Trish HaywardOperational Planning Insights

If your fiscal year starts January 1st, your 2015 budget deadlines are looming. You may be strapped for time, but don’t fall into the trap of doing your budget without a plan. We hate to break bad news, but you may already be in the trap if:

  • It is unclear from your team’s initial numbers what your priorities are for 2015
  • Your budget process to-date has been based on political negotiations (and BTW, will reward those who sandbag and over-deliver)
  • Your initial 2015 numbers look curiously like a straight line trend from prior years
  • Your staff has difficulty answering “why” their 2015 budget is allocated the way it is

So how do you get out? How do you avoid this ‘tail wagging the dog’ scenario? Define your short-term priorities, goals, and 2015 initiatives before you settle on your budget.

Building a cross-functional plan can be painful and time consuming. It’s difficult to reach logical decisions on budget allocation when everyone is defending their own turf, using different planning tools and language. To remedy the pain and streamline the process for our clients, we start with a simple operational planning framework.

Catalyst Strategies Operational Planning Framework and Tips

A standard operating plan framework:

  • Level-sets your organization with the same planning language and model, leading to more efficient planning process and more effective communication
  • Helps your executive team easily assess strategic gaps, prioritize initiatives, and allocate limited resources across functions based on alignment with the strategy and expected return
  • Supports communication of priorities, owners, and milestones across the organization
  • Helps you differentiate and plan for the numbers you’re striving to attain vs. those you’re more likely to attain
  • Is the foundation for ongoing planning adjustments throughout the year, where the organization compares plans to forecast and adjusts priorities and budget to reflect changing needs (aka integrated planning)

Keys to Success

In addition to this framework, we employ the following best practices to ensure our clients’ plans are practical, actionable, and relevant.

#1 Alignment

The best annual operating plans show clear linkages to a solid strategic plan (see our strategic planning framework). Basically, your 2015 initiatives support your short-term priorities. Those short-term priorities align with long-term strategic priorities. Annual goals are stepping stones to long-term goals, which are critical to achieving your organization’s vision. Your core functions and activities (i.e., day-to-day work) align to your organization’s mission. And, where you spend your time and money aligns with annual priorities, goals and initiatives. When everything is aligned, it’s back to the way it should be… the dog wagging its tail.

“A goal without a plan is just a wish.”Antoine de Saint-Exupéry
#2 Moving from Plan to Action

Inertia is a significant force to overcome. All too often, we see client teams melt back into their normal activities after the planning effort has clearly defined the need for a change in what they do and how they do it. This reflects a few breakdowns. First, a failure to communicate the new plan through the ranks and how the budget reflects the plan. Also, a failure to spend the time to define objectives, owners, decision rights, milestones, resources, etc. for each initiative. Next, a failure of managers to adjust expectations of what the team does day-to-day based on the new plan. Finally, a failure to hold team members accountable. This is why we include a review and assessment of core functions / activities in the annual planning process. Moving from plan to action requires frequent communication, clear action plans, and mechanisms of accountability.

“Strategic success demands a simultaneous view of planning and doing.” Lawrence Hrebiniak, The Wharton School
#3 Keeping the Plan Relevant

An annual operating plan quickly becomes obsolete when there is no mechanism to keep it relevant to today’s situation. Best practice is making the planning and budgeting process a continuous and dynamic one. So, how do you adjust to reflect changing conditions? While obvious, it is not easy to maintain momentum on the solution. It requires roll up by geography, product line, or functional group of a dashboard that relates to short-term and long-term goals. Then highlighting current and forward-looking gaps to plan. Getting the executive team together to review gaps, discuss root causes, and decide on course corrections (e.g., re-allocation of resources to close the gap, refinement of the operating plan and budgets).

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So, as you open up your spreadsheet to build your budget, resist the urge to drop some numbers in and decide how to spend later. Keep yourself from falling into the trap where the annual budget wags the planning tail.

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