This is actually an article that I first posted some time ago on another forum. However, I often get asked about winning L&D budget approval (indeed, I quite often work with clients on developing a business case for approval), so I thought it would be worth posting again here on L&D Generous. It’s a bit longer than my usual posts but, hopefully, worth the read.
What they didn’t tell you when you took your first Learning & Development role
There’s a good chance that when you started in your Learning and Development career, no one told you that one of the important abilities you’d need is sales. However, there’s simply no getting away from the fact that to win approval for your training strategy, you’ll often need some pretty decent sales skills.
But, as any experienced, professional salesperson will tell you, to win the approval from your customer (for the typical L&D Manager, this being the HR Manager, CFO, and/or the entire C-Suite), good sales skills are simply not enough…you need to be able to build a compelling business case based on facts, good analysis, and a provable return on investment (ROI).
This article aims to provide you with the key steps that enable you to provide such a business case and, combined with some basic sales and presentation skills, help you win ‘buy in’ from the person(s) holding the purse strings in order that you can achieve all of your organisational capability goals!
Important Learning & Development Business Case Building Info
Before you get started on putting your L&D business case together, there’s some important bit of information that you need to gather/understand. These being:
- You need to understand both your organisation’s recent (past 12-24 months) training spend AND the industry training spend trends in the same period* to gauge how your proposed spend will be received and to show how your spend (and subsequent capability development) compares to that of your competition
- Having understood what the spend trends are, you ideally will also find out what that has been spent on (e.g. face-to-face training, online, distance, etc)
- Identify and understand the priorities of the C-suite (and, in particular, those of the CEO and CFO – e.g. reduce operational costs, increase productivity, expand operations, etc) so you can align your strategy (and subsequent business case) to them
- You need to fully understand the four critical elements of developing a learning & development business case
*Australian industry spend trends can be found on the Australian Bureau of Statistics website – www.abs.gov.au/AUSSTATS
The Four Fundamental Steps of a Learning & Development Business Case
Once you understand the above, you can get started on your training business case, which will comprise of four fundamentals steps:
- Identifying and defining the business requirement(s)
- Identifying and analysing the various solutions available
- Developing the training business case
- Delivering the training business case
Be warned – missing any of these steps can significantly reduce the chances of success!
Step 1 – Identifying and defining the business requirement(s)
- Identify the opportunity or issue needing to be resolved (NB. based on the information you gathered before starting to develop your business case, the results of the solution should be closely aligned to organisational/C-suite goals and priorities)
- Clearly describe the opportunity, result, and benefits that your proposed solution will provide (in both capability and financial terms) – for example ‘Increase productivity by a minimum of 17% resulting in a return on investment of a minimum of $3,000,000 per annum’
Step 2 – Identifying and analysing the various solutions available
- Consult the workforce members most affected by the opportunity/problem for their input and thoughts on the best potential solutions
- Collect, define, and analyse information on each proposed solution
- Where possible, identify and analyse relevant internal and external case-studies (this information will both help you decide if the solution is viable AND, if it is, support your business case)
- Seek the input and advice of other L&D Managers (internal and external) that have had to resolve similar issues
- Compare the various options in terms of benefits, risk, finances, and ease of implementation (for the finance aspects, consider the likely ROI and ‘payback period’)
A simple way of comparing different solutions includes the following tables:
Example table 1 – New training program return on investment example
Situation: It has been identified that poor leadership skills in front-line and middle management are resulting in high turnover of front-line staff. A leadership training program is a possible solution for reducing turnover.
|Current cost of employee turnover (lost activity, lowered production, recruitment costs, etc)||Turnover cost if reduced by just 10%
|Return on investment
|$150,000 (including implementation costs)||$2,500,000
- Calculate the net benefit (the total financial benefit minus investment costs) – $750,000 – $350,000 = $400,000
- Calculate return on investment (net benefit divided by the program cost) – $400,000 ÷ $350,000 = 1.14
- Multiply by 100 to get the percentage of return on investment – 1.14 x 100 = 114% (i.e. the programs returned an ROI of 114%, so every dollar spent returned $2.14!)
NB: A ‘breakeven’ result would be 0% ROI
Example table 2 – Alternative training solution comparison
|Current Solution Investment P/A
|Alternative Solution Investment P/A
|$500,000 (including implementation costs)|
|Annual participant numbers||500||750|
|Average Per participant p/a||$6,000||$1,733|
- Calculate the cost of the current solution per month – $1,000,000 ÷ 12 months = $83,333/month
- Divide cost of the alternative solution by the monthly current solution cost – $1,300,000 ÷ $83,333 = 15.6 months to payback
- Savings over three years: $3,000,000 – $1,300,000 = $1,700,000
- Savings % over three years: ($1,710,000 ÷ $3,000,000) x 100 = 57%
- Annual average savings per employee Average = $4,267
- Additional employees trained p/a = 250
NB. The above example does not take into account savings gained from any reduction in training time the alternative solution may present
Financially Unquantifiable Benefits
Whilst it’s helpful (especially for a training business case) to be able to put a financial value next to any proposed learning and development strategy, there are some elements that are extremely difficult (if not impossible) to measure financially. However, the fact that they are difficult to evaluate financially, this doesn’t mean that they are not ‘of value’ and are therefore an important inclusion in any compelling L&D business case.
