The Value of Corporate Training: Learning and Development ROI
Most organizations understand the significance of offering workplace learning opportunities to employees. However, according to statistics highlighted by Lorman, 59% of employees claim they had no workplace training and that most of their skills were self-taught. While organizations continue to improve their training opportunities, it's equally important for employers to track and measure the results of this corporate training — so they can determine the business impact of their programs. In doing so, organizations are able to discern how effective training was for employees along with its true value to the company moving forward.
The new learning and development landscape in the workplace
Corporate training and development have evolved rapidly in recent years. In response to COVID-19, many businesses were forced to quickly move to remote work options and modify processes to meet this virtual environment, including onboarding and development training. This continues to shift as organizations embrace a variety of in-person, hybrid and remote work options.
94% of employees said they would stay at a company longer if it invested in their learning and development.
With large improvements in technology, there are more options for learning in the workplace than ever before, and offering these opportunities is becoming an important factor to attract and retain talent.
In fact, in a LinkedIn Workplace Learning Report, 94% of employees said they would stay at a company longer if it invested in their learning and development. Besides increased talent retention, a properly structured and implemented learning program can provide a host of benefits, including:
- Improved employee performance and productivity
- Enhanced company culture
- Increased profitability
Common methods of employee training and learning
Effective corporate training is becoming a critical factor for reskilling and upskilling, employee morale and organizational retention rates. But with an abundance of methods to choose from, it’s fundamental to determine the most potentially advantageous options for your individual organization and workers. A few of the most common learning and development methods include:
Instructor-led training (ILT) is the most traditional method for employee learning, and it generally occurs at an on-site location. ILT may be most effective for complex material because direct interaction and questioning are possible. Due to travel, lodging, facility and material expenses, as well as the time that is needed for each session, this type of training is also the least scalable when it’s the sole training method of an L&D program.
As technology continues to grow, there are increasingly diverse options to utilize for online learning, and organizations and their employees often value these opportunities because of the scalability, personalization and flexibility they offer. Some of the most popular online training types, which are most often delivered through a learning management system (LMS), involve:
- eLearning courses
- Social learning
- Virtual Reality (VR) and Augmented Reality (AR)
With on-the-job training (OJT), employees can observe the systems and procedures of the workplace and familiarize themselves quickly.
Common methods for effective employee OJT include:
- Mentoring programs
The importance of evaluating training effectiveness
A survey from McKinsey and Company states one in five organizations don’t measure the impact of their learning programs at all. But, the benefits of proper and effective training can positively influence every aspect of the company. Ripley Training found that successful corporate learning can even boost profit margins by 47%. As employers increasingly recognize the importance of analyzing training efforts, they will need to collect data on measurable outcomes to quantify their ROI. Typical measures of training effectiveness include:
- One-on-one discussions after training
- Post-training quizzes
- Participant case studies
- Employee surveys to complete
- Official certification exams
While several ways to measure training results exist, it's beneficial for organizations to decide which method they plan to employ before these programs begin. This largely simplifies the training measurement and ROI calculations that follow.
Measuring the ROI of corporate learning
Just as employee learning is an investment by the organization, measuring the return on investment (ROI) of this training is an expenditure of time and money as well. However, both of these actions are a necessity for organizational growth and, if implemented successfully, are profitable and invaluable investments.
The learning ROI formula
The ROI of corporate learning is a valuable way to determine if the organization’s training investment was worthwhile. These calculations are utilized to discover if employees are learning new skills that increase their efficiency or reduce organizational costs, as well as compare training program costs to the resulting benefits.
The formula most commonly used to determine ROI for corporate training programs is the benefits or net profit of the program minus the training costs divided by the overall program costs:
The result represents the dollar amount returned as a benefit for every dollar spent on the corporate training program. Just multiply the number by 100 to get the ROI percentage.
Additional ways to measure corporate training ROI
A report from EBSCO Connect states that 96% of CEOs want learning and development to be connected to business impact data, but only 8% report getting that information. However, there are many simple ways to determine the ROI of learning programs that businesses can implement including:
- Using a training ROI calculator: This calculates the ratio of the total cost of the training program relative to the overall benefits of the program.
- Creating an impact study for calculations: An impact study involves going through the phases of evaluation planning, data collection and data analysis.
- Utilizing the Philips ROI methodology: The Philips ROI methodology is a 10-step training evaluation method based on reaction, learning, behavior and results.
- Using supervisor assessments: For more flexible work, such as assessing customer service or teamwork, supervisors can turn observations into a monetary value to calculate ROI.
- Implementing a platform to measure training effectiveness: With the flexible reporting and analytics provided by an LMS, useful reports can be automated and generated for you to simplify the process.
ROIs that signal effective training programs
However you decide to measure ROI, it’s paramount to understand what these numbers mean. Once you’ve converted your ROI to a percentage, you ideally want to see a number over 100%. This means that your training investment had a positive business impact, increasing revenue. A 100% ROI illustrates a program that earned its money back without increasing revenue, while anything below 100% means money was lost on training.
There are additional factors to consider when proving the value and return on training, which we’ll cover in the next section.
These interpretations of data are essential for managers to accurately understand the value of their corporate training programs while guiding them to the learning method that will be the most beneficial.
Overflow benefits and business impacts to consider
Tracking and measuring the ROI of corporate training helps employers quantify program results, but there are also a host of overflow benefits that employee training investments provide as well. Additional advantages that effective corporate training contributes include:
- Improved employee morale, motivation and satisfaction
- Reduced skill gaps
- Keeping pace with industry trends and changes
- Increased retention and decreased turnover
- Upgraded employee performance
- Enhanced working relationships
For example, maybe your training ROI wasn’t at or above 100%, but through employee feedback survey results and HR insights you connected a positive correlation between your new career development training and a reduction in employee turnover. Considering it costs upwards of $4,400 per new hire and takes an average of 36-42 days to fill a job opening, you could be looking at a larger return than you initially thought.
As corporate learning programs grow in importance, employers must understand the variety of options available to the organization and determine what method or practice would be most effective. In the long run, these programs aren’t a cost to the company, but rather a significant investment for talent development and improved business results.