At the end of the financial year, everyone makes business plans for the next financial year. The process consumes resources, time, and yet often remains a just another ritual to be followed. This paper discusses why annual plans fail to yield results, and what should be done to make it a guiding document for the coming FY.

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Does your annual plan set
your company for Win !!!
Dr. T R Madan Mohan
Abstract: At the endof the financial year,
everyone makesbusinessplansfor the next
financial year. The process consumesresources,
time,and yet oftenremains a just another ritual
to be followed.Thispaper discusseswhyannual
plans fail to yieldresults,and what shouldbe
done to make it a guidingdocument for the
coming FY.
Come endof financial accountingyear,mostseniorexecutivesandboardmembersare busypouring
over what has gone right in the last fiscal and what to do in the coming year. Annual planning
meeting often held at exotic locales away from the humdrum of the office settings is expected to
achieve twopurposes.First,clarityon the business focus and expected responses from each group
within the organization, say sales or marketing or HR. Second align financial objectives, and
improvements required to reach the milestones. Annual planning process not only consumes
resources,butisalsoa costlyexercise.Industryestimates range from 0.03 to 0.06% of the revenues
for anycompany. Companies spend14 to 78 daysto complete acomplete annual planning process.
Given the financial and resource implication the annual business planning is a serious affair. Very
few companies effectively gain from the annual business plan motion. The intended benefits of
drivingcollective decisionmaking,breakingof silosandunifiedvision are notachievedby many. The
mostcommon reasoniswhile noeffortsare sparedtomake the annual plan event most glamorous,
planningandfollowthroughrequired both at pre-planning ad post planning day is limited. Annual
planning process is a multi-stage event involving actors at various levels from different functions.
Sales,Finance,Headsof deliveryareas or services, HR, and Marketing do their initial planning from
the functional perspectiveandlatercollate to arrive at department and organizational priorities. In
large organizations,aseparate businessplanningunit,coordinatesthe data, validates the same and
drives common agenda. In most cases, once the broad contours are agreed, key resources from
sales,marketing,delivery,HRand finance are invited for a brain storming session. Most companies
bundle leadership or general management training sessions along with the business plan to align
teams. At the end of the annual plan day, a broad outcome plan is accepted to provide sales
directions,quotasforvariousregionsand products/service wisefocus. Based on the same, delivery
and productdevelopmentteamsreinforce resources, and align their product roadmap with service
expectations. Companiesreiterate the highlevelinputswithinasmall group and a final annual plan
issharedwithrespective businessheads.Monthlyandquarterlyresults of outcomes are monitored
and reviewedbymanagementtoensure the deliverables are happening within the budgeted time
and cost parameters. Multi-period consolidation of historical data is carried out to use for further
planning.Smartcompaniesrealize annual businessplanisagreatopportunityto usher in relevance,
focus and efficiency across organization. Figure 1 shows the broad stages of annual planning
process.

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Diligentadoptionof the processitself isnotgoingtoyielddesiredresults. Annual business plans fail
to yield results for following results
1. Lack of a grand unifying theme tying all functions
2. Inadequate marshalling of resources
3. Loosely aligned plan and execution
4. Low emphasis on operational control
5. Inadequate validation of sales numbers and quota
6. Limited follow through in improvement to align the business goals
7. Silos driving local optima
8. Poor alignment of Ownership & outcomes
Figure 1

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Annual Business plan: Best practices
Basedon our consultingpractice,practicesfundamental tosuccessful annualplancompaniesare:
1. Planinadvance
2. Involve managersineach divisiontothinkthrough
3. Preparedwithinputsfrommultiple perspectives
4. Annual planmeetonlytoshare numbersandclarityof “focus”
5. Detail individual andgroupplans
6. Communicate monitoringplans
7. Share rewards&systemsindetail
8. Celebrate milestone
Common themes underlying companies successful in using annual plans for
ushering growth are:
1. Unifyinggrandthesewith a 2 to 3 yearhorizon
Successful companies while conscious of the short-term marketplace opportunities and
challenges,lookforaunifiedtheme thatwouldmake increase the relevance of their company.
They articulate what they need to achieve this year, and tie strategic objectives to the
capabilities. Identify the key capabilities that may have to be harnessed further with
investment,andcapabilitiesthatmayhave to move towards mooing phase. A trading company
withprinciplesacross the world, evaluated the next 3 years options, derived short-term focus
areas and detailed the activities and outcomes required to transform themselves to meet the
new pole position.
2. Productbreadthand depth
Annual businessplancandefinethe varietythe companyplanstohandle.Eliminate low
revenue buthightransactioncostproductlines. Low growthproductlinesrequiringspecialized
equipmentandsupportmustalsobe relooked. Use annual businessplantobundle
products/servicesintopractice areassothat economiesof scale andspecializationcanbe
gained.AnIT software companyrealigneditsteamsintoIToperationsandProducts practice to
sharpenthe focusof software andservices,andalsobringmore visibilityandownershipwithin
each team. Practice areasbrought infocuswithin group,improve customerexperience and
innovationstrategiestoreduce cost.

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3. Sales:restructuring,operations
Sale isthe keyfunctionthatdrivesthe annual planfocusand meetings.Whatsegments toshave
off,whatnewsegmenttogo after,how to structure to gaincoverage efficienciesandaccount
miningoutputsare commonthemesthatdominate anyannual businessplanmeetings.While
structure and allocationsare commonlydiscussed,veryfew organizationsemphasize onthe
improvementinsalesoperations andcontrol process.A large engineeringservicescompany
discoveredtheirleadtoconversionproductivitycanbe improvedsignificantlybyinvestingina
salescoordinationorganization. Annual businessplanevaluatedthe benefitsandimpactand
wentaheadwiththe roll outby addressingall concernsinthe openbusinessplanmeeting.
4. Discretionaryandnon-discretionaryspend
Successful companiesuse annual planningmeetstoclearlyconveywhere the investmentis
neededmostandforwhat capabilities. Usingof zero-basedbudgetingandmanagement
committee processwouldeliminate non-strategicprojectstoemerge andproliferate.
5. Cross-functional governance
Companiessuccessful inrealizingbusinessplansuse crossfunctionalgovernance structuresto
balance companyprioritieswiththe individual businessarea’spriorities.Cross-functional units
are notonlyinvolvedinpre-planning,butalsoinconsolidationanddefinitionof common
interestareas. AnIT companyrealizedtighterlinkagebetweensalesanddevelopment
organizationwouldsave lotsof frictionandbringcommonownership.Annual businessplanwas
usedas the backgroundto device appropriate structure,deliverablesandownership.
6. Deliverycapabilityandroadmap
While mostbusinessplansdisproportionatelyfocusonsales,notmuchemphasisisgivenon
service delivery. Spell putcapabilityimprovementroadmapsthatwouldbe targetedinthisyear
detailingthe initiatives,investmentsandownership.A manufacturingorganizationbasedina
tierII cityrealizedthe biggestriskonthe deliveryandcustomerexperienceisthe highattrition
and pooravailabilityof local talent.The companyinitiatedafellowshipprogramtoattract
suitable local candidatesandtrainthemoveryearsto mitigate the resource issue. AnIT
companyrecognizedthe leadershipinthe deliveryfunctionwasweakestandinitiatedan
empowermentprogramtoidentifyandnurture program.