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Problems and barriers to strategic planning

Problems and barriers to strategic planning ©CopyrightbyInstituteofOrganizationandManagmentinIndustry,,ORGMASZ" Vol1(1);p.3-11Year2008 10.2478/v10061-008-0001-2 Oliver Recklies* Preamble Thepaperhastheobjectivetoanalyseandtosummarizeexistingproblemsandbarriersrelatedtothestrategicplanningprocesswhichhavebeenindentifiedinboththeacademicand thebusinessliterature.Inthelasttwodecadesalargenumberofarticlesandbooksrelated tothismatterhavebeenpublished.Duetotherichnessofavailableliteratureitisnotpossible todeliveranextensiveoverviewabouteveryopinionfromstrategicprocessresearch1.Taking thenumberofpublicationsintoconsiderationitcouldbearguedthattherelevanceofstrategic planningprocessisunquestionedandwouldneednofurtherexplanation. But still research results ­ including new ones ­ from different studies express that a,,duality"ofstrategicplanningstillexits.Ononesidetherelevanceofthestrategicplanning processfordevelopingorganization'sstrategyisdescribedasveryimportant.Ontheother sideanumberofconcernsandproblemswhenrunningthatprocesscanbefound.2Identifiedproblemareasincludeinparticularstrategyimplementation,communicationofstrategic planningresultsandmonitoringofstrategyexecution. Topresentthetopicthispaperwilluseathreestepapproach.Thefirstpartdiscusses existingproblemsandbarriersinbrief.Thesecondpartwillsummarizeanddiscussideas toovercometheseproblemsandbarriers.Thethirdpartwillsummarizethebenefitsof acustomizedandimprovedstrategicplanningprocess. Theconceptofstrategicplanningcanbedescribedasrelativelynewbothintermsofcorporate experienceandasobjectwithinscientificresearch.3Forthepurposeofthispaperproblems andbarriersconcerningstrategicplanninghavebeendividedintodelimitationanddefinition relatedissues,issuesrelatedtocorporatepracticeandgeneralplanningrelatedissues. * OliverRecklies­Ph.D.student,HeadofFinance,BausparkasseMainzAG 1 Note:LechnerandMüller-Stewens(1999,page4)highlightthismatterintheirresearch. 2 CompareMckinsey(2006):Inasurveyaboutstrategicmorethanthreequartersoftheparticipantsconfirmed thattheirorganizationhasaformalstrategic-planningprocess.Fewerthan25%ofparticipantsconfirmedthatthis processwouldbekeytomakingtheirmostimportantdecisions.Furthermoremanagersraisedsignificantconcerns aboutthewaytheirorganizationcommunicatesstrategyandexecuteitaswellasmeasuresperformanceagainst it.CompareHuber(2006):Around95%ofparticipantsofthissurveyconfirmthatitisveryimportanttoimplement andtoexecuteastrategicplanningprocess.Despitethisimportancearound39%ofparticipantswerenotableto differentiatetheterms"strategy","strategicplanning"and"strategydevelopment".Participantsstressedtheneedto improveimplementationandexecutingmonitoring. 3 Compare Bea, Haas (2004), page 50, compare Baum, Coenenberg, Günther (2004, page 13). Baum et al. arguethatachangefromasellermarkettoabuyermarket,anincreaseinstructuralchangesinthemarketplace, astartinginternationalisationandanincreasingcomplexityinthe1960causedtoafocusonexternalanalysisand hencetotheemergenceofstrategicplanning.ThisisinlinewithWelge,Al-Laham(2003,page9)whoseestrategic planningasresponsetothedynamicchangesinenvironmentoftheorganisation. Existing problems and barriers in corporate practice Delimitation and definition.Inboththeacademicliteratureandthebusinessliteraturevery differentdefinitionsanddelimitationsoftheterm,,strategicplanning"canbefound.Lombriser andAbplanalp(2005)stateasmajorreasonthattheterminologytodescribethestrategic planningprocessisinconsistent,oftenusingdifferenttermsanddefinitionslike,,longterm planning",,,strategicplanning",,,financialplanning",and,,strategicmanagement".Duetothose differencesavarietyofexpectationsrelatedtoprocess,tasks,responsibilitiesandresults canbefoundinorganizationalpractice. Corporate practice.Inboththeacademicliteratureandthebusinessliteraturetheprocess sequence,itsformalorganizationandstrategyimplementationinpracticehavebeendescribed asdifficultareas.Farrellandassociates(2002)arguethatmostorganizationsseestrategic planningasaseparateactivityfrommanagement'sprimeresponsibilitiesandduties.Managementfocusisdescribedastop-downandstart-to-finish;commitmenttostrategicplanning isabsent.Furthermorestrategicplanningisdescribedasaninternalbattlegroundforinterdepartmentalconflicts;negotiationsandbargainingtakeplacetoachieve,,organizational peaceuntilthenextplanningsession".4ThommenandAchleitner(2006)describewithintheir strategicproblemsolvingprocessthatinpracticetheallocationofresourcesismorebasedon distributionofpowerratherthendevelopedcorporatestrategies.5Thiscriticalobservationis inlinewiththecontentofstrategychangeprocessresearchthatdescribesthoseprocesses andnegotiationsaspoliticalprocesses.WelgeandAl-Laham(2003)confirmthissincethey describestrategyasaresultofanegotiationprocessforrareresources.Rothschildetal. (2004)seeblue-skyplanningandstrategybyspreadsheet6astypicalproblems. ThommenandAchleitner(2006)arguethataclearconceptandotherfactorssteerandcontrol thestrategicproblemsolvingprocess.Theyseecorporatecultureandcorporatestructure asmajorimpactfactors.7ThisisinlinewithRühli(1991)andStrong(2005),whodescribe theexistenceofinterrelationshipsbetweenstrategicprocessesandstructure,participant mix,andinstitutionalculture.8MacharzinaandWolf(2005)makethegeneralsuggestion thatorganizationsshouldtunethedevelopmentofstrategycontentwiththedevelopment ofstrategyprocess.9 General planning related issues.Inadditiontotheseproblemsandbarriersthereare othercriticalissues,too.Planningassumptions,e.g.predictionoffuturedevelopment,focus onformalization­whichcanhaveanegativeimpactoncreativityandlateralthinking­as wellasafocusonharddatahavebeendescribedasbarriersforstrategicplanning.Most planningmodelsalsodonotconsidertheirrationalbehaviourofemployees,groupsand organizations.10 4 FarrellandAssociates(2005),page2. 5 CompareThommen,Achleitner(2006),page920. 6 Note:Rothschildetal.(2004)describeblueskyplanningasavisionwithlittleattentionpaidtorigoroushomework;theoutcomeoftheplanningprocessisinthenoman'slandbetweenvisionstatementandconcreteaction. Thestrategyisdescribedasvague,henceitdoesnotforcetheorganizationtoestablishcommitment.Furthermore blueskyplanningdoesnottiestrategytofinancialperformance.Strategybyspreadsheethighlightsthatsomeorganizationsruntheirstrategicplanningasterilebudgetingexercisewithaverystrongfocusinfinancialdetails.Those organizationsfailtoanticipatechangesinthecompetitiveenvironmentandincustomerexpectations. 