The annual budget and business planning process is a pivotal process that sets the direction for your company’s future and represents an opportunity to align your team across all functions. In the How to Plan for Success: 6 Essential Steps for Annual Business Planning post, I outline best practices for building and managing the plan. This post is one in a series that deep dives into these steps.
The series will include these topics:
- The planning calendar – What to focus on in each fiscal quarter
- Managing business reviews – How to manage effective OKRS, MORs, QBRs, and Quarterly Board Meetings
- Communication and plan governance – How to communicate plans and maintain alignment
This post provides background and an approach to establishing and managing a calendar for the annual planning cycle.
There is a school of thought that business plans and budgets should be continuous and not time-bound to a fiscal year. The trend emerged due to the dynamic nature of the markets in which we operate and the need for a high degree of agility to be competitive. The cycle proposed in this post is intended to address the need for agility while maintaining a framework for a more disciplined process.
The Planning Calendar
The financial and business planning calendar should be considered a 12-month cycle. Schedule and plan activities each quarter as part of a continuous process to ensure tight operational execution. Let’s cover the key activities in each quarter. The planning cycle for a future year should start in the third quarter, so I’ll start there.
Third Quarter
Start the planning process in September with the publishing of the formal planning calendar that initiates the process with an executive planning meeting and concludes with communicating the approved budget and plan to the entire company. Publish this plan to the entire management team and set expectations for their participation. Explain the process in an All Hands communication, underscoring the “why” and providing a forum for questions and discussions.
The key event in Q3 is the Executive Leadership Planning Meeting. Set aside two days in early September and consider sequestering in an offsite location to ensure focus. Develop an agenda built around the goal of delivering the super-structure for the business plan for the coming year. The deliverables should include:
- Financial Model – Used for scenario planning. Robust enough to allow manipulation of top and bottom-line performance assumptions.
- Business Plan Pillars – The four to six key strategic imperatives for the company in the coming year, for example, achieving top-line growth targets, establishing a partner ecosystem, improving product quality, redefining culture, etc.
- Key Initiatives and KPIs – Defining the work that needs to get done to support the plan pillars and the outcomes (KPI targets) that will represent progress.
Each executive should assemble the following analysis in advance of the meeting.
- Forecasted end-of-year outcomes on key metrics
- Trends in quarter-to-quarter performance across disciplines
- Progress on key initiatives, risks, and blockers
- Organizational plans, challenges, and risks
Typically, major questions will arise during discussions of strategic topics. Use the forum to encourage constructive debate and table topics for future discussions if necessary to maintain the agenda. Resist the temptation of being too prescriptive in defining the details of these initiatives. Provide a framework solid enough for the management team to construct details within.
Fourth Quarter
This is the busiest and most crucial 90 days in the planning calendar. In addition to the operational intensity of closing out a fiscal year to maximize business performance, the subsequent year plan needs to be fully developed, approved and communicated.
The key activities in Q4 in the order in which they should occur:
- Conduct Management Team workshops – Assemble the direct reports for the executive team for a set of workshops designed to 1) educate the team on the planning framework defined by the executive team in Q3, 2) solicit feedback on the plan and brainstorm solutions to support and potential execution risks, 3) launch the process of building detailed plans for each department, and 3) share initial department plans with the entire team to gain alignment.
- Refining the financial model – Build three versions of the plan based on a high, low, and most likely scenario of the forecasted end-of-year performance
- Build departmental plans – Each department must have a business plan that links into the key pillars of the corporate plan.
- Present draft plan and budget – Assemble the plan and get feedback from external stakeholders (board or operating partners) as early as possible
- Incorporate feedback and finalize the plan – It may require the Board of Directors formal approval
- Communicate the plan and set OKRs for Q1 – Build a structure of cascading OKRs and populate with 90-day targets
Some points to consider:
- If you have an annual employee performance management cycle, it may make sense to integrate it into fiscal planning. This allows synchronization of individual performance feedback to be in line with organization performance and goal-setting
- Recording and managing OKRs properly can be complex and time-consuming. Many tools are available to support OKR tracking and management, and many have integrations with other business systems.
First Quarter
After putting in significant effort in Q4 to develop and approve your plan, you can now organize kick-off events in Q1 to communicate the plan to all employees and generate enthusiasm about the year’s strategy. This is an optimal time to achieve alignment. Make sure to cascade, explain OKRs, and establish individual performance goals for the year.
Conducting well-run monthly and/or quarterly business reviews is a crucial discipline. The aim is to hold the reviews as near the end of the relevant period as possible (2nd or 3rd week in the following month). Q1 is an excellent time to establish the standard for the rest of the year.
Second Quarter
In the second quarter, refine your operating and communication cadence. Many companies set up monthly or even weekly operating reviews. These reviews analyze trends in crucial metrics that affect short-term company performance. They provide an opportunity to pinpoint and address issues, make necessary adjustments, and maintain strong team alignment. Quarterly Business Reviews (QBRs) should reflect on the previous quarter’s performance against OKRs and review the current quarter’s priorities.
Keeping all employees informed and aligned with the company’s progress against the plan is crucial. At the very least, hold quarterly All Hands meetings to review the previous quarter’s performance. Depending on the company’s size, provide Q&A opportunities during All Hands meetings or organize smaller town hall-type meetings to encourage two-way discussion.
At the end of Q2 or in early Q3, conduct a mid-year planning meeting with the executive team. In this meeting, evaluate the company’s overall performance against the original business and financial plan. Also, review the progress of key initiatives set against the strategic pillars. Use it to make course corrections to strategy and adjust goals, priorities, or expectations for the remainder of the year. Create a formal business plan addendum that outlines any adjustments and share it across the company.
Takeaways
This 12-month planning calendar provides a framework for agile yet disciplined business planning. By anchoring key activities each quarter, from executive strategy sessions to departmental plan building and regular reviews, you can ensure continuous alignment, responsive adjustments, and a roadmap to achieving your company’s goals. Effective planning is a journey, not a destination, so embrace the continuous cycle and watch your business thrive.
