When business leaders make decisions about new investments into the company, their primary (not singular!) concern is the Return on Investment (ROI) that decision will produce. Secondarily, investment decision-making is about competitive advantage.
If you want your company executives to buy into your proposal for a new Learning Management System (LMS), then you need to present a compelling business case including both ROI and competitive advantage.
As a Learning and Development (L&D) professional, here are 4 things to consider when building your LMS purchase business case:
It’s about numbers…and compelling rationale!
Corporate decision-makers have to appeal to several stakeholders, including:
- Board of Directors
- Share holders
- Business partners
- …and many more
As a result, when you pitch a plan for a new LMS purchase, you must ensure that your executives will be able to take what you are presenting and use it to justify the investment to other stakeholder groups. Here are some compelling points that you need to address in your business case and presentation:
1. The Need
One of the first push-backs you will likely receive will come in the form of challenging your assertions about the need for a new LMS. Two typical questions you should anticipate include:
- Why do we need an LMS when we’ve been doing without one for so long?
- We already implemented an LMS “X” years ago – why get another one?
If your company doesn’t already have an LMS, or your existing system is dated or not fulfilling your needs, your business case should include compelling cost savings and efficiency arguments for the need for a (new) LMS:
- Rapid training development and roll-out
- Enhanced training monitoring and administration
- Better, more robust reporting capabilities
- Plugging existing “holes” in training
- Reducing technological vulnerabilities that existing systems expose the company to
- Showcasing current LMS’s inability to scale with company training goals
- Replacing non-supported (or dated) technologies
Justifying the need for a new LMS in terms of these needs is something that any executive can understand and relate to. However, it’s not enough to make statements like “Considerable training efficiencies”; “Significant enhancement in employees trained” etc. If possible, quantify the need statements in terms of: Number of employees, number of hours, number of courses, amount of system down-time/up-time etc.
2. The Cost
There is one thing that senior executives demand in a business case – that’s costs! As part of your own fact-finding and solution analysis, you should conduct a cost/benefit analysis including the following:
- Acquisition costs
- Training costs
- Infrastructure, and
- Ongoing maintenance
Since executive level decision-making is often based on multi-year projections, you must be prepared to forecast your costs over the life of the system (usually 3 to 5 years).
3. The Options
Justifying your business case with just one recommended solution is never a good idea. Today, there are upwards of 1,000 different LMS vendors to choose from.
Before presenting a justification, do some research on top LMS providers’ websites and gather information to see (from a mile-high view) which could meet your needs. You should always have executive buy-in before moving forward with the LMS research and purchase process so key items like budget, timeline, etc. are already known.
After conducting your research, make sure to:
- Include more than one option; but refrain from including too many (anywhere between 3 to 5 is ideal)
- Summarize and present the advantages and disadvantages of each option
- If applicable, especially highlight points such as: Compatibility (or lack thereof) with existing tools; Ability (or inability) to port current training content; Steep (or short) learning curve to justify (or reject) a specific option
Once you have executive buy-in, you can conduct a more thorough LMS search and present a detailed findings report to your higher ups.
4. The Payback
The one question that executives like to see addressed in any business case is: What’s in it for the company? Why should they approve moving forward with acquiring a new LMS? Your business case must therefore provide ample justification for the following:
- How many hours of employee time are expended today in preparing and delivering training, and how many of those hours can be saved with a new or upgraded system
- How many employees are left untrained each year because of existing processes/training systems; and how the new system will plug that gap
- How the new system can provide new courses and new skills to employees, which will result in employee performance increases and lower turnover
- For companies that currently have an LMS, calculate what you’re currently spending on your LMS solution plus the cost of missed opportunities via lack of functionality, lack of scalability, etc. to show how a new, better system can actually save money
In essence, your Payback justification will largely depend on the preliminary work you’ve already done in step 1 (Need justification) and step 2 (Cost justification). However, in addition to the quantifiable justifications (Cost, Timeline, Throughput etc.), payback can also come in terms of:
- Higher employee morale
- Better industry and corporate peer-group recognition (in terms of being a leader in employee learning and development
While these types of “fall outs” from embracing a new/upgraded LMS purchase aren’t easily quantifiable, they nevertheless weigh in on justifying an investment.
Simply having a “bulletproof” business case doesn’t automatically guarantee that your company executives will get on board with your proposal for the new LMS system. To heighten your chances of success:
Executives (especially at the Officer and Board level) are extremely pressed for time. From Needs to Cost justification and beyond, your presentations must be succinct.
- While your written document might be 15 to 20 pages long, prepare a concise Executive Summary (no more than a page or two) highlighting your proposal
- Supplement your written case with a slide deck. You should not make this presentation more than 4 to 5 slides long
- Both the business case and the slide deck should be supplemented with optional addenda – should executives wish to peruse them
Credibility is the basis of gaining executive trust:
- Use reliable sources of information (e.g. Product reviews, Cost-justification calculators, etc.)
- Offer LMS Whitepapers and other industry reports prepared by recognized Subject Matter Experts (SMEs)
Though you may be very comfortable talking LMS-speak and Techno-babble, many executives may not:
- Simplify your discussions, staying away from overly complex terminology
- Use real-life examples from your company (for instance, by doing a survey of existing paper-based training systems to get actual numbers) to gain executive attention
- If required, get company’s finance department staff on-board to help you defend and support your assumptions (Cost-savings versus Cost-avoidance; ROI, Inflation-adjusted Real Returns; Amortization of payback, etc.). Those are the types of numbers that will guarantee executive-level engagement
- Use plenty of graphs and tables – because executives find them easier to understand than 17 pages of bulleted text!
Rehearse your presentation with colleagues, and know your numbers with confidence. Have other support staff (Finance, IT, Training Manager etc.) on stand-by when making your pitch – just in case you need help
At the end of the day, getting executive buy-in for a new LMS purchase isn’t about building a great business case – it’s about selling it! And the only way to do that is by the numbers.