In today’s competitive business world, companies are always looking for ways to boost performance while keeping costs under control. This is why measuring the return on investment (ROI) of a corporate learning management system (LMS) is so important.
Investing in an LMS involves more than just buying the software—it includes time, money, and resources spent on developing and delivering training. Without knowing whether this investment is paying off, businesses may waste resources on programs that don’t deliver the expected results.
By measuring the ROI, companies can see how well the LMS is helping achieve key business goals, like improving employee performance, lowering turnover, and increasing efficiency.
It also allows leaders to make informed decisions to ensure that the training continues to provide value. Understanding the benefits of the LMS, both direct and indirect, helps align learning initiatives with larger business objectives, driving growth and positive results.
How to Measure the ROI of the Corporate Learning Management System?
1. Upfront & Ongoing Costs
Begin by determining all of the costs related to the LMS. These costs can be classified into numerous categories:
- Initial costs. This covers the cost of purchasing the LMS software, any setup fees, data migration charges, software licensing, etc in the total infrastructure expenditures for integrating the LMS into the company.
- Implementation expenses. These include the costs of customizing the LMS, integrating it with other systems, and the time spent by IT professionals during implementation.
- Course Creation & Management: These include the expenses associated with creating online training courses or acquiring them from outside businesses, as well as employing training administrators and teachers.
- Ongoing Expenses: Ongoing expenses typically include subscription or licensing fees. There are other maintenance costs such as technical support, system updates, and bug fixes required to keep the platform running smoothly. Another critical factor is the continuous training of employees and administrators.
- Opportunity Costs: Opportunity costs represent the indirect financial impact associated with training employees on the LMS. One major factor is the time employees spend away from their regular duties while training. During this period, there may be a decrease in efficiency or output, affecting overall business performance.
How much does all of this usually come to? The company’s size and unique requirements determine the total cost.
2. Quantifiable Benefits
After considering the costs of the corporate learning management system, it is now time to consider the quantifiable benefits in terms of:
- Improved employee performance: A more direct metric of LMS ROI is the improvement in employee performance and productivity after incorporating LMS. It helps you monitor key performance indicators (KPIs) before and after to see how well the employees implement their newly acquired skills in the workplace.
- Time savings: How much time businesses have saved by using training approaches such as virtual learning instead of hiring a meeting room and forcing all employees to attend at the same time?
- Improved Employee Satisfaction and Retention: When calculating ROI, businesses should also assess the impact on employee satisfaction and retention. Metrics like reduced turnover rates and the cost savings from decreased recruitment and onboarding efforts provide a clear picture of how the LMS contributes to a more stable and engaged workforce.
- Reduced costs: Consider the savings on expenses related to the previous L&D programs, such as venue rental, travel charges, printed learning materials, etc.
- Productivity increase: How many more tasks or activities can the employees perform in a day today than before LMS implementation?
- Increased Revenue: This involves tracking how employee training has translated into higher productivity, improved sales, and improved bottom line. Compare revenue figures before and after LMS implementation to see if better employee performance has driven sales growth or customer retention.
- Improved Customer Satisfaction: By measuring customer satisfaction scores or Net Promoter Scores (NPS) before and after LMS implementation, check out the system’s impact on customer service quality. Higher satisfaction rates often translate into increased customer loyalty and repeat business, both of which are critical revenue drivers.
Additional Read:
Common Challenges in Corporate Training and How to Overcome Them
3.Key ROI Metrics
- Employee Engagement in Training Programs: High engagement levels indicate that employees are actively participating in and benefiting from the corporate learning management system and low engagement levels mean companies need to take certain measures to boost the engagement level.
- Training Time Reduction: The companies can also track the time reduction in training through LMS as compared to traditional methods of training. Reducing the time employees spend in training minimizes downtime and accelerates the time it takes for them to become fully productive, improving overall efficiency.
- Knowledge Retention: Another important ROI indicator to monitor is employee knowledge retention. It is critical to assess the extent to which employees retain knowledge after completing their training. Assessments are a reliable way to gauge what has been learned and how it is being implemented.
- Training Costs Per Employee: This metric includes factors like course creation, platform maintenance, and administrative costs. If the per-employee cost is lower than with previous L&D methods, it’s a strong indicator that the LMS is providing good value.
- Process improvement: LMS helps automate and streamline a lot of processes leading to saved business resources while also making the employee experience consistent. From onboarding new employees, and their training, adapting to updated trends to mandatory annual compliance training programs, and whatnot. How the processes have improved and the costs reduced after implementing LMS for businesses?
4. Formula for ROI Calculation
After getting to know about all the quantifiable net benefits and costs of LMS implementation – it’s now time to put everything into action.
ROI = Net Benefits/Total Costs * 100
A small business invests $20,000 on LMS deployment, including $5,000 for initial setup, $10,000 for customization and integration, $2,000 for training, and $3,000 for the initial annual subscription fee. The benefits include $15,000 in enhanced productivity, $5,000 in cost savings from less travel, $2,000 in improved compliance, and $5000 in customer retention.
What we have is this:
- Total expense: $20,000.
- Total benefits amount to $27,000.
- Net gains: $7,000.
So, the ROI is 35%.
And that’s it! By following these procedures and using the data given, businesses can accurately assess the ROI of their LMS investments.
To Wrap it Up!
Measuring the ROI of an LMS is critical for demonstrating its value and making sound training investment decisions. Organizations can maximize the benefits of their LMS and ensure they get the highest return on investment by learning how to calculate ROI and the elements that drive it.
If you haven’t found an LMS that best suits your needs and gives the best ROI, you can check out one by Blue Dolphin. It is a one-of-a-kind corporate learning management system with all the right features to make the most out of your investment for your business.
To know more about BlueDolphin and how it helps you, your employees, and its analytics features to effectively track ROI, book a free demo now!
