What is the ROI on learning?
At a time when learning and development budgets remain relatively flat and spending has come under increased scrutiny, this question feels more urgent than ever.
It’s one of the reasons the L&D team at MJH Life Sciences, a healthcare publishing company based in Cranbury, New Jersey, looked more closely at their numbers. A LinkedIn Learning customer since 2022, MJH wanted to know if their investment was paying off.
Before LinkedIn Learning, MJH offered its employees instructor-led courses that had capacity limits and defined time frames, as well as a limited number of skills that they covered. But after investing in LinkedIn Learning products, employees could access courses on their own time, learning about what interested them most or would have the greatest impact on their careers.
The ROI? When Samantha Stazko, a training manager for MJH, and her team crunched the numbers, they found that employees’ learning hours increased 33% from 2022 to 2023 — and that people who were active on the platform were three times as likely to move into a new role within the company or be promoted. “We’ve already seen value in our learning investment,” Samantha says.
Like many companies, MJH is just beginning to examine the return on their investment and would like to know more.
L&D leaders know learning is valuable. But how can they prove it?
Because LinkedIn wanted to better understand the ROI it was delivering with its learning platform and products, we commissioned IDC, a global market intelligence firm, to look at this very question. The goal: to provide numbers that L&D leaders could take back to the business, demonstrating how much learning is worth.
IDC kicked off its study* by interviewing 10 Linkedin Learning customers. The customers ranged from smaller businesses to enterprise-level businesses and averaged 2,639 employees and annual revenues of $480.6 million. They were located across the globe — in North America, Latin America, Asia/Pacific, and Europe, the Middle East, and Africa (EMEA). IDC asked customers detailed questions about what their company was like before they purchased LinkedIn Learning and what they were like after.
Not every company has the resources or the desire to hire a third-party evaluator. But a look at some of the IDC study’s methodology may help L&D pros in their effort to establish an ROI for their own learning platform and programs. Let’s look at a few ideas:
1. Find the business metrics that mean something to leaders
If you’re trying to prove the worth of learning, you first need numbers that mean something to business leaders. Those could range from higher net revenue to increased employee productivity.
To find the business metrics that count, first identify pain points within your company. After that, quantify the baseline performance for the functions or teams that are most affected. Let’s say, for example, that your company has a struggling sales team. They may be rock stars at generating leads. But closing deals? Not so much.
You might find out what their current lead-to-sale conversion rate is and then suggest a course or training program on closing sales. After all of your team members have completed it, follow up three to six months later and ask whether their conversion rate has improved. If there’s been a dramatic jump, share those numbers with company leaders.
A chief people officer at a financial services company in the Asia/Pacific region who was interviewed for the IDC study found that courses on virtual selling helped their sales team significantly. “We’ve improved our core sales KPIs,” the executive said, “by over 30% since beginning to use LinkedIn Learning.”
IDC also found that companies that used Linkedin Learning improved their annual net revenue by an additional 1%. And from self-reported data, they also determined that companies using LinkedIn Learning saw an average increase in productivity of 3%. They took that number and calculated the number of extra hours of work that amounted to and then figured how many people an organization would have to hire — and at what cost — to account for those additional hours. Finally, they adjusted these findings with a 15% margin assumption. Those steps may suggest some tacks you might take to determine the value of productivity gains driven by your learning programs.
2. Figure out how much employees are using your platform and programs
When IDC interviewed LinkedIn Learning customers, one of the first things they asked was how many employees at each company actively used the platform. This is information every L&D pro needs so they can show the tangible value of their investment in learning. Start with usage data from your learning platform, and consider running a survey on a more specific skill. For example, you might ask employees which AI courses they have taken and how they applied those skills to their role.
After you’ve gathered your numbers, you may be able to go to leadership and say, “74% of our employees use the learning platform, and more than half have completed at least one course in how to use generative AI.” For leaders, many of whom are concerned about a looming global skills shortage, these numbers could be viewed as a big win. The more that workers increase their skills — particularly mission-critical ones — the better it is for organizations.
In the LinkedIn study, IDC found that 79% of employees were active on LinkedIn Learning — and that, on average, they took more than three courses per year.
3. Determine the cost savings
You should also look at the relative costs of different approaches to delivering your learning programs.
For example, if you recently purchased a comprehensive learning platform — rather than acquiring piecemeal learning from a variety of vendors — how much did you save by consolidating costs? If all your courses are online now, you should also determine your savings for participant travel and in-person instructor expenses.
The IDC study found that when customers consolidated their talent development programs to the LinkedIn Learning platform, it yielded an annual cost savings of 57% when compared with what it cost to invest in training from a variety of sources.
At the same time, employees also gained the skills and knowledge they needed for promotions and internal mobility, which helped companies avoid external hiring costs, to the tune of $190,000 per year. That was based on companies increasing their internal hiring by 1% (about 3.8 additional internal hires per year out of 398 hires total) after investing in LinkedIn Learning. Further, they assumed that the added costs in direct support and longer onboarding time for any external hires would be, on average, $50,100.
While the IDC study relied on self-reported data, there are also hard numbers that you may be able to find within your organization. For example, when MJH was trying to figure out their ROI, they compared the internal mobility and promotions of active and inactive platform users. You can do the same with attrition. Take a look at who is using the platform and how often. Then compare users vs. nonusers (or light users vs. very active users) and compare the attrition rates of the two groups.
4. Calculate the ROI and payback period
To calculate the true worth of learning, IDC — and other third-party evaluators — use what’s called the ROI ratio.
Here’s how it works: If you invest $10,000 in an L&D platform for one year and it generates $15,000 in revenue and cost savings, you have earned $5,000 on your investment. Divide that $5,000 by your initial investment ($10,000), and you arrive at .5. Then multiply that by 100 to arrive at the ROI ratio. In this case, you would have gotten a 50% return on your investment.
You can also figure out the payback period or break-even point — which is the amount of time it takes to earn back your investment. In the example above, it would take roughly eight months to earn back your initial investment.
Final thoughts: Determining an ROI isn’t easy but the payoff can be significant
When IDC ran its calculations for LinkedIn Learning, it found that over a three-year period, the platform delivered a 695% ROI (or nearly $8 for every dollar invested) and broke even in less than six months.
Your numbers may be similar in some areas and quite different in others. But armed with techniques and methodology similar to IDC’s, you can at least begin the journey of calculating your ROI.
For many companies, including MJH, this is just the beginning. “Right now, we’re not looking at the granular level, but more at the bigger picture level of ROI,” says Samantha from MJH. “We’ve been talking about: How do we measure productivity and how people are doing and whether they’re advancing or progressing? Those are things we hope to look at more closely and really get down into those details.”
*Source: IDC White Paper, sponsored by LinkedIn, The Business Value of LinkedIn Learning, #US51404323, January 2024