7 CompareThommen,Achleitner(2006),page921. 8 CompareRühli(1991),page16f,compareStrong(2005),page5. 9 CompareMacharzina,Wolf(2005),page266. 10 CompareLombriser,Abplanalp(2005),page61. Consideringthisbriefoverviewaboutbarriersandproblemsthenextchapterwillsummarize anddiscussideastoovercomethem. Overcoming problems and barriers Beforestartingwithspecificrecommendationsitiscrucialtounderstanddelimitationsof scopeandsomegeneralrecommendations,whichoneshouldhaveinmindwhenimproving thestrategicplanningprocessesinanorganization.Therearelargenumbersofoptionsand waystoovercomeexistingbarriersandproblemsandsotoimprovetheprocessofstrategic planning.Hencedeterminingthebestmethodforeverystrategicplanningprocessinevery industrygoesfarbeyondthescopeofthispaper. Strategicanalysis,agendasetting,strategyimplementationincludingprogressmonitoring areconfrontedwithbarriersveryoften.Typicallysomebarriershaveastronglinkwithspecificphasesandtheirattributes.Oppositeandimportantaswellarethosebarriersthatcan befoundintheorganizationalcontext,e.g.incorporateculture11.Furthermoreoneshould alsoconsiderthatovercomingidentifiedbarrierscannotguaranteeingeneralthattheright strategicdecisionswillbemadeorthatstrategicimplementationwillbebetterexecuted.Most organizationswouldseethisasdesirableoutcome,butthereisanumberofoverlapping features(e.g.creativity,organizationallearning,andcapitalresources)thatalsohavean impactontheplanningresults.Organizationshavetoacceptthecounterintuitivenotionthat thestrategicplanningprocessisnotabletodesignstrategy12.Neverthelesstherearethree majorbenefitswhenovercomingidentifiedbarriersandproblems. Prepared minds.Thefirstbenefitistoensurethatallparticipantsoftheplanningprocess(e.g. seniormanagers,planners,decisionmakers)haveasolidunderstandingofthebusiness,its strategyaswellastheassumptionsbehindthatstrategy.Thisunderstandingenablesthem toidentifyandtorespondquicklytochancesandchallengesastheyoccurinrealtime. Innovation intensifier. The second benefit is to increase the innovativeness of the organization'sstrategy.Astrategicplanningprocesscannotguaranteecreativeinsightor excellentideasingeneral;howevertheprocesscanincreaseprobabilitythattheywilloccur byopeningupparticipantstonewthinkingandchallengingassumptions. Appropriate process.Overcomingselectedproblemsandbarriersenablestheorganization toconsiderownplanningdemandsbestandtofocusonimportantissuesofitsorganization, industryandenvironment.Henceorganizationscancreatetheircustomizedstrategicplanning process,whichoffersthemostbenefits. Takingintoaccountthesegeneralrecommendationsthenextsubchapterswillsuggestimprovementsonplanningcycle,culturalcontext,strategicanalysis,agendasetting,strategy finding,aswellasstrategyimplementationandstrategyexecution. General recommendation for practical application Tailoring the planning cycle Oftenorganizationsareconcernedabouttheefforttoimplementandtorunastrategicplanning process.TosetupanappropriateplanningprocessRothschildetal.(2004)aswell 11 Note:Acorporateculture,whichdoesnotallowraisingtherightquestionsandthatdoesnothaveanappropriatedebateculture,willdenyanhonestinternalanalysisinmostcases. 12 CompareBeinhocker,Kaplan(2002),page51. asDyeandSibony(2007)highlightthebenefitsofatailoredplanningcycle.Theinstrument istofreebusinessunitsfromtheneedtoconducttheplanningprocesseverysingleyear; hencetheseunitsundertakestrategicplanningonlyeverytwoorthreeyears.Inthisplanningapproachorganizationscanemploytriggermechanisms13toidentifywhichbusiness unitsneedtoundergothefullplanningprocess.Majorbenefitsare:Thecorporatestrategy functioncanfocusitsresourcesoncriticalstrategicissues.Furthermorebusinessunitsthat havestartedanewstrategyashorttimeagoarenotforcedtorunthisprocessagainand canfocusonstrategyexecution. Usingthistailoredplanningcycleapproachsomebusinessunitshavetoreviewthestrategytheydevelopedayearagoandmakeminoradaptations.Otherbusinessunitsshould completelyreinventthemselvesduetotheirseveralyearsoldstrategythathasreached maturity.However,whenimportantchangesintheexternalenvironmentoccur,seniormanagementmustbeabletoaddressstrategicissueswiththerelevantbusinessunitsonan adhocbasis. Theorganization'sculturerepresentsthecontextinwhichstrategicplanningprocessesand toolswork.14Henceculturalissues,e.g.conversationstylehaveanimpactontheplanning process.Rothschildetal.(2004)seeaspiritofdebateandproductivechallengeamongseniorandmiddlemanagersasanoptiontoinfluencetheorganisation'sculture.Organizations shouldestablishaculture,,thatgivespeoplepermissiontoraiseuncomfortabletruthand questiontheassumptionsonwhichstrategiesarebuilt".15 Organizationshavetoconsiderthattheestablishmentofsuchanorganizationalculturethat allowsfruitfuldebatesandtoleratesmistakesdoesnothappenovernight.Furthermoreorganizationshavetostartthischangefromthetop.Undersomecircumstancesitmayrequire changesinpersonnel,too. Planningcycleandcorporateculturecanbeseenascontextualfactors,whichdetermine theplanningprocess.Thenextsubchapterswillhighlightsomerecommendationsthatare directlyrelatedtospecificphaseswithinthestrategicplanningprocess. Whenanalysingexternalandinternalfactorsmostorganizationsemployastaticviewof thesefactors.Otherproblemareascanbefoundinthelargenumberofexternaldataand unexpressedcustomerneeds. Dynamic view of the market place.Inordertodevelopasuccessfulandsustainablestrategy, organisationsshouldalsoapplyanapproachthatconsiderstheimpactofso-calledsecondary effects.Furthermoreplannedsystemsandstructuresshouldalsobeinplacefortomorrow's environment.AVILAetal(1995)recommendtakingadynamicviewofthemarketplace.16 Thereforeorganisationsshouldanticipatecompetitivereactionsandexplicitlyincorporate themintotheirstrategicanalysis.Thisdynamicviewisinlinewiththerecommendationsby FarrellandAssociates(1995)whostressthatorganizations'strategyanalysisshouldinclude products,marketsandchannelsofbothtodayandtomorrow. 13 Note:Manyofthosetriggermechanismwillemployfinancialratios.Otherscanbeoperationaltoofferamore complexevaluationoftheunit'sperformance. 14 CompareRothschildetal.(2004),page42. 15 Rothschildetal.(2004),page42. 16 CompareAvilaetal.