The skills evolution is upon us. Half of employees may need to reskill by 2025. The skills needed for organizations to succeed in the workforce are changing. Businesses not only need impactful corporate learning, but they need to be able to show it’s worth the investment. But what factors contribute to proving return on investment (ROI) for learning and how can that data be collected, analyzed and shared to show its worth?
Measuring the ROI of your corporate learning should be an ongoing part of your learning and development (L&D) strategy. By diligently tracking ROI, you’ll always be aware of the value of the learning for your employees and your organization, allowing for continuous improvement of your L&D programs.
If you’re looking to add to your value proposition and stand out in the market by providing or enhancing corporate learning opportunities, the question is: What types of results and returns can you expect?
This guide is here to help you answer that question with categories to consider when breaking down ROI, factors to incorporate into your calculations and sample formulas and metrics.
There’s no single formula for ROI because the calculation needs to be customized to your strategic objectives. This guide will give you the knowledge you’ll need to shape discussions and evaluations in ways that are relevant to your goals. Here’s how we’ll break things down:
- The strategy: Define what success looks like and determine the metrics and data you’ll need to measure it.
- The returns: Take a deeper dive into the types of returns to look for and what to keep in mind as you evaluate them.
- The investment: Understand what costs you need to factor into the equation.
- The final calculation: Bring everything together to quantify some of the returns.
- The additional benefits: Don’t leave out the factors that have a less definable place in a straightforward equation—they have a critical impact.
- The wrap-up: Bring it all together.
Before you can talk about results, you need to define benchmarks around what you’re trying to accomplish. Are you trying to scale your current corporate learning by transitioning to an online program or are you changing from one learning experience platform (LXP) to another? Is the focus on increasing your value proposition? Or is reducing your team’s administrative burden the higher priority?
Whatever your goals are, establishing the benchmarks for success is the first step in figuring out the ROI of your corporate learning.
Questions to Answer
Consider the following questions to make sure you’re thinking of all aspects of your business that can be impacted before getting started:
- Do any external stakeholders need to be involved? Think about partners, vendors or anyone else with whom you might have unusual circumstances to consider.
- What learning platforms, tools and methods are currently in place? Where else do your employees gain knowledge and skills? Include external sources like blogs, courses and YouTube tutorials.
- Do you have the internal knowledge and resources to create effective content or will you need outside help?
- What kind of timeline are you working with?
- How will your processes and operations be impacted, and what will you need to facilitate the change?
- What kind of data and insights do you already have access to? Do you have a formal system for collecting feedback from your learners and their leaders?
Metrics to Consider
You’ll want to be able to quantify the effectiveness of your corporate learning. Think about pulling data on the following metrics to get started:
Returns can generally be divided into three categories:
- Those that reduce costs.
- Those that directly generate revenue growth.
- Those that generate growth or reduce costs indirectly.
Educating your employees through corporate learning programs has a measurable impact on expenses. Consider the following:
- Online corporate learning opportunities deliver education without having to bring in external instructors or bring learners together at an offsite location. This removes the need to pay for things such as travel, meals and facility rentals is a direct cost saving.
- Online programs scale easily to improve reach with much less administrative overhead than in-person learning—meaning you can reach more learners and offer a greater variety of learning opportunities with your existing team.
- Making programs available anytime, anywhere gives employees the ability to fit learning into their workflow, reducing barriers to participation.
- The right LXP software can also use tech to map skills to careers and create clear, personalized upskilling paths for your employees. This provides opportunities to provide targeted custom and curated content aimed at getting them to strategically advance their careers and fill gaps in the business.
- The ability to deliver competency-based learning provides clear links between skills development and job performance.
- Built-in learner analytics simplify data collection and reporting tasks for your employees and gain visibility into workforce readiness and provide accurate information for all stakeholders, even in the face of last-minute data requests.
Factors to consider:
• average cost per onsite training session
• number of training sessions required
• staff hours spent on learning administration, data gathering and reporting
• reduced days of administrative work
• increased productivity
• improved quality of work
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There are several ways that a corporate learning strategy can contribute directly to revenue growth. The primary goal of corporate learning is to help employees maximize the value they get from working at your company—including pursuing pathways to upskill, reskill or grow. You accomplish this by empowering them with the knowledge and skills they need to achieve the results they’re looking for as quickly and painlessly as possible. When thinking about the types of results that come from helping employees in this way, consider:
Removing friction: Implementing on-demand courses allows users to onboard effectively and build their confidence so they realize a return on their investment quickly and painlessly.
