Annual Planning, Mode 1 Management and Circular Logic

database planning, portfolio planningGartner introduced an interesting concept earlier this year: 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.

I theorize 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 you have an annual planning process where all resources are planned, funded and resourced prior to the beginning of the fiscal year, you’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, such as 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 on-going maintenance that may be easily planned for far in advance; for example, the retirement of a given application or 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, for instance, diverting significant resources to this project.

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

This article first appeared on Andrew Lavinsky’s blog, Project Epistemology.

Image courtesy of tec_estromberg — CC 2.0

Written by Andrew Lavinsky
Andrew Lavinsky, PMP, MVP, is a manager in the program management practice of a Big 4 consultancy, where he focuses on enabling organizational performance improvement through enhanced project and portfolio management. As a professional trainer and consultant, Andrew has a diverse background providing services in such industries as oil and gas, healthcare, finance and IT. Andrew has lectured extensively on project and IT operations management topics within the United States and abroad. A graduate of the George Washington University, he has been an active volunteer with PMI, ITSMf and a number of other professional and educational organizations. In the mid-1990s Andrew was involved in the creation of one of the first official nongovernmental organizations in Mainland China. Later in that decade he served as a Peace Corps Volunteer in rural Mongolia, moving on to manage project delivery for Fortune 500 companies in the Chinese market. Contact Andrew at
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