(1995),page40. Improving the cultural context Overcoming analysis barriers Structuring external data.Toreducetheproblemsrelatedtotheanalysisofalargenumber ofexternaldata,itisrecommendedtostructuretheenvironmentintodifferentsegmentsand sub-segments.Segmentscouldbegeneralenvironment,businessmarketandindustry;where technologyandeconomycouldbesub-segmentsofthegeneralenvironment.17Thecreation ofdifferentscenarioscanbeseenasawaytomanagetheuncertaintyofforecasts. Unexpressed customer needs.ToidentifyunexpressedcustomerneedsRothschildetal. (2004)recommendstartingwiththecustomerusingaso-calledstrategiccustomerresearch. Theobjectiveofthisanalysisis,,toexploretheunstatedprioritiesthatcustomerssensebut can'tfullyarticulate"18andtoidentifyso-called,,futuredefining"customers,too.Oneoption todosoinpracticeistoemployscenariotechniquesandtocombinethemwiththeresearch resultsfromtrendscouts. Afterstrategicanalysisorganizationshavetosetuptheagendafortheplanningmeeting. Organizationsshouldfocusonkeyissuesandinvolvemiddlemanagers. Key issues.DyeandSibony(2007)stressthatidentificationanddiscussionofkeyissues shouldbethefirststeptoensurethattheorganizationdoesnotwasteeffortonlessimportanttopics.Keyissuesare,,thestrategicissuesthatwillhavethegreatestimpactonfuture businessperformance".19Inpracticemanagersshouldtrytoanticipatebigchallengesand spotimportanttrendsthatmightaffectorganization'sbusiness.Identificationoftrends,lists ofstrategicquestionsandin-depthinterviewsareseenasexamplestoexploreanddiscuss thosekeyissues. Middle managers.ConsideringthefindingsfromFloydandWooldridge(1997)thequality ofstrategicdecisionscanbeimprovedifmiddlemanagementhasthechancetocontribute theirknowledgetothestageofagendasetting.Henceitisrecommendedtoestablisha procedurethatensurestheinvolvementofmiddlemanagersduringtheprocessofagenda setting.Degreeandcontentofsuchaprocedureshouldconsiderbothsizeandstructures oftheorganizationandrequiresalsospecificskillsamongmiddlemanagers. Togenerateavarietyofideastheorganisationhastoensurethatvariousperspectivesand differentlevelsofknowledgearereflected.Oneoptiontoreachthisobjectiveistoinclude managementrepresentativesfromallfunctionalunitsoftheorganisation;anotheroptionis todividetheplanningprocessintotwoparts. Including representatives from units.DyeandSibony(2007)arguethatassigningandinvolvingtherightpeoplerepresentsanimportantfactorfortheplanningprocess.Basedontheir researchresultstheygiveageneraldescriptionofrightpeople:,,...themostknowledgeable andinfluentialparticipants,stimulatingandchallengingtheparticipants'thinking..."20Hence strategicplannersfromthebusinessunitlevelandthecorporatelevelaswellaspeoplewho carryoutthestrategicmoves,e.g.corporatedecisionmakers,businessunitleadersand peoplewithexpertise,shouldparticipateinstrategicconversations. Dividing the process. FarrellandAssociates(2002)recommenddividingstrategyfinding intotwocomplementaryactivities. ComparePümpin(1992),page194f. Rothschildetal.(2004),page39. 19 Dye,Sibony(2007),page42. 20 Dye,Sibony(2007),page43. Overcoming the issues of agenda setting Overcoming the barrier of strategy finding Progress monitoring.PümpinandGeilinger(1988),Rothschildetal.(2004),Deloitte(2005), Strong(2005)andDyeandSibony(2007)stresstheimportanceofsystemstomeasure andmonitortheprogressofstrategicinitiatives.Twomethodstosupporttheseactivitiesare ,,strategiccampaigns"anda,,metricsmonitoringsystem". HambrickandFredrickson(2001)arguethatthestrategyshouldbeacentralandintegrated concept;Rothschildetal.(2004)specifythisideaandrecommendestablishingstrategic campaigns.Toensurestrategyexecutionthestrategydevelopmentshouldbecombined withcapitalallocation.Strategicobjective,fundingandothermeasureswillbebundledtoa "strategiccampaign".Thesecampaignskeepeachandeveryonefocusedontheimportant strategicobjectives.Usingthisapproachtheorganizationfundsonlythosecampaigns,which haveahighnetpresentvalueandthatsupportthechosenstrategy.Majorbenefitisthat executivescansupervisealimitednumberofworkstreamswithoutgettingoverwhelmed indetailedreports.Bysettingmetricsandmilestonesforeachsinglecampaignaswellas managingcapitalallocationandtrackingoutcomes,managerskeeptrackofexecution. DyeandSibony(2007)highlighttheimportanceofmonitoringsystemsandpresentrecommendationsformetrics.Accordingtothemitisessentialtotrackstrategicmeasuresnotsolely troughfinancialtargetsinmostcases.Insteadavarietyofinputmetrics27shouldmeasure implementationsuccess.Combiningregularreviewswithfinancialandnon-financialmetrics anorganizationcanestablisha,,strategic-performance-management-system"28thatassigns accountabilityforstrategicinitiativesandmakesinitiatives'progressmoretransparent.Further benefitsaretogiveanearlywarningofproblemsandtoenablemanagementtostepinand correctorevenstopastrategicinitiative,whichisfailingtoperformasexpected. Insummaryorganisationscanestablishstrategiccampaignsandmonitortheirsuccesswith astrategic-performance-management-system. Communication issues.Asexplainedinthechapterbefore,communicationofastrategyor thestrategicplanmightrepresentaproblem,too.Kotter(2000)suggeststhefollowing7key elements,whichhavetobeaddressedtoensureaneffectivecommunicationofstrategy:29 ­ implicity:Themessageshouldbeclearandsimple. S ­ etaphor,analogy,andexample:Visualisationmakesthecommunicationmoreeffective. M ­ ultipleforums:Thesamemessageshouldbetransferredbyvariousvehiclestoensure M thatthemessageisbeingheard. ­ epetition:Toensureanunderstandingthemessageshouldberepeatedseveraltimes. R ­ eadingbyexample:Behaviourisapowerfulwaytodemonstrateanewdirection. L ­ xplanationofapparentinconsistencies:Ifmajorelementsofthestrategyseemtobe E inconsistenttheyhavetobeexplainedexplicitly. ­ iveandtake:Insteadofone-waycommunicationatwowaycommunicationshouldbe G preferred. Insummaryitcanbearguedthatestablishinganappropriatecommunicationapproachcan ensurethatallemployeesunderstandtheoverallpictureandtheircontributiontobringthe newstrategicplantolife.Inordertoachievetrustamongemployeesitisalsorecommendedtotargetonopinionleadersfirst,whocanactasadvocatesforthenewplan,basedon informalcommunicationstructures. 27 Note:Examplesforthosemetricsarequalityofavailabletalent,numberofideas,andnumberandskillslevel ofpeoplewithinimportantstrategicprojects. 28 Dye,Sibony(2007),page46. 