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Establishing a UX Budget

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A column by Janet M. Six
May 22, 2017

In this edition of Ask UXmatters, our expert panel considers some different approaches to establishing the budget for a UX team within a large organization. In particular, we consider the pros and cons of using a ratio model for funding User Experience and how to define a UX budget as a percentage of the research and development (R&D) budget.

In my monthly column, Ask UXmatters, experts answer our readers’ questions about user experience matters. To read their answers to your question in an upcoming edition of Ask UXmatters, just send your question to: [email protected].

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The following experts have contributed answers to this edition of Ask UXmatters:

  • Mark Baldino—Co-Founder at Fuzzy Math
  • Lisa deBettencourt—VP, Design, at Confer Health; Adjunct Lecturer at Northeastern University; Founding Director of Interaction Design Association (IxDA).
  • Ben Ihnchak—Co-Founder at Fuzzy Math
  • Jordan Julien—Founder of Hostile Sheep Research & Design
  • Christian Rohrer—VP of Design, Research, and Enterprise Services at Capital One

Q: I need to establish a UX budget as a percentage of the research and development budget for a large, established organization. Where do I start? Are there good rules of thumb?—from a UXmatters reader

“I have an answer to this question, but before going into it, I have to point out that there is a risk in using a ratio model for funding User Experience,” replies Christian. “When you do so, it may cause you to assume that you need User Experience to be part of every project you’re doing, thus putting the function on a treadmill that requires you to meet the unending demands of development. The resulting focus on execution makes it harder to use User Experience to solve strategically important issues. This, in turn, means you can’t attract top talent or retain people as well as if you were to use the function more thoughtfully. If you can find a way to fund User Experience according to the strategic outcomes you are after, that is much healthier approach. This may require a more advanced stage of UX maturity than your organization is ready for, however, so the ratio model may be the only way to go for a while. Just be aware of where it leads.

“Considering where to start when determining a UX budget as a percentage of the overall research and development budget, Table 1 show ratios between Engineering—including all Engineering functions—and User Experience—including all specialties—from a few large software companies.

Table 1—Staffing ratios between Engineering and User Experience
Company Ratio of Engineering to UX Percentage of Development Budget for UX Software Markets

Adobe

8:1

12.5%

Consumer and enterprise

SAP

60:1

1.66%

Enterprise

Salesforce

12.5:1

8%

Enterprise

Intuit

13.33:1

7.5%

Small business

McAfee

35:1

2.8%

Consumer and enterprise

“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.” 

Principal at Lone Star Interaction Design

Dallas/Fort Worth, Texas, USA

Janet M. SixAs Principal of Lone Star Interaction Design in Dallas, Texas, Dr. Janet M. Six helps companies design easier-to-use products within their financial, time, and technical constraints. For her research in information visualization, Janet was awarded the University of Texas at Dallas Jonsson School of Engineering Computer Science Dissertation of the Year Award. She was also awarded the prestigious IEEE Dallas Section 2003 Outstanding Young Engineer Award. Her work has appeared in the Journal of Graph Algorithms and Applications and the Kluwer International Series in Engineering and Computer Science. The proceedings of conferences on Graph Drawing, Information Visualization, and Algorithm Engineering and Experiments have also included the results of her research. Janet is the Managing Editor of UXmatters.  Read More

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