HR Best Practices: Getting Budget for your Key Initiatives

It’s that time of year again! The calendar year is almost over, and 2021 planning is on your mind. You’re interested in rolling out an HR program or technology that will help move your organization forward. The next step is to procure funding for your new program. But what’s the best way to approach your finance leader and make the ask? What kind of information is most important to these stakeholders? Our Q&A with Reflektive’s CFO Travis Wentling and Senior Finance Manager Jason Lau – both with experience at Reflektive and past companies such as SiteCore, NetApp, and Mixpanel – includes tips that help you make a compelling business case.

What is top-of-mind for you when considering requests for funding?

There are 4 questions I ask myself when a colleague submits a budget request:
– Is this project aligned with our company’s strategic objectives?
– Is the project cost-neutral, or does it create cost savings?
– Is there a one-time cost or a recurring cost we need to account for in future quarters?
– How long will it take before we see the positive impact of this investment?

What types of HR projects are you most likely to support?

In my experience, finance & HR teams work very closely together and a strong partnership is critical. I actually think about “HR projects” as people initiatives that aim to retain and engage our people. I meet weekly with our CHRO, so decision-making is a partnership rather than a standalone ask that I’m not aware of in advance. I highly recommend the heads of HR and finance to meet regularly.  

In my view, there are three core areas of HR and all typically require investment.
– Building a strong HR foundation (HRIS, benefits, compliance, etc).
– Recruiting (ATS)
– Developing and growing our employees (L&D, Performance Management, Recognition, etc)

I’m most likely to approve budget requests for programs and projects that fall into these categories.

How do you decide to fund HR initiatives?

I try to understand what problem the initiative is aiming to solve. Two problems that are top of mind for me are:
– Automating and scaling a manual process today (i.e. time and money HR spends on manual tasks that can be streamlined and improved)
– Attrition risk

For the “time and money” pain point, I can see a very compelling case if our Head of HR tells me that her team member is spending 33% of her time managing compensation analysis instead of something more important like coaching and developing our managers across the company. In my opinion, that’s not a good use of company resources. I’ll calculate what 33% of her salary is and if the HR leader can tell me that there’s a solution that costs less than this amount, and enables her team to focus on strategic projects, I’m pretty likely to say yes!

Attrition risk is also really important to us. This is because employee churn is so costly. Per Gallup, the conservative estimate for replacing an employee is one-half to two times the employee’s annual salary. Tools and programs that allow us to understand attrition risk – and hopefully prevent it! – are really valuable for us.

Oftentimes, HR teams don’t have extra budget to invest in new programs. What are some ideas on how I can get funding?

Labor costs – including employee salary and benefits – are one of the biggest line items for companies. They can account for as much as 70% of total business costs. When roles are not backfilled right away, this delay creates a budget surplus you may be able to tap into. Though headcount is a fixed cost, some finance business partners are willing to reclassify budget to variable costs to fund your HR initiative.

It’s also important to highlight future cost savings by investing in a solution today. Although there may not be any budget available now, it still might make sense to invest dollars upfront to avoid the need for future headcount.

Finally, budgets can also be combined across functions. HR leaders should partner closely with the heads of other functions to help them understand the value of the initiative and see if there is a way to jointly fund the initiative across two or more functions.

How should HR professionals request funding from finance leaders?

There are several ways to put your best foot forward in asking for funding:

Build a strong business case: Finance people are skeptical! Don’t oversell your program. Come in with a crisp, clean story on why you need something and what it will accomplish. Linking your ask to a strategic corporate initiative will also increase your chances for success.
Share data: Any information is really valuable to us. For instance, share metrics on attrition at our company versus the industry average. Or if your desired software tool has helped companies save 100 hours of HR time, we would love to know that too.
Do your homework in advance: Share with your finance colleague that you’ve looked into multiple vendors. Let them know the solution you’ve selected, and why you’re recommending it.  
Keep in mind your company’s budgeting cycles and timelines: Ensure you have ample time to share your proposal with your finance partners in advance of their budgeting process.
Share your rollout plan: Let us know when employees will start using your program or tool, and any key activities that need to be completed. This helps bring your program to life, and indicates that you’re taking a thoughtful approach to your program.
Try to offset the costs: This may be easier at larger companies. But if you can say, “We’re saving $X on this, so I’d like to direct that budget to my proposed initiative instead,” it becomes a lot easier to fund the investment.
Help us get comfortable with your proposed program: Share any helpful tidbits about the initiative or software that you’re recommending. For instance, if you’ve used the tool before, or have former colleagues who work at the company, I’ll be more comfortable spending money on the technology.
Partner with IT for new software investments: Your IT team will explore what is required to deploy the technology, and flag if there are cost, security or other concerns. They will also explore viable alternatives already available to you. For example, we have two project management tools at our company: one used by product and engineering, and another used by our front-line business teams. While we did push back on having two similar tools, we ultimately decided that supporting different use cases was worth the investment. It would be challenging for someone to request a third project management tool, though!

We have a template to help folks make a compelling case for their project.

Final question: When is the best time to ask you for funding?

Earlier is always better! It can take time to get the buy-in and approvals needed for any large project.