Formal strategic planning can benefit your organization 

On the face of it formal strategic planning seems valuable for strategic decision making because so much money is spent on it by so many organizations!

The value of formal strategic planning

Some top managers of organizations that use formal corporate strategic planning seem to believe that it helps improve the long term performance of their organizations.

However among many academic researchers opinion seems divided. Over many years research results seem to be in conflict. Some claim a link between formal planning and business performance. Others claim there is no link, while others show inconclusive findings.

There seems to be very little clear research on any link between formality of the strategic planning process and overall organizational performance among non-profit organizations.

My own view is that there are benefits from systematic strategic planning. Ibelive most of the confusion about this arises from differences in measures used for measuring corporate performance, and the nature of the processes called strategic planning.

For a recent piece of work on this, which also highlights the importance of firm innovativness as a key link in the process, see - Linking the formal strategic planning process, planning flexibility, and innovativeness to firm performance.

Describing strategic planning

For our purposes we think of formal corporate strategic planning as a label to describe an organizational managerial process.

I define strategic planning as a set of procedures for -

  • setting long range quantified overall corporate objectives and of
  • determining the strategies, and
  • assigning accountabilities, within policies that govern the acquisition and allocation of resources
  • to achieve the fundamental purpose of the organization.

Strategic planning has also been known under various labels encompassing “long range planning”, “corporate planning”, and even equated with “strategic management”.

When the term formal strategic planning is used the intent is to convey that an organization’s strategic planning process involves explicit systematic procedures used to gain the involvement and commitment of those principal stakeholders affected by the plan, and in particular the beneficiaries for whose benefit the organization exists.

It is not the purpose of this section of to analyze all the variations in terminology used to describe strategic planning. The distinctions between strategic planning and other forms of planning with which it is sometimes confused are dealt with at Definition of Strategic Planning.

Our concern here is with clarifying the benefits of formalizing the process of strategic planning.

What do we mean by formal?

By 'formal' I the extent to which roles in, or contributions to, corporate strategic planning are structured in the organization of the planning process. Additionally, the activities of the persons involved are governed by explicit procedures. These activities are primarily data focused discussions that lead to the taking of strategic decisions.

These deliberations are informed by evidence gathered and analyzed in preparation for and during the planning process.

The amount of data required to feed the process of strategic thinking is a lot less than most managers believe.

You need to collect only three types of data -

  • The corporate objectives and targets.
  • Strengths and weakness inside the organization.
  • Threats and opportunities in its outside environment.

Collect these, lay them out clearly before you, discuss their importance for future performance of the organization, and the strategic possibilities will emerge with almost crystal clarity.

The resulting handful of strategies must then be developed into detailed action plans and business plans but these are executive tasks, which follow on from the planning process.

Finally, there is the monitoring of plan implementation. This overall strategic planning process is as depicted below, and described more fully at Strategic Planning Process.

Here we are concerned to clarify why we think that the process of strategic planning should be formal.

As I indicated above the process is essentially one of deliberation and discussion. The discussion centres on surfacing the most significant issues likely to impact the long run performance of the organization.

By formal strategic planning I imply that the discussions are structured into a small number of stages which embody essential procedures for gaining consensus on these issues and agreement on the decisions needed to address the issues.

Advantages of formal procedures for planning

Strategic planning is essentially a decision making process. Our experience is that strategic planning as a group decision making process benefits greatly from formalizing of the procedures involved.

Unstructured or freewheeling approaches are highly regarded in some organizations; however, when the process of strategic planning is involved such free form approaches can suffer from certain disadvantages.

The purpose of a number of the procedures of formal strategic planning is to reduce these problems, while making the gains possible with group decision making.

Formal strategic planning procedures can challenge complacent acceptance of the status quo

Free discussion can be comfortable because it is the way groups routinely decide things on a day to day basis. Overly formal or highly structured discussions are perceived as unusual or going against the grain of the normal way people interact.

While this may difficult initially, I believe the requisite procedures can get planning team members out of habitual ways of reacting to issues and sloppy ways of addressing issues important to the organization.. Being forced to act out of their ‘comfort zone’ can make educe clearer and more creative thinking than is common in a ‘business as usual’ setting.

Formal strategic planning procedures can ensure top managers are on the same page!

In most organizations top managers are aware in some way of major challenges facing the organization that they should address. Often they deal with them in ad hoc discussions with colleagues. However, all the people, who need to be involved, are not usually available. All are usually heavily pressed with many day to day operational matters. Withdrawing from all this to discuss longer range matters, seems almost like a distraction from their ‘real jobs’. However, the importance of the strategic issues places them in a bit of a conflict. Formal strategic planning gives a legitimacy to setting aside time for deliberating on these larger long range challenges.

Formalizing strategic planning is more likely to result in top managers paying attention to the same important matters at the same time

Even if it is agreed that time be specifically designated for strategic planning, if the planning is not formalalized, with clear structure to the process the discussions can revert to the usual freewheeling talking that characterizes much of their informal daily interactions. Some will even drag the alleged strategic discussion back to operational concerns.

