1. 1
Catalyst Strategies
Make Growth Happen
www.catalyststrategies.com
2014
Annual Operational Planning Framework

2. 2
Antoine de Saint-Exupéry
“A goal without a plan is just a wish.”

3. 3
Elements of the Annual Operating Plan
Core Functions
Initiatives
Budget
Operating Plan
12-month horizon
Short-term Priorities
Annual Goals

4. 4
How to build your plan…

5. 5
Start with Your Strategic Plan
For details on Strategic Planning, see Strategic Planning Frameworkhttp://slidesha.re/1yNZgxQ
Situation Assessment
Vision
Strategy & Strategic Priorities
Mission
Long-term Goals
Monitor and Refine
Strategic Plan
3-5 year horizon
Core Functions
Initiatives
Budget
Annual Operating Plan
12-month horizon
Short-term Priorities
Annual Goals

6. 6
Define Your Short-term Priorities (next 12 months)
Short-term Priorities
Your short-term priorities are key areas of focus for the organization during the planning horizon. They are where the organization’s limited resources will be focused to make the greatest impact either in current year or future years.
Most short-term priorities should align with strategic priorities defined in the strategic planning process.
Short-term priority examples:
Market segments or geographies the organization will focus on in the short-run
Technology development to support future competitive advantage
Operational improvements that will pay off in future years
Expand ZapposCouture (part of long- term strategy to expand into the lucrative luxury market segment)
Make substantial reduction in SG&A (part of the organization’s long-term ‘simplification’ strategy)
Examples:
Expand NIKE-branded retail store presence globally (part of long-term strategy to use Direct to Consumer business to achieve earning targets)

7. 7
Build list of short-term priorities with a cross-functional team
Operational Planning TIP…
Product
Sales / Marketing
Operations
Etc.
Core Functions
Initiatives
Budget
Annual Operating Plan
12-month horizon
Short-term Priorities
Annual Goals

8. 8
Specify How You Will Measure Short-term Success
Annual Goals
This is your short list quantifiable financial or non-financial objectives that measure your organization’s progress toward long-term goals over a fiscal year.
Each should be clearly aligned to one or more strategies or priorities defined in the strategic plan.
Should be:
Specific
Measurable
Attainable
Relevant
Time-based
Example Annual Goals:
By the end of 2015, our team will achieve:
•
$70MM in revenue (e.g., tied to long-term revenue goal)
•
82% top 2-box overall customer satisfaction(e.g., tied to long-term Net Promoter Score goal and strategy to differentiate customer experience)
•
6% customer churn rate (e.g., tied to long-term profitability and Net Promoter Score goals)
*Once fiscal year goals are set, quarterly and/or monthly goals are set to support ongoing monitoring and plan refinement

9. 9
Reward based on stretch goals; Plan based on baseline targets
Operational Planning TIP…
Product
Sales / Marketing
Operations
Etc.
Core Functions
Initiatives
Budget
Short-term Priorities
Annual Goals
Stretch goals are targets to shoot for, where rewards accelerate substantially if these goals are met
Baseline targets are expectations to plan for, including level of staff, marketing spend, capacity, etc. required

10. 10
If you own a P&L, Build Your Revenue Projection
Revenue Projection
Your revenue projection estimates revenue that will accrue during each month or quarter, taking into account a range of factors, such as:
Existing customer revenue by product or group
oCurrent customers at current spend
oCurrent customers with forecasted upsell/cross sell
oRetention rate
New customer revenue by product or group
oAddressable market
oMarketing spend and productivity (e.g., leads per dollar, Lead to MQL conversion rates, MQL to SAL conversion rate)
oSales productivity (e.g., SQL to close ratio, pipeline velocity)
oOnline sales channel productivity
oSeasonality
oEtc.

11. 11
Calculate Costs of Core Functions / Activities of the Team
Core Functions / Activities
Corefunctions and activities are those undertaken to deliver on the mission of the organization.
Unless a major change is inprogress, core functions absorb themajority of the organization’s effort and budget.
Core Functions include:
Delivering product and service offerings
Supporting customers
Selling to new or existing customers
Managing business risk
Developing partnerships
Executing back-office operations
etc.
Steps to Re-think “Business as Usual” (better than trending, easier than zero-based budgeting)
•
By department or group, identify key functions / activities that accounted for significant percentage of headcount or budget in the past
•
Based on strategy and short-term priorities, identify any functions or activities that are no longer required
•
Based on strategy and short-term priorities, identify any new functions or activities that are now required
•
Calculate impact to budget and headcount of new or obsolete activities

