Benefits of
Strategic Planning

The benefits of strategic planning at the corporate level include -

  • consensus on key issues and strategies to address them,
  • commitment to, and capacity for, implementing the strategies,
  • clearer communication of priorities,
  • improved cooperation among those pursuing strategic objectives, and
  • more effective management control of strategic initiatives.

I believe that all of these benefits of planning can contribute to enhancement of organizational performance over the long term.

Does strategic planning improve corporate performance?

The ultimate benefit of strategic planning would be that it contributes, in some measurable way, to improving overall organizational performance.

However, there is little agreement on the extent of any such contribution.

Some research looks at the relationship between strategic planning and organizational performance. Measurement and conceptual difficulties make this a challenging endeavor. For example, varying approaches to selecting indicators of corporate performance make comparison over time and across enterprises and industries difficult.

Such problems obstruct replication of work which might  improve our understanding of any possible relationship between organizational performance and strategic planning and management.

In addition to difficulties over defining and measuring corporate performance, the studies do not even agree on what ‘strategic planning’ means. Strategic planning may variously be confused with operational planning, business planning and budgeting. Some people define strategic planning on the time span of the decisions. For example, they may define a plan with more than a one-year planning horizon as strategic, while any plan of less than one year they see as ‘operational’.

A definition of corporate strategic planning

Here I define strategic planning as follows -

Strategic planning is a systematic, formally documented process for deciding the handful of key decisions that an organization, viewed as a corporate whole, must get right in order to thrive over the next few years.

Decisions that we can call strategic decisions are those likely to affect organizational performance for some years. So trying to find a link between strategic planning and performance over periods of say less than three to five years is unlikely to be helpful.

The contribution of strategic planning to organizational performance

A few early studies suggested a direct positive relationship between formal corporate strategic planning, and improved organizational outcomes. Some others were inconclusive, and a few seemed to suggest a negative relationship.

On balance however, it appears that at least the formal planning process surfaces relevant issues, and strategic options, that would not otherwise be considered, and this may be one of the benefits of corporate strategic planning. Making sure that top managers are paying attention to the right things is a valuable outcome of the process.

A few meta-analyses address the apparent inconsistency in the research results. These confirm the difficulties associated with varied approaches to defining strategic planning, and the lack of agreement on performance indicators.

A useful meta-analysis, or review of research, on the link between strategic planning and corporate performance is J. Scott Armstrong (1982), The Value of Formal Planning for Strategic Decisions: Review of Empirical Research, Strategic Management Journal, 3, 197 - 211.

Armstrong examined the details of the strategic planning process, the setting of firm level objectives, and strategy implementation. He concluded that, despite difficulties in making the comparisons, corporate strategic planning does benefit businesses in terms of increasing the probability of improved performance. The chances of improvement, even with partially carried out planning processes seem to run at about 80%, which is significantly higher than for many other management tools. Studies in some other sectors and for smaller businesses confirm these findings.

The benefits of strategic planning -
magic bullet or waste of time?

Still a few see strategic planning as an empty or symbolic ritual, that makes little or no contribution to corporate performance.

Others see strategic planning as a magic bullet that almost guarantees improved performance.

Obviously improved performance is a desirable result.

However, employing formal strategic planning does not guarantee improved results.

The reality seems to be that even employing just a few of the essential procedures of strategic planning, there is a good, at least 80%, chance of improved corporate performance.

Catch me at Trafeze

This may make us more confident to recommend corporate strategic planning, as an aid to improving organizational performance; however, we must accept that the situation is so inherently complex that we cannot guarantee that strategic planning always improves performance.

I simply assert that one of the potential benefits of corporate planning is improved performance of the organization.

It contributes to improved performance by enabling and enhancing a range of other things in the organization that contribute to performance improvements.

There are a few benefits of strategic planning

From my own experience, I strongly believe that a formal logical systematic corporate strategic planning process, like the Argenti process, which is designed with the realities of organizational life in mind, can contribute those things that will positively affect corporate performance. Therefore, we look to the multiple benefits of strategic planning that can make this contribution.

What the Argenti Strategic Planning Process guarantees is that the process will achieve what it is designed to do. The design and deployment of the Argenti process provides the benefits of strategic planning that together improve the probability of improved corporate performance. If even partially implemented formal processes have an 80% chance of improved corporate performance, then we can expect significantly higher rates of achievement with a process that is specifically designed to yield the benefits of strategic planning that I call the ‘Seven C’s’.

The benefits of strategic planning and the Seven C’s

The benefits of strategic planning at the corporate level include -

  • consensus on key issues and strategies to address them,
  • commitment to implementing the strategies,
  • capability building,
  • communication of priorities,
  • cooperation among those charged with achieving strategic objectives, and
  • control of strategic initiatives.

All of this can contribute to corporate performance improvement.

Surveys show long term rate of satisfaction with strategic planning among managers. Over the years strategic planning has been in the first or second spot. This may be an indirect confirmation that that there are significant benefits of strategic planning. See the Bain Management Tools & Trends 2013 survey.

 

Go back from Benefits of Strategic Planning to Definition of Strategic Planning.

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Argenti Strategic Planning is a process which, for more than forty years, has been used by over 2000 companies and NPOs around the world. Many of them have since become world class performers.

One key lesson from all this experience is that the starting point for a successful strategic plan is categorically not to announce a Mission or Vision Statement. Instead your planning team must move carefully through the ‘Argenti Purpose Sequence©’.
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