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Learning Management System
LMS ROI: A Guide to the value of an LMS
Employee learning can drive your business to hit key goals and high performance across various KPIs.
Now the question is: how are you going to manage the delivery? A Learning Management System is a top choice, but it’s vital that you first evaluate the financial impact and understand the potential return on investment for your own organisation.
7 mins
Written by Mike Hadlow
Why is understanding LMS ROI important?
If you’re reading this, and researching LMS ROI, then you know that the days of relying on manual process, classroom training and paper-based assessments are getting further behind us – and for good reason. Manual admin is one of the biggest drains of time and resources for HR and L&D, and also makes departments far more prone to mistakes and blind spots.
Companies leave themselves in a vulnerable position if they can’t rely on automated processes and systemised approvals. With the right solution, you can create a valuable financial impact and a strong return on your investment.
If you’re considering investing in a learning management system for your business for the first time, or you are taking a lead in the implementation, it's crucial to consider the financial impact of such an investment.
By evaluating the potential LMS ROI you can make sure it aligns with your business goals and generates measurable outcomes. That way, you can be confident that you're making an informed decision that will benefit your organisation in the long run.
So, don't skip the financial evaluation! It's essential to assess the potential financial impact of a learning investment and this article will help you do just that.
Understanding LMS ROI
Learning management systems reduce training costs by an average of 25% to 40%
These cost savings associated directly with training are just one of the many metrics that organisations can use to measure the ROI of their investment.
Other important LMS KPIs include those related to increased productivity. By measuring these metrics, organisations can determine the true value of their investment and make further data-driven decisions to optimise their training programmes.
For example:
- Training plans can be tailored to specific roles and preferred styles of learning, streamlining inductions and development journeys and ensuring learning content is targeted.
- At the same time, managers can get real-time notifications on course completions, recurring issues and instances of non-compliance. This saves a lot of time and worry, and absorbs a large part of the cost associated with traditional forms of training.
Delivering more with less: areas of efficiency
How can an LMS make your learning processes quicker, more efficient, and more cost-effective?
A good solution can provide the following efficiencies.
- Reduce time-to-competency
Getting your staff up to speed is tough when various aspects of their training are spread far and wide. An LMS pulls them all into one easy to access, easy to use, and easy to manage system.
- Avoid risk of repeat training
Diagnostic assessments make it possible for L&D managers to get an understanding of what individuals and teams already know, so they can focus on developing the key skills they need to focus on instead of going over old ground and wasting time better used elsewhere.
- Remote inductions
Now that hybrid and remote work is becoming more commonplace, being able to complete entire or partial inductions from any location, on any device, saves a lot of time and hassle.
- Engaged learners
The best learning management systems allow your employees to learn anywhere, anytime - whenever suits them. Mobile apps and the right tools can help you engage your learners, whether at their desk or remotely.
LMS KPIs
To truly understand the value of the investment for your organisation, it's essential to track and measure key performance indicators (KPIs). In this section, we'll explore some example metrics that can be used to benchmark and measure the ROI of your LMS.
LMS KPIs – Induction
The induction of new employees is a crucial part of any organisation, but it can be a costly and time-consuming process.
However, by utilising a learning management system, businesses can streamline their induction process, reduce the time to productivity, and lower the costs associated with traditional in-person training methods.
These efficiencies can have a significant impact on the ROI of an LMS, making it a valuable investment for any organisation looking to onboard new staff in a more cost-effective manner.
- Average per-hour labour cost: This metric refers to the hourly pay rate for the average employee. It serves as a baseline for calculating the cost of the induction process in terms of time and resources.
- Average number of new starters per year: This metric measures how many new employees are expected to join the organisation in the coming year. It provides a basis for estimating the workload and costs associated with the induction process.
- Current time to productivity: This metric measures how many days it takes for new employees to become fully productive in their roles. It helps to identify areas where the induction process may be causing delays or inefficiencies.
