Why the gains from a learning management system outweigh its costs
...and how you can prove that with a
We have no money. Who is meant to take care of it? And what’s the point anyway? These are some of the most common arguments and concerns brought forward when the topic of learning management systems (LMS) comes up. However, many decision-makers miss that the payback period for such an investment is incredibly short – provided the system is implemented and utilised in a consistent and meaningful way.
It’s easy to show that this is not just an empty marketing claim when basing calculations on a business case. You run through a scenario, examining strategic, economic and managerial, as well as process-based aspects. We spoke to Sales Manager Svenja Kreten who has created business cases many times over.
She is convinced: “For most clients, a learning management system pays for itself within a year. I can demonstrate that using figures validated together with the companies in question.”
In our FAQ, we summarised in easy terms how she obtains those figures, what a meaningful business case calculation should look like and what factors to include.
What is a business case?
A business case is useful for evaluating the investment in an LMS. It helps to illustrate costs, benefits, risks and time investment better. It makes the company’s payback period for the LMS transparent and clear.
Arguments like “too expensive, not worth it” can easily be proven wrong with facts and figures: Functional benefits such as time savings, learning success, administration costs and realisation of revenue potentials can be broken down accurately.
Why develop a business case?
A business case examines the feasibility of an investment. A calculation is performed on the project, providing the relevant indicators. In principle, a business case can be used for a vast range of circumstances. It’s always useful when looking at long-term or cost-intensive acquisitions. That definitely makes it a worthwhile exercise for the introduction of a learning management system.
The exact figures of the company’s spending are clearly defined - for example expenditures for the employees’ professional development. Specific expenditures are examined, like those incurred through manual administration of employee training courses. This includes both labour costs (human resources) and material costs (copies, name badges, etc.). The analysis also extends to parameters that directly or indirectly impact revenue growth.
What is measured in an LMS business case?
The focus is on the cost savings the learning platform offers compared to traditional employee training measures. Costs and revenue potentials are both equally examined.
First, all expenses related to training and professional development are listed. Step two involves the evaluation of factors affecting revenues. Based on these cases, secondary calculations can also be used for specific departments of the company. Topics like new employee onboarding can be analysed separately.
How does the calculation work?
The calculation on an LMS business case looks at the entire training and professional development process. Along this process, the parameters that can be influenced by the LMS are filtered out.
This includes some trivial aspects, like travel cost savings achieved by moving training courses from a face-to-face format to a virtual one. More complex parameters might include a reduction in the production error rate through more efficient training, or revenue increases through a shorter time-to-market cycle. These parameters are then quantified.
Example of an LMS business case
Let’s look at an example to illustrate this: On average, a company trains its 1000 employees for 2 hours per year. For 15% of the employees, this training is a repetition that delivers no new insights. For 10% of the employees, the training is irrelevant, as the learned material is not needed for their work.
Thus, a total of 250 employees was kept from work unnecessarily for 2 hours each. In other words, the company lost 500 hours of labour. Whether or not the affected employees would have been working productively in that time is irrelevant.
The fact remains that they attended a training course that cost money but brought no benefits. In the worst-case scenario, they may even be demotivated and more stressed after this training exercise, as they need to catch up on lost time.
A well-maintained and carefully managed LMS can avoid such unnecessary training, as comprehensive competence management is employed to automatically match each employee with the most suitable training courses. Of course, this requires system data to be checked regularly and in full, and analysed by specialists.
Or as Svenja Kreten puts it: “The figures we present with the business case are real-life figures. We have our assumptions for every single calculation verified by the companies or specialist departments in question.
An LMS only becomes expensive if it’s not used properly after implementation. Yet, when a company manages to achieve a long-term reduction in even just some of the highlighted unnecessary costs – like duplicate training courses – the system pays for itself very quickly.”
Would you like to learn more about how to choose an LMS? Then check this free whitepaper about finding the right LMS.
If you would like to get in touch with us in person, please feel free to use this contact formular.
How to: LMS migration
When a new learning management system (LMS) is needed, sound advice is hard to come by. We have collected tips from industry experts, and summarised the key questions and answers in our FAQ checklist.
Onboarding slightly different
Already today, onboarding can be integrated into an existing LMS. But this is hardly ever used.
We took a little trip into the (near) future to see what a successful onboarding process could look like.
More information about the LMS
If you would like to find our more about the Learning Management System of imc, please find all information here.
I have been working in the Marketing & Communication Team at imc since March 2019.
Communication, creative content and social media are my passion. "KISS - Keep it short and simple" is my credo.
To explain complex content in an understandable way and thus make the topic of e-Learning accessible to everyone is an exciting challenge every day.
Privately I love to read, play poker and travel a lot.
I am always happy to receive feedback or suggestions.