Cost Structures for L&D revolve around three general categories: personnel, technology, and overhead. Programs that rely heavily on research and development ahead of time are usually personnel intensive. When programs need to deliver skills and information quickly and/or in high volumes, this generally raises technology costs. And programs that need their own physical space (or even their own real estate) will tend to have high overhead line items.
Of course, these categories are sometimes no more than wish-lists. When in a vendor relationship with your customer, you’re often dictated a budget and asked to produce within it. There is nothing wrong with this setup, but if you’re hoping to undertake a major initiative or transition to an entirely new learning model, L&D has to credibly establish what the costs for the change will be and tie them to improved business outcomes.
Credibility is the key for an L&D department to make the jump from a vendor relationship to a strategic-level, consultant relationship. If you can prove that L&D can deliver on Business Outcomes within an agreed budget, you’ll ultimately have more leverage to fight for your programs’ costs in the future.
Speaking the Language
I’ve mentioned before that one of the LMC’s best uses is as a conversation starter, introducing the benefits and challenges of a learning model to executives. Don’t be surprised when most of those executives zero in on the Cost Structure section; it’s their fluent language, and you have to be able to speak it as well if you want your arguments to move them.
In your presentations to upper management, be sure to include as much detail as possible about the known costs, connecting specific amounts to their effect on the other aspects of the LMC. Make executives aware that if they are asking for significant changes in results, it will take significant structural changes that will translate into X dollars of budget. Take after your counterparts in the sales department and practice overcoming cost-related objections by demonstrating the kind of value that resonates with your audience or making mutually agreeable tradeoffs.
Connection to the Learning Models
We know that some learning models rely more heavily on specific types of resources than others, and they match up roughly to the cost categories outlined above. Models emphasizing Skills Development can require hands-on training and facilitation, which likely means personnel-intensive cost structures. Technology-heavy cost structures are often found in Performance Support and Innovation models. And while most learning units will have some overhead costs, that is especially true of the University model when a physical, on-site corporate U is involved. If you can anticipate where the costs for a new learning model will rise, executives will have more reason to trust your judgement regarding Cost Structure going forward.
Though it’s the last component of the LMC we’re covering, don’t discount the importance of Cost Structure. Often, it’s the first thing upper management want you to address and can cut short a conversation if it’s not to their liking. But learning how to plan for costs and communicate them to executives can actually turn your balance sheet into ammunition for protecting L&D’s budget. Starting next week, I’ll start shifting gears from theory to practice. Up to this point, we’ve just touched on understanding L&D’s place in the business, but now it’s time to learn the ins-and-outs of selling L&D’s strengths to learning stakeholders. If you have questions about any of the LMC’s components and are ready to start one of your own,drop me a line or leave a comment below.
As I mentioned, if you are in a vendor-style relationship with your customer, you may be put in the position of working within the terms of a set budget. While not ideal, a learning unit can still adapt to cost restrictions if given leeway on Design, Delivery, and other components in which tradeoffs can be made. But if executives are demanding large-scale, Business-Outcome-level changes while keeping you on the same (or reduced) budget, be sure to put your foot down. This would only set yourself up for failure, and nobody will be happy with the results. If management wants to drive the Tesla, they have to be willing to pony up for more than a scooter.