Strategic planning practices in public education institutions
This section reviews the theory and empirical research on formal strategic planning systems as an effective tool for strategy development and implementation. First, it reviews the concepts of strategy, strategic planning, and strategic planning systems as well as the relationship between strategy and formal strategic planning. Second, it reviews the need for and advantages of formal strategic planning systems as effective tools of strategic management for organisations that operate in complex and changing environments.
Third, some attempts made to measure the effectiveness of strategic planning will be reviewed.
2.1 Strategic Planning as a Management Tool
Mintzberg (1994) gives a definition of planning as ‘a formalized procedure to produce an articulated result, in the form of an integrated system of decisions’. In the same place, he recognises the value of a leader’s intuition: ‘Visionary leaders likewise integrate decisions, in their cases informally, or, if you prefer, intuitively’. In the definition, key words are ‘articulated’ and ‘integrated’.
Since its introduction in the early 1960s, formal strategic planning system has received wide acceptance among academicians, authors, researchers, and practicing managers as a major contributing factor to successful management of business organisations. The surge in popu1arity of formal strategic planning systems is due to an implied assumption that there is a positive correlation between improved organisational performance and formal strategic planning. However, not everyone accepts formal strategic planning as an effective tool of management. To this group of people, strategic planning is just another fad that will fade away. The question is, therefore, does strategic planning have any future? As an answer to this question, Steiner predicts that "formal strategic planning will continue to develop and the gaps in our knowledge about it will narrow." He further predicted the following trends:
The emphasis on strategy will continue. This is not to say that strategic planners will pay less attention to operational planning. Rather, emphasis on the formulation and implementation of strategies will grow. The reason is that environments are likely to become more turbulent and complex, making it even more essential that a company pursue those strategies that will best adapt the organisation to changed circumstances (Steiner, 1979).
About the future of strategic planning, Lorange (1980) predicts the following:
About the pressures facing the firm during the years to come, we can, of course, only speculate. However, it seems reasonable to expect that the need to strategize will become even stronger in the future. Thus, a corporate planning system will increasingly become a tool that senior management can use to influence the strategic direction of the organisation. It seems reasonable to predict that a strategic planning system might become a distinct competitive advantage to those companies able to develop effective systems. This, however, will require an increasing emphasis on keeping the system's evolution under close-scrutiny and control as well as ensuring that the system's focus is consistent with the strategic direction actually contemplated by senior management.
2.2 Educational Strategic Management
Strategic planning is one element in the strategic management process (Brady, 1999; Hertz, 2004; Miller, 1998; Vinzant & Vinzant, 1996). In the text, Strategic Management, Miller (1998) identified three major processes of strategic management: strategic analysis, strategy formulation, and strategy implementation. In the Harvard Business Review article, What Effective General Managers Really Do, Kotter (1999) suggested that effective general managers do two critical things: set agenda and build networks. A major agenda setting decision is finding specific initiatives that accomplish multiple goals. Pearce and Robinson (2003) defined strategic management as “the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company's objectives” (p. 1).
In recent years, a number of researchers and commentators have suggested that public sector organizations cannot hope to make significant improvements in their performance without making an effort to develop the capacity for strategic management (Poister & Streib, 1999). According to Drucker (1993), absence of discipline of the bottom line that characterises non-profit organizations makes this a particularly difficult challenge. In too many organizations, top executives spend little time discussing strategy (Kaplan & Norton, 1996). This suggests that top executives may be spending too much time micromanaging operations.
Educational change literature attests to the need for better alignment between
educational organizations and their environments. Change efforts from the 1970s through early 1980s were focused on making single innovative changes in curriculum and instruction (Fullan, 1985). Cuban (1988) referred to these early improvement efforts as first order change. The second order change efforts emerging between early the 1980s and mid-1990s emphasized not one teacher in one classroom as in the first order stage but the process and context of school (Stiegelbauer, 1994). The continued concern with educational performance in the mid-1980s and beyond have forced researchers to redirect from micro-educational change affecting individual schools towards macro-educational change focusing on the school district, governance, and administration (Mauriel, 1989; Murgatroyd & Morgan, 1993).
Though the initial focus was on strategic planning, a process for developing organizational strategy (Mintzberg, 1994), the need for strategic management of educational services became apparent a few years later with the publication of Mauriel’s (1989) Strategic Leadership for Schools. Mauriel wrote:
The strategic management framework provides a new approach for organizing and shaping the many processes and systems that are needed today to lead and manage the operation of a school system effectively. This approach provides a new perspective for superintendents, central office executives, and school board members as they attempt to establish order and structure in the complex world of the public schools (p. 314).
2.3 The Concept of Strategy
The word “strategy” has been in use since Sun Tzu wrote the Art of War in the fourth centuryB.C. (Sun Tzu 1971). Sun Tzu wrote, of course, about military strategy. The literature on corporate strategy, which emerged in the 1950s and 1960s (Chandler 1962; Ansoff 1965) is vast and continues to grow at an astonishing rate. Strategic management – the way in which a firm identifies its strategic direction and aligns its operational processes to its strategy – has become an academic discipline in its own right, like marketing and finance (Mintzberg et al. 1998). In essence, strategy has to do with understanding where an organization will go in the future and how it will get there.