29 CompareKotter(2000),page90. Oneactivityistheformalorganizationofthestrategicplanningprocess;corporateplanning departmentscanmaketheircontributionaroundtheprocess.Theirprimarytasksinclude supplyingformalanalysesandotherharddatatobroadentheconsiderationofissues.This activityisnotintendedtodiscovertherightanswer.21 Thesecondcomplementaryactivitycanbefoundwithinmanagers'responsibilitytoformulate astrategy.22Thisisaniterativeprocessthatstartswithaninvention,anideaoraninnovation. Inthisactivitysoftskillslikelateralthinking,creativityandintuitionarerequested.Theresults ofthisactivitycanbesummarizedintoastrategicplan.Itcanberecommendedtomerge thisplanwithotherdepartmentalstrategicplansbycorporateplannerstosetupacomprehensivestrategicplanfortheentireorganization.ThisisconfirmedbyAvilaetal.(1995), whorecommendthattheorganisationshouldcouplethefunctionalstrategies,,withactions inotherpartsofthebusinesssystemstoreinforcetheimpactofthefunctionalimprovements andlimitstheextentofanycounteractingeffects".23 Atthisstagewithintheplanningprocesstheorganizationdididentifystrategicissuesand wasabletodevelopanewstrategicplan.Thenextsteprequirestheimplementationofthis plan.Recommendationsforstrategyimplementationandexecutionputanemphasison generalconditions,progressmonitoring,andcommunicationissues. General conditions.AccordingtoPümpinandGeilinger(1988)aswellasDeloitte(2005)the followingconditionsrepresentthosepremises,whichareessentialtoachieveasuccessful implementationofacorporatestrategy:24 ­ ightfromthebeginningofstrategydevelopmentallmanagersshouldbeinvolvedto R establishidentificationwiththenewstrategy. ­ opmanagershaveafunctionasrolemodel.Thereforetheyhavetosupportthenew T strategyandhavetoexpressthisclearly. ­ incetheimplementationofastrategycannotonlybeachievedbytop-andmiddlemanaS gers,allemployeesshouldbelinkedwiththeimplementation.Employeesshouldbelieve inandunderstandtherationalebehindastrategytoensureitssuccess.Thishastobe ensuredbyanappropriatecommunication.Deloitteconfirmsthisandalsohighlightsthe importanceofcommitment:,,Effectivelycommunicatingthechosenstrategytoeverylevel ofthecompanyisofparamountimportance"and,,Thechosenstrategicdirectionmustbe communicatedthroughaprocessthatbuildscommitment"25.Motivationandengagement playamajorrole. ­ llcorporateunitshavetomakeacontributiontostrategyimplementation. A ­ pecificmeasuresarerequestedtomeasurethedesiredchange.26 S 21 Note:ThisapproachisinlinewithMintzberg(1994)whoargues"Controllershouldsupplytheformalanalyses orharddatathatstrategicthinkingrequires,aslongastheydoittobroadentheconsiderationofissuesratherthan todiscovertherightanswer.Theyshouldactascatalystswhosupportstrategymakingbyaidingandencouraging managerstothinkstrategically". 22 Note:Mintzbergcallsthisresponsibility"strategicthinking". 23 Avilaetal.(1995),page44. 24 ComparePümpin,Geilinger(1988),page40ff,compareDeloitte(2005,page22). 25 Deloitte(2005),page22. 26 Note:Deloitte(2005,page22)arguesthatitiscrucialthatthechosenstrategybespecific,asitwillleademployee decisionsregardingthemeasurementplans.ThommenandAchleitner(2006,page961)distinguishbetweendirect andindirectmeasures.Directmeasureshaveadirecteffectontheorganisation.Theseareplansandbudgets,project plans,managementsystems,organisation,informationsystemsandtheassignmentofmanagers.Indirectmeasures suchasemployeeinformation,corporateidentitytraining,andcorporateculture,supportdirectmeasures. Overcoming barriers of implementation The new strategic planning process Mostapproachestostrategicplanningputanemphasisinansweringthequestion,,What shouldtheorganizationdo?"Theanswertothisquestionisveryimportantforanorganization.Howeveritdoesnotensurethattheorganizationisenabledtocreatevalue andtomaketherightstrategicdecisions.Strategyexecutionandmonitoringofsuccess havebeenindentifiedascharacteristicproblemareasinorganizationalpractice. Puttingtheproposalsintopractice,whichhavebeendiscussedinthepreviouschapter, theorganizationcanaddressamorecomprehensivesetofissuesrelatedtofundament, executionandfunding: ­ undament.Whyshouldtheorganizationchoosethisway?Whataretheunderlying F assumptions,thetradeoffs,andtherisks?Howshouldtheorganizationrespondifoneof theseassumptionsturnsouttobeflawedorchanges? ­ xecution.Howdoestheorganizationdoit?Whatarestepsforimplementation?Who E isaccountableforthisprocess?Howdoestheorganizationkeeptrackofexecutionand success? ­ ommitment.Howcantheorganizationachievecommitmentamongthemanagement C teamandallemployees?Howcantheorganizationinformemployees? ­ unding.Whatwilltheoutcomeofthestrategicplanningcostintotal?HowwilltheorgaF nizationfundtheplanningresults?Whatistheexpectedreturnandwillitmeettheinternal hurdleratesforreturn? Takingintoaccountthebroadperspectiveforstrategicplanningandconsideringexecution, monitoringandfundingissues,theorganizationanditsmanagerscangainaclearviewof wheretheyaregoingandwhy.Theywillalsoknowhowtomonitortheprogressandcan assessthepayoff.Monitoringofbothmarketdataandoperationaldataagainstplanning assumptionsaswellassustainingorganizationalflexibilityrepresentsanotherfieldofstrategicplanningimprovements.Duetoconsiderationofcapitalallocationandfundingissues itisalsoclear,whichothercriticalcorporateprocesseswillbeinfluencedfromthestrategic planningoutcome.Summarizingandbundlingthisoutcomeinsocalled,,strategiccampaigns"or,,strategicinitiatives"helpstheorganizationtofocusandimprovesintra-organizational communication. Bibliography 1. .A.Avila,N.J.Mass.,M.P.Turchan, Is your growth strategy your worst enemy?,TheMcKinJ seyQuarterly1995,No.2. 2. .-G.Baum;A.G.Coenenberg,Th.Günther,Strategisches Controlling,3rd edition,Schäfer H PoeschelVerlag,Stuttgart2004. 3. .X.Bea.,J.Haas, Strategisches Management,Lucius&Lucius,Stuttgart2005. F 4. .D.Beinhocker,S.Kaplan,Tired of strategic planning?,TheMcKinseyQuarterly2002,Special E editionRiskandResilience,p.48­57. 5. eloitte(2005),Developing strategic plans. Gaining long-term perspective, D h ttp://www.growth-insights.com/articles/GES_DevelopingStrategicPlans.pdf, request on 14.02.2007r. 6. .Dye,O.Sibony,How to improve strategic planning,TheMcKinseyQuarterly2007,No.3, R p.40­48. 7. arrelandAssociates(2002),Mastering Change & Planning for the Future. An Introduction to F the Concepts of Strategy Management and S3 Analysis, h ttp://www.farrell-associates.com.au/Papers/Intro%20to%20S3%20Analysis.pdf,availableon 20.06.2007r. 8. .W.Floyd.,B.Wooldridge,Middle management's strategic influence and organizational S performance,JournalofManagementStudies1997,vol.34(3),p.465­485. 9. .Gadiesh,J.L.Gilbert.(2001),Transforming Corner-Office Strategy into Frontline Action, O HarvardBusinessReview2001,May,p.72­79. 