An annual plan serves as a company's roadmap for the upcoming year, outlining the strategic goals, key initiatives, and priorities guiding its journey toward success. It acts as a compass, providing direction and focus, enabling the organization to align its resources and efforts toward achieving its overarching vision. By setting clear, actionable objectives, an annual plan helps to ensure that every department and team member is working in concert towards common goals, fostering a sense of unity and purpose across the company. Moreover, it is a critical tool for measuring progress, allowing leaders to track milestones, adjust strategies as needed, and stay on course to fulfill their ambitions. The annual plan embodies the company's aspirations for the year ahead, laying the foundation for growth, innovation, and achievement.
Before planning for the future, you must understand where you are. It is an integral step in the annual business planning process, as you need a clear understanding of where you are presently and where you want to be at the end of the yearly plan. Everyone on the team will come into the planning session with their unique perception of how things are going and some ideas for improving and growing the business. It’s great to start the meeting by getting everyone talking and sharing their thoughts. Allowing time for introspection at the beginning of the planning session will immediately engage everyone on the team. It will establish some context for the strategic and future-directed conversations you will soon have. Here are a few ideas to get you started.
Learning from the previous year - Start the session by revisiting the plan you established for the year that is about to end (Targets, Theme, Key Initiatives), and then discuss the actual results. Ask the team: What did we accomplish this year? What improvements to the business did we make? What were our victories and bright spots? What did not go as planned? Most importantly, what lessons did we learn this year? This exercise aims to reflect on the past year, gather insight into what worked well and what didn’t, what you learned during the year, and what is different today than it was a year ago. Much work has been done over the past year, and it’s important to celebrate the progress you have made. All that you have accomplished and improved this year creates a foundation for planning that is stronger, wiser, and steps ahead of the foundation you were planning from last year.
Start, Stop, Continue Exercise - The Start, Stop, Continue exercise is excellent to send out ahead of time as homework for the team. This gets everyone thinking about the future of the business before they come into the planning session. It’s a great way to bridge the gap and ease people out of their day-to-day focus and into a planning mindset. In this exercise, participants are asked to share their top three answers in the following areas:
Start: New things to consider doing. What do you think you or your group should start doing that is not being done today? What things can we do to increase our growth rate?
Stop: What is ineffective that we must stop doing and save energy for other opportunities? These are items that can help us "dehassle" the business.
Keep: What is working well that we should continue? Look for bright spots - items working very well that we might want to replicate across the company.
Opportunities and Threats - The 'Opportunities and Threats' discussion is a key part of the planning process. Unlike the internal focus of the Strengths and Weaknesses part of the SWOT analysis, this exercise encourages the team to consider external conditions, forces, or trends that could impact the business. This exercise prompts a more comprehensive and strategic planning approach by asking the team to assess the impact on the 3-5-year plan. What Opportunities are you aware of that could help you achieve your 3-5 year goals? What Threats are you aware of that could prevent you from achieving your 3-5 year goals? The team can brainstorm a list of potential Opportunities and Threats, then discuss, debate and agree on the top 3 Opportunities and the top 3 Threats.
Annual Planning should include a good balance of strategic thinking and execution planning. This is your opportunity to prepare your team for a successful year and connect strategy to execution with your strategic initiatives. To plan for a successful year, you must have a good idea of the strategic direction you are moving in. Where do you want to be in the next 3-5 years and beyond? What are your strategic goals? What are the strategic priorities to help you achieve them? Because strategic thinking is a process, not an event, you must think about how to use this time most effectively. If you have a fully developed long-term strategy, you could use this time to review it with the team. If you have some pieces developed and some that need more work, you could spend this time focusing on just one strategic topic. Here are a few strategic decisions you should be working on. Consider where you are with each of these and customize this portion of the annual planning agenda to work on the areas most important to you at this time.
Before you can start working on the specific details of your Annual Plan, you need to align the team around a common vision of what a great year looks like. To do this, we recommend a team exercise called the Destination Postcard. This idea comes from Chip Heath and Dan Heath’s book Switch (ch. 4, Point to the Destination). A Destination Postcard is a vivid picture of the near-term future that shows what could be possible. It asks the team to consider how the company will be different a year from now, how life at work may change, and how you will celebrate your success.