Increasing loyalty: Corporate learning programs improve retention rates, lower costs associated with high turnover and the time and cost of sourcing and hiring new talent.
Growing expertise: Personalized learning pathways become a road map for employees to see their path to career growth.
Filling skills gaps: Having open positions in your workplace that are necessary to its success means you’re compromising on output. Getting people into these positions through upskilling improves efficiencies and ensures you’re hitting business goals.
The next part of any ROI calculation is the investment. There are two parts to investment in employee learning and development: the one-time setup costs and the variable or ongoing costs.
One-time Setup Costs:
- LXP implementation
- change management
- content development
Variable or Ongoing Costs:
The Final Calculation
Determining the final ROI requires bringing all your previous calculations together in this equation:
((Annual Program Benefit–Annual Ongoing Program Costs)/One-Time Setup Costs) x 100 = ROI
An outcome higher than zero means your corporate learning programs produced a net benefit after accounting for the costs associated with implementing and running them. The higher the percentage, the better the results.
When it comes to communicating the benefit, people often choose to share dollar figures instead of percentages. An ROI of 50%, for example, means that every dollar spent generates $1.50. If you invested $10,000, your return would be $15,000.
The Additional Benefits
ROI calculations are based on cost savings and revenue growth that can be directly linked to the investment in a single step, but this alone doesn’t tell the full story. There are further benefits that either lead to revenue growth indirectly or have additional qualitative advantages that are harder to put a number on—but are still a vital part of your success.
Let’s look at three: employee engagement, attracting and retaining talent and skills development.
Growing Employee Engagement
Extensive research from organizations including Gallup and Deloitte confirms over and over that employee growth and development are key drivers of employee engagement. The Global Employee Engagement Index (GEEI) reports that employee training results in a 27% improvement in employee engagement.
When your employees are engaged with your corporate learning programs and experience success, they can become champions for your brand. This can result in a range of benefits, like:
- glowing online reviews
- referrals to other top talent
- happy employees who promote your business to their friends and colleagues and on social media
We’ve all seen the effect a following of brand superfans can have. Your engaged employees can have an immeasurable influence on your reputation that can lead to overall growth and financial impact.
Attracting and Retaining Talent
In an increasingly competitive market, offering robust corporate learning could be the differentiator you’ve been searching for. Why?
- It shows employees that you care about their success.
- It adds to your value proposition. Applicants know that when they work for you, they’ll have access to L&D to help propel their careers.
- It’s great marketing. If you make some of your corporate learning employee success stories available publicly, it shows transparency and builds trust.
Corporate learning isn’t just a nice perk anymore—as an employee benefit, it’s a base requirement. But there are other ways learning and development programs reduce turnover as well. Consider the following:
- Fostering internal career growth for employees improves employee engagement and commitment to the organization.
- The cost of replacing an employee ranges from half to twice the employee’s annual salary, and that doesn’t factor in intangible costs such as the loss of institutional knowledge and customer relationships and the possible impact on team morale.
Building a Skilled Workforce
Another major return on investing in employee training is the ability to ensure that your organization has the skills it needs to be innovative and competitive now and in the future. As we’ve already mentioned, half of employees may need to reskill by 2025.
Think about that for a moment. Required skills are changing so fast that failing to provide ongoing learning opportunities for employees creates skills gaps within organizations.
Of course, the objectives of corporate learning go beyond a desire to avoid falling behind. Since Gartner reports that only 36% of managers think their employees can keep pace with future skills needs, continually assessing and building skills and competencies among your workforce provides a competitive advantage. Once again, it’s difficult to put a dollar value on this, but the capacity to innovate that comes from being ahead has clear benefits over constantly playing catchup.
Measuring the Overall Impact of Corporate Learning
Undertaking an ROI analysis can seem like a daunting task, but by going through the process—taking stock of your goals and objectives, understanding what you’ll be measuring and using the correct calculations—you’ll be able to articulate the value of corporate learning in ways your stakeholders can appreciate. It’s proof that you’ll be able to deliver the value your employees are looking for while generating real results for your organization.
The ROI assumptions and calculations in this guide are for illustration purposes only. Individual results may vary.
Karen Karnis has a BA in sociology from the University of Guelph. She has worked in social services, higher education, communications and journalism. Karen is currently working toward a Master of Education in Sustainability, Creativity and Innovation through Cape Breton University.
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