DECEMBER 2017

ISSUE 1712

at work PREPARING AND DEFENDING

YOUR TRAINING BUDGET
TIPS, TOOLS & INTELLIGENCE
FOR DEVELOPING TALENT Lianabel Oliver Bigas

CAREER DEVELOPMENT
 career development
VOL. 34 • ISSUE 1712 • DECEMBER 2017

PREPARING AND DEFENDING YOUR TRAINING BUDGET

AUTHOR OVERVIEW OF THE PLANNING PROCESS................................................ 1

STRATEGIES AND ACTION PLANS.............................................................3
Lianabel Oliver Bigas
Lianabel Oliver Bigas, MBA, CPA, CMA, is the CEO THE STRATEGIC ANALYSIS...........................................................................3
of OBALearn, a company that provides financial training
solutions for the individual and corporate user. She is
PREPARING YOUR WORK PLAN..................................................................7
a recognized expert in strategic planning and cost PUTTING TOGETHER YOUR TRAINING BUDGET..................................7
management with extensive industry experience.
She has written several books on accounting and MANAGING THE REVIEW PROCESS.........................................................11
cost management.
ANALYZING BUDGET VARIANCES............................................................11
Community Manager, Career Development CONCLUSION................................................................................................. 13
Sue Kaiden

Editor, TD at Work REFERENCES & RESOURCES.......................................................................14

Patty Gaul

Managing Editor JOB AIDS

Teresa Preston
How to Prepare Your SWOT Matrix................................................... 15
Production Design A Sample Budgeting Expenditure Chart............................................ 16
Tony Julien
How to Document and Track Your Work Plan.................................. 17

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T
the budget variances and using this information to
he annual budgeting process instills fear
manage your resources more effectively.
in the hearts of many training managers.
It is a time of deadlines, paperwork,
meetings, meetings, and more meetings. Key OVERVIEW OF THE
initiatives and costs are debated. Numbers are
done, redone, and then may be done yet again. If PLANNING PROCESS
you do not manage this process effectively, it will Planning involves identifying a company’s goals
generate a high degree of stress and anxiety and and objectives and the strategies and action
possibly affect your day-to-day operations. plans required to achieve them. These plans are
The preparation of the annual budget does quantified in a budget, which shows the resources
not have to be painful. Instead, you can treat it required to achieve these objectives and is used
as the ideal time to question your programs and to monitor the financial performance of the
procedures, look for alternatives, and redesign organization.
or improve existing processes. It is the perfect As you prepare the training budget for your
opportunity to ensure that you—and your training area, remember your primary objective: to
programs—are aligned to the strategic direction identify and obtain the resources required to
of the organization and the needs of your internal support the organization’s needs for the next
customers. fiscal year. Budget processes and procedures will
In this TD at Work, we will: vary according to the size and complexity of your
• explain the nature of the organizational organization. Ultimately, you will have to adapt the
planning cycle and its relationship to the material in this issue of TD at Work to your own
annual budgeting and forecast processes needs and requirements.
• examine how to analyze your internal and
external operating environment and use this How the Planning Process
information to establish your short-term Benefits the Organization
strategies and action plans for the next
fiscal year During the planning process, management defines
its strategic direction, its long-term strategies,
• focus on how to prepare and document your and the organizational priorities for the planning
training budget and defend it to the next horizon. The budget then quantifies the short-
level of management. term resources required to move the organization
You will learn to plan first and budget later. toward its longer-term goals.
The strategies and action plans that you develop A well-structured plan serves several
during your planning process will underlie the important functions within an organization, as
numbers that you present in your budget. You will described in the sidebar, Why Companies Plan.
learn how to put together the numbers, identify The planning and budgeting process serves
the critical line items in your budget, estimate both a communication and a coordination
costs, and defend your budget to the next level of function. It provides a platform to communicate
management. More important, you will learn to tie how each part of the organization contributes
the numbers to your detailed work plan and key to the achievement of the overall company
initiatives. objectives and enables different work areas to
But a solid budget is not enough to ensure you coordinate their efforts. It allows the organization
get the training resources you need. You must to maximize the use of resources, avoiding
be prepared to defend your budget to the next duplication and inefficiencies. It can promote a
level of management and explain the operational better understanding of interdependencies among
consequences of any potential budget cuts. Once different departments and, more important, can
the budget is approved, you must keep tabs on help you clarify how the training department
your ability to achieve your work plan, analyzing supports the organization’s short-term objectives.

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 1

 WHY COMPANIES PLAN
• Resource allocation. The planning process allows the manager to assess the allocation of resources according to
organizational priorities.

• Control. The budget authorizes managers to spend a specific amount of money in support of company objectives.

• Feedback. Comparing actual to expected results can provide information on how well the organization has used its
resources for the period under evaluation.

• Communication and coordination. The plan provides a platform to communicate how each part of the organization
contributes to the achievement of the overall objectives and enables them to better coordinate their efforts.

• External demands. Bankers, investors, and industry analysts often require information on the future direction of a
company and its expected financial performance. The budgets and forecasts provide the mechanism to collect and
analyze this information.