Make sure your annual plan is successful. This will help you create your four-quarter flyover and envision your path to success.
Ask each person to take a few minutes to quietly think about and write a descriptive narrative of what a successful year looks like to them. They can write a paragraph or use bullet points, whatever is most comfortable for them. It should not just be a list of KPIs or financial targets. Those may be included, but what you’re looking for should be more descriptive than that. Ask them to consider how the company will be different a year from now, how life at work may change, and how you will celebrate your success. Manufacturing companies can get a head start on their Key Performance Indicators by reviewing our 25 KPI Examples For Manufacturing Companies.
Ask each person to consider what three things must have happened during the year that made it possible to achieve this vision. They should write down the three specific objectives that were accomplished.
Once everyone is finished writing, go around the room and ask each person to share their description of a great year and the Top 3 things the company accomplished. Capture the Top 3 things each person mentions on a flip chart. You can use checkmarks if more than one person mentions the same thing.
Leave the flip chart notes on the wall and refer back to them as you work to develop the details of your Annual Plan.
Now that you, as a key player in our team, have created the proper context, confirmed our strategy, and envisioned a successful year together, we are ready to discuss the details of our execution plan for the next twelve months. We must consider and agree upon four components of the Annual Plan.
Targets - As key players in our team, it's your crucial role to set the measurable results we want to achieve this year. These targets, including Revenue and Profit targets, are not just numbers. They are the Milestones that will guide our Journey and measure our Success. Choose a handful of targets that are strategic and meaningful to our company.
Theme/Main Focus - Your input is vital in agreeing on the main thing the company must focus on this year. What barrier do you need to break? What Winning Move must pay off this year? Maybe this is the year to focus on your company’s culture. It could be anything. The idea is to identify one overarching theme for the year that you are confident will drive your business forward. Creating this kind of “rally cry” will help people remember those things they know are most important throughout the year.
3-5 Annual Initiatives - Now comes the hard work of prioritizing and choosing 3-5 specific Key Initiatives you will commit to completing this year. The right Key Initiatives will support your ability to achieve the Main Focus, hit your Targets, move forward on your Winning Moves, and execute your core business excellently. To identify your Key Initiatives, refer back to your work in the first three steps: Lessons from the Prior Year, Start, Stop, Keep ideas, Opportunities and Threats, Strategic Decisions, Winning Moves, and the Destination Postcard. Based on all this, what are your Top 3-5 Key Initiatives for the company this year? In addition to identifying these Key Initiatives, you must assign an owner for each, determine the Red-Yellow-Green success criteria, and map out the sequence and timing of significant milestones for each initiative.
Quarterly 90-day action plan - Now you are ready to get to work. As the last section of your Annual Planning Session or in a separate meeting, take the next step in your Plan Rhythm and create the execution plan for the first quarter. Like the Annual Plan, the Quarterly Plan should include a Main Thing, 3-5 Top Priorities that can be achieved in 90 days, owners, and Red-Yellow-Green success criteria for each Priority.
The leader should also share the 3-5 Priorities the executive team has identified for the first quarter of the new year. Based on that, the department should consider their year and determine the 3-5 Priorities they will pursue in the first 90 days. Each department’s Quarterly Priorities will also need an owner and Red-Yellow-Green success criteria. Taking it one step further, each team member should also identify the 3-5 Individual Priorities they commit to that will support the business unit's plan.
Once the departmental plans are finished, many companies will schedule a kick-off meeting (or series of meetings) for the whole company. This is a great way to bring people together, create positive energy, and make sure the company plan is communicated in an inspiring way to everyone. Remember, your plan is only as good as your ability to communicate it to those who will carry it out effectively. The best time to break down departmental silos is in the planning process, have your discussions surrounding shared resources in the planning stages.
This is the standard Annual Planning Agenda Template however, top CEOs customize their agenda. Download the agenda based on decades of professional annual planning sessions and and annual plans now.