Like strategic planning, the concept of strategy has a number of definitions varying in scope and depth. Many strategic management textbooks exist, each with its own definition of strategy. For instance, Mintzberg and Quinn (1996) define a strategy as the pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole. A well-formulated strategy helps to marshal and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents (emphasis included in the original).
Glueck (1980) defines strategy as "a unified, comprehensive and integrated plan relating the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved." According to Steiner, Miner and Gray (1979), “strategy is the forging of company missions, setting objectives for the organisation in light of external and internal forces, formulating specific policies and strategies to achieve objectives and assuring their proper implementation so that the basic purposes and objectives of the organisation will be met.” Schendel and Hofer (1979) concluded that “an effective strategy will usually describe the present and planned scope and domain of action….the skills and resources, sometimes referred to as the distinctive competencies….and the synergies that will result from the ways the organisation deploys its skills and resources.”
In the business sector, Andrews (1971) referred to strategy as a rivalry among peers. Ohmae (1982) agrees and maintains that the object of strategy is to bring about conditions favorable to one’s own side, judging the right moment to attack or withdraw. Porter (1980) sees strategy as a broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals. He agrees with Ohmae that strategy consists of offensive or defensive actions that create a defendable position and yielding a superior return on investment. Perhaps the most radical view of strategy sees it not as the concepts and vision to compete in the future, but rather the concepts and vision to create the future (Hamel & Prahalad, 1994).
Meanwhile, in the public sector, Bryson defined strategy as a pattern of purposes, policies, programs, actions, decisions, or resource allocations that define what an organisation is, what it does, and why it does it. (Bryson, 2003). Nutt and Backoff (1992) describe strategy as addressing a major management concern positioning the organisation to face an uncertain future, whereas Moore (1995) says that strategy is looking out at the public value created a normative view - as well as looking down at the efficiency and means of production.
In their recent book, Mintzberg et al. (1998) contend, “Strategy is one of those words that we inevitably define in one way yet often also use in another.” Most people think of strategy as a plan – a direction, a guide, or course of action into the future. But when asked to describe a strategy actually pursued, people tend to describe a pattern or a set of behaviors over time, e.g., a company that perpetually markets the most expensive products is said to pursue a “high-end strategy.” So strategy can be defined as a pattern of behavior. Mintzberg et al. include several other ways of defining strategy: Strategy is “position” – selling particular products in particular markets. Strategy is “perspective” – an organization’s fundamental way of doing things, e.g., the “McDonald’s way.” Strategy is “ploy” – a specific maneuver intended to outwit a competitor. The five P’s (plan, pattern, position, perspective, and ploy) serve as a key aspect of Mintzberg et. al.’s framework for analyzing different schools of thought about strategy.
Based on all the above definition of strategy, this study have concluded the following working definition of strategy. Strategies are forward looking actions on fundamental issues that lead to goal accomplishment. Action steps are the result of conscious thought regarding goals, objectives, resources, position in the environment, future uncertainty, and relationships (adversaries, means to ends, stakeholders). Strategies require periodic review, adjustment as necessary, and judgment in application.
How strategy is developed?. Thinking about strategy formulation has evolved over the last 40 years. Early concepts revolved around the premise that the executive officer could design a strategy based on a careful analysis of both internal and external factors affecting the organisation’s competitiveness, and that this strategy should then be implemented by the organisations. Organizations went to great lengths (and expense) in the 1970s to develop a whole system of integrated plans at all levels of the organization to make sure corporate strategy was developed and embedded in all activities. Porter’s (1980) analytic five-forces approach to industry analysis made strategy more externally focused. It had a very strong influence in the 1980s (and remains quite influential). After 1990 the emphasis has been on the need for speed and flexibility in order to respond to the increased pace of change and its effects on competition. The field has become far more eclectic, and confidence in the ability of top management to develop an effective strategy using a purely analytical approach has been largely shattered. The concepts of grassroots strategy development, collective strategy, the learning organization, competency-based strategy, negotiation, and incorporating trial and error in strategy development all recognize that a wide range of players, including employees, customers, and even competitors, need to play a role in developing and shaping strategy.
Current approaches to strategy development, consequently, draw upon a wide range of ideas and models. Mintzberg and Lampel (1999) and Mintzberg et al. (1998) identify the following nine schools of thought that fall into two fundamental types:
a. Prescriptive (in which normative assumptions derive from a view that the environment is relatively constant and the challenge for strategy development is to respond or adjust to the environment)
1. Design school
2. Planning school
3. Positioning school
b. Descriptive (in which the approach is derived from empirical findings or disciplinary perspectives and methods)
4. Entrepreneurial school
5. Cognitive school
6. Learning school
7. Cultural school
8. Political school
9. Environmental school.
It is impossible in a short review to summarize the whole body of work, but a sample of ideas and models about how organizations do or should formulate strategy is presented in the next section.
