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Annual Planning: It's a Process, Not an Event

By Chris Cosper

    Wed, Jul 22, 2020 @ 11:03 AM Annual & Quarterly Planning

    A CEO has many responsibilities, and among the top is ensuring the company has a sound plan and annual planningbudget going into each new year. Seasoned CEOs have likely developed a trusted method for getting this done. Sometimes it’s as simple as estimating organic growth by applying a reasonable percentage to this year’s numbers and maybe adding additional revenue for a new product or channel. There might be a review of the current year’s spending by department to estimate the new year’s needs—adding a little here and cutting a little there—and, of course, there will be an Annual Planning Meeting that brings the management team together to have strategic discussions, gain alignment and hash out the details. As with anything, it’s easy to fall into the trap of doing things the same way year after year, especially if it’s been working for you.

    But what about this year? What are we to do in a year where everything has changed (and continues to change), where the trend lines don’t make sense, and where the current year’s plans have been put on hold? How do we plan for next year when we don’t even know what’s going to happen next week?

    This year, more than ever, we need to take an iterative approach to planning. Rather than thinking we can pull the team together for a few days in December and crank out a plan, we need to be agile and approach planning as a process, not an event.

    The time to start planning for 2021 is now, and the new virtual work skills you’ve gained this year will make it easy to plan early and plan often. Start by scheduling a few ½-day discovery sessions. Bring your team together, and discuss what’s working well, what’s broken, how the market has changed, what is temporary and what will be changed forever. Dive into the numbers. Talk to your customers. Gather as much information as you can and determine what additional information you need to go get.

    Next, you should schedule a few ½-day strategy sessions. Dive deep on specific topics you need to work through as a team—like pricing, packaging, org structure, partnerships, market channels, internal processes, etc. Reset your 3-5 Year Plan, and evaluate your Winning Moves. The market has changed and there are new challenges and opportunities you need to address. You don’t need to wait for a formal planning meeting to work on your strategy.

    annual planning

    Once you’ve worked through the discovery process and completed your strategic discussions, it’s time to start making some choices. What are the biggest opportunities your company needs to advance in 2021? Things are still likely to change before the year ends, but it’s a lot easier to edit a plan than create one from scratch. Decide on the top 3-5 Annual Initiatives you will invest your resources in next year, then work through your budget process to ensure you can support them. Determine how much you can afford to invest as well as the potential revenue or profit benefit each initiative will have on your P&L. Do scenario planning—best case and worst case. Meet again as a team to review the budget scenarios and rank your initiatives. If the best case scenario plays out, maybe you can execute all of them, but if one of the other scenarios becomes your reality, you need to know where you’ll cut and where you’re committed.

    Consider different endings for 2020. How you end this year will surely impact what you can commit to in 2021. Don’t skip your quarterly execution planning sessions for Q3 and Q4. There’s no room for sloppy execution right now. You need everyone focused and aligned around the few most important things and executing with super-high levels of accountability.

    And finally, during the fourth quarter, when you have a better idea of how this year will end, what the market will look like in 2021, what’s working, and what’s not, you’ll be ready to bring the team together for a final planning session to confirm the 2021 initiatives, review the final budget, build your execution plan for Q1, and roll it out to the entire company.

    I know this sounds like a lot of work and a lot of planning—and it is—but what could be more important? How you navigate the rest of this year and set yourself up for next year really will determine the future of the company. Breaking the planning process up into manageable pieces of work that can be done virtually over time will not only reduce the burden and cost, but it will also give you a chance to make real-time adjustments to the plan as the environment continues to change through the second half of the year. If we do this right, we’ll look back on 2020 not just as a year we survived unprecedented change, but as a year we created change and made pivotal decisions that impacted the company’s success for years to come. Now is the time to do the work and enjoy the journey!

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    Here are more resources for Annual Planning:

    Annual Planning: 9 Tips to Focus & Align Your Team with a Great Plan

    Annual Planning Playbook: 5 Steps to Create a Winning Annual Plan

    How CEOs Can Avoid High-Cost Mistakes in Annual Planning

    Best Practices for Annual Planning

    Rhythm Systems Annual Planning Resource Center

    Photo Credit: iStock by Getty Images

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