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Is the Annual Process Disconnected from the Realities of Your Business?

Part I: Planning challenges and best practices

Is the Annual Process Disconnected from the Realities of Your Business?

Under pressure to reduce costs, justify headcount, and deliver more while providing business sponsors with the status of projects? Do you feel like annual planning is a one-time exercise and not a true reflection of strategic objectives? You’re not alone. Many organizations find that the annual process is disconnected from the realities of the business.

As a Planview product manager and a Certified Public Accountant (CPA), I’m responsible for the planning side of Planview Enterprise including strategic investments, strategic planning, investment planning, capacity planning, financial planning, and product portfolio management. Through my experience and having previously managed a $1.5B budget as well as consulting with customers, I am intrigued by the breadth of the challenges companies face from the executives to directors to portfolio managers trying to ensure that their organization is making the right decisions to execute on their strategy successfully. In this four-part series, I’ll delve into the some of these challenges and offer best practices that can help your company improve efficiencies.

An Annual and Manual Process Is No Longer Efficient

When it comes to annual planning, I have witnessed that executives often rely on an extensive, intensive, manual process involving multiple people across the organization tasked with collecting information over several months. Decision making then becomes a byproduct of budgeting for annual planning, not strategic planning. At day’s end, traditional budgeting doesn’t link investments to outcomes or results. Instead, time spent collecting data morphs into a list of equally approved budgeted investments – not a list that can be effectively evaluated and prioritized.

Does this kind of exercise get you excited for annual planning? Probably not – especially when this process is driven by format that feeds into the financial plan. You may even view it more like an administrative exercise to justify your budget. Use-it or lose-it! An organization’s enthusiasm is bound to wane when they’re pushed to reduce estimates while proving they’ll deliver more with less.

Don’t Pigeonhole Innovation – Think About Updating the Annual Planning Process

What price does the business pay for a lack of a budget strategy? There’s nothing wrong with a on-time, in-budget, and in-scope culture – except when controlling spend crushes innovation. The question then becomes what kind of outcome is derived from creating detailed estimates for wish-list projects that may never get started. And if they do get started, there is little to no flexibility to adjust from that estimate.

Inevitably, decision makers will revisit approved budgeted projects throughout the year, setting off yet another organization-wide manual, data collection event. Instead of using this opportunity to re-allocate funding or resources, it becomes a way to reconcile to the budget. Often, this exercise results in forecasts that show investments that are behind may magically catch up by year’s end so forecasts match the original annual budget. The year-end report will simply justify the annual plan.

Ultimately, it is difficult to drive portfolio decisions, prioritize strategically, and evaluate risk for a portfolio that speeds innovation when the Finance department is making a plan to run your business. With the business unsure of expected results, the current finance-based approach perpetuates the behavior of detailed estimates and staying within budget. Changing this conversation can be a struggle – even when roles are created to improve communication between Finance and IT.

Is this happening in your organization? In Part 2, I’ll cover what executives are missing when it comes to Investment and Capacity Planning in their organizations. Stayed tuned!

If you find this topic interesting, I recommend taking some time to watch a webcast I did with Forrester analyst Margo Visitation titled, “When Incoming Demand and Change Derail Your Annual Plan: The Case for a Continuous Approach to Strategic Planning and Execution” where we have a discussion on the four critical elements for a well-integrated, continual approach to strategic planning and execution. You can also review this blog post which provides the highlights.

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Carina Hatfield
Written By

Carina Hatfield always has a plan. Throughout the years, she has improved her ability to respond and re-prioritize for new ideas and unplanned events. She followed her original plan of becoming a CPA going into budgeting, forecasting, and strategic planning until a new idea was prioritized and she took on the opportunity to join Planview. After six years of implementing Planview Enterprise to help organizations improve their strategic, forecasting, and planning processes, Carina has taken that experience and applied it to her role in Product Management.