Annual Planning, Mode 1 Management and Circular Logic

Gartner introduced an interesting concept at the PPM Summit in Dallas last May: Mode 1 and Mode 2 planning.  Mode 1 planning, as they described it, is the traditional planning approach to projects.  Each project is scoped out, estimated, a business case is built, and then approved in some sort of an organizational cadence.  When performed annually, this process is called “annual planning.”

The alternative to Mode 1 planning is Mode 2.  Mode 2, as presented, is much more agile and responsive.  As the request is identified, the project is approved, funding and resources allocated, and the project team is off to the races.  The challenge, Gartner presented, is for IT organizations to move from the Mode 1 planning model to Mode 2.  Or rather, it’s to determine when Mode 1 is appropriate and when Mode 2 is appropriate – and then shift back and forth as required by the organization.

We’ve written on that topic in this blog before, specifically here and here.  In that latter post, I theorized that the farther ahead of starting the project that the planning and the resource allocation takes place, the more complex are the systems required to support the planning.  For example, if I have an annual planning process where all resources are planned, funded, and resourced prior to the beginning of the fiscal year, I’ll need a system to support the resource modeling of all projects throughout the fiscal year – and to model the cascading impacts of delays in one project.

Knowing that planning so far ahead requires increased management complexity, why do we plan so far ahead?

That’s when it hit me.  We plan so far ahead, because we believe that we need to take a Mode 1 approach to project management.  Why do we take a Mode 1 approach to project management?  Because we plan so far ahead, we need to take a Mode 1 approach to support the annual plan.  It’s a tautology.

How do we break that logical loop?   How do we short circuit the time spent between planning/approvals and actually kicking off the project, i.e. moving to a rolling wave portfolio planning approach?  We switch to Mode 2 planning, i.e. moving towards an asset or program based allocation model.

Of course, that may not work in all cases.  There are certainly some projects that require extensive approvals and a Mode 1 planning approach.  Off of the top of my head, I might identify the following criteria for these projects:

  • The project will have significant impact on the future operational expenses of the organization, i.e. a large capital project to build a new facility or an IT project that will deploy a new application into production.
  • The project belongs to the category of infrastructure and ongoing maintenance that may be easily planned for far in advance, i.e. the retirement of a given application, the upgrade or replacement of equipment within a specific facility.
  • The project is so large and significant that it requires a major reshuffling of the overall funding allocations within the organization, i.e. we need to divert significant resources to this project.

That’s my criteria for when annual planning makes sense at a specific project level.  What are yours?

Annual Planning, Mode 1 Management and Circular Logic

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