Investing in employee development is now standard for companies.
However, it is no longer enough to simply start a training program. Executives are asking more questions, especially about the payoff. In 2023, US companies spent $101.8 billion on training. Leaders want to know the value eLearning initiatives bring in measurable terms.
For learners, the key point on their learning journey is to gain knowledge, while when you are an enterprise with 10.000+ employees and the need for qualifications rises, you definitely want to know what the return on investment is. In this blog post, we will explain the ROI methodology and give you a detailed plan to show training value to stakeholders. But first, take our short quiz to see if your company is ready to start an ROI evaluation.
What is eLearning ROI?
eLearning ROI is a financial measure used to evaluate the monetary gains from online training programs. This calculation compares the cost of creating and implementing training against the resulting benefits. In other words, whether it justifies the investment. For an eLearning project to be deemed successful, the benefits must exceed the costs. Essentially, eLearning ROI helps organizations assess the effectiveness of their training investments.
Benefits of Calculating eLearning ROI
eLearning is often favored by organizations because it cuts many costs linked to traditional training. This leads to a better ROI.
Apart from cost savings, modern learning management systems provide flexible training delivery and enhance productivity. If you are considering a switch from traditional training to eLearning to boost ROI, here are some benefits:
eLearning is more cost-effective
Switching to eLearning cuts costs by reducing the need for physical locations and resources. No bills for rent; no bills for utilities and office appliances. Online training lowers expenses for hiring onsite trainers and printing materials. Learners can access course content hosted in your cloud-based LMS whenever needed. Remember, it takes time for eLearning to show ROI. You first need to invest in an LMS subscription. First, you need to start using your LMS to replace traditional training. Then, eLearning will begin generating ROI.
Faster training delivery
eLearning creates more agile processes for both admins and learners. Online training is faster than traditional methods. With a cloud LMS, learners can start absorbing information and building skills as soon as you launch a course. Hosting content online allows for quick updates to meet changing business needs. If feedback shows your support team needs more customer service training, offline training requires creating, printing, and distributing materials. It also involves booking a room, arranging an instructor, and confirming attendance. With an LMS, you simply update the course, notify learners of new training, or schedule a webinar. This approach is more ROI-friendly since you can record sessions for learners to access anytime, anywhere.
Improved training results
eLearning boosts learner efficiency and knowledge retention. Creating an online course makes it easier to monitor and report on learner progress. The impact on your eLearning ROI depends on the training type. Customer training can lead to higher retention and upselling opportunities. Training partners ensure they understand your product or service thoroughly. This helps them generate more revenue for both themselves and your business.
Importance of Measuring eLearning ROI
Businesses use ROI to assess future investments or evaluate past ones. Similarly, eLearning ROI is crucial for online course creators and learning platforms. Before implementing training programs on LMS, it is essential to calculate eLearning ROI. This involves establishing a baseline to measure the impact and success of training programs. It utilizes analytics and baseline reports. It is necessary to calculate eLearning ROI both before and after course completion.
How to Calculate eLearning ROI?
Learning Objectives
Establishing clear goals in writing ensures you ask relevant questions. It also helps avoid missing any details during data collection. Outline objectives from the top down, starting with ROI metrics and ending with learner feedback.
Have a Plan
During this stage, you create and go through three documents. These are a data collection plan, a data analysis plan, and an ROI calculation plan. These documents define your project scope and enable you to track progress. In this way, you can assess your success in the evaluation process.
The project scope should outline the training objectives, how you plan to achieve them, the tools required, and the deadlines. It is essential to set responsibilities for implementing each plan item.
Isolate the Training Effect
Many things, like how you price products or how charming a salesperson is, affect business results. Isolation is a crucial phase that aids in identifying the level of enhancement directly linked to the program. It protects the credibility of the entire evaluation process.
Convert results to monetary values
To execute this step, assign a monetary value to each outcome linked to the training program for comparison with program costs. Typically, tangible data like sales boost, time saved, and enhanced quality can be easily quantified:
Increased sales → Profit generated from these sales
Time saved by employees → Cost of saved time calculated based on the average hourly rate
Decreased equipment downtime → Compared with results from previous periods
Lower employee turnover → Savings on recruitment and onboarding expenses
Improved quality → Money saved by reducing defective items.
