Return on investment (ROI) is something that’s increasingly being placed under the microscope, and it often triggers heated debates amidst stakeholders and between companies themselves. 

In some instances, the ROI is as clear cut as ‘we spent x amount, and we made y amount directly off the back of it’. The times when it’s this simple, however, are next to none, so ROI calculations become far more complex and subjective. 

That’s the fundamental issue with calculating the return on investment for learning and development programmes: more often than not it’s based on someone’s subjective outlook. 

Winning over the C-suite

As managers are well aware, securing budget for an updated toolkit for professional L&D comes with the caveat that the CFO and wider board will be watching with eagle eyes and expecting a report on how this investment has benefited the wider organisation. 

Managers are far more likely to deliver a greater impact if they hit the board with numbers detailing the cost of doing nothing

While it is possible for individual businesses to formulate and establish their own ROI calculator and framework to base all investments against, there’s an alternative metric that’s perhaps slightly more impactful when it comes to translating numbers across the business: introducing the cost of inaction (COI).

Complementing ROI with COI 

The challenge of calculating the ROI of learning programmes is linking learner competence to business impact, such as increases in revenue and boosted staff productivity.

In order to do so, organisations need an effective way to measure, report and analyse performance. Even with these figures, managers are still then faced with the challenge of translating the results back to the board in a way that clearly demonstrates ROI. 

That’s once the investment has actually taken place; the initial challenge is getting the budget allocation in the first place. Ultimately, if the projected return on investment isn’t clear enough, the CFO won’t release the budget. 

Instead, managers are far more likely to deliver a greater impact if they hit the board with numbers detailing the cost of doing nothing. 

A compelling argument

Let’s compare the two approaches. 

As an example, from an upfront investment of £50,000, it is likely that board members and other key stakeholders would expect to see the project return a minimum of £75,000 after one year. Of course this is subjective and the expected percentage will differ from company to company and board to board, but it’s a simple calculation to make and prove. 

We need to move away from a one size fits all approach, and towards something more adaptive

Delivering the cost of inaction, however, would instead include reports on how the business is currently wasting the equivalent of £1,000 per individual in a year, totalling £50,000 that could be invested elsewhere. 

The latter is a far more convincing proposal as it hits home how much the business is currently wasting – rather focusing on what they’d be expected to invest with little context. Showcase the business savings before you lay out the required investment. 

What are the training inefficiencies are we calculating? 

The modern L&D conundrum is that the way we approach digital learning is fundamentally flawed. So many corporate training programmes are based on averages – to match the needs of the ‘average learner’. In reality, there’s no such thing. 

For years, digital learning has been founded on a linear learning model, which takes all users from A to B on a straight-line journey regardless of competency, starting point or experience. It’s not personalised, it’s not inclusive, it’s not effective. 

There is a real business cost to leaving ineffective training programmes where they are and continuing to funnel money into them

We all have our preferred approach to learning, which means we work at different speeds, digest content in different ways, and require varying levels of support at each stage. 

We need to move away from a one size fits all approach, and towards something more adaptive. 

Making your business case with COI

The value of calculating the cost of inaction is that the numbers being reported on are in real-time; all ROI calculations at this stage would be projections. 

There is a real business cost to leaving ineffective training programmes where they are and continuing to funnel money into them. Organisations are far better off enhancing or replacing them with an alternative that automatically adapts to meet the unique needs of each user.  

This isn’t to say however, that organisations should disregard ROI altogether. There is still an absolute need to comprehensively measure and assess the performance of the training programmes once an investment is made. Cost of inaction reports simply complement the metric, creating a 360-degree drive to optimise the delivery of training programmes from a cost and time perspective.  

So, instead of solely trying to calculate how much return you’ve gained from an investment, shock the board with hard hitting numbers that demonstrate the cost of doing nothing. I’ll bet the grip around the purse strings will loosen a great deal in response. 

If you enjoyed this, read: L&D’s time to shine: How to influence the c-suite and deliver business value.