As we approach the end of the year many executive teams are gathering in conference rooms for the yearly ritual of annual planning. Why is this such an important ritual?
According to an article in McKinsey Quarterly, “For those working in the overwhelming majority of corporations, the annual planning process plays an essential role. In addition to formulating at least some elements of a company’s strategy, the process results in a budget, which establishes the resource allocation map for the coming 12 to 18 months; sets financial and operating targets, often used to determine compensation metrics and to provide guidance for financial markets; and aligns the management team on its strategic priorities.”
To make this important process as effective as possible, your team must have discipline and focus. Here’s what you need for a Focused, Execution-Ready Annual Plan:
This is your theme for the year. Consider all the preparation you’ve done for your planning session, and crystallise a main area to focus on as a company. Create a rallying cry, something easy to remember that will help communicate the goal for the year to the entire company. It doesn’t have to be “cute” – it just has to be focused and clear.
These are the results you are hoping to achieve by the end of the year. Consider the 3-5 year targets you’ve set for your Company and think about where you need to be on those by the end of the year to stay on track. Typically, your targets will include key financial metrics (turnove, profit, etc.) and other goals that are important to your business (# of locations, # of customers, # of employees, etc.).
Your Critical Numbers are a sub-set of your annual targets. Think about your main thing and how you will measure your success this year? Your main thing should have a corresponding KPI that is your Critical Number 1 for the year. Then, you should consider what might fall through the cracks if you were overly focused on Critical Number 1. This is your Critical Number 2.
This is where the discipline comes in. You can’t successfully execute too many things in a year. You need to focus on 3-5 initiatives that will drive your company strategy forward. Consider your turnover growth strategies and what you need to do this year to move forward on them. Align your initiatives with your main thing and targets.
You need to be able to see how you are doing on your annual plan throughout the year. You will waste your two-day planning session if you don’t have a way to communicate the plan to the company, break it down into quarterly implementation sprints, monitor progress, and adjust your implementation as needed.