10 QUESTIONS TO ASK AT YOUR NEXT 2015 OP. PLAN. MEETING
October. Winter Daylight Saving Time is coming soon and it means that we are in the season for Budget and Operational plan for next year. So, it’s time to plan for 2015 if you’ve not already done so!
Those weeks, in conference rooms everywhere, corporate planners are in the midst of the annual strategic/operational-planning process. For the better part of a year, they collect financial and operational data, make forecasts, and prepare lengthy presentations with the CEO and other senior managers about the future direction of the business.
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 should establishe the resource allocation map for the coming 12 to 18 months; sets financial and operating targets, often used to determine compensation metrics and other PMOs/PMPs as well as to provide guidance for financial markets if public; Last but not least, it also should align the management team on its strategic priorities. So what can managers do to improve the process?
There are many ways to conduct strategic planning, and determining the ideal method goes beyond the scope of this paper today, but rather, to avoid undertaking a time consuming strategic-planning process, to briefly give some pragmatic aspects that may make sure the executives are not left frustrated with the results.
Bring together the right people
Strategic conversations will have little impact if they involve only strategic planners from both the business unit and the corporate levels. I firmly believe that only those who carry out strategy should also develop it. The key strategy conversation should take place among corporate decision makers, business unit leaders, and people with expertise essential to the discussion. In addition to leading the corporate review, the CEO, supported by members of the executive team, should, as a rule, lead the strategy review for business units as well. The head of a business unit, supported by four to six people, should direct the discussion from its side of the table and here are the 10 Things to ask in any business unit review when looking at the strategic/operational aspects for next year..
Adapt planning to the needs of the business
Answering those questions cannot guarantee that the right strategic decisions will be made or that strategy will be better executed, but at least, they will highlight the critical gears and how they might or should play, and thus, while increasing satisfaction with the development of strategy, they will improve the odds for success.
- How and why is this plan different from last year’s?
- Are major trends and changes in our business unit’s environment affecting our strategic plan? Specifically, what potential developments in customer demand, technology, or the regulatory environment could have enough impact on the industry to change our entire plan?
- What were our forecasts for market growth, sales, and profitability last year, two years ago, and three years ago? How right or wrong were they? What did the business unit learn from those experiences?
- What would it take to double our business unit’s growth rate and profits? Where will growth come from: expansion or gains in market share?
- If our business unit plans to take market share from competitors, how will it do so, and how will they respond? Are we counting on a strategic advantage or superior execution?
- What are our business unit’s distinctive competitive strengths, and how does the plan build on them?
- How different is the strategy from those of competitors, and why? Is that a good or a bad thing?
- Beyond the immediate planning cycle, what are the key issues, risks, and opportunities that we should discuss today?
- What would a private-equity owner do with this business?
- How will the business unit monitor the execution of our strategy?
Plan versus Planning
I have read and it’s a well-known fact that many organizations fail to achieve their desired growth targets in revenue and profitability. And most businesses fall short of achieving their growth objectives for revenue and profitability. In fact, studies report success rates as low as 20%. Why is growth so elusive? There are two major reasons:
First, people do not consider enough, or inadequately the opportunities within their core business, or adjacent to this core business. A typical example would be within new customer sub-segments.
Then, Second, the necessary changes in the organizational infrastructure to achieve the objective has not been thought enough and is not set to support successful execution of the plans.
Bringing the answers to those 10 questions may avoid these 2 majors shortcomings.
Eric Lambert