- Onboarding efficiencies with effective learning: This metric calculates the potential time savings that could be achieved by using an LMS to automate and streamline the induction process. An learning management system can also help to improve the effectiveness of the induction process by providing a consistent and engaging learning experience for new employees.
LMS KPIs - External training
An online learning solution can reduce costs associated with external training by bringing training in-house and eliminating the need for outsourced training services.
To measure the ROI of an LMS investment in this area, organisations can track their outsourced training spend per year and set a target reduction percentage for bringing training in-house.
- Outsourced training spend per year: How much do you spend on external training services?
- Target reduction of outsourced spend: How much would you like to reduce your reliance on external training by bringing it in-house?
LMS KPIs – Training consumption efficiencies
In order to measure the ROI of an LMS by saving costs in the area of training consumption efficiencies, there are several metrics that can be used. These include the hours spent on mandatory training per year, as well as the time-saving achieved through diagnostic assessments.
By reducing the time spent on repetitive training and allowing employees to focus on developing new skills, an LMS can help to improve training consumption efficiencies and ultimately contribute to the bottom line.
- Hours spent on mandatory training per year: How much time do your staff spend on managed training, e.g. cyber awareness, health and safety, accreditations, compliance?
- Time saving via diagnostic assessments: how much time do you think could be saved and reinvested into other skills?
LMS KPIs – Training team efficiencies
An learning management system can also help organisations reduce costs in the area of the training team's efficiencies.
Implementation can help organisations track their training team's efficiencies using metrics such as hours per week administering training and target admin hours saving.
- Hours per week administering training: How long do you spend on manual processes and admin in a week?
- Target admin hours saving: By how much are you aiming to reduce your reliance on manual admin?
Calculating the potential ROI of an LMS for your organisation involves taking into account all of these factors and more. That’s why we’ve built an online LMS ROI calculator! Explore the potential ROI your business can achieve by implementing an LMS.
Why your choice of Learning Management System matters
It's important to note that not all Learning Management Systems are created equal. While each solution aims to provide an efficient and effective learning experience, some may fall short in certain areas, such as:
- user experience
- functionality
- flexibility
Investing in a subpar system can actually result in frustration for learners and administrators alike, leading to decreased engagement and productivity.
Moreover, a poorly designed LMS may not offer the necessary data and insights to track and measure the ROI of your training efforts accurately. It's crucial to choose a solution that aligns with your organisation's goals and requirements and can grow and adapt alongside your business needs. (Check out our simple article How to choose an LMS for more on this).
Your LMS and regulatory compliance
When evaluating the financial impact of an investment, it's important to consider how well it's equipped to support regulatory compliance. This may include features such as:
- automated compliance tracking and reporting
- customisable training content to meet specific regulatory requirements
- integration with other compliance management tools
By investing in an LMS that prioritises regulatory compliance, you can not only reduce the risk of costly compliance violations but also streamline your compliance management processes and improve overall organisational efficiency. (Take a look at our article on Learning Management Systems for Compliance)
Save time and money with eLearning through an LMS
Traditional learning programmes and training days tend to involve a range of specific costs which quickly add up to a significant amount when multiplied across your workforce:
- hiring professional coaches
- travel to external sites
- food and drink costs
- missed working hours
With eLearning courses accessed via an online solution, your business can reduce these costs by taking a more agile, tech-first approach that doesn’t require staff to travel or take full days off for external training.
This allows employee learning to sit neatly alongside normal work, rather than in opposition to it.
It’s also why many organisations are now investing in an LMS and eLearning as a way to cater to the needs of hybrid and remote workers, training from any location is a great way to optimise training processes and get staff up to speed much faster than before.
Such as being able to access eLearning for:
Beyond the clear cost and time savings, eLearning makes it far easier for staff to refresh specific areas of knowledge as and when needed. Different formats and styles of content such as virtual classrooms, video walkthroughs, bitesize courses are available to suit a wide range of learning needs.
An intuitive Managed Learning system, with an LMS and eLearning, that provides diagnostic assessments also ensures that employees don’t keep repeating the same training again and again – so they can instead focus on developing other, more valuable skills.”
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