Subscribe for Exclusive L&D Insights and Events!

    Lead in L&D: Subscribe for Exclusive L&D Insights and Events!

    You have successfully subscribed to newsletter

    Learning and Development

    How to Calculate the ROI of L&D

    pexels pixabay 210600
    nitzan michman
    March 8, 2023
    5 min read
    pexels pixabay 210600

    The rewards of a robust learning and development (L&D) program are many: increased productivity, engagement, and employee retention.

    The problem is, how do you quantify these benefits?

    C-suite executives will want numbers they can use in the decision-making process.

    However, measuring the ROI of an L&D program is a challenge for many organizations. In fact, a recent LPI study revealed that an overwhelming 90% of L&D leaders find it challenging to demonstrate ROI to the organization.

    In the past, organizations would measure ROI of L&D investments based on the number of employees partaking in learning programs or the number of trainings completed. Today, more than ever, we realize how measuring the ROI of L&D  is much more holistic, looking at a wider business impact. This has led many organizations to view learning and development initiatives as a ‘necessity’ rather than just a ‘nice to have’. The spotlight is now on L&D!

    Need to determine the ROI of your L&D investment? Below, we’ll show you how to calculate the ROI of your training program. But first, let’s get down to the basics.

    What Is L&D?

    Learning and development (L&D)  , is a crucial aspect of HR management that aims to help employees acquire new skills, knowledge, and expertise to enhance their professional growth while contributing to the success of the organization. As an HR/L&D professional, you understand the significance of investing in L&D programs to help employees realize their full potential and become more successful.

    However, measuring the return on investment (ROI) of L&D initiatives is equally essential to ensure that the organization’s resources are utilized effectively. In this article, we will explore how to calculate the ROI of L&D programs to help you assess their impact on the organization and make data-driven decisions that align with the company’s goals and objectives. By understanding the basics of L&D and its ROI calculation, you can make informed decisions that enhance your organization’s success and create a more skilled, knowledgeable, and engaged workforce.

    pexels ketut subiyanto 4132406

    What Is L&D ROI

    You’re probably familiar with ROI, but just in case it slipped out, ROI stands for return on investment and is a metric used to evaluate the profitability of an investment.

    For example, if you invest 1$ in something and get $2 in return, your return on investment (ROI) would be 2:1 or 200%. Hence, L&D ROI is simply the return you get from your investment in learning programs for your employees.

    How to Calculate the ROI of L&D

    There are many ways and metrics that can be used to calculate the ROI of L&D. But to keep things simple, we’ll use the learning ROI formula.

    The learning ROI formula takes into account:

    • The cost of training
    • Time spent, and
    • The resulting benefits

    To calculate the ROI of L&D, use the following formula.

    Learning ROI = (Gain from learning – Cost of learning) / cost of learning x 100


    ROI = (Benefits – Costs) / Costs

    To deploy this formula, you’ll need to first determine the benefits and costs of the investment. The benefits can be in terms of increased sales, reduced training costs, and increased productivity. The costs could include the cost of the e-learning system and additional costs such as hiring an external trainer, support services, etc.

    Design your people’s success with us

    Get started

    Here’s a practical example of how to calculate L&D ROI using the above formula.

    Company X invested $25,000 in an e-learning program to train its sales reps in a bid to improve their performance in capturing and nurturing leads. An additional $5,000 was incurred in implementing the system and setting it up. The e-learning program improved employee productivity by an estimated $100,000 and reduced training costs by $50,000 a year. Calculate the ROI of L&D for Company X.

    Benefits: Increased productivity + Reduced training costs

                   = 100,000 + 50,000

                   = $150,000

    Costs: System cost + implementation costs

                   = 25,000 + 5,000

                   = $30,000

    L&D ROI = (Gain from learning – Cost of learning) / Cost of learning x 100

                     = ($150,000 – $30,000) ÷ $30,000

                     = 400%

    In this example, the ROI of the L&D program is 400%, meaning that for every dollar invested in the program, $4 is generated in benefits.

    Keep in mind that this is a simplified example.

    In the real world, many factors can come into play and impact the learning ROI, such as employee engagement and retention, participation level, and more.

    While the learning ROI will give you insights into whether the program is working for your organization, it’s not a definitive measure of performance and, thus, should not be used alone.

    For the best results, it should be analyzed alongside other metrics and parameters, such as employee satisfaction level, learning impact, and measurable improvements in terms of efficiency, turnover figures, and customer satisfaction scores.

    The End Note

    If you’ve never calculated L&D ROI before, here are a few things to keep in mind. The calculation is based on how much it costs to acquire and implement the system and how much money you can expect to generate (or save) from the program.

    In addition to the ROI figures, it’s crucial to consider other parameters, such as engagement level, retention, and employee satisfaction level. These can easily be achieved with a quick employee training survey.

    Wanna learn more about how to calculate the ROI of employee onboarding in particular? check out this article to learn more!

    How to calculate the ROI of employee onboarding

    Privacy Preference Center