Annual end-of-year planning is critical for any organization that has its eye on success. But regardless of how much good intention is behind the planning process, it’s often a time of missed opportunities and, therefore, decreased future profitability, sustainability and growth.
The culprits are usually various flaws in the planning process itself, which means that these missed opportunities typically go unnoticed. The company completes end-of-year planning without realizing how much growth potential was left on the table.
Following are five end-of-year planning mistakes that can put your company’s financial future at risk, and while this is in no way a comprehensive list, it does focus on those errors I’ve found to have the biggest negative impact on growth.
Mistake #1: Knowing Your Numbers Just Enough to be Dangerous
If you’re a CEO without a strong financial background, it’s likely you make this mistake every year during planning time. And you’re not alone. Many CEOs “know” their company’s financial data just enough to believe they understand it fully – a perspective that makes you one thing to your company: Dangerous.
End-of-year planning demands in-depth understanding of the nuances of your company’s financials and I’ve worked with some CEOs who thought their companies were doing good or even great when really they were actually in a full-blown turnaround situation.
How do you fix this mistake? You simply begin to learn what you need to know – and the best way to do that is to find someone highly knowledgeable to teach you.
Mistake #2: Starting INSIDE Your Company
End-of-year planning naturally draws leadership teams to focus on what’s happening within the company. You look at past performance, you set new goals, but what’s often missed is that careful and broad examination of what’s happening in the external world (either because you run out of time or because it’s not a big part of your planning process to begin with).
The problem is two-fold: First, some of the most valuable insights for gaining a competitive advantage and avoiding potential pitfalls, can only be found by looking at what’s happening in the world – on all fronts (social, political, technological, etc). Second, CEOs and their leadership teams enter the planning process already knowing a lot about what’s happening inside the company; what they don’t know nearly as well is what’s outside their four walls.
Understanding the external world first creates a much better lens from which to then look inside your company and make decisions that result in a strong and profitable financial future.
Mistake #3: Not Planning for Resources DURING the Planning Process
While it makes sense to develop the annual budget for the coming year concurrently with end-of-year planning, what’s sometimes overlooked is the task of taking stock of other non-monetary resources required to execute the plan.
The truth is that most non-monetary resources do end up, at some point, requiring money in one form or another and, equally, considering resources of all types is key to determining which strategies are feasible and also making sure there won’t be a delay in implementation.
Mistake #4: Fearing Change
Resistance to change may be the number one reason some companies aren’t able to achieve significant growth or even a solid financial future. However, fear can be especially difficult to spot in the planning room.
For example, if last year’s performance was good, a CEO and leadership team who re-adopt the former year’s plan may walk away from end-of-year planning looking like smart strategists when, in reality, they could have far surpassed the prior year’s benchmark had they been willing to re-think and shake things up.
Mistake #5: Failing to Connect the Plan to Action
The final mistake I want to discuss has to do with the chasm that often exists between strategy and daily action. I’m talking about the end-of-year planning process that results in a plan that sits on a shelf gathering dust.
If your planning process does not go as far as determining what needs to happen on the ground, including what processes, systems, policies and people might need to change, the goals you’ve set (no matter how small) have little chance of being met.
To avoid this mistake, build in enough time to create your implementation plan as part of your end-of-year planning. It helps to remember that end-of-year planning is a process and not an event that can be completed in a day or even a week. Instead think of your entire fourth quarter as end-of-year planning time and carve out time for each step in the process: exploring the external world, examining your internal workings and data, setting goals, developing strategy, identifying needed resources and then, and only then, developing an implementation plan that drills all the way down to daily actions.
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