Some examples of common unquantifiable training program benefits include (but are by no means limited to):
- Increased workforce engagement levels
- Flexibility in training delivery methods
- Improved organisational reputation and brand perception
- Increased opportunity for industry awards
- Increased consistency of training content
- Improved reporting systems and procedures
- A safer workplace
- Reduced carbon footprint
Identifying and analysing risk
As with any proposed strategy, it is important that any potential risks are identified, analysed, and mitigation measures considered. Some examples of the needs and suppositions as well as the probability of risk to each option include:
- Participant availability
- Attitude to change
- Stakeholder support (e.g. managers, customers, etc)
- Scheduling issues
- Available training resources
- Available technologies
- Industry and/or local regulations
- Economic considerations
In summary, to identify the best solution you must, of course, consider several key elements of each:
- The financial ROI
- The unquantifiable benefits
- The risk level
Once you have done the above, it is always worth seeking the opinion of others whose opinion you respect (and, by virtue of their position and/or experience, has value).
Step 3: Developing your winning business case
Once you’ve gathered the information from steps one and two, it’s time to actually develop your business case.
In order to clearly get your message across clearly and succinctly, it’s important to use a format with a simple and clear structure and that includes the following:
- An overview of the current issue
- An overview of your analysis and your recommended solution
- A proposal summary
Overview of the current issue
This is your opportunity to grab the attention of the key decision makers and ensure their engagement in the rest of your presentation, you must therefore:
- Clearly describe the current situation/problem and explain how your proposed solution solves the issue (or exploits an identified opportunity).
- Provide a summary of the alternate solutions in a simple chart that clearly compares the financial analysis, the unquantifiable benefits, and possible risks of each option
- Identify and stress the cost of NOT addressing the issue
- Where appropriate, graphs are a highly effective way of showcasing the benefits of your recommended solution
Overview of your analysis and your recommended solution
Once you have clarified the issue, it’s important to provide information that supports your solution and provides more detail about its implementation. This may include:
- Required resources, key implementation milestones, target completion date, etc
- The inclusion of industry benchmarks to show how it compares to other ‘best in class’ solutions
- Recommended services provider(s)
- A recommended date by which time a decision should be made and a date that implementation should be commenced by (and the possible/probably ramifications of not doing so)
The proposal summary is your final opportunity to gain the required approval and commitment of the key decision makers to implement your recommend solution. It’s therefore extremely important to close the presentation of your business case as strongly as you began it by clearly recapping the organisational benefits (culturally and capability-wise as well as financially) of your strategy.
You should therefore aim to summarise your entire proposed solution (in an easy-to-read format such as bullet-points) on a single page or slide clearly showing how it aligns to organisational goals.
The summary should therefore succinctly include:
- The situation – i.e. what is the issue?
- Recommendation – i.e. what is the best way of solving this issue?
- Benefits – i.e. how will the organisation benefit?
- Consequences of inaction – i.e. the possible/probable cost of NOT investing in the proposed solution
Step 4: Delivering your business case
Whilst the data that you’ve collected, analysed, and presented is, of course, all essential to winning approval of your recommendation, it’s important not to forget that ultimately you are looking to ‘sell’ your proposed solution to the key decision makers. It’s therefore important to:
- Plan your delivery format to keep it concise and to the point (don’t let yourself get off point and/or ‘waffle on’)
- Plan the time, date, and place to best suite your audience (you don’t want decision makers who feel ‘put out’)
- Develop your presentation skills – i.e. speaking clearly, succinctly, at an appropriate pace, etc
- Developing your negotiation and influencing skills
- Anticipating difficult questions and preparing answers for them
- Consider additional resources that might be required for you presentation such as projectors, spread sheets, supporting statements, assisting colleagues, etc
- Practicing your presentation in front of people able to provide informed feedback
Thanks, as always, for reading. I hope it was of interest. Please be sure to like, comment, follow, and share.
About the Author:
I’m a self-confessed Learning & Development tragic. In my work-life, I’m a an Industry Engagement Manager for the University of Queensland’s Business School, meaning I work with clients to design, develop and implement ‘end-to-end’ blended capability development solutions.
If you’re interested in having a chat about how UQ Executive Education can help transform your organisation via our tailored executive development solutions, our public short courses, our Graduate Certificate in Executive Leadership, or the full MBA, please feel free to email me on email@example.com.
I’m also a keynote speaker on topics including (but not limited to) ‘Creating the workplace culture you want to work in’, ‘The future of organisation learning’, ‘Simple strategies for maximising transfer of learning to behaviour’, and ‘Speaking C-Suitese, not L&Dese, to win L&D budget approval’. If you’d like to engage me to speak at one of your events, feel free to contact me on the email address above