• Simulations. During the budgeting process, a company can run alternate scenarios to understand how a change in
plans or in the operating environment might affect its financial performance.

How the Planning Process By comparing actual results to the budget,

Benefits You you can obtain feedback on how well you have
used your resources. Note that the budget only
As the person responsible for the training budget, measures efficiency, not effectiveness. It shows
you must ensure that your plans are aligned to you how you used your resources from a financial
the organization’s strategic direction and its standpoint, but it does not measure whether you
short-term objectives for the next fiscal year. achieved the desired results with the resources
These plans will underlie the preparation of the assigned.
budgeted numbers. Understanding the big picture You need a review process to monitor your
is critical to knowing how your training budget fits progress against the plan, in addition to analyzing
into the organization’s overall planning process. budget variances. The sidebar, Effectiveness
A primary function of the planning process Versus Efficiency, shows the definitions of
is to help you plan the resource allocation for effectiveness versus efficiency and how these
your department. Planning requires you to think concepts relate to the budgeting process.
beyond the day-to-day and tie your resources to Finally, the planning process allows you to
a well-defined set of plans and objectives. A clear perform simulations and run alternate scenarios
understanding of how your training resources without playing them out in real life. Hence, you
are currently allocated and how they should be can better understand how a change in plans or
allocated is an important insight that you can gain a budget cut could affect your organization and
through this process. can make better decisions regarding a particular
Another important function of planning is course of action.
control. The planning process will provide you
with a measurable plan that is linked with a set
of resources, which are quantified in monetary
terms. The budget authorizes you to spend a
specific amount of money to achieve previously
agreed-on objectives.

2 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

 EFFECTIVENESS VERSUS EFFICIENCY
• Effectiveness relates to the achievement of your stated objectives.

• Efficiency relates to resource utilization—how well you used the resources assigned.
The budget measures efficiency—or how you used your resources. It does not measure effectiveness—whether you
accomplished the objectives for which those resources were assigned.

STRATEGIES should discuss this situation with your manager.

It could be that your plans are not aligned to
AND ACTION PLANS the strategic direction of the organization, or
that a key strategy was missed during the senior
Strategy formulation involves identifying high-
management team’s planning process. In either
level plans designed to move the organization
case, you need to raise a red flag.
toward its long-term goals and objectives. The
organizational strategies and key initiatives
established by your senior management team will YOUR PLANS FOR THE TRAINING
form the general framework from which you will
DEPARTMENT SHOULD SUPPORT AN
develop the detailed work plan that will underlie
your training department’s budget. ORGANIZATIONAL STRATEGY AND MEET
Strategies are mid- to long-term plans that THE EXPECTATIONS OF YOUR INTERNAL
support the company mission, vision, goals, and CUSTOMERS.
objectives. They provide a broad framework
for how the company plans to move toward its
long-term goals. Strategies should be limited
in number. As a general rule, five to 10 major
THE STRATEGIC ANALYSIS
strategies should be more than sufficient to define Before you can start developing your detailed
the strategic direction, depending on the size work plan, you need to thoroughly assess
and maturity level of the organization. A long list your area’s internal and external operating
of strategies can overwhelm the organization environments and identify those issues that
and limit the ability of the management team to should (and can) be addressed in the plan. This
execute them. process, called a strategic analysis, should precede
Action plans describe specific, short-term the development of your short-term action plans.
tasks that a department or work group will During a strategic analysis, external factors
undertake to achieve the stated objectives within are analyzed in terms of opportunities and threats,
the established timeframe. Action plans, also while internal factors focus on the strengths or
known as tactical plans, should be aligned with a weaknesses of the particular department or work
particular strategy. They should identify what will area. Together, these four factors make up the
be done, who is responsible, and when these tasks well-known SWOT analysis matrix.
will be completed.
Your plans for the training department should
Preparing the Team
support an organizational strategy and meet the
expectations of your internal customers. If you Before you start your strategic analysis, it is
cannot relate a specific action in your short- important to gather some key documents and
term plans to an organizational strategy, you distribute them to your team. These documents

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 3

 are summarized in the sidebar, Key Planning examined by the training function can be grouped
Documents for Your Team. Your team should into six major buckets each.
come to the strategic analysis session prepared
to discuss these documents and clarify any External Factors
questions. This discussion and the sharing of Six major environmental forces can affect the
information ensure a common level of knowledge training function: customers, the industry,
among your team and facilitates the alignment of technology, the economy, the government, and
your plans with the company direction. social factors. You will need to answer some key
A strategic analysis is not an exercise for questions about each of these factors during your
a lone ranger. It requires open and honest assessment.
discussions with your team so you can reach a
common understanding of the future operating Customers
environment and the strengths and weaknesses • Is training a priority for management?
of the training area. Your team should perform • Who are our internal customers? What
an in-depth analysis of these factors to ensure departments or groups of employees do we
that each area has been thoroughly examined serve?
and no key issue has been overlooked. It is highly
• What are our customers’ needs? What are
recommended that you use an experienced
the business needs? Are these aligned?
facilitator to guide your discussions and keep the
group on track. • How satisfied are our customers with our
current training offerings? How do we
Analyzing the Operating know?
Environment • What feedback have we received from the
The external and internal factors that make up management team about the effectiveness of
the operating environment and that need to be the training function?

