Your planning sessions are important and expensive. Whether they’re Quarterly Planning Sessions, Annual Planning Sessions, or Strategic Planning Sessions, you've invested the valuable time and energy of your most expensive employees – time away from the office,traveland meals, a rented meeting room, a professional facilitator, and who knows what else. That number can really add up, so it’s easy to see why this is a line item that sometimes gets cut when trimming the budget. But before you go there, like any other investment decision, you should consider the ROI of that planning session. The basic ROI formula is(Gain–Cost)/Gain. In order to calculate this, you have to really understand what the cost is and what’s at stake.
Here are a few things to consider:
Cost of Your Investment:
What checks do you have to write?
What’s the payroll cost for the time your team is tied up in planning?
Average $ amount of an executive in your company converted to a daily rate
Multiplied by the # of executives involved in planning sessions
Multiplied by the # of days in planning plus at least 2 days for prep and follow up
These two combined represent the cost of your investment.
What You Have to Gain (or Lose)
What’s the value of having your entire company focused on, aligned around, and successfully executing the most important priorities for the quarter?
One quarter equals 25% of your company’s annual payroll expense on the P&L. Even for a small company with 50 employees, this is usually close to a million dollars.
Even if your team gets lucky and spends 75% of their time working on good, value-added things, that’s still 25% of their time wasted because they didn’t have the focus and alignment provided by a good plan…. that means hundreds of thousands of dollars are at stake every quarter.
What’s the opportunity cost of the initiatives that don’t get executed?
Think of the value of awell executedproduct launch, a new customer, a smooth integration of a merger/acquisition, a new exec team hire, an enterprise-wide process improvement, implementation of a new ERP or CRM system, etc.
The opportunity cost of not executing well on these things, either because you didn’t take the time to plan at all or you tried to cut corners and didn’t plan all the way through to “execution ready”, is large and can’t be recovered. And this opportunity cost falls directly to your bottom line in the form of profit and company valuation.
So before you decide to save a few thousand dollars by cutting your planning budget, think it through and make sure it’s a price you’re really willing to pay. You don’t want to be “penny wise and pound foolish”.