For many businesses, planning for 2011 is in full swing, particularly the horse-trading, haggling, and negotiating to choose the revenue target. The core business team develops a bottoms-up plan they feel is achievable. The leadership team sets an top-down stretch target that is much higher. Then everyone bickers over the gap between the two numbers.
There are a few schools of thought on where to draw the line in between. Set your target too low and you can reliably hit the number, but you may not have achieved anything remarkable. Set your target too high and it may spur you to breakthrough growth, but it will feel like failure if you then miss the number.
A plan is outdated the moment it’s inked. Things change: customers change their minds, new opportunities surface, roadblocks appear. The key to hitting a plan is having a constant list of upsides to chase and downsides to mitigate so that you have contingiencies. I once saw a plan with a long list of downsides, but no upsides. Someone asked why the team hadn’t come up with a list of upsides. It turned out that they had, but they then baked the upsides into the plan. They then had nowhere to go when bad news inevitably came.
The best plans are neither sandbagged or full of hot air. They find the right equilibrium in between. But, they then provide extra incentives to the team for beating plan by different levels. This approach motivates the team to find breakthrough growth, but not at the expense to morale of having a plan perpetually out-of-reach.
