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Cost Benefit Analysis of Online Learning Tools
Keywords: Cost Benefit Analysis, Online Learning,
Blended Learning, Just-in-Time Training
Real-time, interactive content through polls, surveys, or
electronic whiteboards
Flexibility - training can be synchronous or asynchro-
nous
Increased training options can be formal or impromptu
Self-directed learning
Reporting and analysis on learning outcomes through
the integration of a learning management system (LMS)
The casting of a wider net to attract clients by imple-
menting online technologies
Accessibility - data can be shared with clients, co-
workers, or stakeholders through collaboration tools or
cloud drives


For the above listed reasons businesses are increasing
their focus on adding online learning into their training
budgets. Of the business executives polled who imple-
ment online learning, 80% indicated the reduction or
elimination of travel costs was the primary motivator.
Historically, forty cents of every dollar spent on train-
ing goes towards travel and lodging. During the great
recession of 2008-2012, companies reduced the amount
of money they spent on training. However, expendi-
tures specifically for online learning tools have tripled
in the last few years. The reason is primarily the greater
productivity from online learning and reduction in trav-
el costs.

Cost of Hiring and Retaining Employees

One of the most important roles that an executive direc-
tor plays within an organization is managing the budg-
et. This role includes both watching expenses as well
as leading the fund raising process. Often a cost benefit
analysis is used by executive directors to quantify man-
agement decisions and determine their viability from a
Online learning is being used by corporate America today
to teach soft skills, for employee orientations, to provide
certification training, and to create custom courses for
specific business needs. One of the major benefits of
online learning programs is the idea of delivering course
content in real time or what is referred to as just-in-time
training. Just-in-time training is possible through interac-
tive courseware or webinars designed to provide the right
training, at the right time, for employees or customers.

The emphasis on just-in-time training, sometimes called
informal learning, is nothing new, but with training budg-
ets being slashed, a renewed focus on how corporate
knowledge transfer occurs is causing many to better ap-
preciate that most people learn through informal social
networks and web-based tools. For example, the use of
Wikipedia, search engines, and social media platforms is
a common way for employees to access information and
pass it along to co-workers.

The use of online learning coupled with social media
platforms can provide on-demand, interactive training
capabilities at a fraction of the cost of traditional stand-up
classroom instruction. Informal learning with web-based
technology has been proven to increase workplace collab-
oration and the free exchange of ideas to improve work
team effectiveness. The top ten reasons for implementing
online learning are as follows:

Top Ten Reasons For Implementing Online Learning
Reduced travel costs and improved convenience
Increased employee productivity through on-demand train-
ing and workforce collaboration
Heightened security through password authentication, en-
cryption, and other security features
An Information Series by Smart Horizons
Technical Commentary
Technical Commentary
financial perspective. When evaluating human re-
sources, the cost benefit analysis focuses on the value
of human assets or the increase in their performance
as a result of specific training programs.

Training and development is essential in reducing
employee turnover and improving productivity, as
well as improving overall performance. Businesses
today have a hard time finding qualified candidates
and therefore work hard to keep valuable employees.
Training programs are critical to this retention pro-
cess. The Society for Human Resource Management
estimates turnover costs U.S. businesses $5 trillion
annually. Every time an employee leaves an organi-
zation, a lot of institutional knowledge goes with
them, along with personal contacts. For this reason,
executive directors are looking for strategies that re-
duce employee turnover as the cost of hiring new em-
ployees is significant.

When specifically evaluating the cost benefits of hir-
ing new employees many factors go into the decision
process. For example, the cost of recruiting new em-
ployees can be quite expensive when one considers
the cost of advertising for a new position, the cost of
reviewing resumes and interviewing, the cost of drug
screens and background checks, or perhaps pre-
employment assessments. On average, a new em-
ployee who goes through the entire recruitment pro-
cess will cost the organization approximately $3500
in both direct and indirect expenses.

Once the new hire is selected, they must go through a
series of training courses to orient them towards their
new role within the organization, plus any compliance
training required by the human resources department.
On average, companies spend $800 per employee for
this initial training.

