Stop wasting time writing annual plans

The agile software expert Mary Poppendieck refers to “the tyranny of the plan.” Now is the time of year when that tyranny is dominant — and it’s probably cloaked under an innocuous-sounding title, like “Achieving Our 2020 Vision.”

Most, if not all, organisations will go through some form of annual planning process. It’s often gruelling for participants. Yet, according to Robert Kaplan and David Norton’s Balanced Scorecard, a whopping 90% of firms will not end up fully delivering the strategies that those plans detail. And there is widespread acknowledgement that the strategic context has changed. Two-thirds (67%) of CEOs say that acting with agility is the new currency of business, according to KPMG.

So why is the business world still so reliant on annual planning? 

Start with accounting practice and company law, which dictate annual filing of results. Forecasting next year’s numbers becomes a natural — and sometimes unavoidable — consequence of that process. From there, it’s a short skip-and-jump to a plan that seeks to justify those numbers.

Then there is the question of risk. Human beings are not good at tolerating ambiguity. Behavioural economics posits that we all have a tendency to favour  the known over the unknown. Annual plans create the sense that we are in control of our organisations and the world in which they operate. This is a fallacy: by way of counter-argument, the author Nicholas Nassim Taleb’s Black Swan explains that almost all high-impact events are unpredictable. The mathematical logic underpinning this reasoning is sound — but there is comfort to be gained in ignoring it. False comfort, of course, but that is not always the deterrent it should be.

Finally, there is our innate nature, which is time-bound. It is part of the human experience to measure our lives in turns around the sun. Bringing these factors together, the annual planning rhythm achieves a gravitational pull that can be hard to resist.

The purpose of any plan is for leaders to set out high level actions to achieving a defined goal. But the process of achieving anything is not helped by yoking it together with arbitrary periods of time. Or, indeed, periods of time that are dictated by factors other than the nature of the task in hand. Progress is also not helped by activities that distract from the uncomfortable but vital business of facing reality in all its VUCA glory.

Effective leaders focus on building organisational responsiveness, resilience, and innovation potential. They understand that any successful change process primarily involves answering two deceptively simple questions: “what are we doing now?” and “what are we doing next?”

Effective leaders pay constant attention to these two questions, embracing the spirit of agility in doing so. In practice, the answer to “what are we doing now?” determines the answer to “what are we doing next?” Hypotheses and frameworks are vital, but in the end it is only endless real-time experimentation that drives progress.

Consider the UK’s government Digital Service. Wind back a few years, and the government kept appointing “tsars” to “turn government digital.” Each one spent months writing a report containing detailed plans about what needed to happen each year to migrate services online. In each case, progress then stalled as strategy met contact with reality. Enter the next “tsar.”

By way of contrast, the final person to be awarded the gig, Mike Bracken, spent the first few weeks building an alpha site. Having launched it, he then built teams to turn the alpha into the remarkable, multifaceted platform it is today. A practice of “doing now, doing next” achieved that rare result: full-spectrum public service transformation.

Moving away from annual planning is not easy. The false comfort that it offers drops away. There may be teams or individuals within your organisation with a strong sense of ownership of the plan who feel threatened by its loss. And a present moment-focused way of working can be messy: any experimental process produces false starts and failures. But ultimately even a messy process is far less punitive than the slow, painful death of unrealised plans.

Faced with the challenge of change, what practical steps can leaders take? Here are three suggestions:

1. Get real. Virtually every major event that has impacted the world in the last few years made sense retrospectively, but wasn’t easily predicted beforehand. The same will be true of your business — at least in part. You are far less in control than you think. Letting go in this way frees you from the burden of over-planning.
2. Define your outcomes — and focus on the first practical step to getting there. Identify “micro-wins” — strategically aligned quick wins — and deliver on them. See what you learn. Then define and do the next thing. Rinse and repeat.
3. Stay friends with Finance. There are inevitable tensions between the need to report numbers annually and a more agile approach. As a first step to mitigating them, these tensions need acknowledging in a spirit of openness and collaboration. The relationships between budgeting, reporting and planning processes can then be discussed.

The annual plan is a cycle of addiction, wasting time at best, creating misery at worst. Will 2020 be the year in which your organisation breaks it?

Explore more