By Zuhair Suidan, September 2007

Labor Day, the official end of the summer season, marks an important milestone in the annual cycle. Days get shorter in a hurry, temperatures start cooling, the summer harvest has already peaked, children head back to school and businesses focus on closing as many deals in the pipeline as possible before year-end. It is also prime time to get your strategies tuned-up and operating plans developed so you’d be raring to go come next year.

Most companies have an annual business planning cycle. While smaller organization can lump their strategic planning and operating plan development cycles into one, larger organizations tend to have a two-phase cycle – the first for determining their strategies and the second for documenting their operating plans. This two phase cycle is intended to get agreement on the strategies to be deployed before developing the details of the operating plan for the following year.

In a nutshell, strategic plans have a multi-year horizon and answer directional ‘What’ type questions (what markets should we serve, what is our desired position in these markets, what offerings should we produce, what business results should we strive to attain…) while operating plans have a twelve month horizon and answer tactical ‘How’ type questions (how will we produce our offerings, how will we market them, how will we sell them, how will we service them, how much should we budget for each of these functions…).

Many organizations conduct their research and situation analyses, identify their strategic issues and develop their strategic plans during the summer months, with reviews held in the third quarter. After agreement is reached on the strategies, the development of the detailed operating plans is worked on in earnest during the last third of the year with agreement and sign-offs on the operating plans for the following year concluded before the current year ends.

Yet it is surprising how many organizations are not disciplined enough to adhere to a planning calendar. It is not uncommon to find organizations that do not ‘close’ on their operating plan for the coming year until a number of months during that year have passed. This creates a certain degree of paralysis in those early months, with departments not clear on their marching orders or on the budgets they have – both revenue targets and expenses.

One firm I consulted with was still circulating the operating plan for approval on July 9 of one year. While the firm was successful and profitable – it had a great suite of products and a well run sales organization – it was still operating sub-optimally due to the lack of clear direction. Sales figures were coming in but no one knew if they were below, meeting, or exceeding their potential, and in the absence of departmental budgets all initiatives had to be approved piece meal, putting a strain on multi-phase projects and on the management system. On top of that, the executive team was split down the middle as to what direction the company should take. Our mission was to correct this: develop an agreed-to integrated three year strategic plan by the end of October and a one year operating plan by the end of December (we met these objectives by a whisker, and celebrated our accomplishment on the last working day of that year.)

Here are guidelines I recommend following to avoid common pitfalls and optimize your planning:

1. Develop a planning calendar that all are to adhere to. You may elect to have strategic plans completed and approved by mid-October, and operating plans completed and approved by the end of December (assuming you are on a calendar year planning cycle).
2. Strive for integrated plans across functional areas such as sales, marketing, development, services, support and finance. The strategies and operating plans are for the business to meet its goals and need to be integrated. Once agreement is reached on these strategies, the individual functional areas develop their detailed operating plans. Reviews and approvals of the functional plans should be done by the cross-functional teams to ensure that they are aligned with the business strategies.
3. Have the top executives from each of your functional areas represent their functional areas. They may designate an empowered representatives sit in for them at some meetings, but this must be done in a seamless way, without introducing any delays into decision making.
4. Ensure that the operating plans flow from the strategic plans. In a small business these are usually developed in one fell swoop and are essentially seamless. In large businesses, where they are developed in different phases and months apart, sometimes there is breakage between the two and operating plans have little visible tie-in to the strategic plans. This puts in doubt the value of the strategic planning process and should not be tolerated. A good way to avoid this is to hold a summary of the strategic plan before the operating plan review.
5. Assign an executive focal point for the planning process. This person would develop and communicate the planning process and calendar, minimal acceptable levels of plan documentation. He / she should also identify and recommend consultants and resolve any roadblocks or bottlenecks in the system. Excellent inter-personal skills and creative, break-through thinking are a must here.
6. Provide a core set of templates to be completed as part of the planning process. This is especially critical in multi-division firms, where it is important that some uniform standards are adhered to in order to facilitate the review and comparison of plans of the different divisions. The divisions should have the freedom to add to the core set of templates as needed.
7. General George Patton once said: “No plan survives contact with enemy.” That is why your plans need to include contingencies in them. What would you do if the economy faltered? If a new technology picked up steam? If consumer behavior shifted? Scenarios with higher likelihood of occurring and higher impact on the business must to be planned for. You need to at least have initial plans to respond to these scenarios and /or to mitigate their impact.

Another famous general, and later President of the United States - Dwight Eisenhower - once said: “Plans are nothing; Planning is everything.” Planning is not done for the sake of developing plans, but to affect behavior. What matters is the process you go through in developing your plans, the research, the discoveries, the discussions, the debates and the agreements. Once finalized, the plans should become the blueprint for running the business. Reviews of progress against the plans need to be an integral part of monthly senior management meetings.

Wishing you successful planning!