Annual Planning is a bind!…

..but, there are a 101 reasons why you should think about Planning all the time!

My experience of the annual business plan is that the scale of the event haunts even the most conscientious of people.  You may have been through 3 previous annual cycles, but the dread of making the first step towards the next review gives business planning a label and it is hard to get excited. It’s also hard to get the planning contributors excited.  It will be a heap load of work and probably on top of your day job?

It is the same annoyance you feel as filling in more detail on your company expense claims (because the Management Accountants need it) or answering the depth of questioning on a HMRC tax self assessment.  You can’t clearly see the benefit for all the additional effort and input.

One of the Corporate challenges is to bring the Planning cycle into business-as-usual and building business processes and data flows that continuously feed the cycle.  The other concept of planning that you need to consider is that you build a rolling 3-5 year plan with a simple expectation at key times of the year where the planning assumptions are updated.  New forecasts can then be argued through as part of the ongoing business cycle and agreed well ahead of the start of the new trading period.

Just to make an example of this one, think of guiding someone with directions from your London Office to your Newcastle Office by car.  The most important detailed directions are the ones that get them out of the Car Park, heading out on a key artery road and heading in the right northerly direction to get to the M25 (Short Term Plan).  The ‘what happens next?’ is important but requires less detail at this stage, “Northerly direction, M1 for 140 miles…” (Long Term Plan).  You have a Plan to get them there, but the important part of the plan is the immediacy of getting off in the right direction and with detail.  The ideal situation for the Short Term is to see if this has been prepared before for someone else.  In Corporate life duplication happens regularly.

So in short, a company would normally require 1 year of detailed planning and 2-5 years of directional planning.  Of course, your Finance Director and CEO may want to know the long term numbers and investments behind making it happen, but these are directional for the outlying years for early observation that you may need to re-balance your plan or reshape the company to drive a different outcome.

If you are off course, the temptation is to then to do a mathematical extrapolation of the plan numbers, rather than building in links to real and live market and financial data, trend and external conditions.  “The CEO wants 5% annual growth in Revenues and 3% reduction in Costs!”.  Microsoft Excel can give you your answer in 10 seconds, but it would be more prudent to have the 1-5 year revenue projection directly from your Sales Pipelines, Regular Billings with up-to-date risk factor built in for Churn and a clear understanding of Fixed Costs and Variable Costs from the people living and breathing the detail.  The heartache and heartburn really comes when you begin annual planning and start asking slightly different questions and requesting data in a different format.

To achieve the required inputs you will need to identify each of the main insights and which departments own and analyse these regularly.  It also needs to be fed into the business plan review with little or no effort.  The ‘effort’ of the Business Planners is to find out where the intelligence lies in the company and how the data can be standardised for re-use into the Company’s planning process. Try really hard to avoid asking for re-working the same data as it just switches people off.

Now, if you start to think of all Business Processes working in the same direction and have a 1 year detailed plan and 2-5 years directional plans, rolling a forecast then becomes intuitive.  I’ll cover Values and Culture in a separate post as these are very important to align your Managers and Employees to do the right thing when they see cracks in your planning.

The final part of the planning transformation is then to consider the improvement in the planning cycle.  A practice which can work is the Rolling Quarterly Plan.  You build a continuous plan by quarter based on ‘What is likely to Happen this quarter’ (This should be very accurate and detailed), a detailed forecast for the next 4 quarters and then directional plans for the next 2-4 years based on the expectation of your Stakeholders in your business.  As you roll forward, you will always be able take the detailed 12 month planning ‘snapshot’, when required, which becomes your detailed Annual Operating Plan.  Less of an event, more business-as-usual, quicker results and engaged staff.

About David Dugdale
Business Transformation Consultant

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