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Measuring the return on investment (ROI) is one of L&D’s biggest challenges. Whether quantifying time and cost savings, increased productivity, or other metrics, it’s often one of the trickiest elements of any L&D professional’s role. But what’s even harder is transforming ROI data into meaningful insights that resonate with stakeholders.  

For many L&D teams, the difficulty lies in collecting and presenting data convincingly, hindering their ability to secure future buy-in or additional budget. Proving ROI effectively is a key skill that training providers and L&D teams must develop to showcase the value they bring to the organization – but mastering this skill is far easier said than done. 

So if you’re struggling to calculate the ROI of your organization’s L&D efforts, where can you start? 

In this quick guide, we’ll explore the importance of measuring ROI for training, offer practical strategies and tips, and discuss how training management software can simplify the process of collecting and preparing training ROI.

Why is it Important to Track ROI for Training?

L&D professionals are in the business of improving their organizations and those integral to the organization. On top of this, training providers tend to focus on selling the idea that training produces positive results for the organizations they work with. The better trained your employees are, the better equipped they will be to provide the best possible product or service for your organization, so in theory, L&D should pay off. 

But does it matter if you can’t provide it to your stakeholders? Your senior management team likely understands the theoretical benefits of L&D, but what good is that if you can’t prove that your employee development program is getting the results you want?  

Proving ROI is a matter of convincing stakeholders on all sides, both client and internal, that training programs and methodology work – and specifically, that your approach to it is working. In time proving that your training is impeccable will be key down the line when it comes to strategizing boosting course sales or improving learning operations within your field of work.

measuring kpis learning

How to Accurately Track Employee Training ROI

As intimidating or complex as it may initially seem, accurately tracking the ROI of your employee training program can be surprisingly straightforward if you follow a few simple steps: 

Gather stakeholder pain points

Where has training failed most in the past? Where has the organization previously tried to improve? What did those results look like? 

Get everyone on the same page

Ensure that both the client (whether they’re internal or external) and the L&D team are in agreement about what should be measured. 

Establish what metrics should be measured

On top of deciding what should be measured, drill down into what specific metrics will demonstrate the success or failure of your efforts. L&D, your organization’s management, and the people being trained should all know exactly what that looks like for the best chance of success. 

Optimize your learning technology stack

Even with the best intentions, the wrong learning tech stack can hinder your ability to gather metrics and track KPIs. Learning analytics and measuring the right KPIs are essential must-have functions that serve as benchmarks for a proper learning operation tech stack. 

Establishing tangible learning metrics will allow you to show a simple cause and effect over time, which will help you prove the impact of your program. These metrics could include: 

  • Costs for resources 
  • Financial savings 
  • Learner performance scores 
  • Number of incident reports
  • Number of support requests 
  • Responded customer queries 
  • Retention and attrition rates 

Providing the inputs of ROI will help guide L&D teams toward the next critical step in proving the value of L&D – reporting.

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Reporting ROI for Learning Teams

At the end of the day, no matter how flashy or visually appealing your training program may be, your stakeholders ultimately care about one thing: results. Is your program delivering the value they expected? 

But before we go any further, it’s worth noting that metrics can’t capture the entire picture. To many stakeholders, metrics will just look like a page of numbers, and putting it into a pie chart or line graph just won’t cut it. Telling the story of the value returned relies on the L&D team to provide context about the intangible, qualitative metrics, such as anecdotal feedback or what instructors are voicing. Pulled together, all of this information will paint a rich picture of the overall success of your program. 

Measure training ROI

A simple formula for measuring ROI can be calculated as: 

ROI = Net Benefits of Training – Total Costs of Training/Total Costs of Training (x100)

What is the Phillips ROI Methodology for Calculating Training?

One of the most respected models for measuring the return on investment in training among L&D circles is the Phillips ROI Model. Developed by Jack Phillips in the early 2000s as an additional supplement to the Kirkpatrick Model of Return on Investment, the Phillips Model helps learning specialists work backward in creating effective and impactful training.

measuring value of roi in training

Level 1: Reaction

At its first level, the reaction phase is the diagnostic phase of measuring the L&D strategy at the learners’ level after they’ve gone through a complete training program – essentially, completion rates. 

