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Business Management

A young, Black female lab manager sits at her desk going through her lab's budget on a large computer monitor. She is wearing a yellow sweater and glasses.

Successfully Advocating for Investments in the Lab

Building a business case to improve approval rates for lab investments

Labs are expensive operations to run, requiring skilled staff and expensive equipment. Lab managers must constantly make decisions about what investments are required for the lab’s success, and advocate internally to drive acceptance and approval for those investments. To be successful advocating for investment in the lab, lab managers need to execute three different skills well—prioritizing the needs of the lab, developing an effective business case supporting the investment, and communicating the plan to various approvers.

“The first step to building an effective investment priority plan is to distinguish between needs and wants.”

Prioritizing needs

Labs contain a wide array of instruments, equipment, and tools, and most scientists would be happy to have more and newer lab items in the lab with which to execute their science. The first step to building an effective investment priority plan is to distinguish between needs and wants. Needs solve problems in the lab, like keeping people safe, protecting the quality of technical results, enabling the lab to meet its mission, and ensuring delivery for key customers and stakeholders. It’s reasonably easy to communicate the bad outcome if needs are not met. On the other hand, wants solve inconveniences like having newer, faster, better instruments, accessing updated software, providing the ability to explore a new idea, or making it easier to redistribute the lab work. It can be more challenging to understand what bad outcome will occur if a want goes unrealized. Many of the wants make the lab work more fun, or easier for the scientists, but don’t fundamentally change the lab’s ability to deliver.

Once the needs are recognized, even they need to be prioritized. Most labs are operating in a do more with less environment. Capital investment is limited, and lab managers need to make the best use of their capital budgets as possible, and cover as many needs as they can. One way to organize priorities is to compare them through their importance to the lab’s success and their urgency by using a form of the Eisenhower matrix. The highest priority items will have both a high importance and a high urgency.

The prioritization process requires the lab manager and the leadership team to make many decisions. These decisions can be aided by clearly defining the criteria, finding and ranking options, using data to make more informed decisions, discussing risks, and restricting the process to the reality dictated by the budget. Even though the process can be uncomfortable and difficult, the whole lab is relying on these decisions being made.

The prioritization outcome can then be converted into a three-year capital plan. Having a three-year evergreen plan enables the lab to show their fiscal responsibility to line management, communicate future investment goals with staff and customers, and manage emergencies by updating the plan. The capital plan can also feed future budget development, and be linked with annual maintenance and IT infrastructure plans to build accurate understanding of the costs of doing business for the lab.

Building a business case

The business case is the written proposal submitted to line management to gain approval for investments that are above the purchase authority of the lab manager. Unfortunately, most lab managers don’t learn how to create effective business cases. They learn from the denials they receive on important proposals. A business case has two main components—a text document that concisely describes the details of why the purchase is needed, what is needed, the benefits expected, and the risks. This document needs to be short and focused on the needs of the lab that are driving the proposal. The second document is a spreadsheet that contains all the financial data supporting the investment. This document is all about the numbers. It will contain the various costs required to purchase and operate the instrument, and the benefits derived from the investment. All of the arguments supporting the purchase need to be converted into currency units. Tangible benefits, like new customers, expanded market share, and faster turnaround times can easily be translated into currency. Intangible benefits, like modernization of the lab, replacing old instruments, or accessing updated software are more difficult to translate into currency units and require a true understanding of the lab’s operations.

“One of the key aspects of this decision-making process is trust.”

Two key elements of the business case are understanding the approval criteria and calculating a return on investment (ROI). Including the key elements of the organization’s approval criteria demonstrates an understanding of the process to line management, and prevents proposals that don’t meet the criteria from leaving the lab. Calculating the ROI shows line management what to expect as a financial return on their investment in the lab. This enables a clearer comparison with management’s other choices in the organization for investment. Lab investments can use different kinds of ROI calculations. A popular and useful form is to calculate the repayment time of the investment. For example, if a new chromatograph will cost $100,000 to purchase and install, and the lab manager expects to make an additional $12,000/month in revenue from the chromatography lab in increased test throughput, then the ROI for this purchase would translate to repayment in eight to nine months.

Communicating the plan

Once the business plan meets all of the internal purchase criteria, the lab manager needs to purposefully advocate with the approvers, who may be any or all of line management, finance, or purchasing. The key is creating a robust vision for the investment and communicating it to the approvers and their influencers. The vision will answer the questions about why this investment is important (always start with why), what problem will be solved, how much investment is needed, who benefits, and what risks and alternatives exist.

This vision needs to be communicated to both the people who have approval authority, and to the people who they go to for advice and guidance. It is important to understand who can influence the approval process and help gain acceptance for the proposal. It might require some research or guidance from other experienced lab managers to figure out with whom to communicate the vision. In the end, gaining approval is a political process. Politics is about making decisions in groups or organizations. These interactions are necessary, not evil. It’s not about playing politics; it’s about actively participating in a decision-making process.

One of the key aspects of this decision-making process is trust. Lab managers who bring solid business proposals, have delivered on previous proposals, and have a history of delivering on-time and on-budget are more likely to see their proposals approved. The key to being trusted is to be trustworthy, and the lab manager is asking to be trusted with a significant investment.

Advocating for investment in the lab can be difficult. Know what your line management needs to support you and give it to them in easily digested facts. Know that line management can’t have the emotional attachment to the lab and the science that lab managers have. Engage the decision-makers in discussion and help move them to a decision. If the initial response is denial, ask for feedback. The more you understand how the decision was made, the better your next proposal can be. If the response is approval, be prepared to execute the vision in a timely manner.