As a parent with young kids, I read a lot of children’s books (many of the same ones over and over again to the point of having them memorized). One of my two-year-old’s favorites at the moment is called Let’s Go for a Drive!, and I was struck as I was reading it for the hundredth time last night that it has an important lesson for business leaders as well as toddlers. It’s about an overly-anxious elephant who likes to make plans and his carefree friend, Piggie. Elephant suggests they go for a drive, recommends they make a plan and thinks through various things they may need for the drive—the plan includes bringing a map, sunglasses, an umbrella, and bags to put all the stuff in. The last piece of the plan is where things start to break down; Elephant and Piggie realize rather late in the planning process that neither of them has a car. Obviously, this changes the plan significantly.
What does this have to do with business strategy planning? There are 2 important lessons you can apply to your Annual Planning process:
1. Plan First, Budget Second
Creating a plan without the right resources to execute that plan will deflate your teams and will result in failure or having to make significant adjustments later. As we go into Q4, many companies are finalizing budgets for 2020. Don’t divorce the budget process from the Annual Planning process. You don’t want to go into your Annual Planning session with your budget for the year already locked down. Don’t put the cart before the horse or plan your drive without a car. Come up with your growth initiatives for the business for the year and then decide how to allocate financial resources to support that plan.
This sounds pretty obvious and intuitive, but many companies do the opposite. According to an article in Harvard Business Review, "In companies that poorly execute strategy, a staggering 60% do not even link their strategies to their budgets, guaranteeing a disconnect between commitments and resources."
There’s really no upside to doing the budget first. If you come up with Annual Initiatives that aren’t reflected in your budget, you’ll spend time and effort on reworking the budget, or you’ll forego a potentially important growth strategy for the year because you don’t have the right resources allocated. Making changes to the financial plan after the Annual Planning session can have also have an impact on morale and support for the Annual Plan, which are important components of executing the plan successfully.
Let’s say you decide this is the year to double down on your marketing efforts—hire new people, invest in different channels, etc. If you already budgeted the same spend for marketing as last year, now it feels like you have to take resources away from other departments to make the marketing priority happen. It’s going to be much harder to garner support for the marketing priority if sales and service feel like they are taking a financial hit because of it.
Ensure you don’t set your team up for misalignment, rework, frustration, or potentially limiting your innovative growth strategies by timing the budget correctly.
2. Have a Plan B
The other lesson from the book is about how to make adjustments. (SPOILER ALERT AHEAD!) When Plan A failed, Elephant and Piggie used all the “stuff” for the drive to create a pirate ship, and they still achieved their goal of having a fun afternoon in the end. So if your business Plan A goes off track at some point in the year (either due to lack of resources, changes in the competitive landscape, regulatory changes, or one of the million other things that could put your plan at risk), have a Plan B.
Creating Plan B for your big growth strategies is an important step to take at the beginning of the year. Unless you are like carefree Piggie in the story, it’s unlikely that your creative juices will be flowing in the moment of crisis when your plan goes off track. It’s much easier to be creative and think outside the box about potential Plan B options during your planning session, when the pressure isn’t quite so high.
Make a point to discuss a Plan B for any mission-critical Annual Priorities during your Annual Planning session with your team. Add this to your agenda, and be sure to push the team to brainstorm ways to hit the annual goal, even if the way you thought you’d get it done doesn’t work out.
Now that you’ve got some important insights from Elephant and Piggie, have a great Annual Planning session!
Looking for more Annual Planning Meeting information? Check out our additional resources:
Rhythm Systems Annual Planning Resource Center
Photo Credit: iStock by Getty Images