Calculating Return on Investment (ROI) is no easy feat for most any project. And, measuring the ROI for your training programs is no exception.
Industry Growth Means Managers Need to Understand the Business Impact of Their Training Programs
Global e-learning markets are poised for rapid growth over the next decade. This means it’s safe to say that Learning Management Systems (LMS) are here to stay for the foreseeable future. Industry growth suggests that companies will continue to invest in training programs – online and offline. According to Research and Markets report, "Global E-Learning Market Analysis & Trends - Industry Forecast to 2025," the e-Learning market is expected to grow at a compound annual growth rate 7.2% through 2025.
It’s clear that there are lots of advantages to implementing online training programs. Unfortunately, demonstrating benefits isn’t the same as presenting the return on investment.
What Is ROI?
“What’s the Return on Investment?” This may be the top question asked of business leaders as they present a case to launch a new business initiative. Executives, Board Members and other stakeholders always want to understand how their investments will translate into growth.
Return on Investment is a popular financial metric for evaluating the financial consequences of investments. In simplest terms, ROI is the gain that results from an investment. A good real world illustration is the concept of seed and harvest. Planting one seed should yield far more than just one fruit. In this example, the seed could represent an investment. The harvest would be the return on the investment. Similarly, your training investments should ideally deliver financial returns greater than the initial cost(s).
What’s the Bottom Line? Your Executive Team Wants to Know
Your online and offline training investments should deliver quantifiable returns. These said returns should be clearly seen in your bottom line. Executive teams evaluate training programs based on the costs and outcomes of your investments. Program budget allocations are determined by the business impact of those investments. Your management team cares about the bottom line. How well did your training programs do relative to the costs?
You need to calculate the return on investment by comparing the expected benefits with the costs. This is not always a simple task. It can be very tricky depending on the use case. There may be a number of components to factor in, depending on the business case or program. There are a number of online resources that explain ROI in more detail.
Useful Resources for Making Your ROI Calculations
Here’s a list of few, you might want to check out:
- Investopedia explains ROI in simple terms, provides formulas, and explains limitations.
- We've got a few articles of our own on the topic of ROI. Check out this interview with Jack Phillips of the ROI Institute.
- This one may be helpful: why ROI matters for your training programs?