Establishing a UX Budget

“I collected these ratios between 2011 and 2012, so they are about four or five years old now. Plus, these ratios go up and down over time, depending on how favorable things are for User Experience at a company, at a particular time. You can see that there is pretty significant variation across these companies. Enterprise software tends to be more complex; therefore, it seems to require more engineers.

“The most important part of determining the proper ratio between Engineering and User Experience at your company is figuring out a rationale for any given ratio that will work within your company. Good luck!”

“Aim for the sky and be happy with wherever you land,” advises Ben. “In a large organization, one-third to one-quarter of the entire budget would be fantastic. However, the reality of what I see as an outside consultant is typically much, much less. It takes a great amount of time to understand your users, their contexts of use, painpoints, and goals, then deliver your research findings throughout an organization. Once you receive some level of financial support, be sure to continually deliver value—big ideas, small tweaks, and everything in between—and standardize the UX process into repeatable steps.”

Basing the UX Budget on the Overall R&D Budget

“It sounds like you’re probably talking about an organization that sets its R&D budget as a percentage of revenue or some other metric,” answers Jordan. “Many companies have flexible R&D budgets that they can raise or lower to accommodate their upcoming initiatives. This is my preferred method of establishing an R&D budget.

“Devoting a certain dollar figure to R&D often either results in waste or acts as a constraint. Various technology companies invest greatly differing percentages of their revenue in R&D. For example, in 2015, Facebook reportedly spent 21% of their revenue on R&D, while Apple spent only 3%. But bear in mind that 3% of Apple’s revenue is still significantly more money than 21% of Facebook’s revenue.

“The crux of your question is determining what resources your company should allocate to User Experience. I have a few problems with the question. User Experience should be an integral part of each development project, and leadership should encourage each core discipline to accept some ownership over the user experience. Also, organizations in different industries and of different sizes and levels of maturity all approach R&D differently. For example, Facebook undoubtedly spends more R&D dollars on UX-focused projects than a consumer packaged goods (CPG) company would. Most software-development projects allocate about 20% of the total budget to experience design, which is a rough rule of thumb. However, I’ve worked on certain projects that were 100% experience design and others that were 1% experience design.”

“To implement a true user-centered design process, I recommend that clients allocate roughly a third of their budget to UX research and design,” says Mark. “In a large organization, there is much more to consider than just a rough percentage. You need to understand the impacts that introducing user-centered-design practices to an organization will have on people, processes, tools, and data—to name just a few.”

Partner with the Finance Department

“If you have a partner or representative from Finance who you can talk with, I would start there,” recommends Lisa. “Ask them for a rundown of your organization’s or your team’s spending on User Experience in the previous year.

If User Experience is new to the organization, you should take the time to get a sense of the company’s accounting practices and understand how they budget headcount, travel, entertainment, and training for full-time employees, as well as contractor dollars. Are you responsible for a budget that includes all of these, or do some fall into a different budget—maybe that of your boss or a larger department? The answer to this question defines the categories of budget items over which you’ll have more say, as well as how much budget you’ll receive. Of course, if your budget items are part of a larger budget, you’ll still need to understand the decision-making process and how you can influence it—another reason to work with Finance.

“You’ll also need to look at your roadmap or plan for the coming year and, on that basis, determine what kind of activities your UX team will be doing to support that plan, as well as what money you’ll need to spend on those activities, beyond full-time staffing. In my experience, my biggest sources of variable costs are for user research—both recruitment and incentives; software tools—purchases and subscriptions; and contractors and vendors. There may also be an education component that you’ll need to explain. Be sure to inform the folks making the final budgeting decisions why you are asking for a budget that would meet your team’s particular needs. For example, you may need to explain what value user-research spending would bring to the company or why your team needs particular software tools to aid their design and research efforts.

“I also recommend that you get an understanding of how your UX team gets funded. This is important to know because it can help you navigate the right relationships in your organization and may also mean that you need to justify your budget using different reasons for different people. For example, your UX team might be centrally funded by the business or a service that other departments pay for. Each budgeting approach comes with its own pros and cons, with which you’ll need to become familiar.”