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Prioritize Initiatives and Size the Investment
Initiatives
Initiatives represent the majoreffortsor investmentsyour organization will undertake during the year to achieve the strategic priorities.
Prioritize initiatives based on how effectively they will support achievement of goals and strategic priorities.
An initiative may be focused on enhancing or accelerating how the organization runs oropening new opportunities for the organization. An initiative:
Is prioritized based on fit with strategic priorities
Is discrete
Has a finite-duration
Can take multiple years to complete
Requires significant incremental resources
Scale and Leverage Initiative (build shared services & drive process improvement to support SG&A cost reduction strategic priority)
‘Safe Passage’ Initiative(build and launch tools to reduce barriers to standardize on VMware’s desktop and application virtualization and enterprise mobility management)
Examples:
Test womens-only NIKE-branded retail stores in select markets (support Direct to Consumer business expansion strategic priority)

13. 13
Use a standard format to collect information about competing initiatives, this gives the executive team the ability to prioritize
Operational Planning TIP…
Alignment: Supports Which Strategic Priority?
Expected Outcomes: SupportsWhich Goals? EstimatedImpact?
Key Dates
InvestmentRequired in FY’15
Initiative Name
Status: New, or In-flight
Primary Owner
InitiativeDescription
Priority 1
Priority 2
Priority n
Goal 1
Goal 2
Goaln
Start Date
Target Completion
FY Impact
IncrementalBudget
Incremental Headcount
Build next generation marketing infrastructure
New
VP Marketing
Implementmarketing automation platform, integrate with Salesforce; implement predictive campaign analytics capability
X
+$15-20MM
March 2015
PartialSept 2015
Complete March 2016
2016
$420,000
+2
Etc.
In early stages of prioritization, basic information is all that is required

14. 14
Gain executive agreement on initial prioritization of initiatives, senior leadership makes the final call based on business case
Operational Planning TIP…
Once initiatives are narrowed down, those requiring significant investment warrant a true business case

15. 15
Ensure clear linkage between strategic and operating plans
Operational Planning TIP …
StrategicPlan
Operating Plan
Long-term Goals
•Reach50% penetration of mobile banking users by 2018
•Achieve Increasein Net Promoter Score to 75by 2018
•…
•Acquire1.36MM active users (up 36%from 2014) by end of 2015
•Reduce preventable support calls to 18% of all calls
•Increasetop box customer satisfaction rating from 72% to 78% by endof 2015
•…
Annual Goals
Strategy
Winglobally through superiorcustomer experience
•Expand in APJ
Short-term Priorities
Strategic Priorities
1.Build scalable model for customer support
2.Fast follow on priority features development
3.…
•Test new supportmodel in APJ, assess for potential roll out in Q3’15
•Developroadmap for 2015-2016 feature set
•Build partnership with xxx
•…
Initiatives

16. 16
NOW You Ready to Build Your Budget
Budget
Your budget is an estimate of costs and revenues over a specified period, based on an understanding of likelyevents. The budget reflects the financial implications (costs and revenues if relevant) of your annual operating plan.
It includes:
Revenue projection
Operating expenses
oCost of core functions / activities
oCost of initiatives within the fiscal year*
Headcount
*Some initiatives rise to the level of Capital Investment. These are investments in infrastructure, product development, acquisitions, etc. that will pay off over a long period of time.
Your budget should be:
•
Clearly related to strategy and priorities
•
Based on reality vs. political negotiations
•
Based on what is needed vs. trend from the previous period

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Move from plan to ACTION!
Operational Planning TIP …
Common Failures
•Not communicating the new plan through the ranks
•Not spending the time to define objectives, owners, decision rights, milestones, resources, etc. for each initiative
•Not adjusting expectations of what the team does day-to-day based on the new plan.
•Not holding team members accountable
Making it Happen
•Review and assess core functions / activities in the annual planning process
•Communicate the plan clearly and frequently throughout the organization
•Define clear action plans
•Build and stick with mechanisms of accountability

18. 18
Tips

Build a demand / revenue forecast regularly, looking out a minimum of 2 quarters

Compare plan vs. forecast by geo, by group, by product; flag gaps and impending issues

Hold regular, multi-functional reviews of forecast; highlight impending issues and agree on corrective actions

Update operating plan to reflect agreements

Ensure the financial numbers reflect the current operating plan
Keep the plan relevant by continuously revisiting the plan
Operational Planning TIP …
Benefits

Open discussion and collaboration on achievement of results

Reduction of financial surprises

Better and more timely information to inform decisions

19. 19
Dwight David Eisenhower
“In preparing for battle I have always found that plans are useless, but planning is indispensable.”