The one sure thing about annual planning is that it will be wrong – its underlying assumptions have been flawed since LucaPacioli invented double entry bookkeeping in 1494.
The eight reasons why the annual planning process should be replaced are because it:
- Takes too long – too much detail and too many iterations.
- Costs too much
- Does not focus on performance drivers
- Leads to dysfunctional behaviour, building silos and gaming the system
- Undermines monthly reporting (monthly budgets are poor targets)
- Is an anti-lean process
- Does not help run the business as it is out of date as soon as the ink has dried
- Has allocations that budget holders have no control over
Read this article which looks at the foundation stones of rolling planning, a more useful alternative.