Level 2: Learning

In this step, trainers are looking at knowledge transfer – in other words, did learners retain what they learned in the training session? This may be measured via online tests or post-course training simulations, and proof of learning establishes competency at least and proficiency at best. 

Level 3: Application and implementation

This level measures which aspects of the training impact learners to improve or worsen, and why the L&D strategy did or didn’t work. For instance, for an employee development program for manufacturing staff, trainers realized there was a 22% pass rate. Upon further investigation, L&D realized that there was an issue with the new on-the-job training module.  

Level 4: Results

The results stage looks at the overall product of the planning, organization, and execution of the training provided. To return to our manufacturing story, one summary of the training results can say that production has increased since implementing training. On the other hand, the number of health and safety violations has increased, showing that the story is often more complex than it first appears. 

Level 5: ROI

For learning and development professionals, ROI is the most critical metric. ROI is used to measure the connection between the quality of training and the business results produced, using the calculation above. 

ROI seeks to measure the results of the first four stages of the Phillips model, including: 

  • Training resource costs: such as technology used, the cost of in-person training, or the Learning Management System (LMS) used 
  • Implementation costs: such as engineers rolling out new training systems or the cost of scheduling instructors – in other words, the human resources cost 
  • Time allotted: meaning the time learners spent engaging in instructor-led training or eLearning modules 

Where does measuring training ROI matter most? Check out these posts:

>> 7 Strategies to Increase Course Sales

>> 15 KPIs to Measure Successful Learning

The Impact of Not Calculating and Reporting Training ROI

Of course, there are some significant costs associated with failing to calculate or report on your training ROI. For instance: 

  • Reporting errors: usually there are aspects of reporting that are never taken into account, which can cause errors in the “story” of your training ROI 
  • Pre- and post-training measurement: this provides evidence that your L&D program is essential and needed by organizations looking to grow 
  • Repeating the same mistakes: if you keep providing training with no real direction or reflection, L&D teams run the risk of repeating the same mistakes time and time again 

Not presenting your stakeholders with a comprehensive training ROI report that puts metrics into perspective can also make it challenging to: 

  • Prove the cause and effect of training on learners 
  • Measure the impact of new learning technologies, training methods, and content 
  • Establish authority as an efficient training provider 

There’s no denying that learning analytics and metrics are complex for even the smallest and simplest of organizations, and especially for large training programs. That’s why L&D must translate these metrics into a compelling, inspiring story for stakeholders to help them understand the data. 

Streamlining Measuring of Training ROI Reporting with a TMS

No matter what learning technology you use, you should always opt for platforms that provide you with comprehensive reporting on the metrics that matter to you. 

For instance, if you run a lot of Instructor-Led Training (ILT), Virtual Instructor-Led Training (vILT), or blended learning, you will need a Training Management System (TMS) for the most valuable insights into your live training, such as instructor utilization rates, budget tracking, and attendance rates. 

A TMS, like Training Orchestra, comes with several key reporting templates, and the ability to create deeply customized reports via drag-drop, that will help you prove the ROI and quality of your training delivery, no matter how that takes place. Training Orchestra automatically records all the data and costs related to your ILT and vILT, and generates reports at the touch of a button, ensuring you can provide valuable information to all stakeholder groups – with no manual effort. 

The more data you can collect, the easier it will be for you to prove the value of your training program. With the right reports in place, you can create a story that will capture the attention of stakeholders at all levels of your organization, ensuring you can secure their buy-in and any further budget you may need for future training projects. It’s a win-win! 

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For over 20 years, Training Orchestra has helped over 600 training companies, corporate L&D departments, and associations worldwide to address instructor-led training operations management challenges for their employee, customer, partner, or member training programs. We’ve crafted the perfect training management system to address the most critical needs of corporate L&D and training businesses.

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