10. .C.Hambrick,J.W.Fredrickson,Are you sure you have a strategy?,TheAcademyofMaD nagementExecutive2001,November,vol.15,No.4,p.48­59. 11. .Huber,Die Grundlage jeder Basis ist das Fundament. Strategische Planung in der Klemme, A Phius,Berlin2006. 12. .P.Kotter,Leading Change,HBSPress,Boston2000. J 13. h.Lechner,G.Müller-Stewens,Strategy Process Research: What do we know, what should C we know?,[in:]S.B.Dahiyam(eds.),The current state of business disciplines,Spellbound PublicationsLtd,Rohtak2000. 14. .Lombriser,P.A.Abplanalp,Strategisches Management. Visionen entwickeln.Strategien R umsetzen. Erfolgspotentiale aufbauen, 4thedition,Versus,Zurich2002. 15. cKinsey(2006),Improving strategic planning: A McKinsey Survey, M h ttp://faculty.fullerton.edu/pchan/590/Improving%20Strategic%20Planning%20(McKinsey%20 Survey%202006).pdf,availableon02.03.2007 16. .Mintzberg,The Fall and Rise of Strategic Planning,HarvardBusinessReview1994,JanuH ary­February,p.107­114. 17. .Pümpin,Strategische Erfolgs-Positionen. Methodik der dynamischen strategischen UnterC nehmensführung,VerlagPaulHaupt,Bern1992r. 18. h.Rothschild,J.Duggal;R.Balaban,Strategic planning redux. But this time linked to funding P and everyday execution,MercerManagementJournal2004,vol.17, h ttp://www.oliverwyman.com/ow/pdf_files/MMJ17_Strategic_Planning_Redux.pdfavailable on17.05.2007 19. .Rühli,Unternehmenskultur ­ Konzepte, Methoden,[in:]E.Rühli,A.Keller(publisher), E Kulturmanagement in schweizerischen Industrieunternehmen,VerlagPaulHaupt,Bern 1991. 20. . Strong, Strategic planning: What's so strategic about it?, Educause Quarterly 2005, B No.1,p.4­6. 21. .-P.Thommen,A.-K.Achleitner,Allgemeine Betriebswirtschaftslehre. Umfassende Einführung J aus managementorientierte Sicht,5thedition,Gabler,Wiesbaden2006. 22. .K.Welge,A.Al-Laham,Strategisches Management. Grundlagen­Prozess­Implementierung, M 4thedition,Gabler,Wiesbaden2003. Summary Thispaperanalysesandsummarizesexistingproblemsandbarriersrelatedtothestrategicplanning process.Toanalysethetopictheauthorusesathreestepapproach.Thefirstpartdiscussesexisting problemsandbarriersinbrief.Thesecondpartsummarizesanddiscussesideastoovercomethese problemsandbarriers.Thethirdpartgivesanoverviewaboutthebenefitsofacustomizedandimproved strategicplanningprocess.Theauthorarguesthatinparticularprogressmonitoringandbundlingofstrategicmeasuresto"strategiccampaigns"canhelporganizationsfocusandimprovecommunication. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics and Organization of Enterprise de Gruyter

Problems and barriers to strategic planning

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Abstract

©CopyrightbyInstituteofOrganizationandManagmentinIndustry,,ORGMASZ" Vol1(1);p.3-11Year2008 10.2478/v10061-008-0001-2 Oliver Recklies* Preamble Thepaperhastheobjectivetoanalyseandtosummarizeexistingproblemsandbarriersrelatedtothestrategicplanningprocesswhichhavebeenindentifiedinboththeacademicand thebusinessliterature.Inthelasttwodecadesalargenumberofarticlesandbooksrelated tothismatterhavebeenpublished.Duetotherichnessofavailableliteratureitisnotpossible todeliveranextensiveoverviewabouteveryopinionfromstrategicprocessresearch1.Taking thenumberofpublicationsintoconsiderationitcouldbearguedthattherelevanceofstrategic planningprocessisunquestionedandwouldneednofurtherexplanation. But still research results ­ including new ones ­ from different studies express that a,,duality"ofstrategicplanningstillexits.Ononesidetherelevanceofthestrategicplanning processfordevelopingorganization'sstrategyisdescribedasveryimportant.Ontheother sideanumberofconcernsandproblemswhenrunningthatprocesscanbefound.2Identifiedproblemareasincludeinparticularstrategyimplementation,communicationofstrategic planningresultsandmonitoringofstrategyexecution. Topresentthetopicthispaperwilluseathreestepapproach.Thefirstpartdiscusses existingproblemsandbarriersinbrief.Thesecondpartwillsummarizeanddiscussideas toovercometheseproblemsandbarriers.Thethirdpartwillsummarizethebenefitsof acustomizedandimprovedstrategicplanningprocess. Theconceptofstrategicplanningcanbedescribedasrelativelynewbothintermsofcorporate experienceandasobjectwithinscientificresearch.3Forthepurposeofthispaperproblems andbarriersconcerningstrategicplanninghavebeendividedintodelimitationanddefinition relatedissues,issuesrelatedtocorporatepracticeandgeneralplanningrelatedissues. * OliverRecklies­Ph.D.student,HeadofFinance,BausparkasseMainzAG 1 Note:LechnerandMüller-Stewens(1999,page4)highlightthismatterintheirresearch. 2 CompareMckinsey(2006):Inasurveyaboutstrategicmorethanthreequartersoftheparticipantsconfirmed thattheirorganizationhasaformalstrategic-planningprocess.Fewerthan25%ofparticipantsconfirmedthatthis processwouldbekeytomakingtheirmostimportantdecisions.Furthermoremanagersraisedsignificantconcerns aboutthewaytheirorganizationcommunicatesstrategyandexecuteitaswellasmeasuresperformanceagainst it.CompareHuber(2006):Around95%ofparticipantsofthissurveyconfirmthatitisveryimportanttoimplement andtoexecuteastrategicplanningprocess.Despitethisimportancearound39%ofparticipantswerenotableto differentiatetheterms"strategy","strategicplanning"and"strategydevelopment".Participantsstressedtheneedto improveimplementationandexecutingmonitoring. 3 Compare Bea, Haas (2004), page 50, compare Baum, Coenenberg, Günther (2004, page 13). Baum et al. arguethatachangefromasellermarkettoabuyermarket,anincreaseinstructuralchangesinthemarketplace, astartinginternationalisationandanincreasingcomplexityinthe1960causedtoafocusonexternalanalysisand hencetotheemergenceofstrategicplanning.ThisisinlinewithWelge,Al-Laham(2003,page9)whoseestrategic planningasresponsetothedynamicchangesinenvironmentoftheorganisation. Existing problems and barriers in corporate practice Delimitation and definition.Inboththeacademicliteratureandthebusinessliteraturevery differentdefinitionsanddelimitationsoftheterm,,strategicplanning"canbefound.Lombriser andAbplanalp(2005)stateasmajorreasonthattheterminologytodescribethestrategic planningprocessisinconsistent,oftenusingdifferenttermsanddefinitionslike,,longterm planning",,,strategicplanning",,,financialplanning",and,,strategicmanagement".Duetothose differencesavarietyofexpectationsrelatedtoprocess,tasks,responsibilitiesandresults canbefoundinorganizationalpractice. Corporate practice.Inboththeacademicliteratureandthebusinessliteraturetheprocess sequence,itsformalorganizationandstrategyimplementationinpracticehavebeendescribed