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This page is a work in progress, part of a multi-year effort to capture and share learnings, frameworks, tools, and processes to run organizations. See Running Organizations for more.
What Is Planning?
There are several types of planning in organizational settings. This section focuses on operational planning.
What Is Strategic Planning?
Strategic planning refers to high-level strategy work that culminates in a long-term plan (3-5 years). Examples of formal strategic planning frameworks are Integrated Business Planning (IBP) and Enterprise Business Planning (EBP). In most organizations, a 3-5 year plan isn't particularly helpful, as long-term plans often don't hold up beyond one year.
This section does not cover the corporate strategic planning process, as the critical parts of that process are covered in Vision and Strategy. Here, we'll cover Operational Planning at both organizational and departmental levels, in one-year and quarterly increments.
Operational Planning
Converts Strategy Into Plans
Operational planning converts strategy into goals. Plans communicate how resources (budgets and people), will be allocated for a period of time.
Plans align and empower people. Plans align the organization toward fulfilling the strategy while empowering departments, teams, and individuals to make autonomous decisions within the plans’ guard rails. Planning is a key component of a successful operating rhythm.
Planning places focus on the future, rather than the past or the present. Planning is working on the business, rather than in the business. You may not need a whole lot of plans to make progress, but regular planning will instill a discipline of learning that will make your organization more resilient over time.
Questions to Answer in Planning
- What objectives or milestones need to be reached?
- What are the trade-offs or downsides of dedicating resources to each of the objectives?
- How will we know we've succeeded?
- What are the leading indicators we'll use to know whether we're making progress?
- Who is the accountable person for each of our objectives?
The Leadership Team Starts
I'm an advocate of bottom-up efforts because they respect the talents and perspectives of everyone in the organization, and then help ensure buy-in and motivation. Organizational planning should not start bottom-up and should be kicked off by leadership teams.
Departments and the teams within them do not have the necessary context to know how to allocate the organization’s limited resources toward the broader goals.
Components of a Plan
- Objectives
- A plan always includes Objectives or goals that map to the organization's broader Strategy.
- KPIs
- KPIs are predictive indicators of success. KPIs tell you if Objectives are on track or off track. Generally, a handful of KPIs is enough. If you have 10 measures, you're likely measuring too many things and over-complicating the plan. KRs, from the OKR framework, can serve as KPIs.
- Accountable Persons
- Though Objectives may have multiple responsible parties, Teams, and even Departments, each Objective must have an accountable person assigned. The easiest way to fail to deliver on plans is to avoid naming an accountable person.
- Timeline
- Objectives must have a timeline attached to them.
- Resources Required
- Plans must be clear on what resources - including people and budgets - are necessary to accomplish the Objectives.
Levels of Plans
Organization Plans
The highest level of Planning occurs at the organizational level, where leadership teams come together to plan for the year and for each of the quarters within it. Every organization should have organization-level plans to match strategy to execution, on at least a quarterly basis.
Department Plans
Plans must cascade to departments. A plan put together by the leadership team that doesn't cascade to departments is a wish list that won't be met. A planning process that doesn't result in department plans is an expensive waste of time.
Department Plans are Milestones
Department-level objectives that cascade from organization-level objectives become milestones on the road to accomplishing the vision. As these milestones are reached, a feeling of progress is created throughout the organization. Progress creates momentum, and momentum is everything in accomplishing big goals.
"We've got to formulate strict milestones that give us finish lines along the way. Part of that challenge is determining what a finish line mid-way through the journey even is. One great way to do this is to group the milestones within a few months of each other." - Wil Schroter (Source: When Can I Feel Good About Taking a Break?)
Any new plans created at the organizational level have to be considered against the existing work being done within departments and teams. If the leadership team passes down a new plan without finding a way to fit in existing efforts or sunset them, either the existing work or the new plan will be under-resourced.
How Much Do Plans Need to Cascade?
When goals cascade, teams can combine their efforts to accomplish major milestones for the organization. If no cascading is happening, that's a sign that the organization and its teams are not aligned. With no alignment, the organization's goals won't be met.
Cascading goals trade flexibility, agility, and innovation for alignment. Some organizations will need more of one and less of the other. A small organization can cascade everything to create alignment toward a single short-term goal. A more mature business can cascade less to innovate more. A small organization in crisis should cascade everything until the crisis passes.
Too much cascading is dangerous, and is one reason why MBOs failed. When everything is cascaded, central planning takes away people's sense of autonomy. In large organizations, there's simply no way a set of high-level objectives can be reasonably fractionated into hundreds of lower-level objectives effectively.
