Human Capability Building for Tech & PE Leaders
ARTICLE
Most advice about maximizing L&D budgets focuses on simple
cost-cutting, but that's exactly the wrong approach for most
tech companies.
According to ATD's 2023 State of the Industry report, organizations across industries invest an average of $1,297 per employee annually in development programs. Based on my experience with B2B tech companies, this number typically pushes above $2,000 for key roles like managers and leaders, particularly when including specialized training and certifications. However, spending more doesn't automatically translate to better business outcomes.
The challenge isn't necessarily how much you spend – it's how wisely you deploy your resources.
I see L&D teams sub-optimize their budget for five primary reasons:
Take a moment to reflect and assess which patterns are most relevant to you.
Let's explore a budget optimization framework that identifies opportunities to maximize your L&D budget and impact while avoiding the above unnecessary, costly, and career-limiting mistakes.
The budget optimization framework is oriented around three specific opportunity areas:
Let's explore each opportunity area in detail, starting with strategy - where small changes in approach can create significant impact. Then we'll examine internal solutions that maximize existing resources, and finally, look at how to optimize external investments.
Many b2b tech companies make strategic L&D decisions based on historical patterns and stakeholder requests, often missing emerging needs that aren’t readily apparent in last year’s data.
Maximizing the impact of your L&D budget requires three core capabilities that are common sense but not common practice. Simply put, you need a structured way to evaluate investments, accurately forecast future needs, and measure impact in ways that drive decisions. Without these capabilities, even substantial
budgets often fail to deliver expected returns.
Let's examine each opportunity in detail.
Zero-based portfolio planning means starting each budget
cycle fresh, requiring every program and the associated
investment to justify its existence based on current and
anticipated business needs.
The cost of not doing this is substantial.
Research suggests that many tech companies invest in programs that no longer align with business priorities. In our experience working with b2b tech companies, we have seen that this misalignment often affects 20-30% of the L&D budget. Adding to this cost is the opportunity loss when critical new capabilities go underfunded while legacy programs continue unchallenged.
Don’t make this mistake.
Implementing zero-based portfolio planning starts with three essential questions:
Implementation often faces resistance, particularly from engineering and product leaders who've invested in existing programs.
One tech-enabled services company used zero-based budgeting to revamp their manager development programming, resulting in a streamlined program that is better aligned with the needs of
the managers.
The firm saved almost $200,000 USD and could reallocate those funds to other areas.
Modern human capability forecasting identifies the distinctly human mindset, skills, and behaviors necessary for organizational success.
To create your forecast, combine business strategy, workforce data, and analytics to predict capability gaps before they impact performance.
When companies skip this vital forecasting exercise, they often realize they need critical skills 6-12 months too late. This leads to rushed program development, premium-priced external solutions, and missed business opportunities.
Start with your company's 18-month strategic roadmap. Then, build your forecast by:
Effective impact measurement focuses on business outcomes first and learning metrics second.
Most L&D teams track completion rates, satisfaction scores, and other learning-centric metrics. While useful, these measures don't help you optimize budget allocation or demonstrate business value. Leading practices focus instead on raising learners' confidence, time-to-productivity, and direct business impact.
However, the lack of effective metrics hurts your ability to prioritize your budget. Don’t let this happen again.
Begin by selecting one critical program and redesigning its measurement approach. Partner with business leaders to identify the 2-3 metrics proving the program's value, then build simple dashboards that track these outcomes over time.
For example, a semiconductor company measured their leadership program's impact through three metrics: time-to-promotion for new managers, team retention rates, and project delivery predictability. This focused approach helped them demonstrate a clear connection between development investments and business outcomes.
Then, use the refined impact measures in your upcoming budget allocation process.
These are the essential strategic opportunities to explore:
zero-based budgeting, precision needs forecasting and
impact measurement.
While strategic planning sets direction, your internal capabilities determine how effectively you can execute. Let's examine how to maximize the impact of your existing resources.
Tech companies often struggle to distinguish which development needs are best met through internal solutions versus external partnerships. Don’t make this more complicated than it needs to be.
The key is to identify moments or circumstances when internal solutions create unique value.
In general, the opportunities include things like subject matter expertise networks, peer learning, and operational efficiencies.
When you get this right, you can focus your external investments where they matter most.
