Measuring learning and development ROI – An accountant's perspective

by 20 Sep 2012

How many times have you wrestled with how to justify to yourself and the accountants of the world your L&D spend or even why individual programs have merit and justify the investment in them? Adrian Smith outlines a method of calculating ROI on L&D programs.

How many times have you wrestled with how to justify to yourself and the accountants of the world your L&D spend or even why individual programs have merit and justify the investment in them? If you are like us, the answer is probably a lot!

Well, we thought it was time to work with the enemy and sat down with our CFO to nut out how best to establish a method of calculating L&D ROI that could assist a client in managing their considerable L&D spend for a leadership program.

The result looks like this:


Base Data


  • Attendees


  • Average Salary


  • Annual turnover of this cohort


Program Costs


  • Development Costs


  • Delivery and Facilitation Costs


  • Administration Costs


Total Costs/Investment


Program Benefits


  • Employment costs - Savings from increased retention


  • Behaviour change/Improved performance in the role


Total Program Benefits


Return on Investment

B/A   (as a %)


This model was specifically developed to apply to a formal training program, but equally with some minor changes can apply to any other learning intervention, including blended learning, special projects and coaching, and formal external academic education!  Also, with some variations to input data the model can be used when considering new programs, and when measuring and monitoring existing programs.

It looks quite simple, which for an accountant and a spreadsheet is a novelty, but lets look at the components.

Base data

This information needs to be collected prior to the commencement of the program as it is the baseline data from which changes and improvements are measured.  It is quite straight forward and should be immediately available from any reasonable human resources system.  If not, then careful estimates should suffice.

Program costs

Again these are quite straight forward, particularly development and program delivery costs, however in most instances administrative support seems to get forgotten, so it may require some work by the accountants to calculate these.

Program benefits

It’s no surprise that this area is harder to define and measure than program costs, however our CFO is comfortable that benefits should accrue in two distinct areas – employment costs, and some type of bottom line impact.

We are of the opinion that whilst there are a number of employee benefits including improved attraction strategies and Employer of Choice opportunities, improved performance management and training efficiencies, the main measurable benefit in employment costs are generated from greater employee engagement and therefore retention.  This can be measured in the longer term through statistical data from staff attending these types of programs.  However when looking at specific programs in the short term then using employee opinion surveys and asking specific questions about intention to stay will provide useful insights and the data to inform these calculations.

In relation to behaviour change/improved performance in the role, the opportunity exists to track this by measurable performance changes against relevant KPI’s.  Similarly to hard statistics on retention data, it may take some time for these benefits to work through into hard results, but if behaviour changes are measured through some survey mechanisms (360° survey, managers report, etc.) it is possible to very quickly identify quantifiable benefits as the average behaviour change measured should drive equivalent value gains from each persons salary. 

Now lets plug in some hypothetical data (which broadly reflects work we have been doing with our client).



Base Data



  • Attendees


3 day program with 20 attendees per program.

  • Average Salary


Including On Costs.

  • Annual turnover


Based on last 12 months (estimated) data.

Program Costs



  • Development Costs



  • Delivery, Facilities and Facilitation Costs



  • Administration Costs



Total Costs/Investment



Program Benefits



  • Employment Costs - Savings from increased retention


Based on 20% reduction in annual turnover and replacement costs of 30% on annual salary.

  • Behaviour change/Improved performance in the role


1.2% - Based on the anticipated average behaviour change measured from post program surveys which drives equivalent value gains from a persons overall salary.

Total Program Benefits



Return on Investment




Whilst this is a reasonably significant program which means that development costs are amortised over a large cohort of participants, the impact of the program is to show a very positive ROI that easily meets the investment criteria of most organisations, particularly as the return takes place in months rather than years.  Also, the ROI would be even higher if subsequent years’ productivity improvements were also accounted for in the calculation.

How do I apply this to a planning document?

