Operational Planning Will Help Achieve Organizational Goals
Developing an operational plan including a budget for the upcoming year tends to be a daunting task for most companies.
During the 4th Quarter when next year’s Operational Plan needs to be finalized, this process occurs at the same time that management is focusing on maximizing the business performance in the current year.
So, which is more important?
Well, they are equally important for the ongoing success of any business.
Four key questions that need to be asked are:
It is also critically important to develop a Strategic Plan for the longer term growth and success of every company, no matter what the size of the firm.The Strategic Plan identifies a longer term ‘roadmap’ as to where a company wants to be at a defined point of time, usually three to five years, and what actions it is going to take to get there.
The Operational Plan is the means by which the company’s strategic plan is to be implemented in a shorter time period. The Operational Plan clearly documents what the company intends to accomplish in the next year, how and what actions will take place, who in the company will be accountable for these actions, and what the targeted results are.
Most business owners and CEO’s tend to have some idea of what financial results they are looking for in the upcoming year, and some will have put together a financial budget by month.
However, these ‘budgets’ will usually be made up of the current year’s monthly historical performance with some sort of modification for the same month in the upcoming year’s monthly budget.
Very few business owners and CEO’s execute a formalized and documented operational planning process that provides the necessary information with year-to-year consistency and reliability to culminate in an effective budget for an upcoming year.
A budget developed on its own without the process of the other steps listed above will rarely provide the basis to maximize financial performance over an upcoming year of operations.
Some important benefits of implementing an operational planning process include:
Strategic planning and operational planning should be an ongoing annualized process for every company of any size.
Measuring results must be a continuous process, annual updating of the company’s strategic plan should take place in the first half of each year, usually during the 2nd quarter.
Operational planning should begin in the latter part of the 3rd quarter and will culminate in the upcoming year’s approved budget in December of each year.
So, if you have not yet completed 2022’s Operational Planning and are in the latter stages of finalizing your 2022 budget, there is a lot of urgent planning work that needs to be completed to provide the best possible opportunity for success in the year to come.
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