Learning and Development: Shifting from Discretionary to Annuity-based Budget Funding
Against the backdrop of our knowledge and service based economy few leaders in the non-profit (NP) sector would disagree with the value of staff learning & development (L&D) opportunities as a basis of supporting mission success. The prevailing approach for L&D funding, however, works counter to this value proposition. Typically L&D budgets in small-mid size NPs are discretionary. It is usually one of the first line items to disappear in challenging economic times. The sector would benefit from shifting L&D budget funding from discretionary to an annuity-based approach.
The operating budgets of most NPs are tied to a few Funders. Disbursement of funds is primarily connected to program delivery with limited, if any, considerations for “operational” efforts like providing L&D opportunities. Currently, there is very little policy insights to suggest that Funders are shifting towards a more balanced funding approach vs the current program delivery focus.
Unlike Funders, organization effectiveness – which includes consideration of L&D – is a key Board governance focus. Board members are expected to contribute to mission success through their network connectivity and expertise. Furthermore, it’s not uncommon to expect Board members to make a financial contribution to the NP they are helping to steward. In some cases this expectation might help to sift through potential Board members that only want bragging rights for being on a Board. In other cases, it might act as an incentive to limit the term of “lifers” – who have been on the Board for longer than anyone can remember and whose skill sets no longer align with organization needs.
NPs should create an annuity-based L&D budget that is aligned with Board tenure. Given that L&D budgets are typically less than 5% of the human resource budget, contributions from each Board member over the course of their tenure can have a significant L&D budget impact. This funding stream could also be integrated with external sources (e.g. Employment Centres subsidies) to further reduce expected Board contributions. Annual L&D disbursements and Board reporting could be controlled through common governance policies (e.g. Executive Means/Limitations).
By disconnecting L&D funding dependency from operational budgets and creating an annuity-based funding approach, NPs will be in a better position to consistently address their talent management needs as well as related organizational risks (i.e. workforce productivity, employee engagement). They will also have enhanced program delivery capabilities.
By Dave Nanderam, Managing Partner, ASSOCIUM Consultants. Through our collaborative approaches, innovative HR products and customized advisory solutions we impact four leadership priorities: managing risk, driving productivity, strengthening talent capabilities and supporting your bottom line. Let’s connect to find out how ASSOCIUM Consultants can help your organization.