LMS Return On Investment: Estimating Costs and Benefits

LMS Return On Investment: A 3-Step Estimating Guide

Return On Investment (ROI) is one of the most important metrics for evaluating the success and value of your training programs. LMS ROI shows how much return you get from the system compared to the cost of using and running it. The higher the ROI, the more value the LMS provides to your business.

Here’s a 3-step guide to measuring your LMS Return on Investment.

Step 1: Calculate LMS Costs

Assess the costs associated with operating and maintaining a training platform. LMS costs typically include:

• Preliminary requirements assessment. Value to be used in assessing your training needs and choosing the right LMS.
• License/registration fees. Ongoing costs to purchase or access LMS software are typically billed monthly or annually.
• Startup costs. The cost of setting up an LMS, including configuration, customization, and data migration.
• Training costs. The cost of training administrators and users how to use the LMS effectively.
• Maintenance and support. Fees for ongoing technical support, software updates, and system maintenance.
• Content development. Costs associated with creating or purchasing training materials and courses to be delivered through the LMS.

Add up all the costs, and you’ll get the total cost of your LMS.

Step 2: Determine and Measure LMS Benefits

This step is very complicated. LMSs offer many benefits to businesses, but it’s impossible to quantify every single benefit accurately in monetary terms. The immeasurable benefits of an LMS can include:

• Improved organizational structure.
• Increased employee engagement and satisfaction.
• Improved employee productivity.
• Better business and HR branding, etc.

Keep these benefits in mind so you have a full understanding of the return you get from investing in a learning management solution.

However, to calculate tangible ROI, focus on the most important measurable benefits that align with your training goals and business objectives. This usually includes:

• Increased productivity. Measure the time employees spent learning and managing training programs and compare it to current metrics. Then, calculate the monetary value of this time saved based on the employee’s wages. You are likely to see a significant increase in productivity, thanks to the automated training and simplified processes associated with the use of an LMS.
• Saving training costs. Compare the cost of traditional training methods, such as travel, booking space, and printed materials, with the cost of an LMS. Measure the financial difference to see how much you can save by moving training programs to the digital environment.
• Improved compliance. An LMS helps ensure that employees complete mandatory training on time, reducing the risk of non-compliance penalties. To calculate this benefit, examine the costs associated with non-compliance incidents before and after LMS implementation, including fines, legal fees, and lost productivity, and compare them to see savings and improved compliance rates.
• Employee retention rates. Use this metric if you regularly record employee retention rates in your organization. ​Compare profitability ratios before and after LMS implementation and measure savings from reduced hiring and onboarding costs, as well as productivity gains from retaining experienced employees.
• Improved performance metrics. Track relevant KPIs related to your eLearning programs, such as sales statistics, customer satisfaction scores, or productivity rates before and after training. Compare improvements in these metrics to measure the impact of the LMS on your overall performance.

Calculate the total benefits of the questionable LMS to see your overall benefits.

Step 3: Calculate LMS Return On Investment

Calculating LMS ROI is straightforward. Use the following formula:

Where Total Benefits = Total Benefits – Total Costs.

An example of an LMS ROI calculation

Let’s explore the process of measuring LMS Return On Investment for a mid-sized company.

The business invests $80,000 in the LMS, which includes:

• $15,000 for initial setup.
• $30,000 for customization and integration.
• $10,000 for training.
• $25,000 for the first annual subscription fee.

Benefits include:

• $50,000 in productivity growth.
• $15,000 in cost savings from reduced travel.
• $20,000 due to improved compliance.
• $15,000 from improved performance.

These numbers end in:

• Total cost: $80,000.
• Total benefits: $100,000.
• Total benefits: $20,000.

If we apply the formula to the company’s numbers, we get an LMS ROI of 25%.

Use these rules of thumb to measure the ROI of training in your organization and ensure that your LMS investment is delivering tangible benefits, improving training efficiency, and supporting your overall business goals.

Want to Learn More About Getting the Most Out of Your LMS?

Download the Deep-Dive Guide to Making an LMS Really Work for Your Business today to walk you through the entire process of implementing and implementing a Learning Management System.