LMS ROI Calculator Explained: Learn How To Easily Calculate It

  • July 25, 2021
  • Blog
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We often wonder if our money is going to the proper place before we spend it. But what happens once we’ve spent it? Is there a simple method to ensure it’s wisely spent? Yes! LMS ROI calculator is a simple method to track your company’s progress after each training session and give yourself a pat on the back.

In this article, Manaarah explains how to calculate ROI in an easy way with examples so you can do it yourself. Check it out.

What is ROI in LMS?

The return on investment (ROI) for a learning management system is determined by how your training programs affect your organization and its bottom line.

Your LMS ROI is essential for your business since it returns cash and effort that would otherwise be lost.

So you’re attempting to create a business case that demonstrates how your LMS investment will be both cost-effective and revenue-generating for your company.

But how do you back it up? Using the training ROI calculator.

How are ROI Cases Calculated?

ROI is a standardized, global measure of profitability used by millions of companies around the world because it is relatively simple to calculate and understand.

 

ROI is calculated by subtracting the original investment value from the end investment value,

which equals the net return, then dividing the result, which is the net return, by the cost of the investment and multiplying it by 100 at the end.

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It is worth noting that ROI is generally represented as a percentage since it is more intuitively understandable. Furthermore,

because investment returns can be positive or negative, the ROI calculation includes the net return in the numerator.

When ROI calculations provide a positive result, it indicates that net returns are positive since total returns surpass total expenses.

When ROI calculations give a negative value,

it implies that net returns are negative since total expenses exceed total returns, implying that this investment causes a loss.

Finally, total returns and entire expenses should be included to compute ROI with the greatest precision.

How Do You Measure ROI in Learning and Development?

The return on investment (ROI) in learning is the same as the traditional one, however, it aims to calculate the benefit the individuals get as the net return. Training ROI metrics seek to answer two related but distinct questions:

  1. Can we compare the expense of this training to the advantages it provides to both people and organizations?
  2. Are trainees learning new information and abilities in order to enhance efficiency, decrease expenses at work, or both?

ROI may be used to justify the cost of a training course, to compare one training session to another, and to assist an organization create training.

It is a straightforward method for tracking the efficacy of training and determining the value that learning contributed to the creation of.

 

The cost of a training course refers to expenses related to a training program such as:

  1. resources for classes (online or printed)
  2. instructor salary
  3. administrative costs
  4. rental charges (if training occurs at an external location)
  5. investments in software used
  6. loss of production and income during the training.
  7. transportation and accommodation (if necessary)
  8. post-training evaluation costs

Training Return On Investment Examples

Imagine you’re an educational center manager that was asked to conduct training for 30 call center agents to improve their communication skills during calls. You spent $30,000 on that program and want to know how effective it is.

To begin, you would need to assess your agents’ productivity both before and after the training. Consider the cost of processing a call as one example of a measure. You might also consider how many calls your employees can manage per hour.

After the training, you may repeat the measures to determine whether there was any difference as a result.

Assume the team could manage 20 calls per hour prior to training and 25 calls per hour thereafter. If each call costs an average of $1, then a 25% increase in productivity would be worth $5 per hour, or $40 per employee throughout an 8-hour shift.

For your thirty employees, the call handling training delivered a total net benefit of $1,200 per day or $120,000 over a 100-day period.

You would use the following calculation to determine the ROI:

ROI% = $120,000 – $30,000 ÷ 30,000*100 = 300% (positive, so there’s no loss and the total returns and benefits surpass total expenses).

An Alternative Way To Calculate ROI in Training And Learning

If you’re not so good at the numbers and want a different way to measure ROI, rely on surveys!

Pick a platform that conducts automatic surveys and send them to trainees during and after the training to conduct ROI.

These platforms often provide:

  1. Feedback questionnaires are automatically emailed to participants.
  2. Obtaining and analyzing the results.
  3. Automating the testing procedure in order to assess learning.
  4. Providing assistance with workplace observations.
  5. Creating reports based on the reactions of participants.

