Virtual training

How to Maximize the ROI on Your LMS Investment

The CloudShare Team

Jun 06, 2024 - 4 min read

The learning management system (LMS) is the cornerstone of any corporate training initiative.

That’s why it’s crucial that you choose the right LMS and use it effectively.

But doing this requires calculating and optimizing the return on investment (ROI) of your LMS, so you can quantify the positive impact of your LMS on your business while also demonstrating that impact to leadership.

Let’s talk about how you can achieve that — starting with a thorough understanding of key LMS metrics you need to know.

Key Metrics to Measure LMS ROI

Calculating the return on an LMS tends to be somewhat more complex than with other investments. This is primarily because the benefits of an LMS solution may not be immediately evident or financially quantifiable. Learning management systems also tend to come with a complex web of direct and indirect costs.

Before we get into metrics, we need to untangle that web.

• Direct LMS Costs are recurring expenses such as software licenses, infrastructure investments, and the acquisition of training materials. These are the easiest to quantify, as you need only examine your invoices.
• Indirect LMS Costs are a bit more challenging to understand. They include how much time your employees spend on training, support, and system maintenance, as well as any resources dedicated to those areas.
• LMS Returns may include improved governance and compliance, increased operational efficiency, greater user satisfaction, more effective professional development programs, better retention, reduced training and onboarding time, and streamlined administration.

Now that we know what we’re measuring, let’s talk about how we can measure it. Here’s where it gets a bit complicated. There isn’t any singular metric to effectively calculate your LMS ROI.

Instead, depending on your business’s training objectives and strategy, you’ll need to pull data from a wide range of different sources, including:

• Training metrics such as course completion times, course completion rate, time to first value, and login frequency.
• Customer engagement metrics like churn, retention, and customer satisfaction score.
• Metrics that measure productivity and operational efficiency, such as average time per task, employee utilization, planned-to-done ratio, and self-measured productivity. These metrics are particularly relevant where your instructors are concerned — can you tangibly demonstrate that they are spending less time planning and more time delivering with your LMS?
• Employee turnover and other measures of employee satisfaction.
• Changes in helpdesk call/support ticket frequency since LMS implementation.
• Financial metrics, such as cost per learner, revenue per employee, and changes in profit margins.

Steps to Calculate LMS ROI:

1. Identify costs:
   
   • Direct costs: Sum up all invoices for software licenses, infrastructure investments, and training material acquisitions.
   • Indirect costs: Estimate the time employees spend on training, support, and maintenance. Calculate the cost of these activities based on employee salaries and resource allocation.
2. Identify returns:
   
   • Quantifiable benefits: Look at metrics like reduced training time, increased productivity, and reduced turnover rates. Assign a monetary value to these improvements (e.g., how much money is saved by reducing onboarding time).
   • Intangible benefits: Consider improvements in compliance, user satisfaction, and overall operational efficiency. While harder to quantify, these can be estimated through surveys and performance indicators.
3. Calculate ROI:
   
   • Use the following formula:
     
   • Example calculation: If your LMS implementation costs $50,000 annually (direct and indirect costs combined) and the benefits realized amount to $75,000 in value (reduced training time, increased productivity, etc.), your ROI would be:
     

Best Practices for Increasing LMS ROI

Deploying a learning management system is only the first step. Even the best-reviewed solution is only as good as the people using it, after all.

Here are a few best practices to keep in mind when looking to boost the ROI of your LMS:

• Quality of training: You need to make sure that your organization has a solid training strategy in place supported by high-quality, personalized materials.
• Integrations: You’ll also want to integrate your LMS with other business software like your customer relationship management platform, particularly if you want to use the platform to support customer onboarding or education. 
• Leverage your data: Pay attention to the data. The right learning management platform will provide you with a ton of information on your training and how people are engaging with it. Use those insights to identify possible bottlenecks on a continuous basis — and never stop seeking new opportunities to improve. 
• Continuous monitoring and improvement: This isn’t an investment you can pursue and then forget about. A learning management system, like a training program, is an ongoing commitment. Be ready to put in the necessary time and effort to make the most of that commitment.

Finding the Right Software to Manage Your Training

Your learning management system is the bedrock of your training, so it needs to also maximize your success while collecting tangible data that quickly demonstrates the ROI it provides. Are you looking to get the most out of your LMS? Learn the ABCs of achieving success with your LMS.