This time of year, many of my clients (some at my insistence) are looking at planning. Not only does planning and budgeting for the coming year meet the “best practices” standard for good management, this process also offers an excellent opportunity to build alignment in the senior team and across the organization.

The graphic below (thanks to Jeff Hansen for his beautiful artwork!) describes one person’s view of strategic planning. Surprisingly, many of the worst arguments I hear in taking a team through this process are about the framework and terminology one uses. So use this process as a representative model, and “right size” it for the stage and sophistication of your company.

statplan

The first step in the process is to share and agree on the “inputs”. Many start up execs argue that since they are “creating a market”, there is no data to be shared. However, in order to avoid the endless opinion-based bickering that teams can hide behind when facing an anxiety-producing choice, the team must agree on some assumptions. Depending on the business, this might include market info, data on customer needs, an exploration of competitive offerings, as well as an assessment of the company’s technology. Various team members can “own” bringing and sharing the data in each of these areas, triangulating into a shared understanding.

Using this data, the team must agree on how they will define their “market”, and where they will position their offering. Usually, the CEO or CMO will take the lead here, but everyone must agree that the market as defined is big enough, and that the positioning “plays” well with customers and partners. This agreement allows the company to align around a “vision for success”. Today many teams hesitate to look more than 18 months ahead, though I find some thought to a longer term vision is helpful, especially in order to answer the “why should we engage in this journey” discussion when things get hard.

Now comes the really contentious part — the gap analysis. Most members of the teams I work with are fiercely competitive, so they are more than happy to point out where the other functions are “falling short”, but less willing to let the scrutiny fall on their own department. However, the purpose of the gap is to focus in on the “strategic initiatives” — the 3-5 areas where the most cross-functional effort needs to be expended over the next year to achieve success.

Of course, for most start ups there are lots of “gaps” in the picture, lots of “strategic questions” where the team will have to decide together which way to go. In some cases, small teams can quickly develop an analysis and recommendation for the whole team to consider. This gets the team used to a “divide and conquer” approach, where they have to learn to trust the work of others. The process of answering strategic questions will further refine the vision and priorities.

Many start ups hesitate to make the hard calls, to focus in on some small number of opportunities or directions. However, it is crucial that a team learn to make an educated bet and stick to it. I limit the teams I work with to 3-5 priorities. These usually involve some combination of revenue, product, channel, infrastructure/team and perhaps cost control.

At this point, the team should all be grounded in the same understanding of the market, the product and the goals for the year. It is now time for each VP to work with his or her functional team to “cascade” their functional goals from the organizational goals and initiatives. It is important, however, for these VP’s (or even better, also the Directors of each functional group) to come back and share their goals and actions across the functions, ensuring that dependencies and ownership are clear, and there are no “gaps” in critical action items.

These functional plans can then be linked to functional budgets and to the operating budget for the company as a whole. However, before declaring success on the planning process, the team needs to decide how, and how often, and based on what metrics, they will evaluate their process. My recommendation is for quarterly updates to the plan, and at least annual evaluation of any significant change in the market assessment.

Keep in mind that the end doesn’t justify the means, here. It is important to create a nice plan to wow your Board of Directors…but it is more valuable to use this process to develop good team behaviors that you can bring to other hard decisions you will need to make in implementing your plan.