Most organisations take annual planing for granted. But what’s the point of it?

I’ve been involved in annual strategic planning for more than twenty years.

Across that period of time, I’ve worked with a cast of thousands of brilliant people to create hundreds of annual plans.

For that matter, I’m in the middle of two annual planning processes right now…as well as my own.

That’s a lot of slides, a lot of hours, and a lot of spreadsheets.

But what is annual planning really good for?

The Tyranny of the Calendar

The annual plan holds a special and dominant place in many organisations’ strategic rhythm. 

It’s the most significant time unit of taxation, of financial reporting, and therefore of financial planning. Which in turn means that in most organisations, it’s the landmark for personal accountability (and bonuses, if that’s your poison).

This financial commonality also means that the annual plan is the common unit we have with our key significant others: suppliers, retailers, donors.

And of course, it marries with the internal rhythm of our own lives – school years, birthdays, holidays, festivals.

But do you ever have that feeling that the annual plan is like an inverse-Goldilocks unit of time?

It’s never quite urgent enough to inform what you are doing right now (unless you’re in Q4), and it’s never quite long enough to feel like you are making significant change.

What is the annual plan really for? Is it any use?

Why a year goes by in an instant…

Because year isn’t long enough to make something famous.

Perceptions are changed through repetition, consistency, and network effects. There is no way you should change your marketing activities every year. Ads don’t wear out, they wear in – campaigns should be there for three years minimum. Events don’t generally hit their stride before year three. If you are doing something to change perception, you’ve got to stick at it. The frame of your marketing plan should be set on a three-year cycle, not an annual plan.

Because a year isn’t long enough to fully learn.

Hopefully, if you make a change of strategy, at least some elements of it will fail at first, otherwise it is probably not ambitious enough. A year is long enough to see the fruits of your first attempt at something, and it’s at exactly at that moment that you have enough data to give yourself a chance to make it work. Many, many great ideas get killed at this moment, not through inherent weaknesses, but through impatience.

Because a year isn’t long enough to change culture.

The idea that you stand up in front of a team and announce the new direction, and everything flows from there, is a fallacy of control. Culture change is a non-linear process of confusion, adoption, backsliding, re-formation and dialogue. A year is long enough to reveal quite a lot of the pain of change, but nowhere near enough to start enjoying the gain.

Why a year can feel like a lifetime…

Because a year is too long to plan to be relevant.

People are creatures of novelty and reconsideration. We are wired for constant superficial change, and this is the level at which a lot of demand creation and saliency is built. Conditions for your executional plan, whether that’s content or channels or pricing, could change massively over the course of the 18 months from annual plan creation to execution. Relevance is naturally seasonal – not annual.

Because a year is too long to wait to drive improvement.

Everything you do throws off data, whether it’s an internal change or an external campaign. Over-pivoting is a vice, but underusing your intelligence to optimise is a folly. You are best able to stay on the long-term course if you maximise your chances of success operationally in the short term. This means at the very least you should be doing a full review of all your key areas of activity every quarter, to give yourself the best chance of succeeding. Few organisations find the rhythm to do this properly.

Because a year is too long to create motivation.

Whether they are senior or junior, employed or freelance, people have choices about where and how they work. If you only give feedback, recognition or development opportunities once a year, you are maximising your chances of losing the relationship that drives progress. There are industries I work with where average tenure is just over two years, and performance reviews are only annual. That means that on average, you are only planning to do them once.

So, what is an annual plan good for?

My experience shows again and again that 3 years is a better range at which to be setting strategic goals, and expecting to see them recognised in the market, bought into internally, and tested.

If you want to make a substantial difference to organisational relevance, performance and motivation, you need to take stock on much tighter cycles – ideally quarterly. For most individuals who manage to stay on top form, this is roughly the cadence at which they try to take stock personally. But few organisations have a really good quarterly review process.

The year is a suboptimal time unity in so many ways. What is it good for?

The annual plan is a bridge.

It’s a bridge between the future, and the imminent.

It’s a balance between long-term strategy, and short-term improvement.

It should never, ever be written on a blank piece of paper. If you realised there are foundational decisions missing, what you need isn’t an annual plan, but a 3-year+ strategy. 

It should never, ever look the same at the end of the year as it does at the beginning. It needs periodic review, to check and change course on the execution.

But every strategy needs glue – a connection point that brings coherence, between the now and the next.

That is what annual planning is good for.