The Online Option

It's cheaper, faster, and easier to distribute than live classes. But is it effective?


The rush is on. Like everything else related to the Internet, online employee education is sweeping across Corporate America. Executives and employees alike are tuning in to intranets and the Internet to update their skills and acquire new ones from the comfort of their own offices. And companies are producing better- educated workforces at a fraction of the price of traditional training programs.

Or are they?

There's no denying that online learning-- classes or materials delivered via Internet or intranet--is one of the fastest-growing areas of employee education. According to International Data Corp., in Framingham, Massachusetts, the total market for online corporate education is expected to jump from $234 million, in 1997, to $7.1 billion by 2002. And 77 percent of organizations expect to embrace training via company intranets by 2001, according to the American Society for Training and Development (ASTD); another 63 percent will use the Internet.

There's also no denying the method's many benefits. Courses are available anytime, not on a set schedule. Employee training travel costs disappear, training times are often shorter, and some studies indicate that students retain more of what they learn using technology-based training. In addition, while upfront costs are generally higher than for face-to-face training, classes are infinitely scalable at minimal extra charge.

But companies that adopt online education are recognizing that "tech-based training and Web- based training are not necessarily sufficient education cure-alls," says Mark Van Buren, director of research for ASTD. The medium's limitations--lack of direct human interaction, high class-attrition rates, and difficulty in finding high-quality content--often reduce its value and cost-effectiveness.

Cheap, Not Easy

The main attraction of online education, however, is clear: it saves big bucks. Almost three years ago, Al Gordon, program manager at Siemens Virtual University, at Siemens Information and Communication Networks Inc., faced a daunting task: train 600 high-level engineers on data/voice convergence technology, do it as quickly as possible, and keep engineers updated on new developments. If he went the typical route--face-to-face classes, delivered at special training locations--Gordon estimated it would take three years and more than $4 million in travel and lost productivity time to train all 600 people. And that didn't include the cost of the training itself.

The online option, on the other hand, involved around $75,000 for hardware and special server software (plus an additional charge of $1,500 for 100 classroom seats) to create interactive, online classes delivered via the company's intranet. "The $4 million we saved was just low-hanging fruit. Over time, it's evolved beyond being cost-effective. It also does the job," says Gordon.

Today, Siemens's voice/data integration course is one of 64 online classes offered to 7,500 Siemens employees. But implementing their widespread use has meant educating supervisors, as well. "It's a cultural change for managers to understand that instead of sending employees out of the office two to three times a year to learn certain skills, we can keep them at their desks and teach them the skills," says Gordon. "But it's a two-way street; we have to let them have time to work on these lessons." To gain management support, Gordon invited supervisors to take classes to see the benefits firsthand.

Still, Siemens's experience illustrates one of the biggest challenges of online training. Because the method is self-paced and easily accessed, it lacks a sense of urgency. Students often "don't get around to it"; there is no classroom from which to be visibly absent; or students are interrupted by managers who see the training as less important than "real work." Little wonder that the online dropout rate is substantial--some say as high as 50 percent.

The biggest impediment, however, is the impersonality of the technology itself. "Our first generation of training classes was purely self-paced, page-turning, online classes," says John Mallin, leader of corporate learning and development at Owens Corning, in Toledo, who organized the company's online program in 1997. "But we soon realized that just because the classes were there and available didn't mean our learners would gravitate to them and embrace them. They were well designed, but they lacked the human touch that people are used to."

As a result, the company integrated face-to- face components in its online courses. Now, many of its 25 online classes include real- time assignments, such as interviewing managers. Other classes encourage students to gather offline to discuss such lessons as first-time leadership, change management, and new-employee orientation.

At Siemens, a desire to maintain a human touch inspired the company's highly interactive online classes. Delivered using Lotus LearningSpace technology (similar products include Microsoft Corp.'s NetMeeting and Centra Software's Symposium), the classes mix live presentations with interactive technology that lets teachers give demonstrations on students' screens, and lets students "raise their hands" to ask questions in real time. The classes, ranging from basic LAN/WAN technology to call-center training, include asynchronous components that allow Web-based training, as well as E-mail collaboration.

At Microsoft, where online learning is understandably important, trainers also integrate a human element. According to Norm Tonina, senior director of finance development for Microsoft, finance employees (who are asked to take 16 hours of training each year) can choose from a dozen online classes using a variety of approaches. Some topics, such as balanced-scorecard instruction, are self- driven courses taught via a third-party, finance-education Web site. Other classes, like an SAP software tutorial, are initially taught live and videotaped, then transferred to a program called NetShow, mixed with on- screen slide presentations, and delivered via the company's intranet. "Still," says Tonina, "because people think it's out there 24/7, some say, 'I'm going to get to it,' and they never schedule the time. It's something we constantly struggle with."