asdifficultareas.Farrellandassociates(2002)arguethatmostorganizationsseestrategic planningasaseparateactivityfrommanagement'sprimeresponsibilitiesandduties.Managementfocusisdescribedastop-downandstart-to-finish;commitmenttostrategicplanning isabsent.Furthermorestrategicplanningisdescribedasaninternalbattlegroundforinterdepartmentalconflicts;negotiationsandbargainingtakeplacetoachieve,,organizational peaceuntilthenextplanningsession".4ThommenandAchleitner(2006)describewithintheir strategicproblemsolvingprocessthatinpracticetheallocationofresourcesismorebasedon distributionofpowerratherthendevelopedcorporatestrategies.5Thiscriticalobservationis inlinewiththecontentofstrategychangeprocessresearchthatdescribesthoseprocesses andnegotiationsaspoliticalprocesses.WelgeandAl-Laham(2003)confirmthissincethey describestrategyasaresultofanegotiationprocessforrareresources.Rothschildetal. (2004)seeblue-skyplanningandstrategybyspreadsheet6astypicalproblems. ThommenandAchleitner(2006)arguethataclearconceptandotherfactorssteerandcontrol thestrategicproblemsolvingprocess.Theyseecorporatecultureandcorporatestructure asmajorimpactfactors.7ThisisinlinewithRühli(1991)andStrong(2005),whodescribe theexistenceofinterrelationshipsbetweenstrategicprocessesandstructure,participant mix,andinstitutionalculture.8MacharzinaandWolf(2005)makethegeneralsuggestion thatorganizationsshouldtunethedevelopmentofstrategycontentwiththedevelopment ofstrategyprocess.9 General planning related issues.Inadditiontotheseproblemsandbarriersthereare othercriticalissues,too.Planningassumptions,e.g.predictionoffuturedevelopment,focus onformalization­whichcanhaveanegativeimpactoncreativityandlateralthinking­as wellasafocusonharddatahavebeendescribedasbarriersforstrategicplanning.Most planningmodelsalsodonotconsidertheirrationalbehaviourofemployees,groupsand organizations.10 4 FarrellandAssociates(2005),page2. 5 CompareThommen,Achleitner(2006),page920. 6 Note:Rothschildetal.(2004)describeblueskyplanningasavisionwithlittleattentionpaidtorigoroushomework;theoutcomeoftheplanningprocessisinthenoman'slandbetweenvisionstatementandconcreteaction. Thestrategyisdescribedasvague,henceitdoesnotforcetheorganizationtoestablishcommitment.Furthermore blueskyplanningdoesnottiestrategytofinancialperformance.Strategybyspreadsheethighlightsthatsomeorganizationsruntheirstrategicplanningasterilebudgetingexercisewithaverystrongfocusinfinancialdetails.Those organizationsfailtoanticipatechangesinthecompetitiveenvironmentandincustomerexpectations. 7 CompareThommen,Achleitner(2006),page921. 8 CompareRühli(1991),page16f,compareStrong(2005),page5. 9 CompareMacharzina,Wolf(2005),page266. 10 CompareLombriser,Abplanalp(2005),page61. Consideringthisbriefoverviewaboutbarriersandproblemsthenextchapterwillsummarize anddiscussideastoovercomethem. Overcoming problems and barriers Beforestartingwithspecificrecommendationsitiscrucialtounderstanddelimitationsof scopeandsomegeneralrecommendations,whichoneshouldhaveinmindwhenimproving thestrategicplanningprocessesinanorganization.Therearelargenumbersofoptionsand waystoovercomeexistingbarriersandproblemsandsotoimprovetheprocessofstrategic planning.Hencedeterminingthebestmethodforeverystrategicplanningprocessinevery industrygoesfarbeyondthescopeofthispaper. Strategicanalysis,agendasetting,strategyimplementationincludingprogressmonitoring areconfrontedwithbarriersveryoften.Typicallysomebarriershaveastronglinkwithspecificphasesandtheirattributes.Oppositeandimportantaswellarethosebarriersthatcan befoundintheorganizationalcontext,e.g.incorporateculture11.Furthermoreoneshould alsoconsiderthatovercomingidentifiedbarrierscannotguaranteeingeneralthattheright strategicdecisionswillbemadeorthatstrategicimplementationwillbebetterexecuted.Most organizationswouldseethisasdesirableoutcome,butthereisanumberofoverlapping features(e.g.creativity,organizationallearning,andcapitalresources)thatalsohavean impactontheplanningresults.Organizationshavetoacceptthecounterintuitivenotionthat thestrategicplanningprocessisnotabletodesignstrategy12.Neverthelesstherearethree majorbenefitswhenovercomingidentifiedbarriersandproblems. Prepared minds.Thefirstbenefitistoensurethatallparticipantsoftheplanningprocess(e.g. seniormanagers,planners,decisionmakers)haveasolidunderstandingofthebusiness,its strategyaswellastheassumptionsbehindthatstrategy.Thisunderstandingenablesthem toidentifyandtorespondquicklytochancesandchallengesastheyoccurinrealtime. Innovation intensifier. The second benefit is to increase the innovativeness of the organization'sstrategy.Astrategicplanningprocesscannotguaranteecreativeinsightor excellentideasingeneral;howevertheprocesscanincreaseprobabilitythattheywilloccur byopeningupparticipantstonewthinkingandchallengingassumptions. Appropriate process.Overcomingselectedproblemsandbarriersenablestheorganization toconsiderownplanningdemandsbestandtofocusonimportantissuesofitsorganization, industryandenvironment.Henceorganizationscancreatetheircustomizedstrategicplanning process,whichoffersthemostbenefits. Takingintoaccountthesegeneralrecommendationsthenextsubchapterswillsuggestimprovementsonplanningcycle,culturalcontext,strategicanalysis,agendasetting,strategy finding,aswellasstrategyimplementationandstrategyexecution. General recommendation for practical application Tailoring the planning cycle Oftenorganizationsareconcernedabouttheefforttoimplementandtorunastrategicplanning process.TosetupanappropriateplanningprocessRothschildetal.(2004)aswell 11 Note:Acorporateculture,whichdoesnotallowraisingtherightquestionsandthatdoesnothaveanappropriatedebateculture,willdenyanhonestinternalanalysisinmostcases. 12 CompareBeinhocker,Kaplan(2002),page51. asDyeandSibony(2007)highlightthebenefitsofatailoredplanningcycle.Theinstrument istofreebusinessunitsfromtheneedtoconducttheplanningprocesseverysingleyear; hencetheseunitsundertakestrategicplanningonlyeverytwoorthreeyears.Inthisplanningapproachorganizationscanemploytriggermechanisms13toidentifywhichbusiness unitsneedtoundergothefullplanningprocess.Majorbenefitsare:Thecorporatestrategy functioncanfocusitsresourcesoncriticalstrategicissues.Furthermorebusinessunitsthat havestartedanewstrategyashorttimeagoarenotforcedtorunthisprocessagainand canfocusonstrategyexecution. Usingthistailoredplanningcycleapproachsomebusinessunitshavetoreviewthestrategytheydevelopedayearagoandmakeminoradaptations.Otherbusinessunitsshould completelyreinventthemselvesduetotheirseveralyearsoldstrategythathasreached maturity.However,whenimportantchangesintheexternalenvironmentoccur,seniormanagementmustbeabletoaddressstrategicissueswiththerelevantbusinessunitsonan adhocbasis. Theorganization'sculturerepresentsthecontextinwhichstrategicplanningprocessesand toolswork.14Henceculturalissues,e.g.conversationstylehaveanimpactontheplanning process.Rothschildetal.