The CIPD People Management article “How do you make the most of a tiny L&D budget?” suggests that with increasing demand for e-learning amid declining funding, L&D has to work smarter with less. The article goes on to say “the last 18 months have seen digital learning become the norm for organisations across the UK, with L&D leading the charge as companies discover new ways of responding to the challenge. The crisis has also provided opportunities to innovate, realign with organisational needs, refresh tired processes, and streamline many of the employee reskilling practices in response to the disruption.
With the move to digital across all functions, one could be forgiven for thinking that there was money in the company coffers earmarked for these transformational developments. Yet earlier this year, a study by online and blended learning specialist Arden University found that almost 60 per cent of L&D professionals said that while the pandemic had changed their organisations’ attitudes to digital learning, the increased demand was not translating into investment: only half (52 per cent) planned on increasing their 2022 budgets to match this need.
According to Amit Gautum of UpsideLMS, annual budgets are an integral part of the overall business planning, be it on an individual level or for SMBs or big MNCs; everyone understands the value of prioritising and distributing their finances effectively. But, budgeting is a rather complicated process, given the difficulties in assigning appropriate values to different priorities, especially when it comes to business functions like HR and L&D, which have always struggled to quantify their efforts in terms of ROI and business growth.
An L&D budget should factor for the following costs:
- Initial briefing about an intervention
- Delivery (classes, eLearning, course fees, etc.)
- Materials (work books, videos, etc.)
- Employee’s time
- Instructor fees
- Travel and expenses of the instructor
- Upkeep of the interventions
Mary Shacklett wrote an article for TechRepublic titled “How to manage a departmental budget: A guide for beginners”. She suggested that managing a departmental budget is similar to managing a household budget, although corporate budgeting can involve many more stakeholders and is considerably more complex. She outlined seven helpful budget tips.
- Use your existing budget as a baseline – Unless you are starting a new department or function, there likely already is an existing budget for the department you are taking over. Review this budget carefully, and get all of your questions answered. You may or may not agree with that budget, but it should function as a baseline and a starting point for the new budget that you develop.
- Talk with members of your department about budget projections – Most new managers get promoted into a department where they had been a staff member, but they may not be knowledgeable about every area of the department.
- Get an understanding from corporate on budget expectations – as a corporate-wide practice, most organisations have a pre-budget-cycle meeting to determine what the overall budget increase allowance is going to be for the coming budget year. Often, they will come up with a figure and then tell managers of various departments in advance of budgeting what to plan for. The message from corporate usually goes something like this: “Plan your budget to be within five percent of what it was last year.” Understanding corporate expectations in advance can go a long way in helping you to lay out your budget because you already know what types of budget increases they are expecting you to present for approval.
- Operationalise your budget and know what you can sacrifice – in laying out your budget, you should refer to your goals and objectives for the coming budget year so you can position the budget where it can be adjusted if corporate earnings targets aren’t met and you are called upon to freeze or to reduce budget. The best way to give yourself flexibility is to make as many of your budgetary items operational or discretionary as you can. An operational budget item is one that you pay every month and that you aren’t committed to a long contract for. If you need to reduce, eliminate or defer the item, you usually can. A discretionary item is an expense allocation committed to a specific project or activity. If things get tight, you can defer or eliminate the expense and the project. In contrast, when you purchase something large and expense it over time as a capital expense (like a hardware or software license), you are locked in and you have no flexibility.
- Ask for assistance if you need it – if you need help with repaying or depreciating a budget item or other budget-related financial ratios and ways of structuring expense, the finance department often has budget analysts who are knowledgeable and who can help.
- Use all of your financing options – you can work creatively with your budget. If you can’t get authorisation for additional staff and if the position is an entry-level one, you can look toward local colleges and universities that might have students who are being trained in the field and who would like a shot at an internship.
- Implement proof of concepts for new projects if you can’t get them funded – you don’t have to necessarily “stand still” if your budget is frozen or reduced. Many vendors, especially if they are trying to establish market presence, are willing to conduct free proof of concept projects, like a test drive of a new project management system, in order to get their foot in the door the next time budget becomes available.
Communication and collaboration are key to successful management of your budget.