Have you ever made a resolution for the new year?
If yes, remember how you outlined a plan for achieving your goals, pondered about what you expect, and thought about the practices you will employ.
But why I am asking about your resolution?
Because just like a person’s resolution for the new year, annual planning is a resolution for a company.
An annual plan helps companies reach their broader vision by outlining the steps, goals, metrics, budget, and other necessary means to do so.
What is Annual Planning?
An annual plan can be defined as any company’s roadmap to the coming year. It provides the company (management) an overview of the KPIs their team will be achieving as well as employees a clearer path of how their KPIs will be achieved.
Annual planning breaks down the bigger vision of the company into smaller, achievable goals scattered through the upcoming year.
Companies employ annual planning to improve performance by clearing the expectations from employees and reach particular goals before the end of the coming year.
An annual plan is crafted by analyzing the performance in the previous year. Companies derive the expectations from the results of the previous year which gives the employees as well as management a better sense of where they are headed and how they will get there.
Importance of Annual Planning
The significance of annual planning lies in the order it organizes for the company as well as employees. It helps employees set particular business goals throughout the year & provides management better monitoring of the goals expected.
An annual plan explains how the company will reach its expected position in the coming year. It provides employees a better sense of what’s expected of them & a direction to management of what’s critical to achieve in the coming year.
Additionally, it keeps employees focused, energetic, and more motivated thus increasing the efficiency of the company.
● It helps reduce the workload by breaking down bigger goals into digestible actions scattered over time
● It helps management understand what’s crucial to achieve in the coming year for reaching their ultimate vision
● It helps managers lead better and keeps the workforce united, energetic, and relaxed at the same time.
● Employees gain a better sense of their roles in their departments
● It helps a company's vision break down into day-to-day tasks.
Is Annual Planning different from strategic planning?
Imagine you have a company of ladies' clothes and you have the ultimate vision of making it the largest one in your city.
But you can’t do that in one day. So you will outline your mission and decide what you will have to achieve in the coming years to reach that vision.
When you outline the strategic priorities to achieve your vision, that will be called your strategic planning.
However, annual planning and strategic planning work collectively. Strategic planning crafts the framework of a company’s advancement towards its mission while annual planning outlines the goals directly related to the strategic planning.
To put it more simply, strategic planning defines what the company wants to achieve in the coming years and annual planning describes what needs to be done to achieve that.
How to create an Annual Plan
1. Take a look at your past
The most essential step to create an annual plan is to take a careful look at your past. Analyzing where you missed out on opportunities & what worked for you the most helps redefine your company’s priorities and values. Taking a look back at your past helps you define your expectations for the coming year. It also helps employees gain a better sense of areas they lack in and the ones they have excelled in the past.
2. Refer to your strategic plan
As mentioned earlier, an annual plan relies heavily on strategic planning. Analyzing your strategic report, you will learn which department needs to deliver what in which time frame. Then you will transfer these into your annual planning.
3. Activities planning
For each strategy or goal underlined, you will have to craft activities to achieve, assign the people responsible, list the resources required, and a framework to monitor success.
4. Role defining
One of the most important tasks of an annual plan is to provide employees with a sense of their responsibilities. For example, the areas a company needs its COO to outperform him or herself in the coming year. This increases the efficiency of the company by detailing a clear roadmap for each employee.
Essential elements of an annual plan
Though each company crafts its annual plan differently, some elements are always present in the annual planning. We will discuss such elements so that you can have a better sense of what annual planning looks like.
● Goals: An annual plan always contains SMART (specific, measurable, attainable, relevant, and time-bound) goals. The goals help the workforce focus efforts, define ideas, and make sure that all the resources are being employed correctly
● KPIs: Annual blueprint of a company outlines key performance indicators for its employees to gain a better sense of their progress as well as provide the management means to monitor performance better
● Expectations: An annual plan lists the expectations from each department in the coming year. By looking at the blueprint, managers can direct the workforce efficiently.
● Budget: Another crucial element of any annual planning is the budget. By outlining the tasks and expectations, a company gets a clear picture of how much resources it will require to advance its vision.
● Core values: Aside from the work performance, every company needs a certain culture that promotes the values and philosophies of the company required for reaching its vision.
Problems: As the saying goes, the best teacher is the past. In annual planning, a company needs to look back in the past and find out what happened wrong for them. This helps analyze the hindering progress better and find out a solution for the coming year.