Posted by Caveo Learning ● September 22, 2016

5 Steps for Creating a Learning Budget You Can Defend

learning_budget.jpgLearning leaders often dread budget season, and it’s not just because budget development can be tedious and time-consuming. In many learning & development organizations, years of funding shortfalls and allocation denials are reason for pessimism and frustration even before the L&D budget is actually submitted.

Developing a learning budget is a skill that takes careful planning, and if you’re not prepared to justify and defend your funding requests, there’s a good chance your L&D organization won’t get the spending authority it needs to be successful in its mission.

Don’t just cross your fingers and hope the dollars come through—it’s time to take a strategic approach to budgeting. Here are five tips learning leaders should keep in mind when creating an L&D budget.

Have a Defined Learning Strategy

The most important component of a defensible budget isn’t even part of the budget itself—it’s the learning strategy. It’s tough to ask for money if you can’t clearly articulate how it fits into your overall strategy. Before you build your budget, you need to create a learning strategy—including a One-Page Learning Plan that documents projects, deliverables, stakeholders, business objectives, and anticipated return on investment.

Watch the On-Demand Webinar: Making the Business Case for Learning and Development Strategy Successful learning organizations have defined, well thought-out learning strategies aligned to the goals and objectives of the enterprise. These learning leaders tend to have comparatively little difficulty securing the budget they need, because their counterparts in the business understand what the funds will be used for and why it matters in the bigger picture. Conversely, learning leaders who fail to tie their funding requests to learning strategy are in a much tougher position when it comes to defending their budget.

Do Your Research

There's lots of great data available from L&D industry organizations, such as the Association for Talent Development and Bersin by Deloitte, that can be used to craft and later defend your budget requests. Know what’s happening elsewhere in the industry, and understand what comparable organizations are spending on similar projects, what your project headcounts should be, and what sorts of technology advancements and trends you need to be aware of to remain competitive.

Likewise, benchmark your L&D function against industry standards. Use industry data to help set targets and thresholds, and then leverage that third-party evidence to defend your learning budget side by side. Illustrate exactly why you elected to increase or decrease a particular budget item. This provides an opportunity to compare yourself to your peers, including industry counterparts that you aspire to match, and to determine how well you’re aligned to accepted best practices and standards. If you do your research right, even your assumptions and forward-looking guesswork will be rooted in reality.

Be Prepared to Justify Each Request

You need to be able to explain, at a detailed level, how you came up with each budget request. You’ll instantly have more credibility with business stakeholders when it comes time to defend the budget. It’s important to have the right metrics and measurements in place before asking for funding. If your L&D organization lacks a coherent learning strategy, and you’re unable to explain why you're making the funding requests and what their expected ROI will be, it becomes very difficult to ask for more money down the line. To get the funding you need to be successful, you need to clearly explain how the budget will ultimately add value back to the business.

Explain the Alternative

If your budget requests are indeed defensible and justified, then there will be a tangible negative impact if funding fails to come through. This is highly relevant information for stakeholders to understand, yet learning leaders often neglect to convey it. Don’t be meek! If you’re worried that a particular training initiative won’t get funded, lay out exactly what failure to fund would mean for the larger organization. Discuss potential lost revenue, making educated projections where necessary. Don’t make the assumption that the business stakeholders fully understand the implications of denying your funding requests—make them understand. If they’re nevertheless willing to accept the ramifications, then so be it, but it's up to you to make sure they're working from a complete view of the situation.

Prove Your Successes with Metrics

An L&D organization that lacks effective metrics and measurement is going to have a difficult time proving its business value, and that in turn means budget requests may not be taken seriously. Comprehensive learning metrics help L&D gain respect and trust from business leaders, and it goes a long way toward getting talent development initiatives funded. Demonstrating the success of an ongoing learning initiative is obviously quite useful in maintaining or expanding its funding, but it’s equally valuable to prove the learning organization’s track record in delivering results. When establishing a metrics and measurement program, it’s critical to measure training ROI, but it’s also important to measure a learner’s intent to apply the training, the actual transfer of knowledge, and whether desired performance change is taking place.

Watch the On-Demand Webinar Designing an L&D Budget You Can Defend: Top-Down and Bottom-Up Budgeting

Topics: Learning Strategy