2.5 Conceptual Models of Strategic Planning
We have moved to a world of interconnectedness and interdependencies, a world in which no one organization is in charge, yet many are involved (Luke, 1988). These interdependencies, and the increased ambiguity that accompany them, require public and nonprofit organizations to think and act strategically as never before. Strategic planning is designed to help them do so. The extensive experience of the private sector with strategic planning over the last 40 years provides advice on how to apply it to public and nonprofit organizations (Bryson, 2003).
Although the processes and procedures of strategy development vary as much as the authors recommending them, typically, strategy development involves several steps. An organization must first decide if it is ready to engage in strategic planning process. A determination must be made as to whether the organization’s leaders are committed to the effort and whether they are able to devote the necessary attention to the “big picture”. Steiner (1979) recommended that the strategic planning process be designed to fit the unique characteristics of an organisation. But there are several steps that are typically followed. These include preparation for the strategic planning session, environmental analysis, developing the vision, mission, goals, objectives, developing strategies or an operational plan, and monitoring the implementation. These common steps can be examined in the selected models of strategic planning presented below. Several of the more widely used models are summarised in the table 2.1 below:
Prominent Models of Strategic Planning and Strategic Management.
1. Steiner’s Model
1. Assessment of expectations of major outside interests.
2. Assessment of expectations of major inside interest.
3. Examine past performance, current performance and future forecasts.
4. Evaluate environmental opportunities and threats, organisational strengths and weaknesses.
5. Assemble master strategy as composed of:
v. program strategies
2. Glueck and Jauch’s Model.
(Glueck and Jauch, 1984)
1. Determine opportunities and threats in the environment. (Influenced by the enterprise strategies and enterprise objectives.) (Analysis and Diagnosis)
2. Determine internal competitive advantages. (Choice)
3. Consider alternative strategies. (Choice)
4. Choose the strategy. (Choice)
5. Resources and Structure (Implementation)
6. Policies and Administration (Implementation)
7. Evaluation of results and strategy (Evaluation)
3. Wheelan’s and Hunger’s Model
Lindsay and Patrick (1992)
This model has four major components:
1. Strategic planning: Scan - environmental Scanning (External: natural, social, industry environment; Internal: structure, culture and resources)
2. Strategic Planning: Focus - Strategy Formulation (vision, mission, gap analysis, objectives, strategies and policy implementation)
3. Strategic Management: Act - Strategy Implementation (process integration, project involvement, performance integration)
4. Strategic Management: Act - Evaluation and Control (Results Alignment)
4. Well’s Model (1999)
1. Pre Planning: a. Pre-planning activities. b. Organisational Assessment.
2. Strategic Planning: a. Mission, Vision, Guiding Principles and Strategic Foundations. b. Gap Analysis. c. Strategic Goals, Strategies, Objectives, and Develop measurement plan.
3. Implementation: a. Complete the plan. b. Communicate the plan.
4. Implementation: a. Develop action plans. b. Take action. c. Track status. d. Communicate progress.
5. Measurement and Evaluation: a. Collect data. b. Analyse and evaluate. c. Communicate results.
5. Bryson’s Model
1. Initiate and agree upon a strategic planning process
2. Identify organisational mandates
3. Clarify organisational mission and values
4. Assess the organisation’s external and internal environments
5. Identify the strategic issues facing the organisation
6. Formulate the strategies to manage these issues
7. Review and adopt the strategic plan or plans
8. Establish an effective implementation vision
9. Develop an effective implementation process
10. Reassess strategies and the strategic planning process
All the above models can be identified as ‘classical’ planing model and business like models and only Bryson’s model can be considered as a strategic planning model for public and non-profit organisations.
Comparing the models, it can be seen that a number of similar elements exist. Every model agrees that before the planners begin work on the strategic planning, they must carry out an organisational assessment or environmental analysis. In Well’s model, the last steps of the strategic planning process show that after all the data of the current processes are analysed and evaluated, the results of the analysis was communicated and used for the environmental analysis.
Most of the models agree that internal analysis is an analysis of the strengths and weaknesses of an organisation. This framework also can be seen in most of the models and is emphasised in Steiner’s model.
Reviewing the environment sets the stage for developing a vision for the organisation. The vision describes the desired state of the organisation. It is a mental and verbal picture of what the organisation wants to be. It identifies what the organisation stands for and why it should be supported. This relationship can be found in Wheelan’s and Hunger’s model, Well’s model, and Bryson’s model. The vision and mission statement gain strength by being bound together with a set of values. This process appears in Bryson’s, and Well’s models.
The next step in the process of strategic planning is the organisational mission statement, which is a declaration of organisational purpose, designed to inspire and focus the efforts of all the members of the organisation. As has been noted earlier it is usually short, not more than a page in length, and is often simply a punchy slogan. It provides the focus for planning and is intended to give all the staff a sense of purpose and direction. Most of the models agree that this element is an important component in strategic planning. Also the role of the mission is not clearly stated in Glueck and Jauch’s models.
