Expert Annual Planning Tips [Interview]

By Patrick Thean

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During Q4, many companies begin to think and plan for the next year. To gain insight into the process annual planning-1and importance of planning for the upcoming year, my team interviewed me. After all, I am an Amazon best-selling author of two books: Rhythm and Predictable Results, and I've helped hundreds of companies with this process.

Question: Patrick, so annual planning time is rolling around again. Are you still looking forward to helping companies develop their plans, and if so why?

Patrick: Oh, I love this part of the year, when people are thinking and planning for the next year. It is a good practice to take stock, learn what went well and what did not go so well, and dream about how to do much better next year. This is a very important process that can really influence whether you have a great year or not.

Question: Why is it so important to do this?

Patrick: Oh, having a well thought out plan that everyone feels excited about can make a huge difference whether you have a great year or a mediocre year. Imagine a general going to war with his troops without a well coordinated plan. The troops will not know what objectives to take, and how to coordinate their attack. This will result in unnecessary casualties and they will probably lose the battle. A CEO going into the next year without a well coordinated execution plan is not that different. If people are unclear about what objectives to go after, they will end up with unnecessary waste and rework, and people will bump into each other. So we really need a good execution plan. We need a plan to help team members understand what objectives the company is focused on for the year, and how they will go about taking those objectives and delivering results as a coordinated team. This way, the company can line up resources well to achieve clear goals for the year.

Question: How would you suggest lining up resources well? Any tips after doing hundreds of planning sessions?

Patrick: A common pattern I have seen is for companies to develop their financial budget based on last year’s budget and performance. This approach has a couple of problems. (1) The assumption that things will be similar to the previous year is flawed, and lacks creativity. (2) This gives various people a budget to spend based on the previous year. In some cases, departments might not need the same budget as the previous year. This also makes it hard to fund new initiatives and the financial resources have already been parceled out based on the previous year’s spending. People who do not need to spend the money typically feel the need to find ways to spend their budget, or they might not get a larger budget for the next year.

Don't make this mistake. Instead, here is a better way. First come together to figure out what would be exciting to achieve for the next year. What are the top three initiatives for the company? Come up with creative ways to achieve these objectives as a team. Now that you know what we want to achieve, let’s figure how where and how to spend the budget to achieve these objectives. To sum it up, figure out what you want to achieve for the year, then apply resources and budget to make it happen. By all means, use the budget numbers from this year as guidelines to help make good decisions, but don’t cast the budget in stone before considering what the top initiatives are for the next year and how we need to attack them successfully as a team.

Question: Why do people continue to make next year’s budget a percent increase over last year's budget?

Patrick: Because it is easier. And if we were successful this year, we naturally think that we should do something very similar for the next year. I think it is really good to learn from this year, and apply creativity to see how we can further improve for next year. The business world is changing very quickly. We need to be alert, and consider new ways to achieve our goals next year instead of just relying on repeating what made us successful this year. 

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Question: So what would you suggest for annual planning?

Patrick: I would suggest that you start by reviewing your strategies for growth. Make sure that your winning moves still have the competitive edge that they had this year. Your strategies can get dulled after a couple of years. Be proactive and review them. Don’t want for competitors to catch up before renewing your strategies. Then you need to visualize a great year. How can next year be a special year for your company? When you look back, why would next year be a memorable and rewarding year for your company?  Here are some brain-starter questions to help you:

  • What do your customers love? How can you serve them even better? 
  • How can you distance yourself from your competition?
  • Are your employees excited and engaged? How can you further inspire and engage your employees?
  • What would make you happy as a CEO or a business owner? What would you like to achieve that is special next year?

Question: What else should they do?

Patrick: It is critical to spend the time and creativity to come up with the top initiatives to focus everyone in the company. Don’t underestimate the time you need to come up with your top 2 or 3 objectives for the year. Once you have that, work with your team to define what the key results should be. And think about how every team or department should line up their goals and resources to help achieve the company’s plan for next year. Cascade these objectives to every department, and let them be involved in the planning process to come up with their own objectives and key results. This way, you focus and engage the whole company in your planning process.

Question: Anything else that we might miss? Any last tips?

Patrick: Contingency plans are what most people miss. Things don’t always work out the way we design or plan. So look at your plan and come up with contingency plans for various parts of your execution plan. Make sure you have some resources set aside for contingency plans, because something always goes wrong. And finally, a big area that many people forget about is the communication process. It took you a while to come up with the plan for the year. Now you need to have patience and communicate the plan to the rest of the company in a way that will engage them and get everyone excited to execute this plan next year.



Looking for more Annual Planning information to help get you started? Check out our additional resources:

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

How to Conduct an Annual Planning Meeting

Rhythm Systems Annual Planning Resource Center

Photo Credit: iStock by Getty Images

Patrick Thean


Photo Credit: iStock by Getty Images