Speaker 1: Learning and development is an area that most organizations are investing in. According to LinkedIn Learning Workplace Report from 2022, 48% of companies plan to increase their spending on employee training this year. But how do you know your efforts are paying off? When it comes to learning initiatives, calculating the return on investment can be a useful way to determine how well an initiative is working, and whether or not you should continue investing in that particular project or program. It's also helpful when trying to justify funding requests at higher levels within your organization. Hello and welcome to the L&D Academy's channel. My name is Irina, and today we are talking about calculating the ROI of learning in monetary and non-monetary terms. Well, you're probably familiar with ROI, but just in case you aren't, here's a quick refresher. ROI stands for return on investment, and it's a way of measuring the benefits that result from an investment. In other words, if you invest $1 in something, like training, and then get back $2 in the form of greater productivity or sales, your ROI would be 2 to 1, or 200%. Of course, calculating ROI isn't just about dollars and cents. It's also about time saved or increased productivity. So, if you have 10 employees who are spending 1 hour per day learning new skills through online courses and coaching, and after 1 month, those same 10 employees are spending an hour less each week on administrative work because they learned how to streamline their processes, then you can calculate your return on investment by multiplying 10 hours by 7 days a week, which is 70 hours per week, multiplied by 52 weeks per year. That's 3,640 hours saved in a year. 4. You can calculate the learning ROI by using a formula that takes into account the cost of the training and the resulting benefits. The formula is gain from learning minus cost of learning divided by cost of learning and multiplied by 100. In this case, gain from learning refers to how much employees' skills improved after they went through your company's training program or other learning initiatives. You can measure this by conducting an employee survey before and after you offer the training course or the other learning intervention. Cost of learning refers to what it costs you to develop those courses in terms of time and resources. For example, if you paid an outside consultant $150 per hour for 4 hours to create a new course for your team members on managing customer relationships during their sales cold, then your total investment would be $600. That's 4 hours multiplied by 150 per hour. 5. Tangible metrics are easy to measure and track, which makes them an appealing option for L&D professionals. Some common tangible metrics, both in terms of costs and benefits, include things like cost associated with learning needs assessment, design, development, implementation, and learning evaluation, cost for required facilities, travel, and accommodation of learners and trainers, or facilitators and coaches, number of learners per month, quarter, or per year, the financial savings from streamlined processes, time saved using a new system or application, staff and learners' salaries, learners' performance scores, new employee processing time, in other words, how much time does it take to onboard a new hire, number of incident reports or customer complaints, number of closed sales or signed contracts, number of responded customer queries, participation rates in the various learning programs, and retention and attrition rates. If you're looking for more concrete results from your training program, tangible metrics may be the way to go. However, it's important to remember that they aren't always indicative of success. In some cases, such as when it comes to employee engagement, intangible data can trump tangible information. Intangible metrics are the most difficult to measure, but they're also the most important ones. And they include things like the extent to which your learners feel that the training has helped them improve their performance in the work environment, and how much it has helped, how much more confident learners feel about their ability to perform their job tasks as a result of training, how satisfied learners are with their jobs, the extent of employees' commitment to the organization, their department, team, or their manager, how teamwork, customer service, and conflict resolutions have improved, and the extent to which learners actually use the skills they learned in the training on the job. The ability of your training program to impact performance on the job is the most important metric. It's important because it shows that your organization is getting value from its training investment, and because it can be used as a measure of whether or not you have met your goals for learner satisfaction and performance improvement. One of the biggest challenges in calculating the ROI is isolating the effects of learning. If you speak fluent Spanish, is it because of your teacher, the group that helps you practice, the curriculum, or was it because you lived in Spain for the past six months? One of the best ways to tackle this challenge is to determine in advance what output, in terms of performance, time, or productivity, is expected to be directly related to the learning initiative. Practically, this can be measured by setting up control groups. One group goes through the training, and the other doesn't. Then, the changes in their performance are measured, and this becomes the tangible return on investment. When it comes to training and development, calculating the return on investment can be a useful way to determine how well an initiative is working. After all, while you may have the best intentions when investing in training programs, you want to know whether they're actually working. And this is where ROI comes in. If you're not convinced yet, here's what else calculating the ROI can do for you. It can help you understand the value of your training investment, It can help you understand the value of your training programs, It can also increase your ability to justify training investments, give you a better understanding of what training programs are worth and how much they should cost, and it helps you justify your training budget when it comes time to make decisions about whether or not to invest in any new programs. If you've never calculated training ROI before, here are a few things to keep in mind. The first thing to remember is that the calculation is based on how much does it cost to implement a learning program and how much money you can expect to save by doing so. If your company is already invested in learning programs, then you should be able to find hard numbers for these two factors. You might also want to consider whether there are any intangible benefits of training programs that aren't reflected in this formula, such as increased employee morale or improved productivity. If you're not sure how to calculate learning ROI, don't worry. It's a simple process that just requires some time and effort on your part. But you also want to make sure that you have the right tools for the job, like our free ROI calculator template, which you can find and download from the links in the description. Then find out what metrics matter most for your organization by asking yourself questions like what do we want employees to learn? How will we measure whether they've learned it? And finally, what does good performance look like? And this is it for today's video. If you enjoyed it, please consider liking and subscribing for more content like this. And let us know in the comments below what other L&D topics you would like to learn more about. And check out some of our other videos on the channel. Thanks for watching and good luck calculating your learning ROI.