Leadership development has been named HR’s top priority for a third straight year, according to Gartner, as cited by Training Industry and Blanchard’s 2026 L&D trends. A priority that holds for three years is no longer a trend. It is a standing commitment, and standing commitments deserve a hard look at where the money actually goes. For 2027 budgets, the most consequential decision is not how much to spend. It is who the spend reaches.
The case for moving spend to the front line
Gallup has found that managers account for 70% of the variance in team engagement. If that figure is even directionally right, it changes how a development budget should be allocated. A dollar spent improving a manager’s capability reaches every person on that manager’s team, every week. A dollar spent on a one-time executive experience reaches a small group once.
The market is already moving. The same trends sources point to a shift from executive-only retreats toward first-time and mid-level managers. Executive development still matters, but the center of gravity is moving to where engagement is created. Budgets should follow.
Build or buy: what 45% tells you
Forty-five percent of organizations plan to buy leadership development externally. That is a significant share, and it raises a practical question: what makes an external purchase worth it? Buying is reasonable when the provider brings facilitation skill, current content, and an outside perspective your internal team cannot easily supply. It is a poor choice when it is a way to avoid defining what you need.
Before issuing a request, decide which capabilities you are buying. Be specific. “Manager effectiveness” is not a specification. “Prepare first-time managers to deliver difficult feedback within their first 90 days” is. The clearer the target, the easier it is to judge whether the purchase worked. This is the same logic as the argument in measuring capability instead of completion.
Where 2027 budget should go
Here is the allocation logic I would defend in a budget review, ranked by expected effect.
- First-time managers. This group is promoted on individual performance and then asked to do a different job. Fund a structured program that extends well beyond onboarding, with real situations and time to practice. The reasoning is covered in why first-time manager development is the most neglected leadership investment.
- Mid-level managers. They carry strategy down and concerns up. Fund cohort-based development that gives them peers, protected time, and practice with the decisions they face most: prioritization, change communication, and managing other managers.
- Reinforcement after the program. Most programs fail in the months after, not during. Budget for follow-up: short practice cycles, peer sessions, and manager-of-manager involvement. This is the difference between an event and a habit, which I address in redesigning leadership development for daily reps.
- Executive development, tied to manager outcomes. Keep it, but connect it to the system. Senior leaders shape the conditions managers work in. Their development should include how they support, brief, and equip the managers below them.
What to stop funding
A budget is a set of choices, so name what comes out. Be skeptical of any program whose main output is satisfaction scores, any retreat with no follow-through plan, and any content library that no one is accountable for using. These are not worthless. They are hard to defend when the question is whether managers behave differently on Monday.
Define what success looks like before you spend
Because leadership development is the top HR priority, it will draw scrutiny. Finance will ask what the investment produced. Prepare the answer before the program launches. Choose a small number of observable outcomes tied to the capability you are building: whether managers hold regular one-on-ones, whether feedback is delivered in a timely way, whether team engagement and retention in the participant group move over the following quarters.
Avoid promising outcomes you cannot influence. Engagement depends on many factors. But if managers account for 70% of the variance, a credible link between development and team results is reasonable to expect and to track. The case for tracking the right things is made in why manager development has topped HR priorities for three years without moving the failure rate.
Questions to bring to your next budget conversation
- What share of our leadership development spend reaches first-time and mid-level managers?
- For the portion we plan to buy externally, what specific capability are we purchasing?
- What happens in the 90 days after a program ends?
- How will we know, one year from now, that managers behave differently?
The decision
Three years of top-priority status gives HR leaders unusual license. The risk is spending that license on familiar formats. The opportunity is to treat leadership development as operating infrastructure for the managers who shape engagement, and to fund it with the same discipline as any other core system.
Move the budget toward the people who hold the relationships. Define the capability. Plan for reinforcement. Measure behavior. That is a plan a finance partner can back and a manager can feel.