(2004)seeaspiritofdebateandproductivechallengeamongseniorandmiddlemanagersasanoptiontoinfluencetheorganisation'sculture.Organizations shouldestablishaculture,,thatgivespeoplepermissiontoraiseuncomfortabletruthand questiontheassumptionsonwhichstrategiesarebuilt".15 Organizationshavetoconsiderthattheestablishmentofsuchanorganizationalculturethat allowsfruitfuldebatesandtoleratesmistakesdoesnothappenovernight.Furthermoreorganizationshavetostartthischangefromthetop.Undersomecircumstancesitmayrequire changesinpersonnel,too. Planningcycleandcorporateculturecanbeseenascontextualfactors,whichdetermine theplanningprocess.Thenextsubchapterswillhighlightsomerecommendationsthatare directlyrelatedtospecificphaseswithinthestrategicplanningprocess. Whenanalysingexternalandinternalfactorsmostorganizationsemployastaticviewof thesefactors.Otherproblemareascanbefoundinthelargenumberofexternaldataand unexpressedcustomerneeds. Dynamic view of the market place.Inordertodevelopasuccessfulandsustainablestrategy, organisationsshouldalsoapplyanapproachthatconsiderstheimpactofso-calledsecondary effects.Furthermoreplannedsystemsandstructuresshouldalsobeinplacefortomorrow's environment.AVILAetal(1995)recommendtakingadynamicviewofthemarketplace.16 Thereforeorganisationsshouldanticipatecompetitivereactionsandexplicitlyincorporate themintotheirstrategicanalysis.Thisdynamicviewisinlinewiththerecommendationsby FarrellandAssociates(1995)whostressthatorganizations'strategyanalysisshouldinclude products,marketsandchannelsofbothtodayandtomorrow. 13 Note:Manyofthosetriggermechanismwillemployfinancialratios.Otherscanbeoperationaltoofferamore complexevaluationoftheunit'sperformance. 14 CompareRothschildetal.(2004),page42. 15 Rothschildetal.(2004),page42. 16 CompareAvilaetal.(1995),page40. Improving the cultural context Overcoming analysis barriers Structuring external data.Toreducetheproblemsrelatedtotheanalysisofalargenumber ofexternaldata,itisrecommendedtostructuretheenvironmentintodifferentsegmentsand sub-segments.Segmentscouldbegeneralenvironment,businessmarketandindustry;where technologyandeconomycouldbesub-segmentsofthegeneralenvironment.17Thecreation ofdifferentscenarioscanbeseenasawaytomanagetheuncertaintyofforecasts. Unexpressed customer needs.ToidentifyunexpressedcustomerneedsRothschildetal. (2004)recommendstartingwiththecustomerusingaso-calledstrategiccustomerresearch. Theobjectiveofthisanalysisis,,toexploretheunstatedprioritiesthatcustomerssensebut can'tfullyarticulate"18andtoidentifyso-called,,futuredefining"customers,too.Oneoption todosoinpracticeistoemployscenariotechniquesandtocombinethemwiththeresearch resultsfromtrendscouts. Afterstrategicanalysisorganizationshavetosetuptheagendafortheplanningmeeting. Organizationsshouldfocusonkeyissuesandinvolvemiddlemanagers. Key issues.DyeandSibony(2007)stressthatidentificationanddiscussionofkeyissues shouldbethefirststeptoensurethattheorganizationdoesnotwasteeffortonlessimportanttopics.Keyissuesare,,thestrategicissuesthatwillhavethegreatestimpactonfuture businessperformance".19Inpracticemanagersshouldtrytoanticipatebigchallengesand spotimportanttrendsthatmightaffectorganization'sbusiness.Identificationoftrends,lists ofstrategicquestionsandin-depthinterviewsareseenasexamplestoexploreanddiscuss thosekeyissues. Middle managers.ConsideringthefindingsfromFloydandWooldridge(1997)thequality ofstrategicdecisionscanbeimprovedifmiddlemanagementhasthechancetocontribute theirknowledgetothestageofagendasetting.Henceitisrecommendedtoestablisha procedurethatensurestheinvolvementofmiddlemanagersduringtheprocessofagenda setting.Degreeandcontentofsuchaprocedureshouldconsiderbothsizeandstructures oftheorganizationandrequiresalsospecificskillsamongmiddlemanagers. Togenerateavarietyofideastheorganisationhastoensurethatvariousperspectivesand differentlevelsofknowledgearereflected.Oneoptiontoreachthisobjectiveistoinclude managementrepresentativesfromallfunctionalunitsoftheorganisation;anotheroptionis todividetheplanningprocessintotwoparts. Including representatives from units.DyeandSibony(2007)arguethatassigningandinvolvingtherightpeoplerepresentsanimportantfactorfortheplanningprocess.Basedontheir researchresultstheygiveageneraldescriptionofrightpeople:,,...themostknowledgeable andinfluentialparticipants,stimulatingandchallengingtheparticipants'thinking..."20Hence strategicplannersfromthebusinessunitlevelandthecorporatelevelaswellaspeoplewho carryoutthestrategicmoves,e.g.corporatedecisionmakers,businessunitleadersand peoplewithexpertise,shouldparticipateinstrategicconversations. Dividing the process. FarrellandAssociates(2002)recommenddividingstrategyfinding intotwocomplementaryactivities. ComparePümpin(1992),page194f. Rothschildetal.(2004),page39. 19 Dye,Sibony(2007),page42. 20 Dye,Sibony(2007),page43. Overcoming the issues of agenda setting Overcoming the barrier of strategy finding Progress monitoring.PümpinandGeilinger(1988),Rothschildetal.(2004),Deloitte(2005), Strong(2005)andDyeandSibony(2007)stresstheimportanceofsystemstomeasure andmonitortheprogressofstrategicinitiatives.Twomethodstosupporttheseactivitiesare ,,strategiccampaigns"anda,,metricsmonitoringsystem". HambrickandFredrickson(2001)arguethatthestrategyshouldbeacentralandintegrated concept;Rothschildetal.