KEY PLANNING DOCUMENTS FOR YOUR TEAM

Before beginning your strategic analysis, gather documents that contain the following information and distribute them to
your team:
• the organization’s mission, vision, and values

• the organization’s strategies

• analysis of the external environment for the organization

• analysis of the strengths and weaknesses of each department that you serve

• key organizational initiatives for the upcoming year

• needs assessment data and reports

• budgeting timetable, including deadlines and deliverables

• budgeting guidelines issued by the finance department or site management

• year-to-date budget to actual spending reports and forecasted year-end results

• detailed spending year-to-date, by account number

• status review of the prior year’s work plans and progress toward objectives.

4 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

 • Are there any unmet needs? • Are regulatory agencies requiring revisions
to our established compulsory training
• Is there a recurring complaint that needs to
programs?
be addressed?
• How are we delivering government-
The Industry mandated training programs? Are there
• What are the trends in the training industry? more cost-effective alternatives in the
market?
• How do we compare to other training
organizations of similar size in our industry?
Society
• What contractors are available to provide • Is the composition of our labor pool
training in critical areas? changing in terms of age, gender, and
income? If so, how?
• What percent of our training is instructor
led versus online? How does this mix • What impact will these changes have on the
compare to the industry average? training function?

• What is the average usage and drop-off rate • Are there any changes in lifestyle or
for our online courses? How do we compare preferences that will affect how employees
against industry statistics? learn? (for example, social networks, mobile
devices, microlearning)
Technology
• What technologies are available that can
Internal Factors
help us provide training faster, cheaper, and
An analysis of the internal environment will force
on demand?
you to examine the strengths and weakness
• What technologies can increase the of the training department. It will allow you to
efficiency or effectiveness of our training assess how well your department is positioned to
programs? capitalize on the opportunities and address the
threats the external environment poses.
• Are there any new or developing
You should evaluate six major internal factors:
technologies that will significantly affect
people, business processes, facilities, information
how we design and deliver training programs
systems, policies and procedures, and the
in the near future?
financial condition of the company.

Economy People
• Is the economy growing, decelerating, or • Does our departmental structure respond
stagnating? expeditiously to organizational and business
needs?
• How does the state of the economy
affect my organization and the amount of • Could we restructure the training function
resources assigned to the training function? to be more responsive to our customers,
lower costs, or increase the effectiveness of
• How will economic factors affect the skills
our programs?
of the labor pool from which we recruit
employees? How will this affect the type of • Do our people have the core competencies
trainings that we offer? that we need? Are they technology literate?
Do they have the skills to evaluate online
Government training programs from outside vendors? Do
• Is there any new or proposed legislation we need to train ourselves in this area?
in environmental, health, safety, or labor
• Are we recruiting the right type of people?
management that could prompt the creation
of new training programs or the revision of • Is our compensation package competitive?
our existing ones?

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 5

 Are we losing our top performers to the • Do we have islands of automation or stand-
competition? alone systems? Are we keeping key training
information on non-robust platforms such
• Do the managers of the training function
as Microsoft Access or Excel?
have the necessary leadership skills to drive
changes in the business? • Are our software applications updated
regularly with new releases?
Business Processes
• Do we have adequate information systems
• What are the major activities performed
support?
by the training function? (Some examples
include onboarding, instructional design, • Are systems, processes, and procedures
regulatory training, and leadership as they pertain to training properly
development.) documented?

• How well are the training function’s activities

Policies and Procedures
being executed? Are they effective in
• Are our training policies and procedures
achieving business objectives? How do we
properly documented? Are they updated and
measure the success of our programs?
reviewed regularly?
• What types of programs do we offer
• How are changes in our training programs
each employee group (for example, new
and procedures communicated to our
employees, hourly workers, high potentials,
employees?
supervisors, and managers)? Where do we
spend the bulk of our training dollars? • Do we have procedures that hinder our
ability to get things done? How can these
• How do we promote these programs within
procedures be simplified?
the organization? Is it effective? What is the
ratio of hours available to hours used for • Are there any obsolete procedures?
each key program?
• Does the organization have the proper
• What training programs should we target for internal controls to safeguard training
improvement that will yield the most benefit equipment and supplies?
for the organization?
• Do we need to revise or create new policies
to support changes in the business?
Facilities
• Are the facilities adequate to support the
Financial Condition
delivery of our current and future training
• What is the financial condition of the
programs?
corporation? It is operating at a profit or
• Do our facilities provide an environment that loss? Are there cash-flow problems?
is conducive to learning?
• Are we expected to reduce our spending for
• Do we have the right technology in place to the next fiscal year?
encourage collaboration and sharing among
participants of our training programs?
Developing Your SWOT Matrix
Information Systems SWOT, as mentioned, stands for Strengths,
• How do we manage our training records? Weaknesses, Opportunities, and Threats. Once
• Does our training system accurately track the operating environment analysis is complete,
and maintain our employees’ training you can use a SWOT matrix to summarize the
records? key internal and external factors you will have
to address in the next budget cycle. If possible,
try to limit your SWOT matrix to one PowerPoint