During the first month, most employees are getting
acquainted with the job and will function at 25% of
their peak performance. This means 75% of the cost
to employ them is lost. The productivity goes up to
50% for weeks 5-12. By weeks 13-20 productivity
goes up to 75%. An employee will typically not
reach full productivity until the fifth month of their
employment. Most analysts indicate that it takes 6.2
months for an organization to reach a break-even
point on their new hires.

When one considers the total cost of recruitment, hir-
ing, training, and initial costs of a new employee, the
figure most often used is 1.5 times to 3 times their
salary. This means selecting candidates carefully and
training them properly is crucial. Implementing online
learning tools and assessments can save a tremendous
amount of time and money to the organizations bottom
line. Additionally, online assessments can help weed out
candidates before the costly interviewing process oc-
curs. Once hired, initial training can be offered online
to further save time and money. The more automated the
process, the less labor intensity and thus, less cost.

When considering contingent workers (part-time em-
ployees, volunteers, temporary workers, or consultants)
online training has become essential in managing the
learning outcomes of these individuals. The cost of
training these unique workers at the peak demand for
their skills makes just-in-time training solutions all the
more important. Many of these workers require tele-
commuting, flextime, and office-sharing accommoda-
tions that can be easily met with internet solutions. The
use of a cloud-based learning management system
(LMS) can be configured for greater security and moni-
toring of access by these employees without concern for
network integrity.

Whether offering employee orientation or, compliance
training, implementing online workforce collaboration
tools, or simply increasing employee participation in
learning events, online training has been proven to im-
prove employee retention and productivity. Online tools
can also be used to assess new hires both during the in-
terview process and during any probationary period after
employment. This saves the organization thousands of
dollars and potentially can help avoid hiring the wrong
person for the job.

Online Learning for Clients

Training is not limited to employees but is also extreme-
ly profitable for customers. Corporate spending for edu-
cating customers has continued to increase each year,
improving customer retention, building brand loyalty
and product knowledge. When it comes to educating
clients, online learning tools are the most efficient and
effective. The number of students who participate in
online learning has increased 20% every year since
2002. This represents a total of 22 million students in
the U.S. who have taken at least one online course. At
the current projected growth rate an estimated 50% of
all Americans will be enrolled in online learning pro-
grams by 2019. Institutions surveyed from across the
country indicate that 63% believe online learning is a
critical part of their long-term strategy.

Organizations that provide traditional classroom instruc-
tion to their clients can cast a wider net by offering the
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cost of employee salaries and benefits. Employees are
always the largest cost for any business endeavor. There-
fore, if an organization wanted to create a computer lab
for their clients to access in-house, a total picture of the
long-term costs would be better understood by looking at
the 1-10-100 ratio.

Many schools and non-profit agencies struggle with
funds to establish a computer lab or other pet projects.
However, there are a plethora of options for obtaining
donated computer equipment. Many of these donated
machines seem to be broken when in fact they suffer
from software problems. The former users either did not
update software, or a virus or malware affected the com-
puters functionality. Wiping the hard drive clean and
installing a free open source operating system like Linux
is a cost-effective solution. Very quickly an organization
can populate their computer lab with donated equipment
operating on open source systems and have their students
up and running in no time. As funds become available,
newer equipment can swap out older machines to im-
prove speed and functionality.

Another option is to allow students to bring their own
device (BYOD). This reduces, if not eliminates, hard-
ware costs for the organization. However, if implement-
ing a BYOD policy, the network infrastructure will need
to support multiple devices and operating systems. Each
mobile device, whether a tablet, smart phone, book read-
er, or laptop will have a unique security feature. There-
fore, the infrastructure will need to be flexible in protect-
ing the network from malware, viruses, or unauthorized
access to the system.

The charts below, represent the cost factors in imple-
menting a classroom-based life skills course versus an
online training course. This cost benefit analysis assumes
the online course was purchased off the shelf and re-
quired no in-house development time. The scenarios
consider delivering the online course either with a BYOD
policy, which would eliminate most of the infrastructure
costs, or delivering it through an in-house computer lab.
Each scenario has an estimated return on investment
based on savings. To conduct an actual cost-benefit anal-
ysis for your organization, up-to-date data on costs would
be required. Like any analysis, assumptions are made as a
snap shot in time. Costs will change based on a variety
of variables unique to each organization. Each organiza-
tion will have to determine if they think online learning is
feasible. However, based on the charts below an online
program with a BYOD policy was the most cost-effective
option.
same or similar instruction over the web, reaching an
audience they may never have had the opportunity to
approach. This is particularly true of rural areas where
the audience is less likely to travel great distances to
access classroom instruction.

