Case Study: The Cost of Informal Learning versus Formal Learning

Back in 1990 I was working for a DoD Contractor where they built military aircraft…warships of the skies. Where the sky jockey test pilots were often reminded that the thing between their legs was built by the lowest bidder. Ha ha.

Just to set the performance context.

BTW- this was the topic of an article I wrote and published with ASTD’s Technical & Skills Training journal/magazine back in the May/June 1991 issue.


The editors changed my title of “Cost of Nonconformance and ROI Calculations for Training Projects” …to a bit of a misnomer…”Costing Out A Training Project” – which was the kind of editorial thing that happened somewhat on my first book – where I was one of three co-authors along with a professional ghost book writer who we gave cover credit to…editors changing titles and language in an area they don’t understand. Also a reason why my last 3 books were self-published.


Cost of Nonconformance and ROI for Training Projects _ASTD – 1991 – 9 page PDF of the original (not the published version) article submitted and published in ASTD’s Technical & Skills Journal in their May-June 1991 issue under the title: Costing Out a Training Project (which it did not address).

This presents an alternative approach for determining ROI that was unique to one of my client’s situation, and proxy for ROI: RONA – using the quality concepts of Cost of Non-Conformance and the Costs of Conformance in place of returns and Investments respectively.

But I digress. Kinda.

My CASE STUDY target here is the CAD-CAM operators…the draftsmen/people with this new fangled tool of Computer Aided Design – Computer Aided Manufacturing in the design and development of fighter jets.

They’d had the vendor’s “training” – those in the 100 plus sized target audience. The potential savings to the Enterprise for adoption of one of these “early promises of IT” tool-sets was

  • use of standard parts inventories for reuse and material cost control
  • quicker integration reviews with other components/systems
  • version control
  • quality control
  • reduced cycle time
  • reduced scrap from bad parts the first-time-or-twelve around in the new product development cycle

Their situation has a lot in common with our ISD situation of the ever evolving revolution and adoption/adaptation of all sorts of Learning Systems tools…from the early authoring systems to the LMS … to the LCMS … to Talent Management Systems. And also why we are not seeing real significant re-use of Learning/KMS content yet.

But I digress. Again. Kinda.

The Critical Business Issue?

The upper management had determined that their CAD-CAM operators’ proficiencies were the cause of THEM not getting the promise of this expensive system. Their Informal Learning approach after the vendor’s quick and insufficient “training” was not sustainable.

Downstream from these operators/draftspeople were the folks who took these designs…fed them into Computer Numeric Controlled machines to create expensive tooling so that parts could then be made. And then assembled and finally tested.

A bad design set off a big costly effort that too often ended up “back at the drawing board” for rework. An expensive non-LEAN process. The CAD-CAM system was complex and the client’s early investigation suggested that hardly anyone was using half of the capabilities of the system because they just did not know how. (Keep Mager from the room with his “loaded” question!)

So I was brought in to do another CAD – the third or fourth for this firm in the past 12 months. My CAD – Curriculum Architecture Design – which had much in common with their new approach and tool-set for CAD-CAM. Design using data and a team effort to accelerate and reduce rework/reloops.

After the first Project Steering Team meeting in Phase 1 I facilitated an Analysis Team meeting in Phase 2 used to generate the Performance Model data and the enabling K/S data. Then we reviewed the existing training and content…the existing Information & Instruction. For reuse potential. But there was not a typical Phase 2 “gate review meeting” with the PST after that analysis effort.

A Design Team then met in Phase 3 to create a performance-based Curriculum Architecture Design. Again, no Phase 3 gate review meeting.

My immediate contact and I then conducted the Phase 4 activities by ourselves. To prioritize and price all of the gaps of the CAD. Right now, all but one “module” of the CAD was U-OJT. Unstructured OJT. The only value added so far was the articulation of the U-OJT modules titles…with links back to the Performance Models and K/S Matrices data.

So when we sat down in the Phase 4 gate review meeting with the Client and his handpicked Project Steering Team members, many who hadn’t been involved at step 1…only to then have skipped the other critical check point reviews of the data – and to make directive decisions in response to my questions regarding “which way do you want to go from here…and here are your options” – many were on a learning curve regarding why we were doing this in the first place.

A reason I have all of that “info” in the front end of every phases’ gate review meeting presentations…just in case there are new folks in attendance. Plus I know that I need to remind all of these busy people who have probably been involved in hundreds of other issues since we last met.

The Controversy?

The price tag for taking all of those U-OJT modules, as they currently existed, and upping them ALL to Formal Learning of classroom/lab – we had to have both the computer tool and a facilitator/coach – someone who could provide the learner/Performers with guidance and feedback and help in the many application exercises we had spread out through the dozens and dozens of Modules of the CAD.

The price tag was $2M for initial development and pilot-testing. Then deployment cost estimates were another number.

It was a flexible CAD. One could take the first dozen Modules and hold a T&D Event for deployment…or dole them out in smaller or larger chunks to address the current situation. This Enterprise had big ups and downs with Government contracts. Lay-offs were a reality. And large up sizing happened occasionally too.

The CoC and CoNC

This group understood many quality principles and tools/techniques. So in the “debate becoming an argument” in this meeting I wrestled control back from my client at the front of the room by dragging a flip chart up to the front of the room and barking out a question…

  • How many operators do we have right now…approximately? Over 100.
  • I wrote down 100. How much do they make…fully loaded…approximately? Over $60k.
  • How proficient are they they right now? 100%? 75%? 50%? 25%? 5%? Under 50%.

So…I said…the cost-of-non-conformance RIGHT NOW based on just salary dollars is…100 x $60,000 x 50%. Or $3 million dollars.

You are paying $6 million for their total performance in compensation BUT only getting $3 million back because they are less than 50% proficient on this new tool.

That’s what you’re leaving on the Performance Table every year…so to speak. And that doesn’t even address the downstream scrap and rework caused by their lack of proficiency. Right? Which makes these salary dollar wastes look silly. Right? Darn silly! RIGHT?

Heads nodded around the room.

So what is it worth to resolve THIS and get everyone on average up to…say…75%? From 50%?

Isn’t it worth about $1.5 million the first year alone to do that? And more if we bothered to think more about scrap and rework…and contract penalties for missed deadlines….

Then everyone wanted to start talking about “we could get them to 90%” and other topics that told me we had moved off of our sticker shock..of the Cost-of-Conformance.

Because the Cost-of-Non-Conformance was so big that the focus shifted from cost to quality of response. Now we were ready to look at this Design of Formal Learning with less skepticism about the need. Or more correctly…the “value” of the need.

I guess that many in the room, like me, were wondering how BIG a number the real CoNC was.

But it was time to move on to our next step.

The cost of Informal Learning in this Case Study was much more than $1.5M/year. Much more.

But that lack of precision was still sufficient to make the business case for a Formal Learning approach.


For more on this approach to Performance Competence, see the many free books/articles/presentations resources at:

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2 comments on “Case Study: The Cost of Informal Learning versus Formal Learning

  1. Pingback: ROI Case Study: Implementing CAD for CAD | EPPIC - Pursuing Performance

  2. Pingback: Sometimes the ROI for Instruction is Better Seen as RONA « EPPIC – Pursuing Performance

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