In unstructured planning discussions, coordinating activities may be a problem. One manager may be trying to clarify a statement of an issue, while a second planning team member is jumping to a strategy to address it, and yet another is trying to assess ideas raised earlier in the deliberations! In contrast, formal strategic planning procedures make it clear to planning process participants what they should be thinking about at stages of the discussion. This increases the chances that manages will be singing from the same page at least, even if, initially they are quite in harmony on the issue.

Without the structure that comes with formal strategic planning contributions may become unbalanced

Formal strategic planning procedures can reduce the effects of a few over enthusiastic planning process participants trying to dominate a the process with their own views, without getting to properly consider the views of others.

Without the procedures of formal strategic planning, a minority of participants in the strategic planning discussions can tend to dominate proceedings. This problem can be exacerbated in the larger workshop settings that I believe are vital for the SWOT analysis stage of the strategic planning process.

In these larger group settings, some less extrovert participants can feel excluded, and the group may miss the benefit of their insights. However, formal strategic procedures, guided by a skilled facilitator, can control the discussion to ensure that everyone can make a contribution. Additionally, you reduce the likelihood of that a few dominant people will hijack the deliberations.

This raises a related matter, and one that requires the structure provided by formal procedures for planning. This is the issue of the way power is deployed in a group setting.

The procedures of formal strategic planning can moderate the use of power in a planning group

Powerful members of a senior management team, or among participants in planning workshops, can use the informality of unstructured planning processes for their own ambitions. This is less likely under the moderating influence of formal strategic planning procedures, especially when guided by an experienced, independent and skilled facilitator.

This issue of power in the planning group is not only about the exercise of formal authority associated with the most senior management roles. Some less senior managers, sometimes with ‘hidden agendas’ and strong political skills, can steer the planning discussions in directions that suit their ambitions. This can be done by means of informally exercising influence. Well designed guidelines employed in a systematic and formal strategic planning process make it more difficult for powerful members to unduly influence what happens during the course of the strategic planning deliberations.

This leads us to the consideration of possible conflicts among participants in the planning process.

Formal strategic planning systems can help groups to deal effectively with conflicts

By its very nature, corporate strategic planning can arouse strong emotions. The sort of decisions involved may impact people’s careers, and their relationships in the work setting, and these affects may also impact matters on the home front.

So the planning discussions can lead to distress or anxiety, with people sometimes feeling defensive or protective of their positions, and of the people in their own work units. They may also feel great disappointment if a project they have invested themselves in looks like being deferred or cancelled.

With all this going on the potential for conflict rises.

Without the guidance of agreed group norms for team working, including rules to guide formal strategic planning processes, team members may variously try to deny or defuse tensions that emerge. Other participants in the planning activities may become aggressive and lead the group into destructive patterns of discussion that prolong the conflict.

This potential disruption of the planning process may flow from the inappropriate use of power, or be a symptom of deeper personality conflicts previously suppressed. These may distract the group from the issues of substance facing the organization. While it may occasionally occur that these differences in temperament are intractable, more often they can be managed, if the structure and conduct of the planning process makes it very clear what he group behavioural norms are, and what is expected of each participant at each stage.

These group norms and rules for conducting the formal strategic planning process can help groups deal with possible conflict. They can influence groups to recognize and address the conflict. They can also lay out rules as to when and how members can discuss disagreements. As a result, procedures increase the likelihood that groups will manage conflict successfully. They also make it clear when matters belong on the agenda of the planning team, and when they should be taken ‘off line’ for resolution.

As indicated previously all of this can be aided by the involvement of an independent facilitator, who can keep the group focused on the planning process, and alert the group when they need to move issues into other channels for sorting out.

The procedures of formal strategic planning can help to give a sense of direction to meetings

Formal strategic planning involves a big commitment on the part of the senior managers of an organization. The participants need to feel that their efforts and contributions will yield some satisfactory result.

When planning discussions are unstructured, or too free flowing, at least some members will feel that the process is leading them around in circles. Some people may feel frustrated and even become cynical about the planning exercise itself. In some cases this may lead to half hearted contributions. Other planning team members may put pressure on to close discussions. This may lead to forcing decisions prematurely.

In contrast, under a systematic and formal strategic planning framework, members of the planning team should know exactly where they are in the process at any time. They understand what agreements have already been reached and what remains to be done. Each step that participants in the planning process complete contributes to a sense of achievement, and a feeling of really getting somewhere. This reduces frustration with the process, and enables clearer focus on what is required for making informed decisions.

Formal planning procedures enable evaluation of progress

Formal strategic planning methods not only inform members where they are in the process, they give them basis for judging the quality of the progress they are making.

With little or no structure participants in the planning process have no solid basis for judging how well the group is carrying out its deliberations. Under the guidance of a formal strategic planning process or system, the group members can ascertain whether or not the group is doing what it supposed to be doing, and have some basis for accepting some responsibility for keeping the process on track, not leaving it only to the CEO or facilitator.

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