6 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

slide or a one-page Word document. However, expected to complete them within the budgeted
if there are too many issues, you could present year. If any specific initiative or task will carry
the external factors on one page and the internal over to the next budget year, you should highlight
factors on another. The job aid at the end of this this item in your detailed plan.
issue of TD at Work can help you summarize your Your work plan also should include metrics so
detailed analysis into a SWOT matrix. you can measure your progress. These metrics
Distilling all your discussions into one or two can be quantitative or qualitative. Qualitative
pages is probably the hardest part of the strategic measures can be as simple as noting whether an
analysis process. You and your team can start by item was completed or not completed, or they
agreeing on the top three issues for each factor, can be more complex, such as a customer survey
and then, in successive iterations, pare them down to evaluate business outcomes. Key performance
to a more manageable number. Here is where an indicators (KPIs) are quantitative measures to
experienced facilitator can add value. evaluate the effectiveness or efficiency of your
short-term plans. The ATD State of the Industry

PREPARING Report reports 13 key indicators that you can

use to evaluate the efficiency of your training
YOUR WORK PLAN operation. See the sidebar, How to Identify the
Right Performance Metrics.
Your work plan is the foundation of your training
budget. Because training is a support function,
your action plans should be aligned with a BECAUSE TRAINING IS A SUPPORT
major strategy or initiative of the organization. FUNCTION, YOUR ACTION PLANS SHOULD
Your work plan also should address the major
opportunities, threats, strengths, and weaknesses
BE ALIGNED WITH A MAJOR STRATEGY OR
that you identified in your SWOT analysis. If you INITIATIVE OF THE ORGANIZATION.
fail to address a key issue, it should be a conscious
decision and not an act of accidental omission.
In addition to these efficiency indicators, you
As you put together your work plan, you may
need to measure the effectiveness of your training
need to collect more information on the training
programs in producing the desired business
needs of the organization and how you will attend
outcomes. After all, that is the reason for your
to these needs. Some key questions that you will
existence. For example, if you have a financial
need to answer include:
training program, you may want to establish a KPI
• How many employees need to be trained?
in conjunction with your finance department that
• What type of training do they need measures budget and forecast accuracy. From a
(leadership development, compliance, more qualitative standpoint, you could interview
continuous improvement, onboarding, and management to determine whether there has
so forth)? been an improvement in participants’ ability to
• What training delivery mechanisms will you manage the financial performance of their work
use to meet learner needs (instructor-led areas. If it is a safety training, you may want to
training, blended learning, online learning, measure the number and severity of accidents in
mentoring, online collaboration, and so on)? your facilities in total and per full-time employee.

• Will you use in-house resources or

subcontractors? What is the mix? PUTTING TOGETHER
• What organizational initiatives are you YOUR TRAINING BUDGET
expected to support?
The preparation of your departmental budget is
Action plans are specific, concrete, and have a the ideal time to question your current training
short-term time horizon. Typically, you would be programs and how they are being delivered, look

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 7

 HOW TO IDENTIFY THE RIGHT PERFORMANCE METRICS
Traditional training metrics focus on measuring efficiency. The ATD State of the Industry report typically reviews
13 key indicators:
1. direct expenditure per full-time equivalent employee (FTE)

2. learning hours used per employee

3. direct expenditure as a percentage of payroll

4. direct expenditure as a percentage of revenue

5. direct expenditure as a percentage of profit

6. percent of expenditure for tuition reimbursement

7. percent of expenditure for external services

8. employees per L&D staff member

9. learning hours used per L&D staff member

10. learning hours available per L&D staff member

11. cost per learning hour used

12. cost per learning hour available

13. reuse ratio.

Metrics related to business outcomes will require you to think outside the box and talk to your internal clients on how to
gauge the effectiveness of a program. Some examples of possible metrics include:
• budget/forecast accuracy (percent variation from budget/forecast)

• security violations per month

• documentation errors (in total and per employee)

• unused capital investment as a percentage of total approved amount

• hours lost due to equipment downtime

• number of customer complaints

• number of nonconformance reports.

for more effective alternatives that may be better Headcount

aligned to your client’s needs, and redesign or
Start with your headcount plan. The headcount
improve existing processes.
plan drives labor and employee-related costs
The ideal approach is to prepare your budget
such as training, travel, and supplies. You will
by major activity or training program. In this
rarely start from a blank slate when you prepare
manner, you will be able to identify the resources
your headcount plan. Include your current
assigned to each major program and determine
employees by name and position, as well as any
whether your resource allocation is aligned to
new employees that you plan to add during the
organizational priorities.

