What’s the plan? Despite the fact that it’s impossible to predict the future with absolute certainty, business leaders are accustomed to answering this question.
In the past, business owners tried to create annual plans they could refer to all year long. Every year, the leadership and their teams would gather to discuss their goals and the steps necessary to get there. The annual plan was more or less set in stone, even if things changed along the way.
The problem is that once we create an annual plan, the underlying assumptions may change, leaving it obsolete.
The COVID-19 pandemic has served as the clearest illustration of how rapidly things can shift and invalidate many of our well-laid plans. It’s shown how we need to continuously adjust our direction based on new information. We need to answer questions like “If our company’s growth has stagnated, what will we do differently?” or “if we’re on a sudden upward growth trajectory propelled by circumstances out of our control, what should we do to take advantage?”
One-time annual planning simply doesn’t work for today’s businesses. Instead, the most successful businesses are shifting toward continuous planning and forecasting.
What makes a good operational plan?
Before we go into creating a continuous company plan, let’s first define what a good operational plan is. A solid operational plan will be adaptable and provide visibility, allowing you to shift directions and make adjustments whenever necessary.
The best operational plans:
- Consider nuance. The best plans take into account the nuances of a situation, even if it can be tempting to plan for the best-case scenario. For instance, while creating a plan for a sales organization, it’s critical to take into account the predicted ramp time and performance of the sales team members based on their relevant industry experience.
- Are constantly being researched and updated. Every operational plan should function on a rolling 12-month basis. It’s crucial to develop the practice of making monthly or quarterly revisions to the plan so that it consistently takes the next 12 months into account.
- Determine the key trigger points that call for plan modifications. Because it’s impossible to predict exactly what will happen, it’s vital for the plan to include trigger points that will signal that the current course needs to be changed. For instance, a lot of businesses might modify their plan in response to changes in top-line growth or decline, customer churn, expenses, etc.
- Involve all relevant players. Without the support of leadership and other important stakeholders, an operational plan is useless. It’s important to have key functional leaders involved and accountable.
- Obtain the visibility necessary for you to take action. Although a plan alone might not provide visibility, well-integrated tools will. To modify your operational plan as you go, you must have current, precise information at your fingertips.
Creating a continuous company plan
Get leadership onboard to align on strategic objectives
Every member of the leadership team needs to be actively involved, visible, and in line with the overall goals of the business. A list of key and manageable strategic initiatives that will aid the company in achieving its objectives must also be agreed upon by leadership.
Determine leading and lagging indicators
To update and modify the plan, it is crucial to establish the key metrics to monitor to assess how the business is doing. These leading and lagging indicators will show when it’s time to shift gears. Here are a few instances of these signs:
Leading indicators:
- Marketing-to-Sales conversion rates
- Sales pipeline coverage
- Sales team hiring vs. plan
- Annual recurring revenue
Lagging Indicators:
- Revenue
- Ramped sales team firepower
- Install base retention, expansion, and churn
- Operational expense and EBITDA
Utilize well-integrated tools to increase visibility
Without instant visibility into the status of Actuals vs. Plan (also known as BvA), and leading and lagging indicators, a plan is useless. To provide the required visibility, a wide range of tools can be integrated into company operations. FP&A platforms need to integrate with and bring in data from CRM (e.g., Salesforce, MS Dynamics), ERP (e.g., NetSuite, SAP, Oracle, Intacct) Marketing (e.g., Marketo), and HR (e.g., Workday, BambooHR) systems. Hiring tools, such as Lever or Greenhouse, should be integrated as well, so it’s possible to keep a pulse on the status of your hiring efforts as you grow.
Create several iterations of a plan to account for various circumstance
Companies frequently make the error of creating a single plan when they actually need to have several versions based on various scenarios and trigger points. A “most likely” plan, a “stretch” plan (which takes into consideration the best-case scenario when performance is greater than anticipated), and a “doomsday” plan should all be created by businesses (which accounts for scenarios like Covid-19 which could have severe negative impacts on company performance.) If the business has adopted a “stretch plan,” it may decide to invest more money in hiring in order to boost sales or develop a new product. At the same time, a “doomsday scenario” would call for hiring restrictions and cost-cutting measures to extend the runway.
Review performance vs. plan regularly, and make changes accordingly
The most important factor in a successful operational plan is to regularly assess it, especially with regard to performance. That way, if things deviate from expectations, necessary adjustments can be made. As a result, the company becomes more proactive. Assume, for instance, that sales had surpassed the plan’s projections by a large margin. If so, it’s time to start thinking about how and where additional cash can be deployed to grow the business.
Different metrics can be reviewed at different cadences.
For instance, it is possible to monitor daily website visitors, weekly sales pipeline evaluations, monthly income tracking, and weekly ARR evaluations. Make sure everyone is aware of the specific aspects of the plan they are in charge of investigating, monitoring, and reporting on.
Create a plan-based reward and incentive structure
Bonuses and incentives are often awarded on an annual basis due to the nebulous idea of team member performance. Incentives and rewards are increasingly being given by businesses depending on how well a team as a whole performs. Aligning the incentive structure to company-level outcomes drives every leader’s mindset toward doing what’s best for the company. A team will be encouraged to accomplish that goal, for instance, if they know they will be compensated if they can deliver a planned feature within a particular amount of time.
The living, breathing operational plan
An operational plan is a dynamic, ever-evolving document that changes with the business and isn’t just developed and addressed once a year. The most effective operating plans are continuously updated to account for the upcoming 12 months and are examined on a regular basis.