The obvious easiest way of running these calculations is to allow time for longer term benefits to accrue and be measured through actual retention rates, and KPI improvements. In the more immediate period after the program, say 2-3 months we are confident that well constructed and targeted surveys will also give great insights into the measurable benefits of the program – the ROI.  

It is not appropriate to seek significant learning and development funds without this type of calculation and validation, however it is not so easy to do any ROI calculations before the event as they require a number of informed assumptions.

When looking at the employee costs calculation when considering new programs it would not be unreasonable to anticipate even a modest 20% reduction in annual turnover. This can then be applied to the number of people in the cohort, historical turnover rates, and a calculated (by the accountants again) cost of replacement based on annual salary. If this cost of replacement is not available or easily attained then general research data may be required. This often comes in at about 30% of annual salary costs, and for senior staff such as in the example above the figure could be much higher than this!

When estimating productivity improvements it is best if possible to refer to similar programs run within the organisation or if this is not available then again general research data may have to be used. It is worth noting however that as shown in the example above a small improvement in productivity or outputs does go a long way towards generating a very positive learning and development ROI that should satisfy even the toughest accountants!

A word of warning!

The calculations in the model are really very simple. The very basis of the model and therefore it’s accuracy, usability and credibility is the inputs to the benefits section!  It will be critical to work with key stakeholders, including education providers, organisational leaders and finance staff to ensure that actual data is used wherever possible. 

On those occasions when market data or estimates are used that these must be carefully worked through so as to be totally transparent and agreed by all stakeholders. In reality the first few times the model is run you may well have to rely on estimates and general market research, however as you build up an internal database of results achieved the accuracy and reliability of input figures will grow exponentially - satisfying even the most hard nosed accountants!


About the author 

Adrian Smith is a principal of Talent Mondial Australia (and an accountant) and can be contacted at



  • by Greg 20/09/2012 1:39:09 PM

    This approach seems well-intentioned but seems naive, given the apparent experience behiond it. It makes the flawed assumption that there is a direct link between skills and knowledge and behaviour change in the workplace. Behavioural change in the workplace results from the interplay of many factors, of which skills and/or knowledge is only one.

    Investing in learning and development without addressing the other factors influencing workplace performance is a waste of money.

    Monetising the value of behavioural change is also extremely difficult to do for many roles, particularly where teamwork or other forms of interdependence deliver value (and that's just the beginning - try defining the public value delivered by a government agency and the contribution of an individual)

  • by Adrian Smith 27/09/2012 2:42:19 PM

    Hi Greg

    Thanks for taking the time to read the article and post your comments.

    In relation to your comments about improved skills and knowledge and behaviour change, much independent research has been done which confirms a specific and direct link between improved skills and knowledge and behaviour change in the workplace.

    We acknowledge your point that other factors such as you mention can also influence the application of new skills in the workplace, and the futility of not also addressing these factors. We would argue that an effective training needs analysis will allow for these issues to be identified and managed so as to allow every opportunity for new skills to be displayed in changed workplace behaviours.

    Ultimately the impact of all of these factors will all be reflected in the ROI calculation as no behaviour change means no productivity improvements means a wasted investment. This type of no return scenario also raises a whole a series of questions to assist the L&D professional ensuring they do deliver high impact programs in the future, for example – Was there a fault with the training program? Where the skills transferred effectively? What personal or organisational impediments prevented the behaviour change? The answers to these questions are invaluable pieces of data which give insights and therefore strategies to creating a genuine learning environment in the organisation.

    We acknowledge your point about the difficulty of monetising the value of behavioural change for many roles, however please keep in mind we have written this article for a business audience, where the CFO or their delegate is a key stakeholder in any large business expenditure decisions such as L&D spend. The issue of measuring learning in a business environment has been a vexed one for a long time and many people have tried to get a handle on it, particularly since Donald Kirkpatrick first published his 4 levels model in 1959. We think that the ROI model, as challenging as it is sometimes to quantify benefits, is an important tool to help the L&D professional communicate with and influence key stakeholders.