Building scenarios in e-learning: do you favor fictitious names in examples?

I agree with you that using names of actual employees could cause issues. It could be distracting (for example, "why did they pick him as the example instead of me?"). It could also be insulting if the scenario includes bad steps/choices. And, as you mentioned, it requires updating if the person leaves the company. 

Making up names avoids those issues. Also, those could be more diverse/inclusive. 

I wouldn't use "Johnny Appleseed" or another recognizable character. To me, that's also distracting, because it'd make the user think of that character's story (instead of the course's scenario).

As usual, I agree with everything Judy said. 😆

I'll also add that it might be helpful to talk about all the other ways you are working to make sure that your scenarios are realistic and relatable. Point out how you are using realistic names (if not actual names of real people--and as Judy said, don't use obviously fake names). Note how the situations and choices are customized to your specific organization and your audience. Show how you are setting the context through images or internal jargon and language. All of those things do matter to learners, and they make it feel relevant rather than like generic training content that could have been built for any organization.

The problem of relevance that your SMEs are talking about is a real issue. In terms of persuading them, it might be easier to show that you're taking their concern seriously but that you're solving it in different ways than they suggested.

I appreciate your inputs - thank you, both!!!