Ineffectiveness of Formal Strategic Planning

Introduction

The opinions concerning the traditional strategic approach to management range significantly from one scholar to another. While some of the researchers argue that such an approach is highly ineffective due to a variety of reasons, others believe that it has potential and should not be overlooked. Managers are also divided on this issue as some try to find a perfect way of dealing with every problem of a company or follow the latest trends in a hope to discover the best method. However, one should realise that strategic planning, similarly to other types of management, is a complex system that cannot be directly put into one category. This paper aims to assess the works of various scholars on the topic of traditional strategic planning to discuss an argument that the use of this type of planning in a multinational corporation can no longer be efficient in current dynamic and uncertain environments.

Overview of Formal Strategic Planning

To understand the issues connected with the use of formal strategic planning, it is important to review its key factors and details. Various definitions describe this type of strategic planning as long-range strategic management. The goals of this approach are directed at creating a plan for the future by outlining the company’s primary objectives, mission, vision, and strategy to obtain and utilize necessary resources and reach the aims of a particular business (Falshaw, Glaister & Tatoglu 2006). Thus, this type of management focuses on the future outcomes of present operations and adjusts current practices to achieve a range of long-term goals. The history of formal strategic planning reveals that researchers continue to view this method from different points. For instance, some scholars fail in their attempts to link traditional strategic planning and company performance, arguing that there can be no definitive evidence to the relation of these processes. The study by Falshaw, Glaister, and Tatoglu (2006) concludes that the planning-performance relationship is hard to establish due to the lack of measurable data. Moreover, many limitations also do not allow theorists to include other factors into the process of research.

Formal strategic planning includes a number of universal practices that can be implemented in every business. First of all, some scholars outline the theoretical framework of this approach and state that the process of planning is not directly connected to the process of implementation in the minds of many managers. According to Mintzberg (1994b), strategic management is closer to the process of programming than thinking, as it consists of finding the right set of activities that will bring the best results to a company. Thus, this approach is centred on analysing resources and creating a rigid structure of operations. The author argues that this process can become formulaic very quickly as various strategic initiatives become a routine of everyday activities (Mintzberg 1994b). Therefore, this type of planning may not offer the desirable amount of flexibility to some managers.

The use of formal strategic planning in various types of businesses can also yield mixed results. Thus, its consistency is hard to pinpoint as all companies and organizations operate in different environments. Therefore, the aspects of the method that may be effective for some types of businesses can be destructive for others. For instance, this kind of planning in a small company can produce results that will drastically differ from the outcomes of a multinational corporation. The range of strategic planning activities is so broad that public sector uses it as well. Bryson, Edwards, and Van Slyke (2017) show that this approach can be used not only in the for-profit industry, which allows one to see the underlying philosophy of this management method. Here, planning is focused on reaching performance-related effectiveness and goal alignment. Thus, these characteristics of formal strategic management can be implemented in virtually any sphere.

Possible Benefits

One can outline a number of advantages that formal strategic management can bring to a company. First of all, a clear picture that includes the company’s mission and vision allows the main stakeholders to see the central drivers of the business. Managers can benefit from these distinctly established concepts as well. All members of the company’s management need to agree. Therefore, by outlining goals and objectives for the company, one can allow all members of the team to see the chosen direction of the business and contribute to its achievement. Here, formal strategic planning helps one to define a clear vision for one’s business to take actions that will align with the company’s primary objectives.

Moreover, the focus on planning allows one to realize possible outcomes to the company’s actions and try to create a better path for the progression of one’s business. Such departments attempt to look into the future and focus of long-term goals, which may positively affect the process of development. Wolf and Floyd (2017) state that the ideal outcome to successfully using strategic planning lies in the ability of the company to find its strategy and control its implementation to reach specific goals with fewer resources and more profit. Thus, the benefit of using this approach can be that the company creates a plan that can be followed by every worker with a clear vision of future results. The focus on making strategic decisions can provide some motivation for everyone.

The formality of most procedures involved in this type of strategic planning can bring other benefits to a company. For example, the concept of moderation becomes inherent for many processes as traditional strategic management allows one to distribute the power of decision makers and include participants that would be ignored otherwise. Informal meetings and operations may not let everyone to have the same amount of information available to them. Moreover, one’s ideas can be overlooked in these environments as well. Formal planning, on the other hand, allows the management to appoint specific people to perform necessary actions, which can give them a strong sense of being a part of the team. The aspect of discipline comes to play in this situation as well (Channon & Jalland 2016). Workers that are used to discussing particular topics in the same way regularly can get through routine operations quicker and easier than their disorganized counterparts.

The process of evaluation of completed tasks can also be viewed through the lens of strategic planning. With the use of a detailed action plan, one can perceive changes that were made and assess their success. Moreover, the progress of the company can also be measured with formal planning as an outlined set of goals and opportunities becomes a solid foundation for judgment and shows the changes in a more apparent way. Thus, this traditional approach also leaves some room for flexibility (Dibrell, Craig & Neubaum 2014). Adjusting one’s objectives to fit the vision in case of different outcomes can be considered a part of formal strategic planning.

