Strategic Thinking For 2025 – Let’s Talk Budgets!
As 2025 approaches, it’s time for business owners and HR teams to start thinking about the upcoming year’s budget. Effective budget planning is crucial for aligning with your strategic goals and ensuring your financial resources are used wisely. Here are some key steps and best practices to guide you through the process:
1. Define Your Business Goals
Begin by clearly defining your business objectives for the coming year. Ensure that your strategic plans are aligned with the company’s overall direction. Identify your top priorities and align your HR goals to support these objectives. This alignment will help ensure that your budget supports and drives your business strategy effectively.
2. Review Past Budgets
Data is your best ally in creating a data-driven HR budget. Start by analysing last year’s budget to identify trends and patterns. Look into any unexpected spikes and understand their causes. This analysis will help you establish a baseline budget for the upcoming year. Consider factors such as seasonal changes, inflation, and economic conditions to refine your projections.
4. Establish a Budget Framework
Decide on your budgeting method: zero-based budgeting, where every expense must be justified from scratch, or incremental budgeting, which involves adjusting the previous year’s figures. Distribute your budget across key HR areas based on your earlier analysis and strategic objectives.
3. Plan for the Unexpected
To safeguard your business against unforeseen events, allocate funds to a contingency reserve. This reserve can help mitigate the impact of project delays, economic downturns, or natural disasters. The COVID-19 pandemic is a recent example – it’s crucial to be prepared for any potential disruptions.
4. Collaborate and Strategise
Budget planning shouldn’t be a solitary or solely HR-driven process. It’s essential to collaborate with other departments to ensure the budget reflects the needs of the entire team. Gather insights from different stakeholders about their requirements for the coming year. Circulate a draft of the budget for feedback to identify and address potential issues. This collaborative approach fosters alignment and buy-in across the organisation.
5. Eliminate Redundancies
In larger organisations, inefficiencies often arise from redundancies such as duplicate processes, overlapping roles, or unnecessary expenses. Conduct regular budget reviews and performance evaluations to identify and eliminate these redundancies. Streamlining your operations will free up resources for more strategic initiatives and cost-saving measures.
6. Embrace Continuous Improvement
Creating a great budget is an ongoing process. Regularly review and update your budget to reflect changing conditions and new insights. This continuous improvement approach helps you stay on track and adapt to evolving business needs.
Key Budget Considerations for HR
Recruitment Costs: Budget for job postings, recruitment tools, and new hire training.
Salary and Wages: Ensure fair compensation to attract and retain top talent. With upcoming pay transparency regulations, a pay evaluation is crucial.
Benefits: Invest in benefits packages that enhance employee satisfaction and well-being.
Training and Development: Allocate funds for employee growth and development. Investing in your team is essential for retaining and nurturing the talent that drives your business forward.
Technology and AI: Budget for technology and AI tools that enhance efficiency and engagement. Ensure that AI implementation, including chatbots and data processing tools, is factored into your budget. Prioritise AI governance and data privacy to protect client information.
Insights for 2024 and Beyond
According to Gartner, HR technology was a top priority in 2024 for improving processes. Learning and development also gained prominence as a response to talent shortages. Forbes highlights that while the talent shortage is a significant concern, 55% of CEOs plan to increase hiring, and only 7% of small and medium-sized business CEOs expect to reduce their workforce. This reinforces the need to focus on talent acquisition and development.
Looking ahead to 2025, AI and AI governance will be crucial budget considerations. Ensure that the costs associated with AI implementation and data privacy measures are included in your budget to maintain client trust and data security.
By following these steps and keeping these considerations in mind, you’ll be well-prepared to create a budget that supports your strategic goals and positions your business for success in 2025 and beyond.
