How to Measure ROI of Learning and Development [Training ROI Formula].

Learn how to measure your training ROI so you can better quantify your impact.

Learning and development is an area that requires a lot of investment.

And year on year, that investment is going up.

According to the LinkedIn Learning Workplace report, 48% of companies plan to increase their spending on employee training.

But as investments grow, so does the pressure to prove your impact. And as we all know, proving the impact of learning and development isn’t simple.

In this blog, learn:

• What L&D ROI is
• What the challenges and benefits of measuring training ROI are
• How to prove the impact of L&D
• The formula for training ROI

Let’s get started.

🚀 Pro Tip

Want to improve your ROI? An easy way to prove the impact of learning is to sell your course content. Put a stop to L&D being seen as a cost centre as opposed to a revenue-generator.

Learn more about eCommerce

What is learning ROI?

Learning ROI, or training ROI, is a way to measure the financial impact of learning and training.

Chances are you’ve heard of return on investment.

ROI is the return you get on an investment, i.e., how much did you make because of a particular action. And when you’re investing in learning, particularly in a learning management system, you want to ensure you’re getting a good return.

Related: 10 key features to look for in your LMS

Learning ROI is the same, it just specifically applies to your learning and development investments.

Let’s say you invest £100 into your learning strategy, and as a result you make £200. Your learning ROI would be 200%, or 2:1.

Of course, ROI isn’t just about monetary value in the sense of profit. It could also relate to the time you save, or the increase in quality of work. These all have a value too.

For example, let’s say you have a team of 10 and it takes them 2 hours to do a particular task which they perform twice per week.

You might invest in training for that group which means that that task now only takes one hour per person.

You’ve decreased the time taken by half, which across all ten employees is 10 hours per week. That over 52 weeks is 520 hours a year!

Challenges of L&D ROI

Return on investment is never easy to measure. It can be hard to quantify some of the things that you’re measuring. And the same is true for employee learning and development.

One key challenge is that learning initiatives can sometimes be looked at a box checking, rather than a critical part of a business strategy.

When you create learning strategies without a clear foundation tied to business outcomes, you will always struggle to measure your L&D ROI.

While many organisations are using L&D for improved employee and company performance, some of the more traditional tactics are difficult to measure and so seem to have underwhelming impact.

Benefits of L&D ROI

Calculating your learning ROI has a lot of benefits.

While you might have great ideas when it comes to your learning strategy, it can be tricky to ensure that what you’re creating is having the right outcomes.

Calculating your training ROI can help you:

• Understand the value of your training
• Create the best learning strategy ahead
• Improve your current learning programmes
• Justify L&D budgets

With all of these benefits, you can see why it’s so important to invest in measuring training ROI properly.

How do you measure the impact of L&D?

Calculating your training ROI can be broken down to three simple steps:

• Identify the business challenges
• Decide what you’re measuring
• Benchmark your data

Let’s look at each in practice.

Identify the business challenges

What are you trying to achieve with your learning and development?

Are you hoping to:

• Improve learning transfer?
• Create a strong onboarding process?
• Increase compliance rates?
• Centralise your people data?

There are a range of ways that your LMS and learning solutions can improve your outcomes.

Take a look at your strategy and identify what you’re striving to improve.

Decide what you’re measuring

Understanding what you’re trying to achieve will help you start to understand which metrics are the most important.

If you’re looking to improve learning transfer, then you would want to measure knowledge pre and post-training.

Meanwhile, if you want to upgrade your onboarding process, you might look at how quickly people complete their onboarding checklist.

Related: How to create a good onboarding experience for new starters

First, define your goals, and then define the measurements and KPIs to correlate to those.

Benchmark your data

Once you’ve measured the impact of your learning, you need to benchmark your metrics.

When you have this data in place, you can start to compare your results to see how your learning strategy evolves.

Keeping constant evaluation on these key statistics allows you to be agile with how you develop your learning opportunities and continue to put your people first.

What metrics to track in L&D

There are a number of L&D metrics you will want to measure when it comes to understanding your impact.

We usually suggest tracking:

• Course attendance rate
• Course completion rate
• Average time to completion
• Learner satisfaction rate
• Learner retention rate
• Job performance impact
• Training ROI

Tracking each of these can help you understand the success of your training and what is and what isn’t working.

While learning ROI is important, understanding these other KPIs can help you quantify the success of your learning.

Pro Tip

Not sure exactly how to track these metrics? We run through the best learning and development KPIs to track and measure.

How to calculate learning ROI

Calculating ROI is easy, just use this simple formula.

ROI = (Benefits – Costs) / Costs

With this formula in play, you can easily work out the return you’re getting on your L&D programme.

Benefits might include:

• Money saved on improving employee retention
• Money saved on insurance by having 100% compliance
• Money saved on training thanks to good learning transfer

Of course, some benefits are more difficult to apply value to.

As such, you might need to apply your own value to them.

For example, you might attribute a value to every hour saved following taking a training course.

Or you might add a value to improved business outcomes and how learning and development has impacted that.

However you do it, it’s worth tallying up all the way L&D has impacted your business outcomes.

What is the average ROI for training?

A recent study by Accenture found that the average ROI for training was 353%. They found that for every dollar spent, it return $4.53.

You may not be able to attribute the same level of ROI to your own learning. Remember, not every company will adopt the same tools, the same processes or the same strategy when it comes to L&D.

While it’s good to be aware of an average ROI, it’s much more prudent to assess your own ROI and use that as your benchmark.

Improve your learning ROI with Think

Think is a leading learning solution that offers its customers a range of tools and plugins on top of the Totara basecode to create bespoke platforms.

These solutions help users improve learning engagement, create lasting business relationships, decrease employee attrition and all in all, improve L&D ROI.

Book a demo with one of our L&D experts and they’ll walk you through the key features of our platform, to help build you a solution that works for you and your people.

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