All the models suggest that top management must be involved in the beginning of the process to set up the direction of the organisation and then share it with all the staffs and stakeholders.
Identifying the organisational goals is the next essential step in strategic planning. Goals are typically defined by broad statements that are intended to serve as a bridge between the existing condition and the desired condition. Goals state where an organisation is going but they must be congruent with the organisational mission. Goals must also be flexible enough to accommodate sudden changes in the environment and stakeholder needs, and they must be clear enough to be well understood by all staff in the organisation. Once a set of goals has been developed, they are typically prioritised. This framework is included in Wheelan’s and Hunger’s and Well’s models. Well’s and Weindling’s models also agree that the organisation must carry out a gap analysis before finalising the strategic goals or prioritising the goals.
Well, Steiner, and Wheelan and Hunger specifically present the continuous flow of the process from goals to objectives specifically in their models. Goals are usually broken down into specific tasks or objectives. An objective defines a specific achievement to be realised within a definite time and is usually used as a yearly achievement target. Objectives must be specific, measurable, attainable, reliable and have a time frame. Objectives can be driven by strategies that are defined by the analysis of strengths, weaknesses, opportunities and threats.
All the models conclude that after identifying goals and objectives, the next steps is to develop strategies or actions plans. Only Well’s model proposes that objectives are developed after strategies have been identified. The strategy stages in Well’s model suggest those of a grand strategy which is not specific. It becomes more specific and measurable when the objectives are stated. Well’s Model also recommends that before the implementation or implementation of strategic planning, planners should develop measurement plans for measuring the achievement of the strategic plan; this process is not explained in the other models.
The final main step in the strategic planning models is implementing the plan, and monitoring and evaluating goal accomplishment. Implementation is taking the actions necessary to accomplish the goals, strategies, and objectives. This is referred to in the literature as the control function.
This process requires action planning, senior leadership involvement, commitment to the plan, resourcing (people, time, and money) and involvement from the entire organisation.
Well’s model presents in some detail the process of implementation and implementation of the plan, dividing the implementation process into two phases. In the first phase, the plan is completed and published; in the second phase, the strategic plan is formally communicated. The process of implementation steps involves it developing the action plan, taking action, tracking the status of the implementation and communicating its progress.
Strategic measurement is the identification, development, communication, collection, and assessment of selected outcome measures that are directly linked to the organisation’s performance of its mission and attainment of its vision. This step is included in Bryson’s, Well’s, Wheelan and Hunger’s, and Glueck and Jauch’s models. Ultimately, the feedback about the success or failure of the plan is used in the next round or cycle of strategic planning.
One process, which is given only in Bryson’s model, is identifying organisational mandates. This process is important within public organisations. Mandates are the formal requirements the organisation what to do and not to do from stakeholders especially from the government. These formal requirements are likely to be codified in laws, ordinances, articles, circular letters, etc. Bryson (1995) argues that stakeholder analysis is critical because it’s the key to the success in the public and non-profit sectors. If an organisation has time to do only one thing when it comes to strategic planning, that one thing ought to be a stakeholder analysis.
The table below summarises the content of the seven selected models, which have been discussed above,
Table 1: An Analysis of Seven Selected Models of Strategic Planning
Internal Environmental Analysis
Implementation strategy/ action plan
In conclusion, it can be postulated that, as a minimum, the first step in high-quality strategic planning in any organisation should include a strategic future intention component that is emphasises through a review of the organisational vision, mission and goals. The second step is a strategic analysis or auditing component, which involves the appraisal of the organisations external and internal environments. The third steps is a strategy formulation component, which includes the objectives, critical success factors, strategies or programmes, budgets and other resources allocation mechanisms based on the previous step. The fourth step is the strategic operational plan component, which includes the implementation of the plan, and the implementation of actions plan. The final step in the main strategic processes before it is recycled is the monitoring and evaluation process. All these steps can be grouped into two main sections. The first group, which contains from steps one to three, can be labeled strategic processes, while the remaining steps can be considered as operational processes.
As conclusion, strategic planning process proceeds in steps designed to provide answers to questions that are essential to the formulation, implementation and control of an effect strategic plan.
2.5.1 The First Step (where are we?)
The objective is to determine the present position of the organisation. In this task, effort is made to articulate the philosophy of the organisation in a clearly defined mission statement. The mission statement answers three critical questions. First, the need the organisation will fulfill. Second, whose needs does it fulfill. In other words, who are the customers or consumers (market identification and definition) of the products or service the organisation produces? Third, how or what technology will be used to fulfill the identified need. Technology, in this case, refers to how inputs will be converted into outputs (products or services). In this stage, it is important to assess the financial, competitive situation of the organisation and the continuing validity of the current mission, product, and market definitions. The objective is to ensure that the organisation is still well positioned in light of changes in the organisation’s competitive environments. A successful completion of the first step should provide a clear answer to the question of “where is the organisation?”
