Annual Planning: Empty Ritual or Executable Plan? Part 1

Make the most of your strategic plan throughout the year
by Carey Bettencourt, Jeanne Urich and Dave Hofferberth, SPI Research


While heading to my gate at an airport, I ran into a former colleague. “I’m on my way to our annual executive team off-site,” he said. “It wouldn’t be so bad, but we work hard for three days to identify our strategy, initiatives, and financial and operational plans, and somehow the team’s energy and cohesiveness evaporates quickly when we return to our day jobs.”

It was surprising to hear this professional services executive’s perspective on the annual planning process. He’s part of a young and rapidly growing technology company’s credentialed leadership team with respected industry standing based on their performance and promising future. “I know it might seem ridiculous for me to be cynical given our growth, but we fall into familiar behaviors once we return to the business and become myopically focused on numbers, much to the neglect of more strategic initiatives,” he said. “And worse, sometimes this focus creates unnecessary conflict between our respective organizations.”

Unfortunately, his organization isn’t unique in returning to familiar behaviors when business pressures increase. Many firms go through rigorous annual planning processes, create comprehensive plans, and gain executive commitment to goals and objectives, but they’re not successful in execution. So what’s the problem? And more important, how can organizations solve this problem?

The annual planning process — regardless of the agenda, framework or method subscribed — is not only essential for running the business, but is also an opportunity for reflection and a powerful catalyst for change. If an executive team is failing at execution, the root cause resides in conversations not had, topics not addressed and, subsequently, actions not taken. Failing to execute is the symptom; diagnosis is key to solving the problem.

Business plan failure

Based on more than 30 years of facilitating meaningful and lasting change, we have found the most common reasons business plans fail because of the following:

  • Leadership team’s inability to effectively confront the reality of the current business environment with a realistic fact base and competitive benchmarks.
  • Focused on too many — sometimes competing and overlapping — priorities.
  • Lack of alignment across all parts of the organization around a core set of measurable improvement initiatives.
  • Inability to rapidly engage the full organization in translating improvement plans into operational tactics and job-level objectives.
  • No follow-through to accelerate the learning and performing cycle while creating committed leaders at all levels of the organization.

Business planning goals

When creating a business plan, applying the following goals leads to an effective and executable plan:

  • Establish a strategic foundation for the business plan.
  • Develop a common understanding of your business and opportunity.
  • Define success.
  • Create a road map — short-term and long-term — to achieve your goals.
  • Identify a few but high impact action plans. Apply appropriate monitoring and measurement.

Figure 1 is an example of a structure for business planning.Pillars_Plan

Figure 1. Service Performance Insight Business Plan Development Structure

We recommend capitalizing on the annual planning process to incorporate three critical actions that will position the team for a more successful and sustaining rollout and accomplishment of the company’s strategy and plan.

1.  Conduct a pre-planning fact-based assessment. Perform both a quantitative and qualitative assessment of the business prior to the meeting.

2.  Establish the business plan: less is more. Galvanize the executive team around a realistic and measurable plan. To be successful, the plan should be grounded with at least three, but no more than five, overarching priorities. Gain commitment to maintaining an open, honest dialogue throughout the year to establish accountability to the team, company and strategy.

3.  Set up business plan essentials. Create an environment and a set of ground rules for planning meetings that promote and maintain robust dialogue, realism and clarity.

So, what are the details behind these activities and how do they position the team and company for success?

1. Conduct a pre-planning fact-based assessment.

Gaining executive team alignment around the organization’s current state and future vision is a critical first step in developing a plan that aligns with overall company objectives and drives sustained business performance. Many organizations enlist an outside consulting firm to conduct both quantitative and qualitative assessments of the business.

A quantitative appraisal involves benchmarking the firm against industry peers to gain an objective evaluation of strengths and weaknesses. This step, based on fact-based analysis, helps defuse internal factions, rivalries and biases that may mask underlying deficiencies, while exposing new growth opportunities. It provides a realistic view of the current state and improvement potential to determine growth priorities.

Many organizations augment the annual benchmark review with confidential leadership interviews to elicit frank feedback and measure executive team alignment and commitment to the current direction. They also uncover themes to be incorporated into the go-forward plan.

Other excellent pre-planning tools include client satisfaction and employee engagement surveys and feedback to ensure that the voice of the customer and workforce is heard and integrated into the planning process.

