One of the most common complaints about strategic planning is that, once it is approved, it sits on the shelf and molds, never to see the light of day again. This is a waste.

Your strategic plan should be the basis for every decision. We should constantly be asking

“Does this decision tie to one or more strategies?”
“Does this decision advance progress toward our vision?”
“Is this the most effective use of our resources?”

Going to the Strategic Planning Committee or the Board for every day-to-day decision is, of course, ridiculous.

Daily decisions are made with reference to the annual operating plan and the resulting authorized budget. The key is to tie the budget to the strategic plan from the very beginning.

1.a The Strategic Committee prepares the Strategic Plan. This is an on-going activity, with an annual approval by the Board. [June and July].

1.b. Meanwhile, the Development Committee Sets the Annual Development Plan with achievable  dollar targets. The development plan includes the actions necessary to achieve the targets, e.g. Hold a banquet in May. The resulting revenue plan should be calendarized. [June and July]

2. The board sets the priorities for the Annual Plan and the Budget. This is a key step. This is where the Board sets the priorities and constraints for the coming year. These priorities and constraints constitute the criteria for the later approval of the Annual Plan and Budget. [August and September]

These should be the only criteria. As such, the Board cannot spend too much effort on this step. If objections are raised in step 4 concerning items  not mentioned in this step, then the Board spent too little effort here. All potential objections should be covered.

Some example criteria:

• Revenue of at least $xxx. This could mean sending the Development Plan back to the Development Committee.
• Total expense of $xxx. This is often set to match the revenue budget, but does not have to match it. The board could designate a target higher than revenue [a deficit budget] to use retained earnings to move more quickly to the vision instead of hoarding funds. They could also designate a target lower than revenue to build up safety balances.
• Maximum amount (or percent) of compensation expense. This is quite common, especially if the compensation is managed separately from each department.
• Minimum cash available at any point in the year. This is to ensure your organization’s survival. This is why your budgets should be calendarized.
• Percent for each strategy. The board could direct emphasis in certain areas.
• Percent for each department. The board could direct emphasis in certain departments.
• New initiatives, or reductions in old ones. The Board could approve new initiatives that would then be incorporated in the Annual Plan and the resulting Budget.
• Any other thing the board wants to see happen or that they might object to.

Remember. If the Board doesn’t care about it here, they should not care about it when you get to Step 4.

Step 3. The Staff develops a compliant Annual Plan and Budget. They also develop any alternatives as a full pro forma, not as a delta plan. They may propose their own alternatives, in addition to those requested by the Board. [October and November]

Step 4. The Board approves the Annual Plan and Budget. If all of the above steps have been completed, this should be a quick process. See The Corporate Model. [December]

Step 5. The Board and Staff review performance against the Budget monthly. Variances to the Budget provide insight into where further investigation should start. Note that variances to last year’s budget are worthless for monthly review. [Monthly]

Note that all of the above steps are recursive. This is not a waterfall process that proceeds in a linear path from beginning to end. Any step can kick the process back to an earlier step.

Summary

Step 2 is the key. The Board must understand what they want and how to make that the criteria for approval of the Annual Plan and Budget.