2.5.2 Second Step (where do we go from here?)
Having answered the questions about the current position of the organisation, the task of the second step is to answer the question of “where do we go from here?” This begins with an analysis of the organisation’s weaknesses, opportunities, threats, and strengths that underlie the planning (SWOT). Opportunities are defined as any product or service that is not being provided as well as it could be provided. Alternatively, opportunity may be defined in terms of a market or group of consumers that is not being served as well as it could be. It may even be in terms of new technology that could be adopted to improve service delivery or the overall transformation of input into output. An organisation’s strengths are the distinctive or core competencies that are related to its industry key success factors. In other words, an organisation’s strengths are what it does better than its primary competitors. Similarly, an organisation’s weaknesses are what it does not do as well as its primary competitors. Threats are defined as external factors that may hinder the accomplishment of the strategic objectives. In serious situations, they may undermine the continuing viability of the organisation. When possible, threats must be avoided or monitored with a view to developing strategies to respond to their impact. Taken together, the results of the SWOT analysis form the premise or assumptions upon which the strategic plan is based and strategic objectives are established.
2.5.3 Third Step (can we get there?)
The third step of the strategic planning process is the identification and evaluation of strategic alternatives that have the potential to achieve strategic objectives established in the step two of the process. Each strategic alternative should be carefully evaluated in light of the organisation’s strengths and weaknesses. The objective of this stage of the strategic planning process is to answer the question: “Can we successfully implement a chosen strategy?” To answer this question, effort is made to identify organisational resources required by each strategy under consideration. These include facilities, people, financial, and organisational structural requirements. Also included in this analysis are discussions about relevant changes in managerial and organisational cultural values that are needed to effectively implement a given strategy. The result of this stage is a set of strategies to be implemented in order to achieve strategic objectives.
2.5.4 Fourth Step (what strategies will achieve objectives?)
Now that a decision has been made on which strategies the organisation can realistically implement, this stage is set to develop implementation or action plans. This requires the translation of plans into budgets. These budgets include, personnel, financial, facilities and any needed structural adjustment to support implementation plans. It is necessary at this stage to assign people to each strategy and identify who is responsible for results.
2.5.5 Fifth Stage: This stage calls for the development of a selective control system to monitor the performance and results of each strategy. It is also critical that a strategic system is developed to monitor the premise or underlying key assumptions upon which the plan is based to ensure the continuing validity of key assumptions. It must be noted that that there is no final stage of the process of strategic planning because it is a continuous process.
2.6 The influence between public and private environment or culture on strategic planning practices and organizational performance.
Although the business world traces its strategic management roots only to the early 60.s, the public sector has been even later in coming to see the benefits of strategic management. Numerous authors have either noticed or called for a difference in strategy making between the public and private sectors (Lindblom 1963; Bryson 1995; Nutt and Backoff 1995). Bryson explains the reasons in terms of the different types of decision-making found in the public and private sectors. Builder (1989) questions whether a public institution is even capable of developing a coherent strategy. In deference to public administration, that is where we will begin.
Part of the appeal of strategic planning is that it is perceived as a private sector advance that the government organisation is once again slow to take advantage of. It is true that the government organisations still has efficiencies to achieve, and there are some private sector techniques that could help. But it is dangerous to assume that because a method is used successfully in the private sector, it can be equally successful in the public sector agencies including school, and even more dangerous to assume that the government school can be run as a business.
2.6.1 Public and Private are Different
Many scholars in economics and political science claim that the public and private sectors differ (Dahl and Lindblom, 1953; Barton, 1980; Downs, 1967; Gabris and Simo, 1995; Crewson, 1997; Dixit, 1997; Gore, 1998; Kurland and Egan, 1999; Nutt, 1999). Wamsley and Zald (1973) proposed that organisations differ because of different degrees of external control through mechanisms such as ownership, control over budgets, and external oversight. Savoie (1994) provides four specific areas where the public sector differs significantly with the private:
- Performance is easier to measure in the private sector
- Public management is subjected to much closer scrutiny
- Private industry manages to the bottom line, the public sector manages to the top line
- Public goals are not clear and often are in conflict
In that same vein, Ring and Perry (1985) identified five major differences in strategic management between the public and private sectors:
- shared exercise of constitutional powers resulting in policy ambiguity,
- fishbowls caused by media and public scrutiny,
- public comprised of a wide range of stakeholder interests,
- short tenure of leadership (public officials), and
- shaky coalitions unable to withstand the pressures of implementation.
2.6.2 Public and Private are not Different
Knott (1993) examines the basic internal characteristics and external constraints on management in both the public and private sectors. He then developed four general management categories that cut across both public and private organisation. Using this framework for analysis, Knott suggests that the greatest challenge facing management both in both sectors is a commitment to trust and good faith.
2.6.3 They are Different and Similar
Some scholars have suggested that public organisations are characterized by rigid rules, formal job guidelines, formal communications lines, and inflexible rewards (Meyer, 1982; Perry and Porter, 1982; Rainey, 1983).