8 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

upcoming year. If you are downsizing, you may past decisions, such as depreciation. In general,
want to identify which current positions will be these costs represent fixed amounts that can be
eliminated. precisely calculated. In contrast, discretionary
The budget provides an opportunity to costs are incurred at the option—or discretion—
question the current staffing structure and of a manager. They may include such items as
explore alternatives. How is your department subcontractors, supplies, and travel, among
organized? Are you meeting customers’ needs? others. These line items should be budgeted on
What is the level of customer satisfaction? Can the basis of resources required in these line items
any programs be consolidated, eliminated, or to achieve your work plan. You can use historical
delivered in a more cost-effective manner? A clear data or vendor estimates to budget these line
understanding of your organizational structure items.
and how it supports the business needs can better Be sure also to identify any nonrecurring
prepare you for the tough questions that may be costs that will be incurred as a result of special
asked during the budget approval process. programs or initiatives that may require dedicated
In medium to large organizations, managers resources, such as an enterprise resource
may not have access to payroll information. planning implementation or a global training
The finance department usually calculates the initiative. These costs should be clearly identified
budgeted labor costs based on the headcount in your budget.
plan. Therefore, it is very important that your The job aid, A Sample Budgeting Expenditure
headcount plan details the resources needed Chart, at the end of this TD at Work provides
to run your department effectively and meet an example of how you can prepare a budget by
the business objectives. If you have resources major programs or initiatives.
dedicated to a particular initiative, program, or
function, these should be clearly identified
in your headcount plan.
THE PREPARATION OF YOUR
DEPARTMENTAL BUDGET IS THE IDEAL
Spending TIME TO QUESTION YOUR CURRENT
Once you have finalized your headcount plan, you TRAINING PROGRAMS AND HOW THEY ARE
can proceed to budget other expenses for your BEING DELIVERED AND LOOK FOR MORE
department. Be sure that you review your year-
EFFECTIVE TRAINING ALTERNATIVES.
to-date budget-to-actual spending reports and
understand the sources of any budget variances.
You also need to examine the cost structure
of your department. Are there any expenses that
Capital Budget
fluctuate with sales or production volumes? For If you require major equipment purchases for
example, if volumes increase, you may have to the training function, you will be asked to submit
recruit new employees, which will affect the cost a capital budget. The capital budget describes
of your new employee orientation program. If those projects that meet the capital expenditure
you have costs in your department that will vary criteria in your organization and itemizes their
directly as a function of volume or the number cost. Finance typically issues separate budgeting
of employees trained, identify these costs and guidelines for capital projects. The preparation of
calculate a cost per employee to budget these a capital budget is beyond the scope of this
line items. TD at Work. However, you should ensure that your
Another must is to identify committed capital budget complies with the documentation
versus discretionary costs in your department. and format required by your finance department
Committed costs result from contractual and has a business justification that is clearly
obligations, such as a maintenance contract or aligned to the organizational objectives for
licensing agreement, or are a consequence of the year.

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 9

 Assumptions, Risks, were used and how each estimate was derived
and Opportunities (an average of historical costs, vendor quote,
and so on). Be sure to keep all source documents
The final step in the budget preparation process that contain evidence of how the numbers were
is the documentation of your key assumptions. calculated, including any backup calculations used
The documentation should include your SWOT to arrive at a budget estimate.
analysis, your detailed work plan, and how you In addition to documenting your assumptions,
calculated each budgeted line item. It should you should highlight those opportunities that you
clearly identify the sources of information that

BUDGETING TRAINING EXPENSES

This chart shows an example of how you can categorize each line item of your training budget. If you are unsure how to
budget a particular line item, ask for help from your finance liaison.

Spending Category Item Estimation Base

Salaries and fringe benefits Base salary, payroll taxes Headcount, usually calculated by finance

Professional services Instructor fees Number of training sessions or events

multiplied by cost per hour or day
Course development Contracted outside services for course Number of development hours multiplied by
development cost per hour
Training materials Participant materials Cost per participant multiplied by number of
training events
Multimedia production Outside video or audio production Vendor quote or past billings
(personnel, facilities, equipment)
Promotional materials Promotional literature for training events or Vendor quote or past billings
campaigns
Equipment rentals Screens, projectors, computer equipment Cost per rental multiplied by number of
rentals
Facilities rentals Room rental Number of days multiplied by cost per day

Educational software licenses Licenses for online courses or programs Cost per user multiplied by number of users

Software licenses Software licenses for system applications Cost per user multiplied by number of users

Dues and subscriptions Dues for professional associations; Membership fee multiplied by number of
subscriptions to professional journals memberships; number of subscriptions
multiplied by cost per subscription
Office supplies Miscellaneous office supplies for internal Cost per employee based on prior year
use multiplied by number of department
employees
Travel expenses Travel for business purposes (conventions, Airfare, hotel, stipend per day for meals and
training conferences, corporate meetings) incidentals for all expected trips, itemized or
presented as a lump sum
Donations Charitable donations Detailed list per organization or based on
prior year’s budget

