How to Design Your L&D Budget

Learning and development as a function is playing a more central role than ever before. While every organization’s priorities may differ, when grounded in a strategic approach, L&D investments help grow, nurture, and leverage organizational talent pools. Part of that strategic approach is designing your L&D budget.

Before you dive into the various components of an L&D budget, it is important to get a better understanding of what overall learning industry spending looks like. The Association for Talent Development (ATD) conducts annual surveys to understand the state of the L&D industry and identify critical trends. Their most recent survey noted that globally, the average direct learning expenditure in 2021 was about $1280 USD per employee. How the expenses are divided is based on various factors, such as the size of the organization, nature of industry, the skills set needed as well as training delivery modalities (I4PL members can hear more in an exclusive Webinar on Critical Trends in the Field recording).

Once you have a frame of reference, the next step is a current state assessment of your own organization. Start with a thorough learning needs analysis, complete competency mapping of key positions, and performance review data to identify the areas of focus and improvements. Based on the priorities identified, consider how to distribute learning expenditure under these major learning buckets:

1. Internal costs: The size of the team can determine the biggest chunk of internal cost. When deciding on the size of your L&D team, a useful consideration is whether there are training solutions available in the market to address your learning needs. If not, you will need customized and curated content, potentially built in-house.
   
   Another question to answer is the modes of training delivery. Will your organization be conducting online training, virtual webinar style training, in-person, hybrid or all of them? While there has been a return to in-person training since late 2021, virtual and online learning continues to gain traction because of the accessibility and flexibility it provides to learners. But online training requires investment in technology. Depending on the type of online learning, you might need a learning management system and/or access to existing online academies such as LinkedIn learning, Udemy, etc. Virtual or hybrid sessions also require technology investment in platforms such as Zoom or MS Teams.
   
   In-person learning experiences may also be needed; for example, they can be a great way of learning skills that include tactile components or require demonstration. In-person training costs include logistics, travel, and accommodation.
   
   
2. Learning supplier expenses: These include potential costs for external consultants and services, outsourced content development and licenses, and training delivery by external vendors. Having a long-term L&D strategy and identifying success metrics to evaluate efficiency and ROI for learning initiatives can support decision-making around these external costs. External suppliers without the right industry knowledge and skills might be cheaper but with poorer ROI.
   
   
3. Tuition reimbursement: Another major budget item that has gained popularity over the years is tuition reimbursement. Employers may reimburse employees for completing relevant courses, programs, licenses, or certificates from colleges, universities, or other providers. Tuition reimbursement can be a win/win for employers and employees: it can be part of your retention strategy as well as professional development.
   
   
4. Time away from work: A less-tracked learning investment is the hours employees spend in learning and away from their day-to-day work. Including these parameters in your budget and tying them to business performance can help learning deliver optimal value for its investment. Consider modalities: for example, time away is often higher for in-person training, especially if it requires travel.
   
   

Experts agree that L&D has shifted from a “nice to have” function to a “need to have” (LinkedIn Learning, 2023). L&D programs create value not just via talent development and organizational performance but also by contributing to organizational culture, employee experience, succession planning and pipeline development. Position your L&D program to be seen as an investment rather than a cost.

What do you think is the biggest influence on L&D budgets right now?  If you are an I4PL member, sign in to comment on this post!

Sources:

The Association for Talent Development (2023). Critical Trends in the Field - ATD 2022 State of the Industry Report [I4PL Member Webinar].

LinkedIn Learning. (2023). Workplace Learning Report: Building the Agile Future.

Tags:  budgeting  costs  ROI  trends