"A healthy system is not going to cascade in a perfect hierarchy of intent. We want outliers. We want wild swings. Not a lot, but enough. And it's easy to forget to make space for them in a system like this." - Aaron Dignan (Source: Brave New Work)
Individual Plans
Departmental plans must cascade to individuals. While not every organizational goal needs to cascade to individuals, there has to be some fit between individual people's work and the overall annual and quarterly plans.
Individual plans can be formal or informal. Individual plans are generally set for a given Quarter and not set annually. One exception is personal development plans, which can last for a full year or more.
Annual Plans
Most Organizations Do Annual Planning
Year-end is a good time to check up on whether the organization is fulfilling the strategy, vision, and BHAG and plan for the next year.
The EOS system suggests an annual planning process in which the leadership team sets a few big goals for the year and then moves to quarterly planning.
"Priorities have to be geared to a specific outcome in mind. And they have to be measurable, but they don't always have to be quantitative. I might write statements that I want to be able to say yes to at the end of the year. It might be about launching one or two new products for the next year. There might not be metrics for everything, but the question is, have we achieved that outcome, and can we identify the specifics that we need to tackle to achieve it?” - John Donahoe, CEO of Nike
Sufficiently Motivating
If we're going to commit to a Plan for a whole year, we better be motivated to fulfill it. Objectives should tend toward "new and exciting" to create motivation. But we can't forget efforts that are currently in progress, and we can't neglect maintenance as part of our annual plans. The goals created from our plans should have a balance of all three categories.
"A critical test of this skill for leaders is whether they can use it to articulate a clear, galvanizing plan for what the company is trying to achieve. Can they stand up in front of their employees and, in a simple and memorable way, explain where the company is headed and why, along with a plan, timetable, and ways to measure progress along the route?" (Source: The CEO Test)
Plan for Change
The Planning Fallacy says that optimism bias leads us to be overly confident in our plans. Even if we could have perfect information in advance, our overconfidence will cause us to need to shift plans mid-year or even mid-quarter.
One common example is overconfidence in hiring. We often hire people to solve problems but forget that people can take up to ~6 months to productively work toward big goals. A quarterly objective to hire, onboard, and get someone to complete an objective is unreasonable.
Organization-level plans have to be updated as the context changes, and in most organizations, context changes more often than once-a-year. To that end, a quarterly planning process is necessary to revisit the annual plan. We need to be willing and able to change course within a given quarter, too.
Quarterly Plans
Quarters are the right cadence to plan short-term goals and provide clarity on budgets and resources. Some organizations plan in 6-week or even 2-week sprint cycles, but quarters work best for most organizations.
Goals should be reset every quarter. Ninety days is the right amount of time to get significant work done, but not so much that the context the plan was based on hasn't changed drastically.
Many organizations skip annual planning and only plan quarterly. Early-stage startups are a common example. Netflix is an example of a larger organization that does no annual planning.
"Those processes took so much time, and the effort wasn't worthwhile because we were wrong all the time... Whatever our projections were, we knew they would be wrong in six months, if not three. So we just stopped doing annual planning. All the time we saved gave us more time to do quarterly planning." - Patty McCord (Source: Powerful)
What Plans Look Like
Writeups, Goals or Both
Writeups, goals, and strategy frameworks are three options for communicating plans. Writeups are the best choice. Planning requires thought, writing is thinking, and our teams need to understand the thinking behind the plans.
As you make hard choices, being able to communicate those choices in writing is an important part of building people's commitment to the plan.
Writeups
Writeups are the most common way to express plans, as they allow you to include all the necessary context behind the plan. They're flexible enough that you can tweak a writeup template to serve your needs as you grow and change.
Writeups can be done in Google Docs, in a short-form format in spreadsheets, or in your project management tool of choice.
Goal-Setting Frameworks
Goal-setting frameworks like OKRs are the most lightweight option to express plans. They're the easiest for others to digest and understand at a glance. OKRs don't include context and don't explain the reasoning for why decisions were made.
In the case of OKRs, the Objective is what you're trying to accomplish in a given time period, and the Key Results communicate the specific activities (i.e. the KPIs). Every OKR is assigned to a person (accountability) and has a clear timeline attached.
It's one thing to know what you're looking to accomplish, it's another to know what you're up against. It's one thing to know what everyone else is working on, but in the middle of the quarter, it's helpful to remember why you're working on it. V2MOM addresses this directly, adding a narrative element by answering five questions, including "what's important to you?" and demanding context with "what is preventing you from being successful"?
