Developing a L&D Business Case

1. Developing a L&D Business Case

2. Session objectives Learn how to develop a financially strong L&D business case. • Understand current L&D spend trends • Recognize the priorities of the CFO • Review the fours stages of creating a business case Sources: Chief Learning Officer magazine, November 2012 Skillsoft course: Thinking Like a CFO: Preparing and Presenting a Business Case

3. Spend Trends in L&D • While budgets declined in 2008 and 2009, they have grown modestly since 2010 • 2013 budgets are expected to see a 6% overall average increase

4. Where will money be spent? Investments focus on the most relevant content delivered in the most scalable and cost-efficient way • elearning • Informal learning • Proprietary learning content • Leadership development content • Learning technologies (LMS, vILT, authoring tools) • Staffing • Outsourcing As you make appeals for business cases, keep these trends in mind

5. Priorities of the CFO • Identify cost control and optimization opportunities • Reduce volatility and risk • Manage cash flows • Increase value of investments • Weigh the financial benefits of strategic decision making

6. Four Stages of a Business Case • Define the business issue. • Analyze the alternatives and select the best option. • Prepare the business case. • Deliver the business case. Skipping or not fully addressing a stage will weaken a business case and reduce approval probability.

7. Stage 1: Define the business issue • Identify the business opportunity or problem to be solved • Create a succinct description of what your proposal will deliver • The objectives should help your organization reach its overall goals and be aligned with the priorities of senior management • An example may be “reduce operating expenses” or “increase talent capability” • Develop an opportunity statement • This describes the benefits of solving the problem or seizing the opportunity • For example, “Reduce HR budget and expand talent development to more employees.”

8. Stage 2: Analyze the alternatives and select the best option • Ask those closest to the issue for their ideas on possible alternatives • Research case studies of those inside and outside your field that have faced similar challenges and solved them • Collect information about each alternative • The goal is to weigh alternatives against one another in financial terms, intangible benefits, and risk level • For the financial terms, a Payback Period and pro-forma ROI are often used to compare • Payback period illustrates how long it will take to recover the initial investment • ROI shows the monetary impact your investment is predicted to yield

9. Payback Period Example • Example: elearning is being compared to an instructor led method of delivery to achieve cost and scale efficiencies

10. Payback Period Example Continued • Calculate the monthly cost of the current option: $1,200,000 ÷ 12 months = $100,000/month • Divide cost of the alternative by the monthly current solution cost: $1,290,000 ÷ $100,000 = 12.9 months to payback • Three year savings value: $3,600,000 - $1,290,000 = $2,310,000 • Three year savings percent: ($2,310,000 ÷ $3,600,000) x 100 = 64% • Average annual savings per employee: $1,462.50 • Opportunity savings could also be included by calculating the average reduction in training time for the participants • Number of additional employee served: 200/year

11. ROI Example • Example: Management program options are being considered to reduce turnover rate of front-line employees. Exit interviews indicate that poor management skills are a chief contributor to loss.

12. ROI Example Continued • Compute the net benefit (total benefit less cost invested) • $345,000 - $250,000 = $95,000 • Determine ROI = Net benefit/program cost • $95,000 ÷ $250,000 = .38 • Multiply by 100 to get a percentage • 100 x .38 = 38% ROI of 0% is the break even

13. Identify Intangible Benefits • Intangible measures are intentionally not converted to monetary values within your business case • Although they are not converted to monetary values, intangibles are still important to highlight within your alternatives • Examples: • Improved content consistency • More robust reporting • Real time availability • More variation in delivery methods • Reduction in carbon footprint • Improved employee engagement • Increased instructional quality

14. Define Risk • This section describes the dependencies and assumptions as well as the likelihood of risk to each alternative • Examples: • Scheduling • Staff resourcing • Regulations • Technologies • Stakeholder support • Supplies • Economy • Change acceptance

15. Select the Best Option Evaluate the elements to select the best alternative: • Financial outcomes • Intangible benefits • Risk level Ask other vested peers for their assessment

16. Stage 3: Prepare the Business Case • After analyzing the alternatives you will prepare the actual business case • The template you use to lay out your business case should have a simple and sound structure: • Executive summary • Current situation • Analysis & Recommendation • Conclusion

17. Executive Summary • The executive summary is the first section of a business case • The goal is to briefly summarize the proposal (e.g., 1 page or slide) • Executive summaries typically contain the salient points from each of the subsequent sections: • Current situation • Analysis & Recommendation • Conclusion • A strong executive summary aims to engage the audience's interest in reviewing the remainder of the proposal

18. Current Situation • Purpose is to clearly state the problem or opportunity facing your organization in a quantifiable way • Express success in terms that contribute to the strategic plan (especially your CFO) such as increasing revenue, decreasing costs, or minimizing risk • Discuss what is likely to materialize if the situation doesn't change

19. Analysis & Recommendation • Explain how your proposal solves the problem or capitalizes on the opportunity identified in the ‘current situation’ section • Summarize all the alternatives in a simple chart that encompasses the financial analysis, intangible benefits, and risks side-by-side • Use graphs to display the most powerful aspects of the suggested option

20. Conclusion • It’s important to close a business case as strongly as you began • In this section, succinctly recap the benefits of acting on the selected option in terms that support the organization's strategic goals • Consider including benchmarks to show how this compares to other “best in class” approaches • Outline the high level implementation milestones, target dates, and the responsible parties • Clearly flag the date when a decision should be made and what the implications are of not acting on or before that date

21. Stage 4: Deliver the Business Case • During this stage you “sell” your recommendations • Hone your persuasion and influencing skills • Rehearse with an informed, invested colleague • Plan the forum and format with care • Select the time, place and approach that suits the stakeholders best • Keep your presentation focused and concise • Avoid going into unnecessary detail and don't meander off the point • Be prepared to deal with questions that may arise • Have you ever implemented a similar recommendation? • What else might be needed that is not articulated in the business case? • What assumptions have you made that your stakeholder may not agree with?

22. Skillsoft has created a complementary template for an L&D business case

23. Questions & Answers

24. Thank You! Kieran King kking@skillsoft.com