Annual Planning: Smart Talent Planning for Growing Businesses

It’s annual planning season – business leaders around the world are beginning the long and difficult work of forecasting what they want and expect to achieve in 2027. I’ve been in dozens of these, from initial drafts to rewrites, goal generation (and goal rewrites), and to final publish of our strategic plan.

I’ve also been in the revisions of the plan, often at the end of the year or early Q1, when the chaos that is reality hits home and those pie-in-the-sky hopes encounter hiring delays, budget overruns, and burned-out teams. And, more often, I see smaller businesses stuck because of poor planning around their people operations, which becomes significantly more impactful when you realize that as much as 70% of a small- or medium-sized company’s expenses are tied to their people.

Successful annual planning is more than getting the target numbers right. Successful businesses align headcount pacing with their financial realities, and talent development with their business milestones.

Today, I am going to touch upon some of the more common missteps I’ve seen, highlight the risk and impacts, and suggest steps to better planning.

Headcount Pacing

We’re often really good at planning our goals and milestones for the year. But often, we miss opportunities to ensure we align our talent strategy with our larger goals.

I was working with hiring manager who had a position to fill. Their goal was to have the roll filled and the hired employee to be doing the work within 30 days. They also pushed back on the suggestion of a multi-day onboarding (I’ll dive deeper into this another day), saying “I need them doing the work immediately.”

While this may be a bit of an extreme example, given we are focused on annual planning here, the Ramp-Time Delusion still becomes a factor here. I’ve seen goals of hiring 5 new hires in Q1, and the rest of the planning to assume 100% productivity by Q2. Different scenarios, same problem.

The truth is, you probably want to assume closer to 2-3 months, and maybe as much as 8 months, from job posting to full productivity. Which means, if you are planning in August, and happen to have the funding to post the job in time for October, you should be expecting to have someone in place and fully onboarded and comfortable enough in their job to contribute to your goals by about May. Maybe you get lucky and have someone ready to go in January. But, I would hesitate to build your goals on a foundation of luck.

What I have found is that, more often than not, hiring and onboarding take longer than what was aggressively planned, and delays mount. You can significantly reduce this time by as much as half with a structured onboarding plan, but either way you’ll want to be mindful of this pacing. Otherwise, you might run into a huge issue if you are depending on a round of financing or an a promised product update.

Static Headcount Wishlists

I’ve seen companies fight for headcount, and leaders have to make difficult all-or-nothing decisions based on their financial realities. I once heard “there’s no way we can accomplish what we want with anything less than what I’m asking” in a planning meeting, as a leader was upset at not getting their target headcount approved. Leaders find themselves deciding between two risks: over-hiring, where a potential revenue slump leads to culture-damaging layoffs, or under-hiring, and burning out your teams while seeing, at best, incremental growth.

The danger? In a landmark study of over 3,200 scaling companies, the Startup Genome Report found that 74% of high-growth startups fail due to premature scaling—specifically hiring and expanding team size ahead of actual revenue or product validation. Prematurely scaled teams were found to be 3x larger than necessary for their actual growth stage.

If it works for your organization, consider milestone-gating hiring, where you tie role releases to concrete performance triggers. “Open senior backend engineer hire after reaching $X ARR” or “Add Operational Manager upon shipping Product Y.” Building flexible Tiered headcount models, defining core headcount to maintain and grow the business within reasonable expectations separately from growth conditional headcount that can supercharge your business or save employees’ time.

The End of Year Surprise

Sometimes change happens. Your change management and ability to keep your employees engaged become much easier when you look around corners and assess risk during annual planning.

There we were, 5 calendar days before employee would learn their annual compensation raises, when, out-of-nowhere, the compensation plan changed. Everything we had communicated and had built  in anticipation of a normal annual compensation review was now obsolete. In 5 days, we had to learn the new policy, review where there was now misalignment with known policies and trainings, and write the new policy and education. As you can expect, we did not pull off a clean pivot, and the result was angry employees.

Compare that to another instance where we planned a change to running compensation, this time involving a change in the equity vs cash mix, but we had time to run some user testing, get feedback from a small circle of employees and managers, preview changes, and roll out fully reviewed updates with Q&As ahead of the announcement. Now the questions we got were more deep dive in nature, and on the whole most employees were receptive or even excited.

Sometimes surprises happen, we all get that. But some surprises can be somewhat anticipated. Doing a risk analysis and playing out some scenarios ahead of time gets you a head start on doing the work correctly when a sudden surprise hits you late. Research back up the value of early communications of leader and manager decisions drive 70% of the variance in team engagement.

Conclusion

I could run down many more common people operations issues that can be addressed during annual planning, but that’d be closer to a book than a blog post. In summary, when it comes to people operations and talent, a lot of times we plan for the best case scenario, rather than our most likely outcomes. While product roadmaps still sell the vision, the talent strategy executes it. The companies that succeed treat their talent strategy with the same rigorous approach as their core product or service planning.

Are you finding yourself stuck during annual planning and need help defining your people goals? Don’t let rigid planning burn your runway or your people. If you’re building your 2027 strategic plan and want to align your headcount pacing with financial reality, let’s grab a coffee and chat!