Training Cost Estimation
At the base of the Phillips pyramid lies Step 0: Inputs, where it is essential to review and adjust the overall program costs. This includes both direct expenses like instructor salaries and LMS costs. It also covers indirect expenses such as PR campaign costs, equipment purchases, and more. Additionally, remember to factor in the costs associated with evaluating the program's performance.
Calculate ROI
Typically, ROI is computed annually. If desired outcomes are not achieved in the initial year, it is unlikely they will materialize in the future. For big projects like setting up a corporate university, it could take years to see the full results. It is essential to take this into account during evaluation.
Identify Intangibles
Training programs often bring both intangible benefits and financial results. They can improve a company's image and strengthen team spirit and loyalty among employees.
The challenge arises because soft data can be subjective. Trying to convert it into monetary values for ROI calculations can affect the accuracy of the final results. It is safer to present a lower ROI. Give a detailed report on intangible benefits instead of risking the evaluation's credibility with a higher ROI.
Report Results
Reporting is the final step in evaluating training performance. It needs careful planning because the project's future depends on it, and the stakes are high.
At this stage, you have two main tasks:
a) Create reports for various audiences
Consider the type of reports needed. Different audiences need different information. Typically, you will need two versions of each report: a detailed one and a simplified one.
b) Communicate results
Decide how to present the report to specific audiences. Make a list of channels you can use and tailor the reports accordingly.
Steps to Apply ROI to Your eLearning
Calculating eLearning ROI is useful for educating employees, partners, or customers. Now, let's look at how to apply ROI to eLearning within an LMS.
Assess previous training
Before integrating your training into an LMS, consider your past and current ROI metrics. This establishes a starting point to gauge the effectiveness and success of your training. Suppose you want to see how customer training affects support tickets. Compare support inquiries from untrained customers with those who completed training. This shows if your training reduces queries effectively.
Use training reports
Using LMS training reports, you can gauge how eLearning affects your ROI.
A good LMS provides detailed reporting on learner progress, exam scores, and module completion. For example, you can use module completion reports to track customer progress and completion status in your courses. This information helps assess the training's impact on support queries.
Compare your data
After these steps, compare the performance of trained customers with that of untrained customers. Analyze data from prior training and training reports to determine ROI.
Kirkpatrick’s Model of Training Evaluation
The Kirkpatrick Model is used worldwide to measure training effectiveness. It was developed by Donald Kirkpatrick in the 1950s with 4 levels, covering learner reactions to the training's impact on the organization. Let's explore the 4 levels of the Kirkpatrick Model of Training Evaluation and how you can use it to measure ROI:
Reaction
The reaction level involves collecting feedback to gauge learners' feelings about the training. Use your LMS to create a post-training survey to capture their comments and recommendations. This level is crucial as it shows if learners found the course relevant, and highlights any areas to improve.
Learning
This level assesses what participants have learned. It measures the increase in knowledge, skills, and behavior changes. You can evaluate this through assignments, tests, or practical demonstrations. This level is vital for learning and development specialists to see if training objectives are met and to identify knowledge gaps for course improvement.
Behavior
This level is evaluated after the course ends and measures changes in learner behavior due to the training. It looks at which skills or knowledge from the training are now being applied. The behavior level is crucial as it confirms the value of the training investment, though it can be harder to assess than other levels. For instance, improved efficiency in adaptive learning would be a form of validation.
Impact
The impact level evaluates the final outcomes of learners' participation in the training. Traditionally, this is measured by productivity gains. Recently, the Net Promoter Score (NPS) has also been used. This level should clearly demonstrate that the desired results or learning objectives from the training have been achieved.
Conclusion
To wrap up, assessing eLearning ROI is crucial for gauging the effectiveness of online learning platforms and training. By analyzing costs, outcomes, and intangible benefits, organizations can optimize their programs and boost returns.