In 2022, corporate training expenditure in the United States exceeded $100 billion. An increase of $10 billion on the previous year, it’s the highest figure recorded to date. And it delivers a strong message: Training’s worth investing in.
But how do businesses know? And what exactly are they getting in return?
With that level of investment comes an expectation to understand impact. Which leads us to one of the hottest topics in L&D at the moment: training ROI.
If you’re reading this post, chances are you already know that training is an important tool for the modern enterprise. With this in mind, you’ll either have deployed, or are preparing to deploy, an LMS platform to cover your organization’s training needs. And from personal experience, you’ll have an intuitive understanding of the ways training can benefit your business and its bottom line.
But you may be struggling to gather the data and insights needed to demonstrate those benefits in clear and irrevocable detail.
If so, read on.
In this article, we address the common missing link in the training evaluation chain: training ROI. We describe the different methods that can be used to accurately measure and evaluate training ROI. We look at how to source the specific stats (quantitative data) you need to keep training front of mind and thriving across your organization. And we share how to gather qualitative data that will give your reports depth, context, and meaning.
But first, let’s set the scene.
What is training ROI, and why does it matter?
As a training professional, you’ll have an active involvement in your L&D program. And either you or a colleague will get the chance to witness in person where training is having an impact and where it may not be working. So, are detail and data really important? Isn’t this first-hand experience combined with a general, but professional, perception of success enough?
In a word, no.
In its broadest sense, training ROI refers to what an organization gets back from the money it invests in L&D initiatives. As a business with an eye on the bottom line, your C-suite needs to provide financial accountability for training to investors and other internal and external stakeholders. And will look to its L&D leads to provide them with the information needed to verify and quantify that investment.
To secure continued investment for training programs and build a case for the funding of new L&D initiatives, being able to measure and demonstrate ROI is key.
But financial return is more than just increased profits. It comes in a variety of different forms. So how do you even begin to calculate the ROI of the e-learning courses you have deployed?
You start by asking the question: Why does training matter?
The ROI of training: Working out what to measure
Training gives employees the skills and knowledge they need to raise their performance, work more efficiently and productively, and, ultimately, grow your business. With a clear and direct link to KPIs, this aspect of training often drives an almost immediate uptick in revenues.
It’s usually captured through SMART objectives linked to a company’s strategic goals. And with the right tools and systems, it’s relatively easy to report on the ‘M’ or ‘measurable’ element of those objectives.
But the purpose of training doesn’t stop there. Learning and development (L&D) is also a key driver of engagement. This leads to higher employee retention rates. And, by elevating your brand, it underpins a successful talent and customer acquisition strategy too.
Having a more knowledgeable and skilled workforce also reduces the need to hire externally. Saving money on recruitment and advertising. All of these elements will indirectly impact your bottom line. But they take time to emerge. And are less easy to attribute.
Here’s where training ROI becomes complicated. To get a true picture of the value and impact of L&D, you need to look at more than just KPIs and performance statistics. Which means using a variety of different evaluation methods.
How to structure training ROI: Four models of evaluation
When it comes to the evaluation of training programs, there are a few formal models that can be used. Kirkpatrick’s Four-level Training Evaluation Model is the most popular and forms the basis for the remaining models. So let’s look at that one in detail first. Here’s how it works:
Kirkpatrick’s four-level training evaluation model
This first stage measures the reaction of the trainees to their training. It does this by using surveys to record feedback. A pre-training survey captures the expectations of trainees. And a post-training survey measures the degree to which these expectations were met.
Tip: Look for emotion-related or affective reactions on various training aspects.
Next step is to measure learning achievement. How have knowledge and skills changed since the training? This is done using assessments that are linked with learning objectives.
Tip: Keep objectives clear and simple and only assign one skill per objective.
At the third level, behavior changes are assessed using workplace observation checklists, 360-degree reviews, and company-specific evaluation tools.
Tip: Line managers are best placed to complete these checklists.
Officially the last stage in the process, this level is all about measuring business results using hard data and analytics. Areas to focus on could range from productivity gain and the impact on quality measures to getting a higher number of customer subscriptions or selling more units.
Tip: Arguably the most important set of metrics, it may make more sense to start with this step and work backward from there.
ROI is then calculated by converting the business impact gains (as shown in level 4) into a monetary value. For example, when a higher number of customer subscriptions are received, the total subscriptions multiplied by the cost of one subscription will provide the net profit as compared to the previous months.
Logical and easy to follow, Kirkpatrick’s model is popular with eLearning teams. But it’s by no means used exclusively. The following models take Kirkpatrick’s approach further.
The Phillips ROI model
There’s an additional fifth step in the Phillips model. This evaluates ROI by measuring the difference between training costs and training results.
This particular training ROI metric can be a very persuasive tool when requesting more training resources from company leaders.
Kaufman’s five levels of evaluation
Like Phillips, Kaufman’s model also measures resources invested, but Kaufman puts this as the first rather than the last step.
Instead, the final stage of this evaluation model focuses on assessing societal benefits. For example, how did training add value to its clients or society as a whole?
Anderson’s model of learning evaluation
Focused more on business strategy, Anderson’s model is about ensuring that training is delivered (and evaluated) where it’s needed the most.