10 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

identified in your SWOT analysis, but chose not to the prior year or if your manager feels that he
to include in the budget, such as a potential price or she cannot justify the budget to the next level
decrease or a reduction in subcontracted services. of management, you will be asked to rework the
These represent a potential upside for your numbers.
department in terms of lowering the budgeted The management review is a negotiation
spending for the year. process. As the budget moves up through the
You also should identify any potential risks that organizational hierarchy, the numbers will be
may increase your costs to above the budgeted subject to more review and scrutiny, which may
amounts. These situations may include changes result in a downward adjustment. Preparing your
in regulations, project delays, and any other budget by program and tying the amounts to
potential situation that may affect your costs. key initiatives will facilitate the handling of
If possible, quantify the likely impact of any budget cuts.
potential risks and opportunities in your budget If you did not pad your budget, you cannot
presentation. If the situation materializes, it absorb a budget cut without affecting your work
will be easier to explain because you already plan. It is important that you communicate this
anticipated and documented the situation. to the next level of management and have them
decide what will not get done as a result of a

MANAGING THE budget cut. The sidebar, Tips for Defending Your
Budget, offers some recommendations to facilitate
REVIEW PROCESS the budget approval process.

There are two levels of review: financial and

management. Before you present the budget to ANALYZING BUDGET
your manager, you should have it reviewed by the
finance liaison for your department. In this review,
VARIANCES
you will discuss the budget with a finance expert After your budget is approved, you are far from
who can examine your work plans and numbers. done. Now the real work begins—executing your
This person can not only verify that the numbers work plan and monitoring how you spend your
are consistent, reliable, and accurate, but also resources in support of your plans. You will need
check that your work plans are aligned with the to monitor your financial performance against the
rest of the organization. budget (efficiency) and how well you are executing
Your finance liaison can ensure that all your plans (effectiveness).
budgeted costs are accounted for in your work Typically, department managers receive a
plan. In addition, they can help you identify comparison of budget to actual spending each
inconsistencies or highlight unusual trends that month. Make sure that you understand how to
may raise a red flag. They also can confirm that read this report. Identify the major variances for
the budget information is complete, presented the month and ask yourself some key questions:
in the right format, and conforms to the Did you expect this variance? Was there a change
expectations of management. in your departmental, organizational, or corporate
The management review is where the rubber plans? Did you cancel or postpone a planned
meets the road. In this review, your manager will training event?
ask the hard questions to determine if you are Your budget-to-actual comparison should
aligned to the organizational strategies, padded tell the story of your training department for the
the budget, or have inconsistencies or duplication period under review. If you do not understand
of functions that will result in inefficiencies. If why you have a budget variance, get the details
finance has blessed your numbers, it will certainly for this line item and talk to your finance liaison.
help during the management review process. Determine whether the variance resulted from
However, if your budget is too high in comparison an accounting error, a change in plans, or a
nonrecurring situation.

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 11

 TIPS FOR DEFENDING YOUR BUDGET
• Know your audience. What are your manager’s expectations for the budget? What about his or her manager?
Ascertain how management likes the information to be presented. Do they want to see the big picture, or will they
delve into the details?

• Tie your resources to specific programs and initiatives. In this manner, you will be able to specifically defend
the budgeted amounts for a particular program and explain how budget cuts will affect the training programs for
organizational initiatives.

• Don’t sweat the small stuff. Focus on big-ticket items. But be careful! Some line items, such as travel or donations,
may not be significant, but they are highly scrutinized. Know which line items will be subjected to a thorough review
regardless of the budgeted amount.

• Document, document, document. You will need this information to answer questions during the review process.

• Know your numbers. You should be able to discuss your budget without using the phrase “I don’t know” or “I will get
back to you.” No one should be able to explain the numbers better than you!

• Prepare for the review. Have your finance liaison or a colleague ask you hard questions on your work plan or
budgeted figures.

• Avoid getting defensive. You have put in a lot of work. Do not get defensive if your manager questions your work plan
or your numbers. This type of situation can quickly deteriorate into a nonproductive and stressful discussion. Argue
your case with data and facts, not opinions or speculation.

• Have a Plan B. Be ready to present alternatives if you are asked to reduce your budget by a certain amount. Anticipate
what areas or programs could be reduced and be prepared to discuss the organizational implications of these
budget cuts.

Be sure to tie your actual results to the

• Red means not started.
training programs and initiatives you have worked
on during the month. Use your key performance • Yellow means in progress.
indicators to analyze your actual spending in
• Green means completed.
relation to the training hours used or the number
of employees trained. Determine where you
need to take action to mitigate any variance in THE MANAGEMENT REVIEW IS A
the future or whether the variance should be NEGOTIATION PROCESS. AS THE
incorporated into the financial forecast.
You also need to establish a systematic BUDGET MOVES UP THROUGH THE
mechanism to monitor your progress against the ORGANIZATIONAL HIERARCHY,
work plan. In contrast to budget variances, this THE NUMBERS WILL BE SUBJECT
progress review can be done on a quarterly or
semiannual basis. Its purpose is to assess whether
TO MORE REVIEW AND SCRUTINY.
the department is on track with the work plan or
whether there are tasks that need to be added, The stoplight method can help you quickly
postponed, or eliminated. identify what progress has been made during the
Stoplight reporting is a visual tool that uses period and what areas you may need to focus on.
a stoplight metaphor to indicate the status of a A job aid at the end of this TD at Work can help
particular task:

12 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

you monitor the progress of your detailed work
plan using this method.

