How to align strategic planning cadence with your Objectives and Key Results (OKRs)
What is a Fiscal Year?
Your fiscal year ends every 12 months and having one is an accounting and tax requirement. Choosing a fiscal year will dictate the quarterly cadence for managing your business, including setting budgets and sales targets. The two most common options for a fiscal year:
January Through December The most default option is to match your fiscal year to the calendar year. Your quarters will start January, April, July and October. This is the simplest approach for most startups and businesses.
February Through January An increasingly popular choice for SaaS companies (especially those that sell to other businesses) is to delay the end of the fiscal year by a month. Your quarters will start February, May, August and November.
Advantages to a January close include a Q3 that overlaps less with the summer doldrums, not wrapping your fiscal Q4 during major holidays (Christmas, etc), and mitigating buyer’s trained behavior around demanding discounts at the end of calendar quarters when they know your sales team may be trying to hit quota.
Many other options for your fiscal year are also possible, though less common.
Strategic Planning Cadence
Once your fiscal year is set, you’ll also want to align your strategic cadence to the same period. Here’s how:
During the last month of your fiscal year (December or January per above), perform annual strategic planning as a leadership team. As you begin annual planning, you’ll first want to revisit your company mission, vision and values. Next, review and score progress on Q4 goals and yearly objectives. Then, begin planning for the next year. This is the opportunity to take a step back and think big. What do you want to radically transform about your business? What’s possible to achieve without being wildly over-ambitious? Write this out as a set of Objectives (plus long-form descriptions) for the year, along with key metrics like ARR (Annual Recurring Revenue) targets that need to be achieved. Alongside your annual objectives, write out the overall strategy for how you plan to achieve these outcomes. This document should be available to the whole organization and required reading for every new hire, since it will serve as the blueprint for what you’ll accomplish overall.
We recommend against trying to plan out each quarter in detail at the beginning of the year, and we also recommend against formal annual OKRs. Instead, treat the yearly plan as aspirational and fuzzy, and save the detailed planning for a quarterly time horizon.
During the last two weeks of each quarter (and as a fast-follow to your annual planning), create quarterly OKRs. Think of your quarterly OKRs as an opportunity to shine a spotlight on the areas of the business you want to make significant progress on over the next three months. Why quarterly? It’s a long enough time to have a big impact, but short enough to stay agile and avoid planning paralysis.
Your quarterly OKRs over the course of the year should add up to accomplishing your annual objectives and plan. However, try to focus on the three months ahead and define goals that are accomplishable over that period. It’s unlikely that you’ll work on all aspects of the yearly plan every quarter; instead focus on a few key areas you can make huge progress.
Quarterly planning should be relatively lightweight and done quickly (no more than one to two weeks from start to finish). Don’t let finalizing your OKRs slip past more than a week into each new quarter, or your team will spin it's wheels not having certainty about what you’re trying to accomplish.
Organizing all your business planning (tactical and strategic) around your fiscal year will simplify planning and alignment across your company. Aspirational yearly Objectives mixed with crisp quarterly OKRs are a great fit for most modern, agile businesses.
A software-based OKR tool like Koan can help to provide a centralized place to track annual and quarterly goals, and maintain visibility for everyone in your organization. Schedule a demo today to see how Koan can help your team work with purpose.