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Pitfalls of Yearend Planning

By Drive, Inc. on Friday 15 November 2013.

I am often entertained when I see annual operating plans with round numbers or the same reduction targets year after year. Many times the plans are fantasies rather than actual plans that will move the company closer to its business objectives. Since these plans are so loosely constructed, managers and directors fail to challenge the current condition. These leaders know corporate is going to reduce the budget by 20% anyway, so they add 20% fluff in the beginning which leads to The Showdown (also known as the budget review). At the end of this review, the managers leave thinking, “Well, it could have been worse,” and the corporate managers think, “Well, we got an extra 20% out of those guys.” In the end, there is incremental improvement to the business, at best. We see companies play this same game year after year. Now, we are all smart and know it isn’t right, so how did we get here?

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