Of course, all executive team members need to come to the business planning meeting with an impartial view of past performance. They review why the organization met some targets and goals and failed to meet others. Critical data include client, product and service revenue and margin contribution showing trends. A ranking of the company’s products and services by revenue and profit helps the team concentrate on the most important business priorities while establishing realistic growth objectives.

2. Set up business plan essentials.

A key component of all business plans is to build a shared vision of the future and define success. The organization won’t have an ultimate destination or aspirational target to shoot for when it doesn’t have a clear success vision.

The annual planning process must support robust, honest dialogue and promote it. The executive team needs a level of trust and must feel that the planning sessions are a safe place where they can constructively challenge, be challenged, be thoughtful and pull for the company.

Discussions and decisions must be rooted in reality, yet they should favor strengths and opportunities over weaknesses.

The business plan encompasses three areas:

1.  Strategy. Strategic challenges are indicated by a slowing of top-line revenue growth or failure to gain market share vis-a-vis competitors. If revenue growth is failing to meet expectations, it’s time to re-evaluate strategic alternatives. The annual business planning meeting is not the time to determine, evaluate or reset strategy. Those important decisions are best made by a strategic planning team in advance of annual business planning.

However, the business planning team needs to review and clarify the strategy to ensure that everyone is on the same page. All business planning decisions must be tested against the strategy to support execution.

2.  Execution. One of the most important questions to ask when determining key strategic initiatives and business goals is “Can we execute?” Signs of execution failure manifest in below-target profits or employee burnout. Both of these danger signs point to poor processes and systems or cumbersome or haphazard ways of doing business.

If poor systems and processes are the root cause of execution challenges, then key initiatives must address improvements. Do we have the people, systems and processes to deliver? If the answer is yes, great. Move on. If the answer is no, the team collectively determines the actions that must be taken to improve execution.

3.  Alignment. Easy to say, hard to do. Lack of supporting and congruent goals is at the heart of business plan failure. Too often, the mission and charter of the professional services organization are not clear or not universally supported by the entire leadership team. Fundamental decisions around the primary charter must be made to propel execution.

In reality, there are four fundamental but somewhat mutually exclusive charters for a professional services organization:

  • Customer satisfaction.
  • Revenue.
  • Profit.
  • Driving market share growth.

Establishing a clear charter and mission for the professional services organization ensures that all future decisions support the strategy and implementation.

3. Establish the business plan: less is more.

The hardest part of the planning process is narrowing the list of possible alternatives. Competing priorities are a natural order of business, but they must be rationalized into a short list of “must dos” as opposed to “nice to haves” in order to drive execution. Organizations will fail if they emerge from planning meetings with a laundry list of tasks.

Improvements for improvement’s sake aren’t very interesting. And often, incremental baseline trending of budgets and sales forecasts isn’t enough to keep pace with fast-changing markets or the financial demands of the business. Executives need to show demonstrable benefits from any investments they make. By focusing on the highest-leverage areas first, the financial benefits can drive quick wins and solidify support for larger scale changes over time.

Figure 2 is an example of a planning tool that helps teams prioritize decisions by evaluating potential initiatives in regard to business impact and implementation complexity.

Figure 2. Priority Initiatives: Evaluate Implementation Ease Versus Impact


If the core vision and charter have been established, selecting a succinct, impactful set of overarching improvement initiatives can be a source of empowerment. By involving emerging leaders throughout the organization, powerful new self-governing work teams will emerge.

By leveraging a structure and following a process that keep the responsibility for leading business planning in the hands of business leaders, the result is quantum improvement in targeted initiatives in a shorter time and a fundamental improvement in leadership acumen from top to bottom.

Outcome of solid business planning

Done right, annual business planning can be transformed from a necessary evil to a powerful catalyst for change. Incorporating a comprehensive business assessment; establishing a planning foundation based on strategic clarity, bias for action and alignment; and focusing on a succinct, measurable set of improvement priorities can empower and fire up emerging leaders throughout the organization.

Business planning can deliver exceptional financial results while yielding transformative improvement. The tools for success are available and the rewards are great for those who learn to capture that value.

This is the first article in a three-part series on developing a meaningful annual business planning process that’s effective in driving results. In Part 2 we will discuss rolling out the annual plan to the company.

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