Conducting the Strategic Planning over Time

Conducting the strategic planning over time

Hax and Majluf (1991) describe the strategic planning as “a disciplined and well-defined organizational effort aimed at the complete specification of a firm’s strategy and the assignment of responsibilities for its execution”, which needs to be divided into neatly delineated steps and using a controlled, conscious and formal process, and generates explicit strategies which can be implemented through detailed attention. Though each firm has different characteristics, there are basic commonalities in the formal planning process of most business firms. The process should be conducted by the CEO in principle and part of the responsibility is borne by planning staffs in practice, say, various managers of hierarchical levels: corporate, business and functional levels, participate the process.

On the contrary, Mintzberg (1994) points out that a grand fallacy: strategic planning is often confused with strategic thinking. In his view, strategic planning in practice is the articulation and elaboration of strategies which already exist, meaning that strategies are often more like ‘emergent’ rather than ‘planned’. He suggests that strategy making should be a collective learning process, and conducted as capturing what the managers learns from all sources and then synthesizing that learning into a right vision. However, planners should contribute to the strategy making by supplying data that strategic thinking needs.

Grant (2003) make some findings through a study interviewing some large oil companies. He came up with three trends: shortening time horizons, a shift from detailed planning to strategic direction, and increased emphasis on performance planning. The role of strategic planning within companies management has changed as it has become less about detailed planning but more a method to measure performance. The study found that companies were still using strategic planning systems building around formal planning cycles, which set a context for decision making and provided a mechanism for coordinating and controlling decentralized strategy formulation, and fostered adaptation and responsiveness.

However, few decisions had their origins in the plans that came from the companies’ strategic planning systems. The typical sequence was the other way round: strategic decisions were made in response to the opportunities and threats that appeared, and were subsequently incorporated into strategic plans. That means, strategies found in these companies were still from a process of emergence, yet also a ‘planned’ emergence.

The reason that companies remained their corporate planning staffs was they could provide technical, administrative, analytical, pro-communication, and consultant support to strategic management activities, this is also where Hax and Majluf (2003)’s ‘planning’ view lies. But the transformation of market environment brought some changes. It was harder to make forecasts, and companies began to shift decision-making responsibility from corporate to business-level managers and from planning staff to line managers in order to get more first-hand information and direct thinking of external environment, and to react more agilely. Mintzberg (1994)’s suggestion is supported in this part. That means, the findings point to a possible reconciliation of ’design’(which essentially is similar to ‘planning’) and ‘process’ approaches to strategy formulation, both views are adopted and adapted in practice.

Both Hax and Maljuf (1991) and Mintzberg (1994) were written in the early 90’s. At that time, the increasing volatility and uncertainty of the external business environment represented a fundamental challenge, required strategies that were more flexible and creative, able to face unexpected events not properly foreseen within the assumptions underlying the strategy formation process. Therefore, the theoretical foundations of strategic planning, systematic formalized approaches to strategy formulation were criticized by Mintzberg (1994).

At the same time, Hax and Majluf (1991) still got its foundation. With increasing scale and complexity of corporate structures, multidivisional firms were more eager to unify corporate directions and improve the segmentation of the huge, international organizations. And also there were demands of conducing multiple interactions and negotiations at all levels through the firms. These tasks still need a detached and professional department in each firm to systematically plan.

Fast-forward to 2003, Grant’s findings show that strategic planning continues to play a central role in the management systems of large companies, although in a different manner.

He found less evidence of a decline of strategic planning as suggested by Mintzberg (1994) than to fundamental changes in the ways in which companies undertake their strategic planning. Strategic planning processes had become more decentralized, less staff driven, and more informal, while strategy plans have become shorter term, more goal-focused, and less specific with regard to actions and resource allocations. The role of strategic planning systems within companies overall management had also changed. Strategic planning had become less about strategic decision making and more a mechanism for coordinating and performance managing, and in fact consistent with the process view.