Subject matter expert networks excel at transferring contextual knowledge - the kind that's specific to your products, technologies, and ways of working.
Without effective SME networks, critical institutional knowledge remains isolated, leading to repeated problem-solving and slower onboarding. You don't need external providers to harness your people's intelligence - instead, focus on creating structured ways to share knowledge.
You can create your SME network and mentorship opportunities by:
The most effective sharing mechanisms vary by knowledge type:
The sharing mechanism needs to be well-thought-out but doesn’t require much or any budget.
The most valuable learning often happens during actual work - in team meetings, design discussions, and project debriefs.
Peer learning enables individuals to learn from each other, allowing them to share knowledge, perspectives, and experiences to deepen their understanding of a topic through collaborative activities like discussions, group projects, or mentoring partnerships.
When companies rely too heavily on formal training for these areas, they miss opportunities to capture and amplify natural learning moments. The key is identifying where peer learning already happens effectively and creating simple structures to expand
its impact.
You can implement peer learning through:
Peer learning efforts can focus exclusively or on a combination of business, leadership, and domain-specific topics.
Strong internal operations ensure your internal and external development investments deliver consistent results.
Weak operational processes lead to fragmented learning experiences, inconsistent quality, and wasted resources. More importantly, poor operations make it harder to identify which development needs truly require external expertise.
You already know how to build operational excellence, but it’s worth repeating:
With your strategic foundation and internal capabilities aligned, it's time to focus on where external investments can accelerate your impact. Let's explore how to be more selective and strategic with these investments.
Most tech companies maintain too many external partnerships, leading to fragmented solutions and wasted resources. Let's explore how to be more selective and strategic with external investments.
The difference between a vendor and partner is more than semantics. Vendors sell what they have. Partners help solve
what matters.
Don't place all the blame on external firms. Too often, L&D teams create barriers to effective partnerships through their own
approach and mindset.
You can build stronger partnerships in the following ways:
Sometimes, you're solving problems that require external
expertise - particularly in areas experiencing rapid change or
where internal build-out isn't time or cost-effective.
Many companies make two mistakes with external expertise:
they either try building everything internally, slowing their
progress or they over-rely on external experts without
developing internal capability.
The key is finding the right balance.
External expertise creates the most value when focused on specific situations:
Remember, the goal is to solve an immediate challenge and to transfer knowledge in ways that build your team’s internal
know-how.
Start with clear outcomes in mind, then source specialized expertise that delivers both immediate impact and long-term value.
Before investing in new learning technology, take a hard look at your existing tools and systems. Most companies have more learning technology than they effectively use.
Many L&D teams fall into the trap of adding new tech-enabled tools before maximizing current investments.
This creates unnecessary complexity, increases costs, and often frustrates learners navigating multiple systems. It’s common for companies to discover they already have powerful features within their existing development environment.
You can build your technology strategy around three key principles:
One enterprise software company discovered their engineering team was only using 30% of their existing learning platform's capabilities. By fully activating features like peer assessments and skill tracking, they improved program completion rates without additional technology investment.
The most effective learning technology strategy integrates learning into the platforms and processes your teams already use successfully.
Many L&D leaders feel pressure to do more with less. But the real opportunity isn't about spending less – it's about investing more strategically.
Start by choosing one area where you can demonstrate impact within 90 days:
The goal isn't perfection. The goal is progress. Each improvement builds momentum and credibility for broader changes.
Remember: You're not just managing a budget – you're building your organization's future capabilities. Make every dollar count by being strategic about where you focus, intentional about what you build internally, and selective about where you seek external support.
What's your first move?
Benchmark your approach against leading tech companies.
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Practice Lead, People & Organizational Performance
Over the last three decades, Mike has helped global technology companies build human capabilities at scale, guiding 50+ organizations through talent transformation - from high-growth startups to industry leaders like Microsoft, Meta, and TSMC. As a former McKinsey & Company External Advisor and founder of SmartHabit, he specializes in helping tech talent leaders navigate the AI era with practical, scalable approaches to human capability building.
Benchmark your approach against leading tech companies.
Fresh perspectives on helping your people hit strategic targets. No consulting jargon – just real stories and practical tips you can put to work.
Fresh perspectives on helping your people hit strategic targets. No consulting jargon – just real stories and practical tips you can put to work.