Kurland and Egan (1999) found that public staffs perceived similar job and communication formalization and emphasis on results as their private sector counterparts, but were less satisfied with rewards distribution and supervision. Finally, a two-decade long study by Rainey and (2000) refutes the notion that public organisations have more goal complexity and ambiguity and exhibit more formal organisational structures than private organisations. In that regard, it is time to look at specific approaches to public and private strategies Bozeman
2.7 Strategic Planning and Organisational Performance
For more than three decades, strategic planning advocates, researchers, and management practitioners have argued for its legitimacy as a tool of effective strategic management. These arguments are based on a presumed positive relationship between strategic planning and organisational performance. specifically, they link strategic planning with improved financial performance, effective organisational mission definition, competitive advantage, and organisation-environment alignment critical to creating and sustaining superior competitive advantage.
Several studies have shown that strategic planning at best produces an intended strategy, which can be quite different from the realized strategy (Miller, 1998; Mintzberg et al., 1998). Robinson and Pearce (1988) suggested that planning should be studied as an exogenous variable influencing the relationship between the content of strategy and organizational performance. According to Rhyne (1986), organizations whose planning processes follow the prescription of strategic management theory tend to perform better than other organizations. Perhaps one of the earliest studies on the relationship between formal strategic planning and organisational financial performance was done by Ansoff et al., (1970). The objective was to determine the impact of strategic planning on successful acquisitions using a sample of manufacturing firms that have acquired other firms. The companies were grouped into planners and non-planners. The performance of each group was evaluated with twenty-one financial measures. The results showed that companies that practiced strategic planning outperformed those that did not.
Thune and House (1970) studied thirty-six companies in six industries to determine how the adoption of formal, long-range planning procedures affects on a firm's economic performance. The results of this study showed that formal strategic planners significantly outperform informal planners on five economic measures. Also, formal strategic planners improved on earnings during the period formal strategic planning was adopted. The second part of this study, which dealt with industry-by-industry analysis, showed that firms with formal strategic planning in industries of drugs, chemicals, and machinery clearly outperformed those without formal strategic planning systems.
Herold (1972) extended the study of Thune and House for four more years. He replicated only the part of the study that examined the drug and chemical industries. Using sales and profits as performance measures, the findings indicated that formal strategic planners outperformed informal planners. Rue and Fulmer (1974) studied strategic planning practices of 386 firms over a period of three years. The 386 firms were divided into three industrial groups: service, durable, and nondurable. The supposition tested was that the more sophisticated the planning techniques, the better the performance of the firm. Using four measures of financial performance, they failed to find consistent results. In the durable goods industry, planners clearly showed better performance than non-planners. In the nondurable goods industry, however, the reverse was the case—non-planners out performed planners. The results were mixed in the service industry. Malik and Kargar (1975) sought to determine whether long-range planning improves company performance. This study utilized data from thirty-eight firms in the electronics, chemical-drugs, and machinery industries. Using thirteen economic measures of performance, the study failed to find consistent results. In nine of these measures, planners clearly outperformed non-planners. However, the results were mixed in the remaining three measures. Wood and Laforge (1979) investigated the relationship between formal planning procedures and financial performance in a sample of large
banks. Using interviews and questionnaires, they sought to determine if comprehensive planning has any impact on financial performance. This study found that banks that engaged in comprehensive long-range planning significantly outperformed those that do not have formal planning systems. They also outperformed a randomly selected control group. Burt (1975) examined the relationship between planning and performance in fourteen retail firms in United States . The study utilized "Quality of Planning" ratings derived from the application of predetermined weights. From this study, it was found that high quality planning is significantly associated with high levels of performance (as measured by improvement in profits; rates of return on invested capital). Moderate quality planning is associated with moderate performance. However, when the quality of planning is low, the relationship between the quality of planning and performance was found to be ambiguous. Australia
Not all studies reported this systematic relationship between planning and organisational performance. However, Kudla (1978) studied 348 firms divided into two groups of planners and non-planners. The author used stock price changes and dividends as economic measures of performance. Analysis of the data by the use of Chi-square tests and Student “t” tests did not show any significant differences in performance between the two groups of planners and non-planners. Leontiades and Tezel (1980) investigated the relationship between planning perception and planning results. Using planning perceptions of chief executive officers and chief planning officers as well as traditional financial measures of organisational performance, they concluded the following:
We could find no evidence to corroborate prior empirical studies which purported to find a strong positive association between formal planning and corporate performance. Companies with the best planning systems-- as perceived by the chief corporate planners and chief corporate executive officers--had no noticeably better results to show for their planning effort.
In support of these countering arguments, other researchers, including Mintzberg (1987, 1990), have argued that in an uncertain environment, strategic planning actually inhibits an organisation’s ability to engage in creative thinking that is critical to innovative ideas that are necessary to deal with environmental surprises. This argument assumes that organisations operate in an ever-changing and unpredictable environment and ignores the notion of strategic planning as an ongoing process that provides for periodic strategy review and modification when the strategy premise is rendered invalid by significant environmental changes. Further, it ignores the need for a contingency approach that considers an organisation’s size, environmental complexity, and uncertainty (Lorange & Vancil, 1979). These mixed results leave the question of relationships between strategic planning and organisational performance open and debatable.
Recently, however, attempts have been made to examine and explain the lack of consensus on the relationship between strategic planning and organisational performance. These efforts have uncovered certain limitations of previous studies. First, most previous studies conceptualized strategic planning in terms of dichotomous categorization such as planners and non-planners or formal and informal planners.
Such categorization assumes that all non-planners and formal planners have the same planning system design, processes, and organisational contextual dimensions. Hussey (1974) considers this conceptualization flawed for the fact that engaging in strategic planning does not mean that it is done well. The second limitation is the almost exclusive use of financial performance as a measure of organisational performance, ignoring the fact that in some organisations, such as public educational agencies, performance is better measured in terms of efficiency and effectiveness of the services they provide. A third limitation is the use of single measures of strategic planning and planning effectiveness as well as the use of simple correlation to test for the existence of relationships.
Responding to these limitations, Ramanujam and Venkatraman (1987) used a multidimensional conceptualization of strategic planning and its effectiveness that included organisational, design, process, and top management involvement. By doing so, they effectively responded to Wood and LaForge (1979) who called for a richer conceptualization that considers the sophistication and variation in an organisation’s strategic-planning system. Similarly, to effectively measure strategic planning effectiveness, they adopted the arguments and comments of Greenly (1983), King (1983), and Lorange (1979) and expanded the measures of planning effectiveness to include processes and outcomes. In this regard, Lorange specifically argued that many of the measures in previous studies were based on surrogate variables when it probably would have been more relevant to measure effectiveness as a function of the capability of the strategic-planning system to meet specific planning needs (1979).
Others argue in favor of measuring effectiveness in terms of a strategic planning system’s capability. For example, Camillus (1975) suggests that a strategic planning system’s capabilities is its ability to encourage creativity and control, and Lenz (1980) suggests an organisation’s ability to generate and acquire resources and general management technology is a more promising approach to measuring the effectiveness of strategic planning. Ansoff (1991) and
and Cowen (1990) argue that a major objective of strategic planning is to promote strategic and adaptive thinking for the expressed purpose of effective organisation-environment alignment. Therefore, strategic-planning performance should be measured by the extent to which it facilitates organisation-environment alignment. Adopting these arguments would mean that the effectiveness of strategic planning would include measures such as the ability to predict future trends, clarify organisational missions, foresee and avoid future threats, and take a proactionary rather than a reactionary stance to establish credible short and long-term performance objectives (Miller and Cardinal, 1994). They, therefore, suggested further research on the relationship between effective strategic planning process and organisational performance. Aram
Strategic planning in and of itself is not sufficient to improve internal workings of the organization. Because a school or any type of organization goes through a strategic planning process does not guarantee that it will experience increased organizational effectiveness or that it will result in a collegial and empowered culture.
“Planners have been notably reluctant to study their own efforts,” writes Henry
Mintzberg, “not only what they really do but, more importantly, what they and their processes of planning really get done, in terms of impact on the functioning and effectiveness of their organizations” (Mintzberg, 1994: 91). Mintzberg, a well-known author on strategic planning, suggests that evaluations have not been done because those who have mastered the plan have not had the need, nor the desire, to rate the implementation of their work. If planning does not result in improvements and create an atmosphere of teamwork and goodwill, planners very often will blame it on “pitfalls of planning.” Mostly they will blame failure on management or organizations, not on planners and their systems. “Pitfalls are to planning what sins are to religion: impediments to be brushed aside, perfectly understandable cosmetic blemishes to be removed, so that the nobler work of serving the almighty can proceed” (Mintzberg, 1994). So as long as planners can develop and introduce a plan, they can reflect on their good work, which is then left to others to implement.
Has the staff of the school been given the power to act and make decisions? No evaluation methods and tools exist to test the hypothesis that strategic planning results in a more effective organization. The assumptions about improved organizational culture and its ability to think and act strategically as a result of strategic planning remain untested.
“Evaluation of strategic planning performance in strategic management assesses whether the organisation is following its strategies and achieving its operational goals. If there is a gap between expected and actual performance, the evaluation seeks to determine the reasons for that gap and whether corrective actions are warranted. It should be ongoing, providing continual feedback to the organisation so that the organisation can make adjustments to its operations as needed” (Martin, 1992). While Martin writes about evaluating and monitoring strategic plans, he does not go any further than other authors in discussing the evaluation of the strategic plan and planning process.
The literature review on evaluation of strategy performance has not disclosed any indication the impact of strategic planning on organizational effectiveness and culture is anything that should be evaluated. “Ultimately, long range strategic planning provides a foundation for strategic management and organizational innovation.” Over time, long range strategic planning should contribute to the school’s development of a collective quality of mind that enables it to consistently identify and shape the forces that lead to better performance. There have been few studies of the impact of strategic planning perse. Many writers (Bryson, 1987; Goodstein, Nolan & Pheiffer, 1993; Allison & Kaye, 1997) have discussed evaluating strategic planning as a part of the strategic planning process. The literature review undertaken revealed a small, insignificant piece on evaluation of the strategic planning process itself. However, all authors refer to the importance of ongoing monitoring and evaluation of the strategies articulated in the plan, not necessarily the plan itself. “While program evaluation is important to agencies in the strategic planning process, a full discussion of program evaluation is beyond the scope of this Workbook. And, because program evaluation often involves tracking clients over time, an agency that does not have an existing program evaluation process will likely be unable to do a significant evaluation during the relatively short period during which the strategic plan is developed” (Allison & Kaye, 1997).
