Friday, April 12, 2024
CEOWORLD magazine - Latest - Education and Career - The Importance of Calculating True ROI in Learning and Development

Education and Career

The Importance of Calculating True ROI in Learning and Development

The significance of Return on Investment (ROI) as a metric for measuring the impact of Learning and Development (L&D) cannot be overstated. However, it is crucial to recognize that accurately calculating the true ROI goes beyond simply crunching numbers.

Every year, millions of employees participate in various L&D programs, encompassing a wide range of courses such as compliance training, soft skills development, upskilling, product training, onboarding, and reskilling. In the wake of the COVID-19 pandemic, companies are investing more than ever in training initiatives. In 2022, small, midsize, and large companies invested $1,400, $826, and $1,700 per learner, respectively.

In the present context, measuring the ROI of L&D is of paramount importance for tracking its impact, particularly in terms of revenue and profits over a given period. However, it is worth considering additional metrics that hold value, including increased sales resulting from training, enhanced employee confidence in their roles, reduced employee turnover, and higher engagement. Pre-COVID metrics, such as the number of training attendees, the frequency of employee travel for professional development, and the percentage of employees completing webinars, are less likely to carry the same weight as before.

Surprisingly, only 8% of L&D teams calculate their ROI, indicating that a significant majority of L&D programs lack metrics to measure their success. The original ROI formula appears straightforward: ROI = (L&D Benefits – Cost of L&D) / Cost of L&D x 100. However, calculating a genuine return on investment for your organization can be challenging, particularly when considering less tangible metrics.

First and foremost, it is necessary to understand the expenses associated with L&D initiatives. This includes factors such as time, effort, and money. Employees may need to sacrifice valuable working hours to complete traditional courses, and companies can spend up to 71 hours of training per employee. Moreover, in-person training sessions can cost up to $40,000, considering additional expenses such as transportation, accommodations, venues, catering, speakers, and equipment. It is also important to note that online or alternative models are not always more cost-effective.

When evaluating the impact of L&D, it is essential to assess the extent to which it enhances employee abilities. Unfortunately, many employees express dissatisfaction with the outcomes of their training. For instance, 24% feel that their training is irrelevant to their roles, and 21% believe that the training content is outdated. Organizations also struggle to access suitable training content. As a result, only 10% of the money spent on traditional L&D initiatives delivers tangible results for companies, and ineffective training can cost $13.5 million per 1,000 employees, amounting to $1,350 per employee.

Another avenue to consider for ROI calculation is tracking the increase in revenue. The key lies in finding the right tool for the job.

There are science-backed microlearning platforms designed to meet learners where they are. It is utilized by the world’s Fortune 500 companies and offers a means to measure ROI by assigning value to modern key performance indicators (KPIs). These include confidence enhancement, frequency of applying knowledge, qualitative application of knowledge, internal mobility, and employee retention.

These platforms also provide cost savings in terms of time, money, and energy. Creating ‘push’ microlearning content takes between 2 and 8 hours, which is up to 195% less time compared to traditional methods. Furthermore, employees can complete microlearning modules in just 5 to 7 minutes. In terms of cost, the annual estimated cost per 1,000 learners is $96,000, resulting in average annual savings of $480,000. Additionally, it can save L&D teams up to 82% on course creation and delivery. These factors contribute to boosting ROI and revenue in multiple ways. Employees feel 30% more confident in their roles, learning adoption increases by 90%, and the speed of learning creation improves by 95%.

Learning platforms extend to learners around the world, including countries such as Madagascar, Kenya, Sudan, Venezuela, Peru, India, Nigeria, and Sierra Leone. Furthermore, it receives positive feedback from learners, with an average Net Promoter Score (NPS) of 79 on a scale of -100 to 100. This stands in stark contrast to the average NPS of 41 for Software as a Service (SaaS) companies and a negative NPS of -24 for learning management systems.

In conclusion, accurately calculating the true ROI of L&D is vital for organizations seeking to optimize the impact and effectiveness of their training initiatives.

Have you read?
Best Fashion Schools In The World.
Best Business Schools In The World.
Best CEOs And C-Suite Executives In The World.
World’s Most Influential and Innovative Companies.
World’s Best Hospitality And Hotel Management Schools.
Ready to join the CEOWORLD magazine Executive Council– Find out if you are eligible to apply.

CEOWORLD magazine - Latest - Education and Career - The Importance of Calculating True ROI in Learning and Development
Brian Wallace
Brian Wallace is the Founder and President of NowSourcing, an industry-leading content marketing agency that makes the world's ideas simple, visual, and influential. Brian has been named a Google Small Business Advisor for 2016-present and joined the SXSW Advisory Board in 2019-present

Brian Wallace is an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn.