Learning and development is an area that most organizations are investing in. According to the LinkedIn Learning Workplace report (2022), 48% percent of companies plan to increase their spending on employee training in 2022.
But how do you know if your efforts are paying off? When it comes to learning initiatives, calculating the ROI can be a useful way to determine how well an initiative is working—and whether or not you should continue investing in that particular project or program. It's also helpful when trying to justify funding requests at higher levels within your organization.
What is learning ROI?
You’re probably familiar with ROI, but just in case you aren’t, here’s a quick refresher. ROI stands for Return on Investment and it is a way of measuring the benefits that result from an investment. In other words, if you invest $1 in something (like training) and then get $2 back (i.e., greater productivity or sales), your ROI would be 2:1—or 200%.
Of course, calculating ROI isn't just about dollars and cents; it's also about time saved or increased productivity. So if you have ten employees who are spending one hour per day learning new skills through online courses and coaching, and after one month, those same ten employees are spending an hour less each week on administrative work because they learned how to streamline their processes during the coursework, then you can calculate your return on investment by multiplying 10 hours by 7 days/week = 70 hours/week, multiplied by 52 week/year = 3640 hours saved in a year!
How to calculate learning ROI
You can calculate the learning ROI by using a formula that takes into account the cost of the training, the time spent on it, and the resulting benefits. The formula is:
Learning ROI (%) = (Gain from Learning - Cost of Learning)/Cost of Learning x 100
Learning ROI Formula
In this case, “Gain from Learning” refers to how much employee skills improved after they went through your company's training program. You can measure this by conducting an employee survey before and after you offer the training courses or other learning interventions.
“Cost of Learning” refers to what it costs you to develop those courses in terms of time and resources. For example, if you paid an outside consultant $150 per hour for four hours to create a new course for your team members on managing customer relationships during their sales calls, then your total investment would be $600 (4 hours x 150 dollars per hour).
Tangible Learning Metrics
Tangible metrics are easy to measure and track, which makes them an appealing option for L&D professionals. Some common tangible metrics include (both in terms of costs and benefits):
- Costs associated with learning needs assessment, design, development, implementation, and evaluation
- Costs for required facilities, travel, and accommodation of learners and trainers/facilitators/coaches
- Number of learners per month/quarter/year
- Financial savings from streamlined processes
- Time saved using a new system or application