Annual Planning Through the Lens of Talent
written by
David Berk
written by
David Berk
November 12, 2020

As we get to the mid-point of Q4, it’s safe to say that we are all looking forward to putting 2020 in our rearview! This is the time when we start to chart our path forward into next year and that means….Corporate Planning!

Whether you conduct strategic planning on a quarterly, bi-annual, or annual basis, nothing quite compares to the level of planning and decision making that happens in Q4. This is when we chart our course for the next year, we establish corporate and departmental goals, we establish (and advocate for) budgets and perhaps the most critical part, we begin planning for hiring.

Headcount planning is a consistent challenge for organizations big and small. According to PeopleFluent, 60% of HR leaders say headcount planning is one of their weakest links.

If you really think about it, this shouldn’t come as a surprise. It is ironically the last step to our corporate planning process and the first step in executing against those corporate plans.

In my experiences in the corporate world as an individual contributor, department leader, hiring manager, and founder I have consistently seen the same themes emerge when it comes to developing headcount plans and executing against those plans; 

  1. The process and communication from individual, to department, to leadership is often reactive and poorly defined
  2. There is an inevitable negotiation between finance and hiring managers for resources
  3. Timelines consistently slip, impacting the execution against goals and hiring.

We are all setting a high intention to put the past behind us and come out strong in 2021. So with that in mind, I’ll offer some thoughts and hard-won insights on how to improve your headcount planning process this year and save us all some grief. 

Communicate a goal-setting process early and often: 

When it comes to picking a framework, there is plenty to choose from, all with their pros and cons. Far more important than the actual framework is how it is applied in practice within your organization and how you improve and evolve it year after year. If you are looking for a starting place, click here for a great resource that provides a high-level overview of all the goal-setting frameworks you could ever want.

When considering which framework is right for you, our advice is to orient around frameworks that will be effective at communicating up and down your organization. For example, here at Beacon we are big fans of SMART goals. The SMART framework provides a really clear structure for how each and every goal should be communicated. It’s not perfect for every single goal in your organization, but the point is to get your team to strive to make every goal; Specific, Measurable, Actionable, Realistic and Time-bound. This is particularly valuable as teams and departments scale. The natural progression is for certain procedures to evolve within departments, but goal-setting has to be cross-departmental and this framework is a nice and easy way to support a universal approach within your organization. 

OKRs are another framework we like. But again, they are not for everyone. Our friends at Small Improvements put together a good overview of its pros and cons. What we like about OKRs is that they help teams connect the dots from how an individual contributors' goals impact the departmental and corporate goals. This connectivity is huge when it comes to discussions about how the organization needs to resource against those goals, and also to gain early warning about goals and priorities that may be at odds with each other or misaligned.

Set finance and departmental teams up for success

Let’s face it, operational teams will always advocate for more resources to do their jobs and the finance department will always advocate to constrain costs and use resources more efficiently. This tension is inevitable, but with some planning and work, we can make it a healthy/productive tension and not an unhealthy tension.

First, communicate how the process will work as early as possible. At Beacon, one of our core values is “setting expectations early and often.” When we go into quarterly or annual planning, we have a clear timeline laid out from the start and we make it clear that team leads and department leaders will have to justify their budgets and resource requests. This puts the onus on them to come prepared.

Second, hiring and headcount are often the biggest line items in annual budget planning for most organizations. Equipping your team and department leaders with a well-defined process for arriving at and justifying their headcount will standardize and streamline this process. We’re big fans of the Scorecarding framework and it is particularly useful here. What finance and executive teams are looking for is how a new hire will contribute to revenue growth or improvement in a core metric for the business. The scorecard framework lends itself really nicely in communicating outcomes and impact on key metrics.  

Build a budget for hiring, not just salary

Have you ever found yourself halfway into the quarter and you still don’t have a budget finalized for the key hires needed in order to deliver against the goals you set for the quarter? You’re not alone. This is too common a problem and understandably so; headcount approval is usually the last step in the corporate planning process and the most likely to miss its milestone date. Often, even when you do get the salary budget approved, there is no clear budget for the recruiting costs.

In fact, only about 1 in 5 companies I’ve spoken to (sub-300 employees) actually incorporate talent acquisition costs as part of their annual budgeting. We see this play out consistently. It’s a huge roadblock to achieving the goals we so painstakingly created. What often happens is that internal recruiting teams are put under intense pressure, hiring managers moonlight as recruiters, and companies end up spending vast sums of money on agency fees because they are “easier to budget”; one of the most impactful and cost-effective things you can do for your business is to establish a line item in your budget for talent acquisition costs. If this is a priority, we think Sequoia Capital has done a great job of building a recruiting calculator that can help you to establish a budget for your talent acquisition costs. 

Corporate planning doesn’t have to be a painful process. It can even be an opportunity to bring your team together and realign around a common vision and mission. The process can be complex and time-consuming, but with a well-defined framework, good communication, and a proactive approach to alignment and execution, you have a great chance of setting a plan and sticking to it! 

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