Allison and Kaye (1997) suggest evaluating the plan when finished and to celebrate it in a significant manner. After year one, a retreat should be planned with specific questions asked about how well the implementation is going. They say (1997) that the leadership of every organization has a responsibility to ensure that a strategic plan is in place and that adjustments to its implementation are made as necessary. While the materials of Allison and Kaye serve as a “How To/What Next” approach, it does not get at how an evaluation of that new culture occurs.
The strategic plan needs to be embedded in the performance management and performance appraisal systems of the organization. The strategic-focused performance management systems is one of the key tools of strategic management. The performance appraisals of all members of the organization include a test of how their work since their previous reviews has helped carry out the strategic plan of the organization. In other words, each member of the organization should have a personal set of Critical Success Indicators (CSI) that were derived from the organization’s CSI’s. Thus, the performance will not be measured simply on the basis of output, but also on the basis of how that output has helped the organization accomplish its objectives (Goodstein, Nolan and Pheiffer, 1993).
Measurement of this kind is not always easy; it takes a high degree of commitment to the plan. Furthermore, not every organization engages in performance appraisals of staffs. This is particularly difficult in a school environment as many judges think performance appraisals infringe on their judicial independence. The difficulty in having performance appraisals for staff and not judges is that it can contribute to two separate cultures.
“The various approaches used by the organization to hold units and people
accountable must reflect the elements of the strategic plan. A process for doing this involves, first, developing specific, strategically-based CSI’s for each member of the top management team; then each member of that team does the same for his or her subordinates, and so on, cascading throughout the structure of the organization” (Goodstein, Nolan & Pheiffer, 1993). Every member of an organization, from top management to front line staff, should then be held accountable for their CSI’s. This will ensure that there will be a serious effort towards implementing the strategic plan. “A good strategic priority is both clearly linked to the shared vision, and capable of galvanizing commitment from the people in the team (if not the whole organization).
Someone–an individual or a team–must be accountable for it, enough to replace some of their other work with achieving this new priority” (Senge, 1994). The bottom line is that people must be held accountable for their effort in implementing the plan. “There is no substitute for leadership. Only key decision makers who are also effective leaders will be able to motivate and guide their organizations through a successful strategic thinking and acting process. Leadership from the key decision makers is absolutely necessary if the organization itself must be changed as a result of strategic planning” (Bryson, 2003). Executive commitment to the process will communicate the message to staffs that the process is worthwhile and important to the achievement of an organization’s mission. The big innovation in strategic planning is having key decision makers’ talk with one another about what is truly important for the organization as a whole. A strategic planning process is merely a way of helping key decision makers think and act strategically. Initiation and institutionalization of the process, however, can provide the occasions and justification to gather key decision makers together to think and act strategically on behalf of the organization. All too often, in all too many organizations, such occasions and justifications do not exist. Organizational performance and stakeholder satisfaction suffer accordingly (Bryson, 2003).
“Measuring is critical to improving and the process of improving must be continuous” (Williams, 1994). The schools, in particular, have much to do with respect to measuring performance. Many schools are now engaged in strategic planning as a response to their public’s cry for improved quality services. Yet it is not alone sufficient to do a strategic plan. To truly evaluate a school’s performance, the school must engage in measurement. A school must understand its mission of conflict resolution; it must rethink and reorganize its human resources and tap into the commitment and productivity from high-performance teams. But, most importantly, the school must measure, evaluate, and hold itself accountable for continuous improvement. Strategic planning can help a school focus on these primary objectives. Performance measurement needs to become part of the organization’s internal culture. Staff involvement and participation is one of the best ways to do this. Staffs must understand that performance measurement is about achieving the organization’s goals and not about evaluating staffs. Communicating the performance measurement results enables staffs to see how their efforts have helped to move the organization ahead. It provides them with insight as to where they fit into the whole process. Very often when the word evaluation is used, people experience evaluation apprehension. Simply put, the thought of being evaluated creates anxiety. Information can prevent this anxiety by focusing on the fact that performance measurement is all about determining whether the organization has achieved what it set out to achieve.
The extent to which an organization improves its internal culture is very often
found within its staffs. By enhancing the organization’s ability to improve, emphasis must be placed on the development side of the organization. Staffs may have to be trained in thinking strategically.
“This is a testament to our naiveté about culture that we think we can change it by simply declaring new values. Declarations such as these tend to only produce cynicism” (Senge, 1994). So it is not sufficient for an organization to produce a strategic plan. This plan must be not only implemented but the impact on organizational culture and effectiveness as a result of the plan and planning process must be measured.