When companies work on strategic  plans for a new year, they have options.

They can start with a budget, and then fit strategic priorities around it. Or they can do the opposite, identifying their objectives and then figuring out how much they'll cost. Sometimes, they can assess both simultaneously. 

There are further options for how companies have these conversations. They can do it in a tight, top-down way, where a small group of leaders set the North Star for the new year. They can do it in a radically open, collaborative way, where many team members at different levels of the organization weigh in. They can also do it the way we did for 2022: bottom-up planning, where business leaders set their own KPIs, budgets, and plans. (I'll explain more about bottom-up strategic planning below.)

Any configuration of strategy, budget, and method can work. It just depends on where you are as an organization. This includes:

  • How fast you have to move. What product/revenue pressures are you facing? Do you have the luxury to be deliberate, or do you have to move fast? If the latter, you might need a top-down approach, where the goal-setting portion moves quickly. If the former, you can spend more time gathering input and then synthesizing it at the top.

  • How aligned your executives are. Does your leadership team already have a shared set of goals? When facing a transition, for example, executives need to spend time understanding and measuring the ideal direction for the company. Ensuring total alignment, especially in the face of unknowns/new dynamics, is essential. 

  • What stage of business the company is in. How you develop a strategy in a phase of expansion is very different from how you plan around contraction. This goes back to how quickly you need to move -- what pressures or freedoms come with your present stage of business.

  • Who's in the room. Different companies tap different leaders to be part of strategic discussions. Depending on whose expertise you have at hand, you may put an extra emphasis on financial constraints, or you may take a more ideas-forward approach.

This year, we decided to do things a bit differently at ThirdLove. 

We wanted our leaders to feel more ownership over their strategic goals. So, we shifted to bottom-up planning.

When we were setting our strategic priorities for 2021, we started very broad. Our executive team got together in a room, came up with ideas, and turned them into specific business goals. Then, our finance team met with each executive, took in their ideas, and created financial models. Executives used those financial models as road maps for 2021.

We found there were two main issues with this method: lack of ownership and KPI misalignment. 

Because each executive inherited a budget from the finance team, they felt like they were executing on someone else's vision, rather than their own. They didn't feel like they owned the plan, but they still felt an obligation to act on it. Plus, when KPIs were inaccurate -- when they measured something extraneous, or when they set the wrong benchmarks -- they didn't drive meaningful outcomes.

To fix this, we shifted to a bottom-up approach, in which each executive builds their own 2022 budget. We want to make sure our 2022 goals are more operationally driven, and the business leaders are the ones who operate the business. They know their numbers, their KPIs, and their overarching objectives.

This should increase the sense of ownership each executive feels toward 2022. When you set your own objectives, they're fundamentally yours, and so executing them is personal. 

Part of why we were able to shift from top-down to bottom-up planning was that our executive team was already aligned on this year's strategic objectives. Again, this was circumstantial: We recently hired a new CFO, which prompted us to change our company's goals in the middle of the year. This enabled us to get the whole executive team on the same page. Now, when each leader sets a plan for 2022, they have the same strategic targets.

This level of alignment has also enabled us to think far into the future. Once we complete this phase of strategic planning, we'll look toward 2024 and 2025, brainstorming about what success would look like at that horizon. This includes at least one major strategic change that's already confirmed. I can't tell you what it is just yet, but I can tell you that it was made possible by total executive alignment.

There's no absolute right way to create a strategic plan. Last year, a top-down approach felt right for us, and it came with both benefits and drawbacks. This year, we're in a different place as an organization, so we changed methods. As you set your strategic planning process in motion, assess your circumstances, evaluate what did and didn't work last year, and take an informed set forward.