Headcount Planning

Annual Planning - Playbook For a Successful Planning Season

July 28, 2021

2022 Annual Planning is just around the corner and operations at corporate seem to stop for most companies.

Major components of annual planning and forecasting are:

  1. Revenue: Top-line forecasting models including sales operations models and projections
  2. OpEx: Headcount drives 60-70% of OpEx and is a key driver to other headcount ancillary costs such as T&E, real estate, software, etc.

Annual Planning is typically performed in 3 Stages: Information Gathering, Negotiation, and Final Approval

Stage One: Gather Information 

  1. Finance / FP&A Analyst: Creates 1 Google Sheet per department and asks department leads to fill out how many and what type of headcount is expected for the following year
  2. Department Lead: Converses amongst front line managers to understand roadmap for the following year and what resources are needed
  3. Department Lead: Enters into spreadsheet without much data validation and sends it over to Finance Analyst
  4. Finance / FP&A Analyst: Cleans the data, reviews cost numbers and consolidates into an overall summary for CFO and CEO to review

Stage Two: Negotiation

  1. Executives: Cuts down on asks due to budget constraints (can be in the range of 40-50% for growing companies)
  2. Finance / FP&A Analyst: Relays the message back to the department leads and force prioritization and negotiations
  3. Process stalls for a month due to side conversations and office politics
  4. Finance / FP&A Analyst: Forced to lock the plan due to an upcoming Q1 board meeting and sends a final notice to department leads - Executives get involved

Stage Three: Final Approval

  1. Executives: Lock the plan and present results to the board
  2. Recruiting: Receives the approved hires and plans hiring; however gets dumped with asks across the company to change original asks

Tips and Tricks for Success

We have all been in this situation of chaos and if you are wondering, you are not alone. Here are some tips & tricks to ensure this process is a step closer to efficiency:

Tip 1: Guide budget owners with tops down guidance prior to step 1. If given a blank slate, budget owners have no idea how many they are allowed to have - therefore, leading to unclear actions and outcomes. Most often, direct labor (any headcount tied to KPIs) can be provided with clear guidance (for example, 1 AE per $1m of ARR)

Tip 2: Ensure google sheets have data validation to keep the input data clean. If given the free reign of free-text fields, Finance will have to clean the data which takes up unnecessary time. 

Tip 3: Ensure Recruiting is in the loop in the process. Often, recruiting teams are not part of this process and hear about the plan last. Recruiting capacity and bandwidth is crucial in execution of the locked plan.

Tip 4: Have clear insights and outcomes. One DRI has to be responsible for ensuring the approved plan (i.e., hiring plan) is active and reconciled. Often, questions arise on who has been filled, which are additional hires outside the plan, which are closed in plan vs. active in HRIS - this reconciliation is extremely important to have an accurate financial forecast and operational forecast. 

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