It’s a numbers game: how to calculate return on investment for your LMS
4 minute read
No need to remember your GCSE maths lessons, as Ciphr’s LMS ROI calculator is the essential tool to demonstrate the potential value of this substantial investment – both in terms of costs and efficiency gains
So you’re ready to purchase a new learning management system for your organisation. However, your stakeholders have asked you a few questions before you sign the contract. What’s the real value of an LMS? What metrics can be used to assess these values? What are the costs of our current solution, and how can a new LMS reduce these (and mitigate any risks)?
Now you have a question for yourself: is there a tool that can help calculate return on investment for an LMS? The good news is that Ciphr has an LMS ROI calculator that contains all the information you need to get an estimated ROI percentage for stakeholders. This guide takes you through how to calculate return on investment using the tool, and what it can show you and your organisation.
How to calculate return on investment: understanding each metric
Measuring compliance risks and expenses
What compliance looks like will differ between industries – what applies in banking won’t be needed within healthcare, for example – but the reasons to comply will be the same. Not only does it improve customer trust, business revenue and your own internal processes, you’ll be better protected from legal action and financial penalties. And this is where your LMS comes in.
Using the ROI calculator to determine how an LMS reduces compliance-related risks and expenses
The specific rules and regulations with which you’ll need to follow can all be supported by your LMS, which can also highlight current processes that might expose you to the risk of non-compliance. Typical compliance areas include:
- Health and safety: the Advisory, Conciliation and Arbitration Service (ACAS) states that employers are responsible for the health, safety and wellbeing of their workforce, whether on-site or elsewhere. Your LMS can distribute and monitor the completion rates of relevant health and safety courses, plus store information from one-to-one meetings
- FCA and SMCR: the Senior Managers and Certification Regime includes all financial service businesses regulated by the Financial Conduct Authority. It aims to strengthen the integrity of the financial services market by improving the sense of personal responsibility among those in the sector. Firms can show who does what in their organisation, and how decisions have been made
- Information security: the General Data Protection Regulation (GDPR) moderates how a company collects, stores and processes all its data – including employee data
To help calculate your ROI, you’ll need to know what financial risks there are for non-compliance: your LMS helps you deliver impactful and effective training that reduces these possibilities in your organisation, therefore reducing the cost of non-compliance. For instance:
- The maximum fine in the UK for not following GDPR rules is £17.5 million or 4% of your company’s annual global turnover (whichever is greater)
- With bribery, businesses are at risk of an unlimited fine and must return any financial gain from the action. Other implications include serious crime prevention orders, and directors being disqualified from such positions for up to 15 years
- According to the UK government’s Cyber Security Breaches Survey 2022, for those companies that reported material outcomes – where money or data was lost with a cybersecurity breach – the average estimated cost per attack was £4,200, rising to £19,400 for medium and large enterprises only
Now, add your current monitoring process for each of these areas of compliance. The calculator will help identify the amount of risk you open yourself up to with non-compliance based on these processes, which can then be linked to the potential financial repercussions of these actions.
It’s here you need to consider the costs versus benefit of investing in an LMS. Take your sales team, for instance: if each employee spends four hours every week completing due diligence procedures manually, that’s 10% of time spent on tasks that aren’t selling. But if you automate processes with your LMS, they can spend more time on sales and increase revenue quicker. Your ROI calculations will show stakeholders that automated compliance programmes are the way to go.
Calculating financial and time costs for administration
The right LMS will enable your HR and L&D teams be more efficient with their time. If training can be delivered online, for example, then in-person sessions won’t be necessary, and your employees can complete courses at a time that’s most convenient for them. And, you’ll benefit from being able to access accurate training data and records more easily.
Using the ROI calculator to determine how an LMS reduces hours and budget allocated to administration
Areas where you can save time on administration may include:
- Manual setup and management of user profiles
- Assigning training content to your employees
- Generating email reminders and alerts, particularly for mandatory training
- Manual processing and approval of course booking requests
- Creating and sending booking confirmations and joining instructions
- Training course management, update and administration
- Processing monthly report packs
- Manual updates of training records (eg status, scores)
- Onboarding new employees (eg training)
Add this information into columns B to I in the LMS ROI calculator; the remaining columns contain formulas that will automatically calculate the costs and savings. Enter the average time spent on every task, including other admin you work on, plus the average hourly wage of the person conducting these duties. This will create the formula to estimate the hourly cost of a task.
These details are then compared with how long it would typically take to complete the same processes using Ciphr LMS. When you calculate the potential return on investment, your LMS should be efficient enough to reduce logistical costs and save time compared to your current manual processes – allowing your HR and L&D teams to increase their focus on high-level strategies.
If you need help understanding how Ciphr LMS can save you time, contact us and we’ll talk about the boost it will give your business.
Assessing operational costs: software and overheads
Different systems and solutions may be used by your organisation to support myriad tasks for employee training and communications, but an LMS will combine these functions into one platform. As well as annual subscription costs, you’ll need to add service charges, management fees and other figures here.
Using the ROI calculator to determine how an LMS can decrease your operational costs
Add your organisation’s ownership costs for systems and platforms used for training and communications into the LMS ROI calculator. This will include, but may not be limited to:
- Learning content subscription
- Survey platforms
- Learning content authoring platform
- Service costs
- Communication tools (including your company’s intranet site)
Include other related overheads here, too, such as:
- Training costs (eg bespoke content development)
- Fees for face-to-face/classroom-based learning (eg instructor, venue hire, accommodation for trainers/delegates, travel expenses)
- Other additional budget items
Next, add the cost of your new LMS. This figure will vary depending on the solution you select and which of your current functions it replaces – so while your new training platform could be more expensive that what you have now, you won’t be paying for the other systems it replaces.
Your ROI dashboard: calculating the impact of learning
This dashboard will give you a summary of the information you’ve added to calculate return on investment for your LMS, as well as your continuing ROI and the effect on your company’s training programmes. It also highlights your benchmarks for success, such as lower costs, better efficiency and fewer risks.
Using the ROI calculator to determine the impact of learning
This is the tenable part of the ROI calculation: the developments your C-suite executives will appreciate. The information here will show areas of success when aligned with your LMS data. They may include, depending on your industry:
- Sales success: new sales, renewals, average net promoter score (NPS)
- Staff retention: staff turnover costs and percentages, employee survey results
- Recruitment cost: average cost per vacancy vs number of vacancies
- Other metrics: eg inspection ratings, fines, and other charges relevant to your business context
You can boost these metrics by creating a culture of learning, which includes organisational values, practices and processes that encourage employees to continue learning and add skills – improving motivation and morale. Although this takes time and energy to create and maintain, the payoff your organisation will enjoy from cultivating one will be substantial.
The foundation of successful learning and development plans is modern, robust technology – such as your LMS. You can identify, build, and mobilise your talent and skills networks by understanding (and leveraging) the capabilities of your learning management system.
So what does this mean for ROI? Automation of processes thanks to your LMS means less time spent on tasks such as creating reports, enrolling users, and building learning paths. This allows HR and L&D teams to concentrate on other activities, without increasing costs or reducing headcount. Investing in quality training programmes also makes it easier for employees to succeed and for managers to get more from their people.
What do I do with the result?
Using our LMS ROI calculator will give you a broad perspective on the cost- and time-savings you could experience with Ciphr LMS – not as a definite answer, as your organisation will have various other expenses to consider, but a solid indication of what it could do for you. Download and use our LMS ROI calculator template now to see what difference it could make to your productivity and performance, and then book a demonstration to experience our platform for yourself.
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This article was first published on Digits.co.uk – a Ciphr Company.