How Aligning L&D To Business Objectives Is Key To Delivering Strong ROI

Calculating L&D ROI the right way

You never get a second chance to make a first impression. That famous Will Rogers quote rings true not only for people, but the companies they represent. Frontline workers – the 80% of employees, who handle everything from answering customer service calls to taking orders at a fast food restaurant – are the face of companies, and set the tone for how customers perceive the brand. 

And that first interaction is a crucial one. Sales pro Josh Belfort, who was immortalized in The Wolf of Wall Street, cautions that employees have just four seconds to make a good impression. If they don't succeed, it will take eight positive impressions to override that first negative one. Suffice it to say, a negative first impression can cost a company significantly, not only in reputation, but it can have a lasting impact on sales and profitability long into the future.

Setting a Strong Foundation with L&D

Learning and development (L&D) has been considered foundational to the success of many companies, particularly for management and white-collar workers with a focus on skills and competencies, leadership development and other corporate learning programs. 

However, according to a 2018 Deskless Workers Study only 1% of all IT software spending supports deskless workers. Particularly now, as they have been hit hard by the pandemic, companies are taking a closer look at expenses, spending on tech and SaaS tools, as well as headcount and budget. 

Digital transformation has been underway for the last 30 years, but often, companies overlook investing in the digital transformation of their people's experience, training and knowledge.  At the same time, IT teams continue to look for ways to cut costs and consolidate systems, and the C-Suite puts pressure on showing the value and continuous improvement related to L&D activities. 

However, it can be very shortsighted to cut back on operational training and knowledge for frontline workers and not leverage modern learning platforms to understand better what is working and where employees need additional help to improve their own performance as well as that of the company. 

Gallup Q12 research proves how learning, training and knowledge play an important role in facilitating an exceptional employee experience and tying L&D to the overall business performance. The research revealed that companies in the top quartile of employee engagement outperform companies in the bottom quartile significantly, including:
 

• 10% better customer satisfaction
• 14% increase in productivity
• 23% improvement in profitability 
• 66% better employee wellbeing

These impressive results are achieved only when business objectives are aligned with learning outcomes before an L&D program is established. It also requires modern learning solutions that enable learning managers and company executives to track performance and analyze key data so that the C-suite understands how L&D activities deliver ROI and positively impact the business overall.

How to Calculate L&D ROI

Traditional L&D tools offer no real quantitative way to measure their impact. As a result, many companies may not know where to start measuring ROI as they transition to modern L&D solutions. 

When considering the business case for L&D, especially for frontline workers, there are four key areas of ROI to consider:

1. Employee training savings - Explore how to drive greater efficiency in new employee onboarding, ramping and training, as well as in ongoing training for existing employees. The greatest impact on ROI comes with onboarding and ramping up new employees, since making them proficient, productive and successful in their jobs faster, reduces turnover and improves employee satisfaction. 

2. Headquarter training development costs - Consider how much time and money the learning team spends to create, edit, update and distribute training and knowledge content. With modern, digital learning tools, companies can reduce time and cost by as much as 60%, just by eliminating printing and shipping costs for paper binders, operational manuals, and other training material. 

3. Operational Cost Savings - Easier access to training and knowledge material, including refreshers in the course of work, will reduce errors, making the job easier for employees and improving efficiency. Additionally, digital learning tools provide a single source of truth, giving all employees easy access to the most up-to-date information. This speeds the time required to find and consume training content, and allows employees to serve customers faster, with more accurate information. The addition of "find, learn, and do" models for repetitive tasks, like routine equipment maintenance, store surveys, and cleaning procedures, also contribute to operational efficiency. 

4. Revenue Growth - Better training and knowledge among frontline workers can have a lasting impact on customer satisfaction, repeat business, net promoter scores, and other key measures. Additionally, more effective sales training and enablement can directly improve revenue through increased sales.

Achieving Real ROI Results

When looking at these four areas, there is a lot of upside for L&D to deliver ROI results. Consider the example of a company that invests $1 million a year on a modern, digital L&D solution. Obviously with that type of investment, companies would expect to see strong savings on employee and headquarter training expenditures. But the real impact actually comes from operational cost savings and revenue upside by bringing learning to the employees while they are on the job. 

In this scenario, the combined savings and revenue increases result in a payback on the initial investment in less than six months once the L&D solution is fully in use. More impressive is that over three years, the company could achieve more than a 6x ROI.

But these types of results are much more than just theoretical. There are real companies achieving real returns on their L&D initiatives:
 

• $30 million in labor savings, resulting in a reduction in turnover, by an international fast food company
• $2 million saved in L&D material printing and shipping costs by another fast food company
• 117% increase in calls resulting in sales from  cross-selling or upselling by a national communications company
• 70% increase in initial new product sales compared to previous launches, by a medical device manufacturer. 
• 50% reduction in initial turnover at a  fast food chain
• 38% improvement in controllable out-of-stock products by a retailer 
• 32% increase in savings and reactivation rates by a national media firm

Businesses today cannot afford to scale back L&D activities as a way to cut expenses and control costs in a tight economy. In fact, the opposite is true. By investing in modern, digital L&D tools, aligning training and knowledge initiatives to business goals, and leveraging analytics to determine what's working and what's not, companies of all types and sizes can get a fast ROI on training investments, while also strengthening operations and setting the stage for further revenue growth.

Chris Tratar is Vice President of Marketing at Inkling. Visit Inkling Connect Chris Tratar