A Crisis of Content

Successful online training requires more than the right media mix. According to Van Buren, companies must evaluate the audience's geographic and demographic dispersion, the subject matter, and the sophistication of the technology already in place. "Different languages [of students], for example, can be a barrier to effective online learning," says Van Buren. "It's not insurmountable, but it's important that the class content match the needs of the students. People don't all learn the same way."

Then there is the question of whether to make or buy content. Most companies develop some of their own less-sophisticated online training, or combine internal content with outside technical assistance. The general rule, however, is that it takes 100 person-hours of development for every one hour of finished online class, a fact that has fueled rapid growth in the online content development industry. One such company, Yipinet LLC, based in Marina del Rey, California, licenses more than 400 online classes for $20 to $150 per user/per class, according to Bryan Austin, vice president of corporate sales. Another source of content is colleges and universities. The Wharton School at the University of Pennsylvania, for example, offers a five-week, online class entitled "The Market Update with [author] Jeremy Siegel: Understanding Economic Issues and Financial Markets." For a sliding-scale fee, starting at $1,500 per person, students can access five weekly, live, one-hour Webcasts, coupled with on-screen presentation slides and a simultaneous E-mail connection, so that teaching assistants can answer questions. An additional eight hours of on-demand video lectures with accompanying slides and notes are also supplied.

For companies that demand custom content, however, the price escalates. Yipinet creates custom programs that cost from $7,000 to $13,000 per course hour, but the cost runs as high as $100,000 to $200,000 for multi-hour, multimedia programs like some used at Siemens.

Report Cards Due

Quantifying the payoff on all that investment is tough, and rare. ASTD's Van Buren notes that few companies, less than 7 percent, even attempt to chart the ROI on online training.

Bell Atlantic Corp. is in that 7 percent. According to Toni Hodges, manager of measurement and evaluation in the training education and development group at Bell Atlantic in Silver Springs, Maryland, ROI is determined by calculating quantifiable performance results (such as customer contacts per hour) of newly trained employees, then comparing them with results of a nearly identical "control group" that has not received training. The difference, translated to dollars, is the ROI for the class. When control groups aren't available, Hodges uses "before and after" comparisons of work performance, among other techniques.

"We're not looking for ROI hurdles," she says. "Right now, we're trying to look for trends in terms of what types of training are most effective." However, one recent class actually achieved a negative ROI, and it was targeted for termination.

Not all companies have performance measures tied to bottom-line impact. "After a year and a half on the job, I still haven't cracked that one," says Microsoft's Tonina. Still, online classes have helped reduce the number of internal questions--an occurrence that Tonina calls "randomization." "I'm pushing for our managers to start tracking the decline in support requests we get," says Tonina. "ROI for me means, are my accounting and financial people less randomized?"

Such benefits--whether real or anecdotal-- promise that online education will grow in popularity, say experts. Although online learning currently constitutes only a small portion of training at many companies--5 percent to 10 percent of classes at Owens Corning, for example--that balance is expected to tip. "It's never going to replace the classroom completely," says Gordon at Siemens. "But, over time, classroom training will decrease and this area will increase."

But as the percentage grows, companies are adopting more of a hybrid approach, which mixes online, face-to-face, and group- discussion components in order to train employees effectively. Gordon says he first thought that online training would replace live training, but he now sees it as an enhancement mechanism--one that allows him to offer, say, four-hour refresher courses to employees who would have had to fly cross- country for the class.

In the end, he admits, "there really isn't a substitute for the human touch."

----------------------------------------------- --------------------------------- Finance Class Clicks
Access online finance education at these sites:

Association for Investment Management and Research: offers online prep material for certified financial analyst tests

Competence Software: marketing site for basic finance classes for corporate intranets

Continuing Professional Education Accounting and Tax Institute: CPE credits online offers accounting and taxation offers CPE credits on line

Digital Springs Inc.: works with education partners to serve up a variety of online finance classes

Financial Executives Institute: CPE-credit online finance courses

PricewaterhouseCoopers, Financial Planning Campus: online education service offering basic financial education to employees

Strategic Management Group Inc., Finance IQnet: marketing site for basic finance classes for corporate intranets

Yipinet LLC: offers online finance, accounting, tax, and personal-development classes; CPE credit courses also available


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