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May 7, 2018

How to Craft the Perfect Annual Plan

by Andrea Fryrear

Christmas magic in the air

In many parts of the world, December is a special time of year. There’s a little bit of extra sparkle and magic in the air, and the world seems just a little more hopeful and joyous.

Unless, of course, you’re trapped in the annual ritual that rears its head every fourth quarter: drafting next year’s annual plan.

While children everywhere are gleefully imagining what gifts and treats are in store for them, many business professionals are wistfully dreaming of never seeing another spreadsheet or data point as long as they live.

The process of plotting an organization’s course for the next twelve months is often grueling, and it’s certainly never full of sparkle and magic. But, even without festive trappings, the yearly plan can be a document that inspires hope and incites joyful anticipation of what the next year could hold.

An effective annual plan builds on a larger strategic vision and core values, while still providing specific goals, metrics, and budgets to guide individual managers and employees. And, of course, the perfect yearly plan is flexible enough to handle an unpredictable and volatile future.

That may sound like a long wish list, but with some expert insights and a little holiday magic, your annual plan may just be at the center of your best year ever.

Toasting a successful annual plan

Separate Planning From Strategy

Software and technology are no longer the only groups that are expected to evolve at the speed of the market. Every industry, from consumer goods to the service sector, has to be prepared to respond and adapt to changing conditions, practically in real time.

This new reality means that the era of the five-year strategic vision has gone the way of the dinosaurs, with even the two-year strategy making the endangered list.

It’s certainly hard to imagine a strategy that was crafted in 2012 being remotely relevant in 2017, but organizations that jettison all strategic efforts and shackle themselves to the immediate demands of short-term plans risk losing the connection between vision and reality.

Ken Favaro argues in Forbes that when strategies “are taken prison by bureaucratic planning processes,” it “creates a void that [businesses] fill with lofty statements about their vision, mission, purpose, and goals, while their people are left to grapple with the huge gap between such statements and their own everyday experience.”

To bypass this problem, he argues that “strategy development must be an ongoing, deliberate, and purposeful process,” one that is undertaken as a distinct project of its own.

Robert Sher, also writing in Forbes, agrees:

“Strategic planning must have its own place on the calendar, separate from operational planning. Leaders should collect, research, discuss, clarify in print then select the big initiatives before the annual operational planning process begins. Quality strategic decision must be made, then and only then, followed by quality operational planning to implement them.”

If you’re feeling stressed out because it’s December and you haven’t done any strategic planning, much less “quality operational planning,” don’t worry. Take the time to lay down a firm foundation of strategy now, and you can then tackle planning in early days the New Year. Then your strategy and planning will be running independently (and you won’t be trying to force a brain addled by holiday sugar infusions to do two things at once).

Revisit Your Organizational Values

If you’re currently striving to draft an annual plan, it stands to reason that your organization has already crafted high-level concepts like a mission statement, vision statement, and core values. (If not, it’s probably time to get started on that.)

For the sake of clarity, let’s briefly define each of these.

Mission Statement

A short, specific statement of what your company actually does. Ideally one that differentiates you from your competition and is easy to memorize.

Example: "To organize the world’s information and make it universally accessible and useful."(Google)

Vision Statement

An aspirational statement about what your company hopes to become. For the purposes of planning, this one is a big deal because your future actions should be designed to get the organization closer to this vision.

Example: "To become the world’s leading Consumer Company for automotive products and services." (Ford)

Core Values

Also known as principles, beliefs, or philosophy, these help shape company culture, and they should support your future vision.

Example: "Deliver WOW Through Service, Embrace and Drive Change, Create Fun and a Little Weirdness, Be Adventurous, Creative, and Open-Minded, Pursue Growth and Learning, Build Open and Honest Relationships With Communication, Build a Positive Team and Family Spirit, Do More With Less, Be Passionate and Determined, Be Humble." (Zappos)

These may all seem like what my Texan parents would call “touchy feely stuff,” but companies that take the time to develop these statements do so with the goal of using them to guide basic employee behavior and crucial company decisions.

So, if you’re drafting a plan that’s designed to cover an entire year, and you haven’t referenced any of these foundational statements, you’re likely to have a problem.

Focus on the Journey and the Destination

Unlike the lofty visions that dominated the old five-year plans, a yearly plan can’t confine itself to a broad statement of goals alone. Clearly articulated objectives certainly have to be part of the document, but any expectations about timelines, metrics, and budgets belong here too.

First, let’s talk about goals. To keep them grounded in reality without perpetuating the status quo, your yearly plan should include both SMART and stretch goals. 

This combination comes from the book Smarter, Faster Better: The Secrets of Being Productive in Life and Business by Pulitzer Prize-winning journalist Charles Duhigg. SMART (Specific, Measurable, Achievable, Realistic, Timeline) goals have been a staple of the business world for decades, and, despite being highly useful, they’ve made it clear that focusing only on things that are realistically achievable doesn’t often lead to game-changing innovations.

Stretch goals, on the other hand, are important too. These are slightly improbable things you might not be able to pull off.

By putting both types of goals together on a single to-do list (or combining them in your annual plan), you get a roadmap to concrete successes along with aims that will encourage creative behavior.

Yearly plans, however, need to go a step further than simply outlining goals and objectives. If department heads are going to be expected to use them as guiding documents, annual plans also need to include information on when projects are due, how success will be measured, and how much can be spent to make it happen.

Some organizations may find this component unnecessary. For them, the plan is the “what,” and leaders are expected to come up with the “how” and the “when.”

Either way can work, as long as the arrangement is crystal clear before the plan is distributed.

Execute the Plan With Agile Iterations

Once your perfect annual plan is complete, it still needs to be implemented. And even a yearly plan that’s impeccably designed will encounter unexpected obstacles in twelve months.

To compensate for these hurdles, you can plan to execute the plan in 90-day cycles. These more agile iterations instill “a great sense of urgency and an immediate translation from plan to execution,” says Falguni Desai.

Dave Brussin, co-founder of the SaaS company Monetate, runs his company on a similar cadence:

“We treat the end of every quarter like the end of a full 12-month year. That means we roll the last 12 months together and review all the metrics just like you would at the end of any year — we’re just constantly shifting the year by a quarter.”

This allows Monetate to compare its results at every point to its goals and objectives, and to the historical outcomes of similar companies and competitors. They look at the trailing 12 months’ growth rate and change rate from the previous quarter. “Essentially, we have the opportunity to look at annual change every single quarter,” he said.

What Makes Your Yearly Plan Perfect?

Are you basking in the glow of a completed yearly plan? What advice would you offer to those of us still in the throes of panicked planning? 

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