Learn How To Calculate ROI

calculate roi

calculate roi

A few of our clients have asked us how we determine the ROI (Return on Investment) for a compliance training initiative. It’s a great question because it recognizes that taking on a learning and development effort is ultimately a decision that addresses a business opportunity or marketplace threat. Let’s take a look at how ROI can work when it comes to training.

Taking a traditional view of calculating ROI for a training initiative is purely a numbers-crunching exercise. It’s a simple, but very difficult, task of tallying up the monetary value of all the inputs (costs associated) and outputs (positive outcomes) linked to creating and deploying a training effort.

Examples of Inputs – Costs Associated

  • The cost of buying an “off-the-shelf” training course or paying a vendor to create a customized version.
  • The amount of time and effort that an organization’s subject matter experts (SMEs) will need to invest in creating and reviewing learning deliverables.

Examples of Outputs – Positive Outcomes

  • An improved new hire training program, which leads to a reduced amount of time and cost it takes to get a new employee to the production floor. When considering a training program that covers how an organization needs to safeguard private and personal information.
  • The cost savings related to avoiding lawsuits or reducing regulatory fines and penalties.

After the positive outputs and required cost inputs are totaled, simple math can be applied to compare different learning options or to the current stead state. Organizations will typically calculate how long it will take to “pay off” the investment of the required cost inputs with how quickly they can expect to see positive outputs.

Can deciding on a learning initiative be defined by purely financial factors?

Sometimes these inputs and outputs are simply too difficult to monetize. However, looking beyond monetized value gives an organization a view of value-laden possibilities that should be considered. These inconsequential but rich realities offer value that cannot be counted or measured in financial terms.

Establishing credible professional expertise, connecting new communication ties across organizational teams, and creating marketplace and brand trust are just a few that we have experienced in our practice.

When you mill these intangible benefits into your decision-making grinder, you can see and capture even more value from a training initiative. ROI doesn’t need to be confined to a purely financial and accounting calculation. You can blend and mix several intangible benefits into your decision-making process about how to tackle a training and development opportunity. Here are a couple of examples of intangibles that we have seen at our company:

  • During the learning analysis and design phases of course creation, a learning initiative might reveal process improvement opportunities that may have otherwise gone unnoticed and unchanged.
  • Learning assets created for customers or alliance sales partners could create marketplace credibility and brand value by giving your sales team an edge on the way they offer sales and service support compared to competitors.

The bottom line is, calculating, or even thinking about ROI, gives organizations an advantage when making the important decisions about training and development investment. At LHT Learning, we recognize those risks and opportunities, and we bring innovation, fresh thinking, and creative solutions that match your requirements, goals, and organization’s vision.

By LHT Learning
| December 19, 2018