AS YOU GO THROUGH THE BUDGETING

PROCESS, DO NOT LOSE SIGHT OF
YOUR PRIMARY GOAL: TO OBTAIN THE
RESOURCES REQUIRED TO SUPPORT THE
ORGANIZATION’S BUSINESS NEEDS FOR
THE NEXT FISCAL YEAR.

CONCLUSION
“Most people don’t plan to fail; they fail to
plan.” This saying, attributed to John L. Beckley,
American author and businessman, accurately
sums up the key learning of this TD at Work:
plan first, budget later. As you go through the
budgeting process, do not lose sight of your
primary goal: to obtain the resources required to
support the organization’s business needs for the
next fiscal year. The detailed work plan for your
training department should underlie the budget
calculations and support the organizational
strategies and key business objectives.
Each organization typically has its particular
budgeting playbook, with detailed procedures
and templates on how to gather and report
information. This process can use simple
spreadsheets or more sophisticated planning
and budgeting applications. However, the best
technology will not compensate for a flawed plan,
no matter how accurate the budget calculations.
The ideas in this TD at Work will help you
plan, budget, and defend a training budget that
is strategically aligned to your organization. The
challenge is how to adapt this material to your
particular circumstances. The budget is not
something to fear, but represents an opportunity
to revisit the old and welcome the new. Happy
budgeting!

COPYRIGHT © ATD Preparing and Defending Your Training Budget | 13

 REFERENCES & RESOURCES

Books Harvard Business Review Staff. 2015. “The Right

Way to Prepare Your Budget,” Harvard Business
Brimson, J.A., and J. Antos. 1999. Driving Value Using
Review, July 20. https://hbr.org/2015/07/the-
Activity-Based Budgeting. New York: Wiley.
right-way-to-prepare-your-budget.

Bryson, J.M. 1995. Strategic Planning for Public and

Porter, M.E. 2008. “The Five Competitive Forces
Nonprofit Organizations. San Francisco: Jossey-
that Shape Strategy.” Harvard Business Review,
Bass.
January. https://hbr.org/2008/01/the-five-

Oliver, L. 1999. The Cost Management Toolbox: competitive-forces-that-shape-strategy.

A Manager’s Guide to Controlling Costs and

Sammer, J. 2011. “Successful HR Focuses on
Boosting Profits. New York: AMACOM.
Business First,” Business Finance, October 4.

Poister, T.H. 2003. Measuring Performance in Public

———. 2012. “Translating HR into Financial
and Nonprofit Organizations. New York: Wiley.
Performance,” Business Finance, September 16.

Porter, M.E. 1985. Competitive Advantage: Creating http://hrmanagementapp.com/translating-hr-

and Sustaining Superior Performance. New York: into-financial-performance.

Free Press.
Serven, L. 2017. “Is Forecasting Destroying Your

Steiner, G.A. 1979. Strategic Planning: What Every Planning Process?” Strategic Finance, July 1.

Manager Must Know. New York: Free Press. http://sfmagazine.com/post-entry/july-2017-is-

forecasting-destroying-your-planning-process.

Team FME. 2013. Pestle Analysis. www.free-

Articles and Reports management-ebooks.com/dldebk-pdf/fme-
Chartered Global Management Accountants. 2015. pestle-analysis.pdf.
Six Categories of Key Performance Indicators.
Durham, NC, and London, UK: Association of
International Certified Professional Accountants Video
and the Chartered Institute of Management
“The Explainer: Porter’s Five Forces.” Harvard
Accountants. www.cgma.org/resources/tools/
Business Review, January. https://hbr.
key-performance-indicators.html.
org/2008/01/the-five-competitive-forces-that-

Churchill, N.C. 1984. “Budget Choice: Planning shape-strategy.

Versus Control,” Harvard Business Review, July.

https://hbr.org/1984/07/budget-choice-
planning-versus-control.

Deloitte. 2016. Enabling Business Results With HR

Measures That Matter. www2.deloitte.com/
content/dam/Deloitte/us/Documents/human-
capital/us-hc-enabling-business-results-with-
hr-measures-that-matter.pdf.

14 | Preparing and Defending Your Training Budget COPYRIGHT © ATD

JOB AID

HOW TO PREPARE YOUR SWOT MATRIX

SWOT stands for strengths, weaknesses, opportunities, and threats. For our purposes, your SWOT matrix will look at
factors you will need to address in your next budget cycle.
qq Limit yourself to one page if possible, but no more than two.
qq Use a reasonable size font. Do not cheat by using a very small font size (10 point or below) to cram more
information in your document.
qq Start by picking the top three items for each internal and external factor.
qq Keep paring the list based on importance, until you get to a manageable number that can be summarized in 1-2
pages. A training-related example of a SWOT analysis is provided below.