 

The finest platform can assist in the generation of reports for stakeholders to demonstrate the impact of training and the value it has returned to the company. This emphasizes the training’s return and justifies the original expenses.

What is ROI in eLearning?

eLearning ROI is a financial calculation used to assess the monetary benefits of delivering online training programs.

The eLearning ROI calculator compares the cost of producing and delivering training to the value or advantages gained, providing a financial explanation for the investment.

To call an eLearning project a success, you must be able to demonstrate that the benefits outweigh the initial costs.

Kirkpatrick’s Model on How to Calculate eLearning ROI

Aside from the traditional ROI calculations, Donald Kirkpatrick has created a way of measuring your eLearning investments in a reliable way. Since it was invented in the 1950s, millions of professors and trainers have used it to evaluate the results of their training.

  • Reaction

The first stage assesses participants’ interactions with the learning software. Did they enjoy the classes?

Were they satisfied with the outcome?

These insights are obtained by several professionals through post-program feedback and discussions.

This level is essential since it informs you whether your learners found the course useful and warns you of any adjustments that are required. This, in turn, influences your instructional design strategy.

 

  • Learning

Participants must demonstrate at this level that they have mastered the skills and information taught by the training. Exams, surveys, and interviews with students demonstrate how well they retained the knowledge provided in the course.

This level is essential since it allows learning and development professionals to assess whether their training objectives are being fulfilled,

as well as another approach to uncover knowledge gaps so you can enhance your overall course material.

  • Behavior

Following training, students must use their skills and knowledge in the job. Observations and interviews give insight into whether or not learners have used their knowledge in their everyday work.

Furthermore, companies can assess the success of the training by comparing the learners to a control group.

However, it can be expensive to do so. That’s why most companies rely on observations and interviews rather than control groups.

  • Impact

The last step assesses the learning program’s success in line with the organizational goals. Did it produce the desired results? Sales revenues, quality of products, quality of service, and productivity are examples of assessment measures.

This level should allow you to clearly demonstrate that you have achieved the expected results, or learning objectives, from the training that you have executed.

The fifth step is to calculate ROI in relation to all of the preceding phases. You may calculate your eLearning ROI by monetizing the gains or value-added from training and evaluating if it exceeds the investment.

This is accomplished by comparing the fourth level to the total expenses of developing, delivering, and monitoring training.

What is ROI in Instructional Design (ID)?

In instructional design, ROI (return on investments) is replaced by ROE (return on expectations).

The concept goes as far as 1959, presented by Donald Kirkpatrick.

Return-on-expectation definition is a method in which learning professionals ask questions to explain and improve the expectations of key business stakeholders so that they are satisfied while realistically attaining outcomes in training.

It is about transforming frequently vague expectations into observable, measurable success outcomes that the organization as a whole appreciates and values.

What Is A Good ROI Percentage For Training?

A number of strong ROI studies that provide a compelling argument for the value of learning and development are emerging.

The good ROI percentage of training and development has been calculated to range from 4% and 353%.

This is a satisfying percentage to find after measuring the before and after measures and conducting the assessment.

Make sure the numbers used in the formula are accurate and well-revised not to calculate the final number in a misleading way.

Is ROI a KPI?

No, ROI is not a KPI. The two words are used in very different contexts.

KPIs (key performance indicators) help marketers to measure the short-term impact of their initiatives,

but they are unlikely to reveal the entire story of a campaign’s worth.

ROI, on the other hand, considers the broad picture. It informs you of the total impact of your campaign or training after it has ended in relation to the amount of money you put into it.

We may infer that ROI is a long-term game, and while KPIs are critical for evaluating short-term success and optimizing ongoing decisions, they should not be mistaken with ROI. ROI gives the entire story, whereas KPIs disclose what the chapters represent.

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