The first step is to make sure training programs correlate with strategic priorities. The next step is to measure how training has contributed to those strategic results. The final stage is to decide whether the training ROI is worthwhile.
None of these models represents a right or wrong approach. The model (or combination of models) you choose will depend on what your own indicators of ROI or “effectiveness” are. Is success all about performance, changes in revenue, and profit? Or are culture and employee happiness factors too?
10 ways to measure training ROI
We’ve looked at the models that can give structure and focus to the ROI of training. But what specific methods can you use to support this?
Gathering both qualitative and quantitative data, the following list addresses most of the requirements when it comes to measuring training ROI. Some directly relate to money saved or money made. Others have a more indirect impact. Either way, all of these methods link up with training ROI and will eventually translate into financial gains.
Just remember to pick and choose the most appropriate method for the type of information you need to source.
1. Tests and reports
A good way to evaluate the impact of training on knowledge and skills, assessments and quizzes are easy to generate using the right LMS.
Automatically graded with built-in reporting, once you’ve set up a test or a quiz on your LMS, all that’s left to do is interpret and analyze the data at the end. To benchmark progress, assess impact and ROI, test learners at the start and the end of a course.
Your LMS should be able to generate a range of reports and statistics to assess learner performance. They won’t in themselves provide a complete picture of ROI. But they can highlight areas for further investigation.
If, for example, most employees are failing specific tests, it will be futile to expect the courses to have a positive impact on the company’s operation. Instead, it’s a sign that the course needs to change for it to be successful.
Using a checklist or journal to record information, observations are a good way of assessing learning and behavior changes in a real workplace setting.
A qualitative rather than quantitative approach, this method works better for soft skills such as creativity and persuasion.
Surveys used at the beginning and the end of a course help evaluate changes in perception and opinions. Easy to generate using an LMS, with accessible and automated reporting, they’re an efficient and affordable evaluation tool.
But this method won’t provide hard data about performance or business outcomes.
Instead, its value lies in measuring how successful a learning experience was in terms of engagement. Was the training interesting? Was the software easy to use? Sourcing answers to questions like these can help evaluate your investment in a particular program or platform, which represents an indirect, but still important, link to your training ROI.
Sometimes data doesn’t provide the full picture.
There are trainees who may score poorly at an eLearning summative assessment but actually go on to apply their newfound knowledge well in a workplace context. So, how do managers measure this type of performance success and report to their senior managers? Observations are one way. But they can be intimidating for some employees.
A gentler and potentially more insightful approach is to simply ask them. Whether it’s a series of one-to-one, face-to-face chats or a small online focus group, informal interviews give managers the chance to look beyond the rigid format of standard questionnaires. Not only can managers find out if the training has been useful and is being applied, but they can dig deeper into other aspects of the learning experience too.
5. Performance records
For hard data linked directly to business outcomes, performance records are hard to beat. Free from bias, they’re a solid way to measure success, whether it’s number of deals closed, average call times reduced, or support queries solved.
6. External stakeholders
If you’re a client-facing business, why not ask your customers (or some of them) if they’ve seen any improvements in their interactions with your employees post-training?
Structure and record the feedback as methodically as possible to make it easy to collate and identify trends and patterns.
7. Skills gap analyses
Conducting a skills gap analysis is a good method to identify areas for improvement within your team. But it goes beyond that.
It’ll also show progress.
When you analyze your team’s skills gaps before and after training, you can understand whether and how much the particular training has helped cover those gaps. To get useful insights, make sure to collect feedback from direct managers, peers, and employees themselves. If they feel confident using their newly-acquired skills on the job, and their colleagues notice that, you can safely claim your training is successful.
8. Business metrics
Most companies have metrics that relate directly to their operation and performance. Comparing them before and after relevant courses is an effective way of measuring the impact of your eLearning program.
9. Accounting books
Ultimately, of course, most companies exist to make money and will want to be able to measure ROI in direct profits.
Checking the books is an obvious way to do this. But it will take a little time for your employees to put their new skills to practice. So set aside a reasonable period of adjustment before checking for an uptick in profit or revenues.
10. HR records
And, finally, make use of the rich range of data your HR team will have access to. This could range from promotion history, churn rates, hiring patterns, and attendance records to wellbeing and engagement surveys, course completion rates, LMS logins, and eLearning activity.
While many of these are not in themselves training ROI metrics, they can all in some way be influenced by training. Analyzing them in conjunction with training data can pinpoint connections. And generate some interesting insights about ROI.
(Hint: If your LMS software integrates with your HR tool, you can link training with HR data more easily.)
A long-term investment
Not all training will result in an immediate increase in your bottom line. And it’s important to approach the ROI of training with this in mind.
Yes, some training will have an obvious link with revenue-building and cost-cutting. And prove its value almost immediately.
But a large part of training is about building a strong foundation for growth. Think of it as investing in the health of your company. This still equates to significant financial returns, just over a longer period of time. The challenge here is to find accurate ways of recording this. And compelling ways to present it to your board. Use graphics, quotes, and stats. Link it to data where you can.
And always underpin it with evidence of short-term gains too.