OPPORTUNITIES THREATS
• Increased use of mobile technologies. • Aging labor pool, many of whom are not
technology savvy.
• Investment in training fluctuates with the economy
(currently on an upswing). • Millennials are more self-directed and can get
bored with structured training programs.
• Online learning is more cost-effective, flexible, and
convenient than live training. • Online training, particularly MOOCs, has a high
drop-off rate and requires constant follow-up.
• Mentoring and coaching can complement online
or instructor-led training. • Limited availability of L&D expertise to produce
technical content.
• Use of social collaboration tools to promote just-in-
time learning. • In-house technical resources with good
facilitation skills have limited availability.
• Employees and business professionals have limited
time available to attend live training seminars.

• Companies are demanding increased leadership

skills for exempt employees.

STRENGTHS WEAKNESSES
• Business partner relationship with internal • Training programs are not evaluated based on
customers. business outcomes.

• Proprietary training content in critical business • Lack of alignment between training programs
processes. and organizational needs.

• Expertise in the design, delivery, and assessment of • New employee orientation program is too long
online programs. and too boring.

• World-class training facilities. • Lack of availability of in-house technical experts

to conduct training programs.
• Experienced in-house facilitators.
• Lack of resources to coordinate and follow up on
• Access to in-house subject matter experts.
training offerings.
• Active participation in professional associations
• Low ratio of hours used to hours available.
provides access to latest knowledge and industry
trends. • Lack of agile and user-friendly system to track
training hours.

ATD Press grants permission for the material on this page to be reproduced for personal use. Preparing and Defending Your Training Budget | 15
 JOB AID

A SAMPLE BUDGETING EXPENDITURE CHART

This sample chart can aid in budgeting your training program by major program or initiative.
Under each column, list those costs that you can directly trace to that particular program. Put any shared resources
under the General and Administrative Support column.

SPENDING CATEGORY Program Program Program General and Total Spending

Managerial and Compliance Business Administrative
Supervisory Processes Support
Salaries and fringe benefits
Professional services

Course development

Training materials

Multimedia production

Promotional materials

Equipment rentals

Facilities rentals

Educational software
licenses
Software licenses

Dues and subscriptions

Office supplies

Travel expenses

Donations

Total

% of Total

16 | Preparing and Defending Your Training Budget ATD Press grants permission for the material on this page to be reproduced for personal use.
JOB AID

HOW TO DOCUMENT AND TRACK YOUR WORK PLAN

The template on the following pages can help you document your work plan and track its progress. The headings and
the information required under each are described below:
• Strategy. Enter the organizational strategies that affect the training department and that you will be expected
to support.

• Action plan. Enter the specific actions that support each strategy.

• Responsible. Enter the name(s) of the person(s) accountable for completing this task.

• Status. Use stoplight reporting to indicate the status of the task: green (completed); yellow (in progress);
red (not started)

• Metric/KPI. Enter how you will measure the progress of this task or when it is considered completed.
The measure can be qualitative or quantitative.

• Fiscal Year. Enter the fiscal year.

• Q1/Q2/Q3/Q4. Mark with an X the quarter in which you expect this task to be completed. If it is ongoing, enter an
“X” in all the boxes. You also can enter a specific date or month if you prefer.

ATD Press grants permission for the material on this page to be reproduced for personal use. Preparing and Defending Your Training Budget | 17
 JOB AID

Date Prepared: XX/XX/XX

Last Revision Date: XX/XX/XX

ORGANIZATIONAL METRIC/ FISCAL YEAR: XXXX

ACTION PLAN ACCOUNTABLE Status
STRATEGY KPI Q1 Q2 Q3 Q4

Conduct a pilot project

using continuous
Pilot
improvement to
completed,
reduce new employee A. Smith X X
new employee
orientation time without
errors
sacrificing program
effectiveness.

Review compliance
training program to
reduce the number of Number of
N. Johnson X
errors that generate errors
a nonconformance
Reduce costs report.

Define business Outcomes

outcomes for each defined and
J. Hill X
major training program agreed on
or initiative. with client

Establish assessment
process to measure Process
effectiveness of training J. Hill designed and X
program in achieving implemented
business outcomes.

Analyze results and Report and

determine actions J. Hill follow-up X
required. actions

Identify training needs

Needs
for senior leadership
T. Jackson assessment X
team and their direct
completed
reports.

Build capabilities Develop training

of our leaders and program for senior
Curricula
technical experts. leadership and their T. Jackson X
approved
direct reports based on
needs assessment.
Design and implement Percent
management training T. Jackson managers X
program. trained

18 | Preparing and Defending Your Training Budget ATD Press grants permission for the material on this page to be reproduced for personal use.
JOB AID

ORGANIZATIONAL METRIC/ FISCAL YEAR: XXXX

ACTION PLAN ACCOUNTABLE Status
STRATEGY KPI Q1 Q2 Q3 Q4
Review training
procedures and identify
Review
areas for improvement M. Dueñas X X
completed
with no systems
automation.

Strengthen our Ensure all procedures

Completion by
administrative are flowcharted and M. Dueñas X
due date
systems and properly documented.
infrastructure.
Identify and
Solutions
implement automation
implemented;
opportunities to O. Mation X
benefits
improve training
obtained
recordkeeping.

ATD Press grants permission for the material on this page to be reproduced for personal use. Preparing and Defending Your Training Budget | 19
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