Some web-based training can be asynchronous, allowing
the user to receive instruction when convenient. Other
training options are collaborative, allowing students to
maintain the connection between themselves and the
instructor, as well as benefit from the participation of
other students. One example is the webinar. The webi-
nar allows for real human interaction within the training
program. Subject matter experts can address questions
through live chat, phone or video conferencing, and so-
cial media platforms. These webinars normally last 45-
75 minutes and allow for more question and answer ses-
sions. Live web events combine the benefits of having
an instructor onsite without incurring the travel costs
and lost productivity of classroom instruction. Web
conference tools allow for blended learning solutions in
that video conferencing co-exists with interactive
courseware. A survey conducted by Citrix Systems Inc.
indicated that 82% of respondents preferred webinars for
training due to the convenience.

Many students across the country indicate that they are
not able to take all of the courses they want because of a
lack of instructors. Others complain that they need more
personalized self-paced learning outside of the class-
room that fits into their busy schedules.

Evaluating Cost
Often when evaluating strategic costs for an organiza-
tion, the financial analysis projects forward 5 years, 10
years, or longer to better understand long-term costs.
Executive directors understand that spending money
today will have a long-term impact on the organization.
For example, building a computer lab within ones facil-
ity is not just about finding a room and purchasing
equipment. There will be software updates, network
security updates, potential IT support costs, and other
associated expenses. Some of these expenses may be
realized annually, and others may only occur every five
years or so. However, a big picture analysis will project
out these costs and determine the feasibility of particular
financial decisions. A typical rule of thumb is the 1-10-
100 ratio. The 1 equates to the initial cost of construc-
tion for a facility, remodeling, equipment purchase, soft-
ware, or other associated startup costs. The 10 relates
to the continuing cost of maintenance and operation of
the business over its life. Using our computer lab scenar-
io, these costs would include software updates or pur-
chasing replacement equipment. The 100 relates to the
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To input your organizations data and run a cost benefit analysis download a free spreadsheet by clicking here

The Generation Gap

Online training is ideal for todays multigenerational
workforce. Currently, 75 million people from the millen-
nial generation are entering the workplace. This genera-
tion of employees or clients tends to be very comfortable
with online technology. The younger generation is in-
creasingly using online tools to develop their own per-
sonal learning networks. In an age where these individu-
als can immediately access Wikipedia, YouTube, or so-
cial media to learn, they prefer the immediacy of online
learning lessons that are offered in small, bite-sized mod-
ules.

Older students or employees with family may also prefer
the flexibility of accessing their training at home through
an online medium. With the hectic, busy lives most indi-
viduals face these days, having the ability to access ones
training 24/7 is much more convenient.

For young people in the at-risk category, online training
is essential to improving their overall digital literacy.
While access to the internet within the at-risk community
is at an all-time high, most in this demographic use
phones for accessing online content. This tends to cause
youth in the at-risk category to be more consumers than
creators of online content. That trend affects their level
of digital literacy. As the digital divide increases for
these youth, they lack the ability to create, collaborate,
and curate online content and therefore lose valuable
skills that could provide them access to the 21
st
century
economy. This requires at-risk youth to achieve a level of
digital literacy that can only be accomplished through
familiarization with online learning tools. We discuss this
trend in more detail in our white paper, The Benefits of
Online Learning for At-Risk Youth.

For more information on our online learning programs
contact Smart Horizons Lifetime Training Solutions at
855-777-8032, or visit our website at
www.mytrainingnow.com.
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Pensacola, FL 32534

Office: 850-475-4000
Toll Free: 855-777-8031
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REFERENCES:

2012 Corporate Learning Factbook
Boggs, David, E-Learning Benefits and ROI Comparison of E-Learning vs. Traditional Training, Syberworks
Inc 2010

Mueller, Annie, The Cost of Hiring a New Employee, Investopedia, July 2011

Philips, Jack Ph.D. The Business Value of E-Learning, E-Learning, December 2007 (with Holly Burkett)
Training Industry, Inc. How to Promote the Value of Online Training within Your Organization Citrix Online


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