The Planning Hierarchy

The planning hierarchy is four levels that answer four different questions. Vision asks where we are going, three to five years out. Strategy asks why anyone would choose us, over one to three years. Plan asks what happens in the next twelve months, by when and by whom. Action asks what happens before Friday. Each level has to be derivable from the one above it, and breaking a link turns everything below into activity.

Planning failures in small businesses are often a broken link between levels rather than a lack of effort.

The four levels

Vision — three to five years

The vision says where this business is going, and roughly when. Write one paragraph, specific enough that you would know whether you had arrived: turnover, profit, shape, and what your own role in it is. A vision that does not say what you will personally be doing is not finished.

Strategy — one to three years

Strategy is how you will win: who you serve, what you are better at, what you refuse to do, and why a customer would choose you over the firm down the road. A strategy should include at least one sentence beginning “we will stop”.

Plan — twelve months

The plan sets out what happens in the next year and the next ninety days. This is where strategy becomes revenue targets, margin targets, hires, systems and projects, each with an owner attached.

Action — this week

Actions are specific, small and assigned to a person. The other three levels exist to make sure this week is spent on the right thing.

Where it often breaks

• Vision with no strategy: a big ambition and no explanation of how you will win, which produces busyness and, a year later, the same turnover.
• Strategy with no plan: a document from an away day that nobody converted into numbers, dates and names.
• Plan with no strategy: targets, budgets and initiatives, but no answer to why a customer picks you. It is hard to spot because it looks like planning.
• Action with no plan: a team working hard on whatever arrived most recently.

How to use it

Write the four levels on one page

Use one page with four boxes. A box you cannot fill is the broken link to work on this quarter.

Test the strategy box for refusals

Find the sentence that says what you will stop doing or turn away. If there is no such sentence, the strategy is not finished.

Trace one number all the way down

Take next year’s revenue target and work backwards: divide by your average job or order value to get the number of extra jobs; divide by your quote conversion rate to get the number of extra quotes; divide by the share of enquiries that reach quote stage to get the number of extra enquiries; then divide by twelve. Then ask whether anybody in the business has the capacity to produce that monthly number. Either the plan gets the resource, or the plan gets smaller.

Put a name and a date on every line of the plan

Anything without both is a topic rather than a plan item. Delete it or assign it before the end of the week.

Cut the ninety-day list to three

Choose three things you will finish this quarter.

Set the review cadence now

Review actions weekly, the numbers monthly, the plan quarterly and the strategy annually. Book them all today, in the diary, for the whole year.

Common mistakes

The first mistake is planning without a strategy. The budget is done, the targets are set, three projects are named — and there is still no answer to why a customer would choose this firm. Everything then depends on working harder than the competition.

The second mistake is planning annually and reviewing annually. Break the same plan into ninety-day blocks and review it monthly.

The third is planning at the wrong altitude for the audience. The team does not need the five-year vision every week, and it does need to know exactly what this week is for. Owners who keep the vision to themselves and hand out tasks get a team that cannot use its judgement.

Questions to ask yourself

• Out of 10, how confident are you that this week’s work is traceable in a straight line to where the business is going?
• Which of the four levels is missing or weakest in your business right now, and how long has it been that way?
• What does your strategy say you will stop doing? If nothing, what are you choosing between?
• If you asked three of your people what the priority is for the next ninety days, how similar would the three answers be?

This is the structure the strategy and twelve-month planning work in Business Coaching is built on. Now, Where, How is how you set the vision in the first place, and The Pillars of Value is what tells you which of the ninety-day priorities deserve the quarter.