2022 Annual Planning: Your Top Three Priorities
As the CEO of a growing small or mid-size business, you may feel that planning for the year ahead is a luxury you can't afford — especially when there's much work to do in closing out the current year strong. If you are thinking this way, you're headed for trouble.
Annual planning is the No. 1 responsibility of any CEO. Even if you have a clear vision for a three- to five-year strategy, it's crucial to phase and prioritize goals into shorter, measurable segments to ensure company success. I urge you to plan annually and quarterly, document your plan in writing, and share it with all company stakeholders. To make your 2022 planning achievable and straightforward, take these three steps:
1. Define priority goals. Clearly articulate what you're trying to achieve next year and why these goals are vitally important. Although your business and you are not the same things, you have a responsibility as the CEO to be highly invested in your company's success. Reflecting on what's important to you personally is a big part of this process. If the business's goals don't motivate you into action, you need to refocus the company toward what truly moves you. This introspection may seem scary at first, but once you pause and give yourself the space to reflect, it's a very liberating exercise.
Next, within the context of your three-year vision, take the time to create or recalibrate a one-year vision for your company. Doing this will help ascertain your priorities for 2022. Sometimes a year may feel too brief in building a sense of accomplishment, but when you're able to see the connection between the next one and the next, your march onward gains greater meaning, and you'll become unstoppable.
If your vision and one-year plan don't truly feel meaningful and important to you, your business is bound to struggle. As the CEO, you must feel inspired by your company to identify the path forward, motivate and inspire others to take shared ownership of the vision, and collaborate enthusiastically in achieving your annual goals.
If you lack motivation and inspiration and find that you're no longer suited to lead the business, step aside and let someone else become CEO. You can still retain ownership while someone else fills the executive leadership role. But most importantly, be prepared to coach your successor. Do this well, and you'll see why the word success is in the word successor.
2. Assign roles. Identify who is needed to achieve your annual goals. Start by determining which team members will specifically be responsible for each objective. For businesses with less than five employees, assign a result to each of them that is truly attainable and related to their everyday responsibilities while at the same time creating a "stretch" opportunity.
As your business grows, the more effective way to allocate goals is following a three-step process:
Create an organizational chart.
Assign an objective to each position in the organization.
Assess if someone fills each role in the org chart with the skills and resources required to deliver the desired result.
If a critical goal doesn't have someone assigned with the skills and resources to produce the desired results, the organization will fall short. Some organizations stretch their star performers across too many positions in the org chart, leaving them drained, burnt out, and underperforming. Each role in an org chart must have only one person assigned to it. If you give more than one role to an individual, a hiring process needs to be in place to resolve this situation.
Every employee in an org chart should definitively know and understand the goals related to their position. Many CEOs fail to coach their top managers on assigning goals to each team member, measuring performance, and identifying performance gaps. The most effective way for a CEO to ensure that managers are setting their teams up for success is leading by example. As the CEO, you must ensure that your managers' positions and goals are both clearly defined and communicated with a transparent and regular performance measurement process.
3. Project financials. Both the CEO and upper management need to foresee cash flow projections for 2022. In profitable companies, it's critical to specify if the profits will be saved as reserves, distributed, or reinvested. For unprofitable businesses, it is crucial to determine how loans or investments will fill funding gaps.
In volatile businesses, where revenue swings are significant and unexpected, the financial projection exercise must encompass three scenarios:
CEOs of volatile businesses must carefully study the three scenarios to foresee if any given month, week, or day there could potentially be gaps in funding. Any funding gap has the potential to massively damage the business's reputation and significantly disrupt many stakeholders.
When CEOs underestimate the importance of creating a cash flow projection, there is the possibility of catastrophic failure. In small businesses without a Head of Finance, the CEO should be responsible for creating the cash flow projection, measuring the results, adjusting, and taking responsibility for an accurate cash flow projection for the next 12 months. In companies with a Head of Finance, this person should present the financial outlook to the CEO and discuss it together in length to prepare the CEO for what lies ahead.
As the economy rebounds from the pandemic, companies across every industry face an encouraging business environment to pursue growth in 2022. Those who have planned successfully for the year ahead will reap the benefits from this positive environment and be well-prepared to adapt to any potential adverse shocks that may derail the current outlook. But it's crunch time right now with these three areas: goal setting, assigning roles, and projecting financials. For any CEO who wants to enter the year-end holidays as a joyful season, their company's 2022 plan must be ready by mid-December at the latest.