How to analyse ROI for corporate learning programs
“You don’t build a business, you build people, then people build the business.” – Zig Ziglar
To build a business, you need people. Employees who are well equipped and passionate about what they do. But you also need profits. The balance of the two is essential. Investing in your employees is an investment in your business. Of course there are many ways to invest in your employees. Learning is one of them and is absolutely essential for the growth of any employee and therefore of any business. But a question often asked is how do you calculate the return on investment (ROI) of corporate learning programs.
Thankfully the ROI can be calculated and the impact of your learning initiatives can be quantified. But before we delve into the calculations, which we’ll discuss in detail, it is worth investigating smart investment options. One option essential to the ROI of corporate learning is eLearning.
Why eLearning is the future of corporate training
Corporate eLearning is a growing trend, and there is good reason for this.
To immediately up your ROI on any learning initiative, we suggest eLearning.
eLearning, simply put, is learning conducted via electronic media, typically on the internet. Since 2000, the eLearning industry has grown by over 900% and if you are not part of the 77% of companies already utilising corporate eLearning, you should be part of the 93% of companies planning to adopt eLearning training.
Incorporating eLearning does not necessitate the implementation of your own eLearning platform, and designing of your own eLearning courses. We simply suggest that you tap into the many benefits provided through eLearning.
A bit different to the traditional face to face learning, many organisations used to steer away from corporate eLearning because it supposedly lacked the human element. Causes for concern included the engagement of employees, the effectiveness of the content and whether or not all learning styles can be accommodated.
With technological advancements many of these fears were put to rest. In general, eLearning consistently provides high quality learning, not impacted by the mood of the facilitator or the number of learners attending.
Corporate eLearning also has an unlimited reach. Where perhaps classes were limited in number because of space or time constraints, these excuses are no longer relevant.
Though, for the most part, unquantifiable, eLearning truly adds to the bottom-line of an organisation by cutting costs usually associated with training and guaranteeing the same high level learning experience every time.
An important concern to address is of course its effectiveness. Specifically in comparison to traditional styles of learning.
Is eLearning effective for training employees?
To put your mind at ease let’s consider some statistics.
Students in general love and embrace eLearning, now more than ever.
- 50% of students took part in eLearning – showing an incredible interest to learn
- 40% of students reported that eLearning is helpful
- 36% of students reported that eLearning is useful for managing their course schedules
How does this relate to employees? Do they feel the same?
- 58% of employees prefer to learn at their own pace and in the comfort of their home.
We all have different learning styles and a natural understanding of different topics. One learner may require a week where another needs a month to cover the same topics. eLearning makes it possible for each to learn at their own pace. Absorbing the information as they have capacity which increases their retention of knowledge and ultimately provides a better ROI.
If happy employees are not enough motivation to consider eLearning as your preferred method, here are a few more stats:
- eLearning improves employee productivity by up to 25%
- Employee engagement and therefore employee morale, can increase by up to 18%
- 42% of companies who use eLearning generate more income
So, with all these stats considered, and all the other benefits taken into account, we know that corporate eLearning will, in subtle ways increase your ROI. But let’s consider how we can actually quantify the ROI of learning.
How do you estimate the eLearning ROI?
Based on industry standards and the selection of the right factors, measured before, during and after corporate eLearning can help you calculate the benefit factor.
Though not full proof, a simple formula was developed by business leaders over time to help calculate the ROI for corporate training.
ROI (%) = [(Monetary benefit – Training Costs)] / Training Costs x 100
This calculation is best explained with an example.
Let’s say an organisation identifies an increasing backlog in their administration department. The options for addressing the backlog is to either appoint more staff or increase the production of the current staff, potentially through eLearning training.
To calculate the ROI for corporate eLearning, the first step is to identify factors to measure. Consider the type of training that is being offered and which areas of the organisation it is designed to impact.
In our scenario, we hope to increase the production of our administration staff through eLearning training.
Next we need to identify the current output of the department. (Any increase in this output, following the training initiative is an indication of ROI.)
For example the administration department of 10 employees, is currently able to process 400 documents in a 40 hour work week. Thus, on average, 1 employee can process 40 documents per week. Or a single document per hour.
What then is the estimated profit of this output?
To calculate this we need to know the overall cost for the same timeline as well as the value of the service. The cost should include wages, materials, equipment, facilities, distribution and overheads.
Let’s say the overall cost of the administration department is $ 15 000 per week. The value of each document produced is $ 50 per document.
Thus the total profit for this department is $ 5 000 per week.
[Total value ($ 50 x 400 documents = $ 20 000) – Total cost ($ 15 000) = Total profit]
Now that we know the current output, current cost and current profit, it’s important to evaluate the potential weaknesses and identify eLearning training courses that will improve those weaknesses for better production. eLearning, though always beneficial, will have limited ROI if incorrectly chosen.
In our scenario, our administration staff may require assistance with the process or software used by the organisation. They may need training on the content or data, or they may need assistance with time management. There is no benefit in enrolling for a course addressing basic administration and time management, when the identified skills gap is system administration.
We’ve reached the halfway mark. We now know the purpose and cost of our training initiative, and also know that it is appropriately chosen to improve our identified output. Now it’s time to measure our results.
Once the eLearning training has been completed, we can start to measure improvements using the same methods and calculations as when we determined current output measurements. This is important as using different measurements will skew the data. If the employee or department produces more in the same amount of time, it is an indication of a clear qualifiable improvement.
Now let’s calculate the increased profits.
Let’s say that our administration department is now, once corporate eLearning was completed, able to process 450 documents per 40 hour work week. Our cost remains the same and so does the value of the document.
This means our total profit is now $ 7 500 per week.
[Total value ($ 50 x 450 documents = $ 22 500) – Total cost ($ 15 000) = Total profit]
In our final step to calculating the ROI for corporate eLearning programs we simply populate the formula. This can be done, per employee, per department or per organisation.
Our monetary benefit here refers to the increased profits following the learning initiative. Remember that we simply want to calculate the ROI of the specific eLearning initiative.
Following the steps provided above, you will now have the profit before training and profit after training. For our example, the ROI for our scenario will be calculated as follows:
Monetary benefit: $ 7 500 (Profit after training) – $ 5 000 (Profit before training) = $ 2 500 (Net profit)
Let’s assume the course would cost $ 189 per learner.
Training costs: 10 employees x $ 189 = $ 1 890
ROI (%) = [(Monetary benefit – Training Costs)] / Training Costs x 100
ROI = ($ 2 500 – $ 1 890) / $ 1 890 x 100
ROI = 32.3%
In this scenario, we’ve seen 32.3% ROI within the first 40 hour work week.
The return on investment will of course continue to grow as the benefit of learning lasts long after the cost of the course has been paid.
We know that corporate eLearning is beneficial to the employee and employer. With a simple calculation you can determine exactly how beneficial, if implemented correctly.