Preparing for the Uphill Climb: Rethinking Annual Planning

The Leadership Test Kitchen is a newsletter where I share the ingredients behind leading and growing successful companies. Some editions feature practical frameworks from CEOs who’ve mastered challenges in strategy, culture, and growth. Others share the lessons I’ve learned firsthand as a CEO, or insights I’ve gained from my work with other executives.

If you know me, you probably know that I’m a cross-country skier, and I actually like to ski uphill. 

On my favorite course, there is one particular hill that earns its reputation every single time. It’s long and difficult, even in good conditions. Add wind, ice, and fresh snow into the equation, and it becomes a real test of will. 

After climbing that hill many times, I’ve learned something that may sound obvious, but took me a few years to internalize: the work before the climb matters as much as the climb itself. You need to slow down, read the conditions, and adjust your technique based on what you see ahead. Not based on how you skied it last year. 

I've been thinking about that hill lately as I head into the 20th annual planning season of my career, and for the first time in a while, I'm seriously rethinking my technique.

This feels like one of the most important planning cycles in years. AI is accelerating faster than most organizations can absorb. Markets are shifting quarter to quarter. Customer expectations keep moving. And yet many companies are still running annual planning processes built for a more stable era.

Under these conditions, the winners over the next few years will be those who can adapt and respond fastest.

That’s what this edition is about.

Why Annual Planning Wears Your Organization Out

Over the years, I have experienced a lot of annual planning challenges, and most of them share the same fundamental flaw: they treat an unpredictable world like a linear one.

Here's the typical arc. Many of us start in the summer with long-range strategic planning sessions. In the fall, we move into goal-setting. Teams build plans. Leaders push their teams beyond their comfort level to land on numbers that Boards will accept. You get approval, head into the holidays feeling great, and come back in January with the dread that you now need to deliver! The whole process can easily stretch five or six months, and by the time the ink is dry, the market has moved. New policies, new competitors, new technologies. Q1 arrives, and your team is often executing against assumptions that already need updating. Then Q2 becomes a scramble to recalibrate.

And that’s just the first problem. Here are a few others worth naming:

Plans get built top-down, without the customer's voice. I've done this myself, sitting in a conference room with a handful of leaders, setting revenue targets in a vacuum, based on historical patterns and shareholder expectations, without ever asking what's actually happening at the front line. The result is growth goals that feel ambitious in the boardroom and unachievable in the field, creating a gap in expectations between the leader and front-line employees.

Data-driven approach gets abandoned. The most valuable player in the annual planning process is your Financial Planning & Analysis team. The most important asset is your dashboard of metrics that tell you how the business is performing. And yet, we build annual plans irrespective of how we are currently performing. We then use industry and market data that has no direct correlation to who we are and how we are executing. I confess that I’ve made this mistake at least a dozen times.

Q1 becomes a miracle sprint. Every annual plan seems to require the business to start strong right out of the gate and plant all the seeds for the year's strategy at the same time. Budgets get spent before you understand how the new year is actually performing.

Incentive targets get set in the same broken process. When growth goals are too aggressive or disconnected from reality, your best salespeople walk into January already bracing themselves for falling short again. That’s a tough way to start the year. Balancing annual plans with incentive targets can sometimes feel a little like playing the board game Operation. Every number is connected to another number, and one small adjustment somewhere in the system sets the whole thing buzzing.

Changing Technique for 2027

So what am I doing differently this year? Here are four approaches I'm testing:

1. Test Strategies Before Committing to Them

If you have a solid Quarterly Business Review cadence, you already have everything you need. Use that rhythm to test assumptions before fully committing to them in the annual plan. What can you test with customers? What feedback can you gather from front-line employees? What assumptions about growth can you pressure-test before the numbers become fixed? Building that learning loop into the process creates room to adjust targets before the plan is finalized.

2. Treat Annual Targets as Ranges

A few years ago, one of my CFOs and I resisted the urge to commit to a single number. Instead, we presented a range of revenue and profit outcomes tied to different business conditions. I liked the conversation it created. It acknowledged the uncertainty and gave us a better framework for talking with our teams about how we would navigate changing conditions throughout the year. We still used the midpoint for bonus targets, but we also committed to recalibrating quarterly during the year.

3. Go Deep on Q1

For some organizations, the “range” approach may feel too loose. What worked for me was pairing flexibility at the annual level with much more precision around Q1. We had good visibility into what the next 90 days looked like – demand, delivery, and costs. We planned bottom-up, starting at the client/account level. Our front-line teams led the way – detailing what they saw and knew – helping us get them on board for Q1 targets. And then, we gave them relief, reducing meeting time and slowing down initiatives so that they could go create immediate value for our clients and our business. 

4. Use AI to pressure-test your assumptions

I have yet to test this with AI specifically, but I've spent years using scenario planning to stress-test growth assumptions. AI can dramatically accelerate that work, running more models faster and surfacing the assumptions we didn't know we were making. Combined with range-based targets, I believe this makes annual plans genuinely more elastic and leadership teams more agile when navigating uncertainty.

These four approaches share a common thread: they trade some precision for adaptability. The goal isn’t to predict the year perfectly. It’s to build a planning process that still works when the year stops cooperating with your assumptions. That's a different objective than most annual planning processes are designed for, and I think it's the right one for where we are right now.

A Culinary Note

I recently finished Good Things: Recipes to Share with People You Love by Samin Nosrat, the chef behind the series Salt, Fat, Acid, Heat, and it changed the way I think about planning.

I used to map out every meal before my Saturday grocery run. By the middle of the week, the plan usually fell apart, food went to waste, and the whole system felt too rigid. Nosrat’s philosophy is simpler: stock your kitchen with versatile, high-quality ingredients, then assemble based on what the moment calls for. I’ve started doing that. It’s more flexible, there’s less waste, and honestly, the meals are better.

I think annual planning has the same problem. Too often, we lock in the menu before we fully understand the conditions ahead. Maybe the better approach is to build plans the way good cooks build meals: with strong ingredients, clear principles, and enough agility to adapt.

That’s the uphill climb I’m approaching differently this year.

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