The strategic planning cycle embodied in a set of formal planning procedures, ensures that managers examine major strategic issues, or 'strategic elephants', faced by their organization. This is necessary to overcome the natural preoccupation with short term operational problems.
The formal planning cycle also provides a logical framework to enable managers to tackle their strategic elephants in a systematic way, and so ensure that no major issues are left unaddressed.
This need for a logical and thorough system is expressed in the amazing variety of corporate planning cycle diagrams on offer.
This is a small sampling of the literally thousands of planning cycle diagrams available on the Internet.
The variations represent different levels of abstraction, ways of defining stage boundaries, grouping of sub-steps or tasks into larger stages or phases, and so on.
Sometimes there are different sector viewpoints that influence the design of the strategic planning cycle. For example some public sector organizations are governed by funding and budget cycle considerations, as well as the need to explicitly take into account a multiplicity of constituencies in the planning process.
The need to use a formal strategic planning cycle, and the many apparent variations in planning process design, also reflects changes in the broader context in which organizations of all types operate.
The need to use a more systematic approach to corporate strategic planning has increased in recent decades. Society has become keenly interested in the behavior and governance of organizations, and now requires clearer public statements of corporate intentions.
Also because organizations have increased in size, complexity and geographic scope of their operations, rates of change, growing lead times on larger, more complex projects, there is a demand for more professional approaches to management at all levels.
Some may see strategic planning as a means of dramatically improving corporate performance through innovation, or grand disruptive ocean coloring master strokes in some great competitive battleground. While I believe that a soundly managed cycle of strategic planning can help an organization to improve overall performance, I see it more as a means of defending against the rising penalty for error. I believe this because the strategic planning cycle is a way of organizing to take major corporate decisions in conditions of extreme uncertainty.
There is such bewildering array of strategic planning process diagrams. Yet the fundamental procedures required are few in number.
I will approach the clarification of these procedures by first describing a minimal strategy development cycle; or rather pair of cycles, as shown in the following diagram.
As you can see the planning process depicted is composed of two interlinked cycles.
The left of the diagram focuses on setting corporate objectives and keeping them under review.
The cycle on the right concerns the determination of strategy and keeping that under review.
The cycles are linked by an arrow in one direction only, indicating that a strategy is selected only after the objectives have been decided.
A strategy is valid only to the extent that it achieves the objectives.
Objectives are not influenced by strategic decisions.
It should be noted that the factors that affect the choice of corporate objectives are, or may be, wholly different from the factors that are taken into account when selecting a strategy; that is why I have separated them into two different elements in the chart.
It should also be noted that the need to review objectives arises from signals that may be different from, and independent of, the signals that cause a review of strategy. Each of the two cycles may take place at different times and over different periods of time.
This approach to describing the strategic planning cycle or process is somewhat different from most of the charts that others have devised. The justification for these differences is twofold.
The diagram also suggests that corporate objectives are not affected by results or by a manager’s confidence in his plans.
It also suggests that objectives cannot be determined until some of the environmental factors have been examined, i.e. those factors that affect the selection of objectives have to be examined before the objectives can be selected. But those that affect strategic decisions may be examined before, during or after the determination of objectives, the diagram is neutral on that point. It does show that strategic decisions cannot be taken until both the objectives and the factors affecting strategic decisions have been determined.
What we are really saying is that the strategic planning cycle is not a thing unto itself. The planning cycle is subject to the setting of corporate objectives. These are the province of corporate governance rather than corporate management. The objectives consist of two parts.
With this clear we can look again at the simple form of planning process flow, or planning cycle, we have used elsewhere on this site.
The strategic planning process cycle consist of five essential procedures as follows -
The second stage of the strategic, or corporate planning cycle, about purpose and target setting involves acceptance, by management, of the purpose. This is determined by the founders and governors of the organization, and managers agree with them a set of targets for this overall performance.
At the first stage, the engagement of people in the process, a key group is obviously the governing body. See who is involved strategic planning for more information on this.
For more detail on the individual steps see steps in strategic planning process.
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