help you to prepare to address the costs and financial requirements for your learning infrastructure needs, whether it's simply purchasing some tablets, software, or laptops, to meeting major needs like buying an LMS. Involving your finance people helps to answer questions like, "where will the funding come from?"; "how will it be accounted for financially?"; "what benefits should the organization expect to receive?", among many other financially focused questions.
3. IT Department
One group that are often left out, or left as an afterthought, is the IT department. IT are the most challenging group to convince after the fact, and rightly so since your decision directly impacts the organization's delicate digital infrastructure. It's best to include them early on in the process so that they can properly contribute to the planning, designing, and implementing of your technology requirements, without any muss or fuss. Another benefit is that you're gaining their early support for your infrastructure need, mitigating any resistance from them or your decision-makers.
Your Next Step
Moving forward you must acknowledge and accept that your learning efforts aren't an island unto itself. Learning is a significant operational support activity, requiring the support of many other enabling elements to deliver value for your end user and ultimately, to the benefit of the organization. If you expect to deliver value and build your internal credibility, then do so by involving those internal subject experts that will happily help you do just that.
Please share your thoughts and feedback with us. We would enjoy hearing about your efforts. And who knows, it may be the topic of our next eLearning Industry article. Also, please check out our LinkedIn Learning courses to learn more about developing business credibility for your learning efforts. Please share your thoughts and remember #alwaysbelearning!
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