Problems

While this approach to management has many advantages, it also has some weak points. First of all, while formality brings control and moderation, it also creates a routine for workers. Therefore, some may incorporate this system and discuss the same issues every meeting without really achieving or succeeding at anything. A fear of making significant decisions can also become a negative factor in this type of management. Although adhering to the created plan can provide some stability for some people, it can make them indecisive and dependent as well. Therefore, while the choice of creating a strategy may be useful, the process of implementation may yield unsatisfactory results. This problem can affect the possibility of innovation in a company (Tama 2015). The focus on protection of the company’s objectives can overshadow the need for change.

Moreover, the rigidity of formal planning can also affect one’s vision of the company. Finding and outlining specific goals and objectives for a company, especially if it is a big one, can be hard. Thus, some final decisions may differ from those that individuals had in mind previously. Defining a vision does not always give one a clear picture of the company’s future and may skew some activities to go in the wrong direction. As Mintzberg (1994a) points out, the codification of objectives and required actions may be unclear for everyone due to its formal structure. Therefore, this issue can lead to the company becoming more lost in its direction than before. Elaboration becomes the primary focus in this issue as the defined goals need to be interpreted by all workers to follow the created instructions correctly. Standardised planning may not provide the company with a clear and definitive vision in the end.

The Role of Dynamic Environment

As was mentioned previously, formal strategic management can yield different results for various types of companies and settings. One of the main issues connected to this type of planning is its ability to function in an ever-changing and uncertain environment. According to Courtney, Kirkland, and Viguerie (1997), it is essential to remember that a created plan should be regularly adjusted to match the surrounding environment. Moreover, the failure to do so can lead to adverse and even dangerous outcomes for one’s business. This information should be especially crucial for corporations as their scope of operations should always be in tune with the latest events. Multinational corporations cannot afford to be rigid in environments that differ from each other and themselves in the past. Therefore, the use of a formal strategic approach may lead to a number of issues.

Dynamic environments ask of the corporations to reevaluate their goals and objectives frequently to stay relevant to the key stakeholders. Thus, one may think that traditional strategic planning cannot work in these conditions. However, it is possible to continue making systematic decisions and resolve issues of the uncertain environment by finding a strategy that can be changed and improved over time. According to Wilson (1998), a strategic planning department should consider devising or outlining a strategy that will show the company’s vision and mission in its actions and will be open to further change. It is necessary to point out that one cannot abandon the concept of creating a strategy altogether, as it may lead to further contributing to the uncertainty of the environment. A systematic approach, while rigid in some people’s minds, can allow the management to control the situation better.

Therefore, the existence of a dynamic environment does not mean that one should neglect the positive sides of a formal approach. Although it possesses some problems, they should not be the only decisive factors in this situation. The inflexibility of this approach is not ubiquitous as it offers a system for others to change and improve. Furthermore, one should not focus on adhering to the principles of the company blindly without attempting to make changes. The purpose of formal strategic planning is to bring order to the system and make it easy to follow. Thus, it is possible to make this system flexible. Glaister and Falshaw (1999) conclude that the use of formal strategic planning can bring some benefits to various companies. Large organizations and corporations can also be advantageous with utilizing this approach.

Conclusion

Formal strategic planning can offer companies an opportunity to systematise their operations and outline a final vision for the company to follow. Moreover, this approach can also contribute to the way people view the company. While the method of formal planning may encounter some difficulties in changing environments, its structural certainty may provide a solid basis for businesses to rely on in stressful situations. Moreover, multinational corporations need to have a systematised structure to pay attention to all parts of their business. All in all, formal structural planning may still be useful for big companies as it provides them with an ability to focus on particular issues and not worry about every detail.

Reference List

Bryson, JM, Edwards, LH & Van Slyke, DM 2017, ‘Getting strategic about strategic planning research’, Public Management Review, vol. 0, no. 0, pp. 1-23.

Channon, DF & Jalland, M 2016, Multinational strategic planning, Macmillan Press, London.

Courtney, H, Kirkland, J & Viguerie, P 1997, ‘Strategy under uncertainty’, Harvard Business Review, vol. 75, no. 6, pp. 67-79.

Dibrell, C, Craig, JB & Neubaum, DO 2014, ‘Linking the formal strategic planning process, planning flexibility, and innovativeness to firm performance’, Journal of Business Research, vol. 67, no. 9, pp. 2000-2007.

Falshaw, JR, Glaister, KW & Tatoglu, E 2006, ‘Evidence on formal strategic planning and company performance’, Management Decision, vol.44, no. 1, pp. 9-30.

Glaister, KW & Falshaw, JR 1999, ‘Strategic planning: still going strong?’, Long Range Planning, vol. 32, no. 1, pp. 107-116.

Mintzberg, H 1994a, ‘Rethinking strategic planning part II: new roles for planners’, Long Range Planning, vol. 27, no. 3, pp. 22-30.

Mintzberg, H 1994b, ‘The fall and rise of strategic planning’, Harvard Business Review, vol. 72, no. 1, pp. 107-114.

Tama, J 2015, ‘Does strategic planning matter? The outcomes of US National security reviews’, Political Science Quarterly, vol. 130, no. 4, pp. 2015-2016.

Wilson, I 1998, ‘Strategic planning for the millennium: resolving the dilemma’, Long Range Planning, vol. 31, no. 4, pp. 507-513.

Wolf, C & Floyd, SW 2017, ‘Strategic planning research: toward a theory-driven agenda’, Journal of Management, vol. 43, no. 6, pp. 1754-1788.

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