How to Set Goals and Build an Annual Operating Plan

Why Annual Goal Planning Often Misses the Mark

Do you want a shock?  Assigning or identifying goals is not an annual plan.

It's that time of the year for business.  Many businesses lay careful plans for the next year in Q4 or for the current year in early Q1. Over the last nineteen years, I have had the privilege of both receiving and authoring many annual business plans.  Often, plans simply assign goals such as “grow 5%,” “reduce costs by 3%,” or “create a rebate program with our suppliers.” 

These common approaches miss two important dynamics.  

1. Untapped Talent

First, the untapped talent and vision of your people.  It’s an odd thing in business that our single biggest expense is personnel. Yet, we often don’t take the time to leverage these resources.  I have seen profound ideas come from asking the line operator “What do you need for this equipment to run more efficiently?” or “What is this manufacturing floor lacking or getting wrong?”  In fact, I saw a new plant manager turn around a facility that had chronically underperformed for over two decades.  His secret.......he showed up at each shift change for the first 90 days and asked each operator what support, resource, or tool they needed to dramatically improve their workday. 

Shock #1: The people in the business know so much more than commonly perceived, and they are already invested in the result. 

2. A Rallying Cry

Goals in and of themselves are not innovative or clear. The second important dynamic for effective, strategic goals is accurately and winsomely identifying your business’ “moment” or “season” and communicating that spirit to your team members. A rallying cry unites people and creates organizational velocity.  Labeling the year with a theme provides clarity. Instead of asking for 5% growth, share the vision of sold-out capacity and investing in new, cutting-edge equipment. Instead of asking to cut costs with vendors, share the need for strategic partners who will participate in growth with you.  When the business owner or CEO steps up and says “this year our systems are being transformed, help us retain our customers and our future trajectory will change” a clear rallying cry is heard.  A more traditional and contrasting approach would be “We need year-over-year growth.”  The latter is a hollow goal while the former is a theme and a vision to rally behind that creates belief and optimism. 

Shock #2: Identifying the company’s “season” or “theme” provides far more clarity and speed than goals. 

Building a Better Annual Operating Plan

As you create this year's annual operating plan (AOP), take time to ask all your team members for input. The effort can be as simple as these two questions:

1. What is one thing the company has to stop or change?

2. What’s the one part of the business that would grow more quickly if the company invested more heavily?

Secondly, take time to identify what season the business is in. What does the company need to be this year, and how can your people rally around it regardless of their department? After these two dynamics are considered, strategic goals can be identified that align with these key insights.

Need Help Creating Your Annual Operating Plan?

If you would like help in creating a clear Annual Operating Plan, Dominion Consulting is ready to help.  Reach out today alex@thedominionconsulting.com.