Here's a "Rocks Charter" you can use to expand detail on Rocks.
Strategy Framework Tools
The Balanced Scorecard is a compact strategy framework tool that can be used to communicate plans. Theory of Change is another conceptual model that can be used to link strategy to plans. Unless you're using these frameworks to communicate strategy, I wouldn't use them for plans.
Accessible to Everyone
Organizational and department/team plans should be published somewhere visible and available to everyone. The easier your plans are to consume and understand by anyone who wants to know, the better.
Goal-setting and People tools like 15Five and Lattice are two tools where organizations communicate plans publicly. Attaching a write-up to a public goal is one way to make the plan and the goal accessible.
"Research shows that public goals are more likely to be attained than goals held in private. Simply flipping the switch to 'open' lifts achievement across the board." - John Doerr (Source: Measure What Matters)
Plan Format Examples
Amazon's Annual S-Team Plans
- The S-Team creates Objectives for the entire company - specific Objectives like revenue growth by geography and business.
- Each group creates "bottom-up" granular operating plan in the form of a writeup, based on the overall Objectives. These plans include:
- Assessment of past performance & lessons learned
- Key initiatives for the next year
- A detailed income statement
- Requests for resources, with rationale
- Each operating plan is presented to a panel leaders - either Directors, VPs, or the S-Team
- The panel reconciles gaps between the operating plan and the overall Objectives. Teams sometimes need to re-work their plans and present again.
- The S-Team reads each operating plan and chooses the initiatives in them that they think are the most important to achieve. These are called S-Team goals, and are the initiatives that are allocated the most resources to throughout the next year. This sets a "commander's intent," similar to how the OKR framework prioritizes using Committed vs. Aspirational Objectives. The difference with S-Team goals is that they expect ~ 75% of them to be hit (rather than 100% with Committed OKRs).
- In January, operating plans are edited to include Q4 results. Plans are occasionally changed, but require S-Team approval to be changed in January.
- S-Team goals are aggregated and the metrics are tracked by the finance team. Each of these goals is analyzed at a tactical level by the S-Team throughout the quarter (not all at once) in quarterly reviews.
How to Do Annual & Quarterly Planning
Outcome: Annual & Q1 Plan
The outcome of your Annual Planning Meeting or set of meetings is an annual plan for next year and a Q1 Plan for the coming quarter.
Annual Plan Pre-Work
Start by October
Have Leaders Collect Feedback
You can also have Managers interview staff to collect more perspectives over a period of weeks before planning meetings.
Re-Assess Strategy
Asking questions and doing analysis can be as important as actually putting together a plan. A plan might live for two weeks until it's killed by some internal or external force. In small organizations, a change in a key resource, for example, a key employee leaving, could force you to change plans. Analysis can hold up for much longer and can enable you to iterate more quickly on your plan.
Leadership Off-Site
Time to Reflect As a Group
Trevor Boehm and Reagan Pugh's Techstars article "How to Run an End-of-Year Reflection for Your Organization" is a structured resource for team reflection.
Annual Plan
- Goals: Revenue, Profit, Growth Metrics - customers, employees, geographies, etc.
- Thematic Goal - Is there a memorable, even emotional rallying cry for the year?
- 3-5 Objectives - based on the strategy, what you learned in the past year, all of the employee feedback, and the perspective of your leaders, what are the 3-5 Objectives for the year?
- Assign an owner for each Objective
- KPIs, milestones, and leading indicators of success, with a red-yellow-green scoring in roll-up reporting
- Overall headcounts, department budgets, and capabilities needed
Leadership Q1 Plan
- 3-5 Objectives for the first 90 days of the year.
- Assign an owner for each Objective
Department Objectives
Leaders to Departments
The real legwork of an Annual Plan takes place In November/December when leaders take the overall organizational objectives for the next year and next quarter to their teams.
Tying In Department Plans
Individual Plans
These plans or goals must be finalized before the next quarter.
Finalized Plans
By the end of the year, and hopefully, before late December, plans for the next year and the next quarter should be finalized.
- Organizations Goals
- Department/Team Goals
- Individual Goals
- Budgets
- KPIs
Quarterly Review or Kickoff
Having Departments share their plans with one another spreads information and awareness across the organization and helps build enthusiasm for the coming year and quarter.
Repeat For Q2
For the next quarter, abbreviate the process by cutting out the "Annual Plan Pre-Work" and start with the Leadership Off-Site step.
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