10 Ways To Calculate Return On Investment (ROI) For Your LMS

Learning Management Systems (LMSs) have been used extensively in employee education, and even more so since the pandemic. Employee training has become a priority for every organization as they evolve and adapt. 

In the United States, training expenditures tops the list rising 12% to 92.3 Billion, followed by infrastructure and travel.  Training expenses increased even more for midsized companies by 60%, on average, as compared to the previous year. The top three investment priorities for employee L&D are; authoring tools, online learning tools/learning management systems (LMSs), and content development.

Implementing an LMS is considered part an expense of the employee training budget. LMS implementation involves an upfront cost and an ongoing expense in technology and people. Even as employee learning and development programs are critical for an organization to keep pace with changes and maintain its competitiveness, employee training is still perceived as a “cost center.” It is important to understand it’s value and related business outcomes for implementing an effective training tracking program (a.k.a. LMS) in order to assess the return on investment (ROI) correctly.

Employee training is like any other investment, and calculating ROI requires gathering data for an accurate assessment. ROI is an economic indicator.  As other ROI indicators, intangible benefits should be given proper weight to determine ROI. 

Here are ten ways to calculate ROI by using an LMS:

1. Top-line revenue impact

An LMS helps train employees to build new skill sets or improve existing skill sets. The revenue impact of training depends on the industry vertical and business function to which an employee belongs. Training can directly impact revenue in an industry if the functions acquired skills help generate revenue. 

The impact of employee training can be directly correlated to top-line revenue when a trained employee works for a company who pays for the trained resource. 

The impact needs to be assessed both in the short term and long term perspective. This is applicable when acquired skills help companies create products and services that generate even greater revenues over an employee’s career.  

Job roles, such as marketing and sales, also significantly impact revenue. Skill sets from these personnel often need more training on soft skills, which improve their ability to connect with others, communicate effectively, close deals faster and upsell. 

There is not a one-size-fits-all solution as each organization is unique. The top-line revenue impact of training needs to be assessed considering the industry, business functions, and company initiatives. 

2. Infrastructure cost savings

An organization can save significant costs by subscribing to a cloud-hosted LMS, as compared to on-premise or in-house solution.  Infrastructure expenses are lessened for an organization’s IT budget and in-house technical resources are free to pursue other strategically important projects. 

3. Data maintenance and security

Cloud-hosted LMS platforms allow greater data security which has become more critical as employees access a learning platform remotely through the internet. However, it’s critical to ensure the LMS provider you consider to be in compliance with the highest standards of cloud security and your IT department’s SSO compliance. 

In addition to data security, a cloud-hosted solution also enables the leveraging of the latest data technologies since the LMS vendor keeps the platform updated with the latest innovations in database management, which helps save costs on near future investments in data technologies. These cost savings help improve an organization’s ROI by having an LMS to enhance capabilities to leverage data, evaluate analytics, and improve training outcomes. 

4. Data analytics to improve outcomes for enhanced ROI

An LMS can collect granular learner data that offers a comprehensive overview of the effectiveness of learning. The availability of data allows you to analyze e-learning and employee performance.

An LMS helps you organize and store data about many layers of learning with analysis capabilities. You can monitor learner progress in drill-down details such as the number of modules completed, courses in-progress, test and quiz results, and overall participation in training time spent.  The analysis of learners’ performance at such a granular level enables you to optimize individual performance to improve productivity and improve ROI from your LMS. 

At an organization level, you can assess the performance of training using metrics such as user counts, course completion percentages, and more. The data are important inputs for the assessment of LMS ROI.

5. Optimize lost productivity 

Lost productivity is an indirect cost that an organization incurs when an employee is in training. An LMS enables an organization to deliver online training, which can be accessed anytime, from anywhere, and from any device. The flexibility offered by LMS in terms of training delivery enables organizations to allow employees to learn on their own timeline with the ability to compensate them for time spent on training hours, if desired. The data on lost productivity during “production hours” can be useful input for the calculation of LMS ROI.

6. Reduce attrition

An LMS helps create a personalized learning path for employees to enable them to learn and grow with the organization. This makes employees feel valued and also provides clarity about their career path and development. 

An organization spends an average $1,300 to train employees. Using an LMS enables an organization to reduce employee turnover and saves on the cost of hiring and training their replacements. When an employer invests in an LMS, it provides a continuous learning and growth opportunity for employees.  This has been proven to increase job satisfaction, personal pride and positive feelings about their company.

7. Reduce training expenses 

An advanced LMS eliminates the need for physical classroom training which saves on real estate (classroom) expenses, cost for physical materials and is more eco-friendly. An LMS enables you to repeat the courses without extra cost and offers better insights into course and individual performance. The benefits can easily be expressed in monetary terms and the data can be leveraged in the calculation of ROI.

8. Reduce travel expenses

An LMS removes the need for travel to a physical location and saves critical employee time. Employee saved time can be quantified in monetary terms and along with cost savings offer important input for ROI calculation.

9. Collaborative learning enhances organizational culture.

Some LMSs come with advanced technology features, including social learning capabilities that help companies to increase employee engagement by facilitating online communities and forums. The online forums encourage community learning, which leads to greater bonding among employees and also improves organizational culture. The intangible benefits offered by LMS help to improve the return on investment from your LMS.

10. Time for high-level strategy

An LMS can automate the entire learning process from course creation, training delivery, assessment evaluation, compliance and reporting. The Learning and Development and HR teams can focus on their core competencies such as creating content, analysis of how to upskill and reskill their talent, best practices, and ultimately retain and help employees feel fulfilled and happy. You can get in touch to help you assess ROI from LMS for informed decision-making for the implementation of the platform.