(2004)specifythisideaandrecommendestablishingstrategic campaigns.Toensurestrategyexecutionthestrategydevelopmentshouldbecombined withcapitalallocation.Strategicobjective,fundingandothermeasureswillbebundledtoa "strategiccampaign".Thesecampaignskeepeachandeveryonefocusedontheimportant strategicobjectives.Usingthisapproachtheorganizationfundsonlythosecampaigns,which haveahighnetpresentvalueandthatsupportthechosenstrategy.Majorbenefitisthat executivescansupervisealimitednumberofworkstreamswithoutgettingoverwhelmed indetailedreports.Bysettingmetricsandmilestonesforeachsinglecampaignaswellas managingcapitalallocationandtrackingoutcomes,managerskeeptrackofexecution. DyeandSibony(2007)highlighttheimportanceofmonitoringsystemsandpresentrecommendationsformetrics.Accordingtothemitisessentialtotrackstrategicmeasuresnotsolely troughfinancialtargetsinmostcases.Insteadavarietyofinputmetrics27shouldmeasure implementationsuccess.Combiningregularreviewswithfinancialandnon-financialmetrics anorganizationcanestablisha,,strategic-performance-management-system"28thatassigns accountabilityforstrategicinitiativesandmakesinitiatives'progressmoretransparent.Further benefitsaretogiveanearlywarningofproblemsandtoenablemanagementtostepinand correctorevenstopastrategicinitiative,whichisfailingtoperformasexpected. Insummaryorganisationscanestablishstrategiccampaignsandmonitortheirsuccesswith astrategic-performance-management-system. Communication issues.Asexplainedinthechapterbefore,communicationofastrategyor thestrategicplanmightrepresentaproblem,too.Kotter(2000)suggeststhefollowing7key elements,whichhavetobeaddressedtoensureaneffectivecommunicationofstrategy:29 ­ implicity:Themessageshouldbeclearandsimple. S ­ etaphor,analogy,andexample:Visualisationmakesthecommunicationmoreeffective. M ­ ultipleforums:Thesamemessageshouldbetransferredbyvariousvehiclestoensure M thatthemessageisbeingheard. ­ epetition:Toensureanunderstandingthemessageshouldberepeatedseveraltimes. R ­ eadingbyexample:Behaviourisapowerfulwaytodemonstrateanewdirection. L ­ xplanationofapparentinconsistencies:Ifmajorelementsofthestrategyseemtobe E inconsistenttheyhavetobeexplainedexplicitly. ­ iveandtake:Insteadofone-waycommunicationatwowaycommunicationshouldbe G preferred. Insummaryitcanbearguedthatestablishinganappropriatecommunicationapproachcan ensurethatallemployeesunderstandtheoverallpictureandtheircontributiontobringthe newstrategicplantolife.Inordertoachievetrustamongemployeesitisalsorecommendedtotargetonopinionleadersfirst,whocanactasadvocatesforthenewplan,basedon informalcommunicationstructures. 27 Note:Examplesforthosemetricsarequalityofavailabletalent,numberofideas,andnumberandskillslevel ofpeoplewithinimportantstrategicprojects. 28 Dye,Sibony(2007),page46. 29 CompareKotter(2000),page90. Oneactivityistheformalorganizationofthestrategicplanningprocess;corporateplanning departmentscanmaketheircontributionaroundtheprocess.Theirprimarytasksinclude supplyingformalanalysesandotherharddatatobroadentheconsiderationofissues.This activityisnotintendedtodiscovertherightanswer.21 Thesecondcomplementaryactivitycanbefoundwithinmanagers'responsibilitytoformulate astrategy.22Thisisaniterativeprocessthatstartswithaninvention,anideaoraninnovation. Inthisactivitysoftskillslikelateralthinking,creativityandintuitionarerequested.Theresults ofthisactivitycanbesummarizedintoastrategicplan.Itcanberecommendedtomerge thisplanwithotherdepartmentalstrategicplansbycorporateplannerstosetupacomprehensivestrategicplanfortheentireorganization.ThisisconfirmedbyAvilaetal.(1995), whorecommendthattheorganisationshouldcouplethefunctionalstrategies,,withactions inotherpartsofthebusinesssystemstoreinforcetheimpactofthefunctionalimprovements andlimitstheextentofanycounteractingeffects".23 Atthisstagewithintheplanningprocesstheorganizationdididentifystrategicissuesand wasabletodevelopanewstrategicplan.Thenextsteprequirestheimplementationofthis plan.Recommendationsforstrategyimplementationandexecutionputanemphasison generalconditions,progressmonitoring,andcommunicationissues. General conditions.AccordingtoPümpinandGeilinger(1988)aswellasDeloitte(2005)the followingconditionsrepresentthosepremises,whichareessentialtoachieveasuccessful implementationofacorporatestrategy:24 ­ ightfromthebeginningofstrategydevelopmentallmanagersshouldbeinvolvedto R establishidentificationwiththenewstrategy. ­ opmanagershaveafunctionasrolemodel.Thereforetheyhavetosupportthenew T strategyandhavetoexpressthisclearly. ­ incetheimplementationofastrategycannotonlybeachievedbytop-andmiddlemanaS gers,allemployeesshouldbelinkedwiththeimplementation.Employeesshouldbelieve inandunderstandtherationalebehindastrategytoensureitssuccess.Thishastobe ensuredbyanappropriatecommunication.Deloitteconfirmsthisandalsohighlightsthe importanceofcommitment:,,Effectivelycommunicatingthechosenstrategytoeverylevel ofthecompanyisofparamountimportance"and,,Thechosenstrategicdirectionmustbe communicatedthroughaprocessthatbuildscommitment"25.Motivationandengagement playamajorrole. ­ llcorporateunitshavetomakeacontributiontostrategyimplementation. A ­ pecificmeasuresarerequestedtomeasurethedesiredchange.26 S 21 Note:ThisapproachisinlinewithMintzberg(1994)whoargues"Controllershouldsupplytheformalanalyses orharddatathatstrategicthinkingrequires,aslongastheydoittobroadentheconsiderationofissuesratherthan todiscovertherightanswer.Theyshouldactascatalystswhosupportstrategymakingbyaidingandencouraging managerstothinkstrategically". 22 Note:Mintzbergcallsthisresponsibility"strategicthinking". 23 Avilaetal.(1995),page44. 24 ComparePümpin,Geilinger(1988),page40ff,compareDeloitte(2005,page22). 25 Deloitte(2005),page22. 26 Note:Deloitte(2005,page22)arguesthatitiscrucialthatthechosenstrategybespecific,asitwillleademployee decisionsregardingthemeasurementplans.ThommenandAchleitner(2006,page961)distinguishbetweendirect andindirectmeasures.Directmeasureshaveadirecteffectontheorganisation.Theseareplansandbudgets,project plans,managementsystems,organisation,informationsystemsandtheassignmentofmanagers.Indirectmeasures suchasemployeeinformation,corporateidentitytraining,andcorporateculture,supportdirectmeasures. Overcoming barriers of implementation The new strategic planning process Mostapproachestostrategicplanningputanemphasisinansweringthequestion,,What shouldtheorganizationdo?"Theanswertothisquestionisveryimportantforanorganization.Howeveritdoesnotensurethattheorganizationisenabledtocreatevalue andtomaketherightstrategicdecisions.Strategyexecutionandmonitoringofsuccess havebeenindentifiedascharacteristicproblemareasinorganizationalpractice. Puttingtheproposalsintopractice,whichhavebeendiscussedinthepreviouschapter, theorganizationcanaddressamorecomprehensivesetofissuesrelatedtofundament, executionandfunding: ­ undament.Whyshouldtheorganizationchoosethisway?Whataretheunderlying F assumptions,thetradeoffs,andtherisks?Howshouldtheorganizationrespondifoneof theseassumptionsturnsouttobeflawedorchanges? ­ xecution.Howdoestheorganizationdoit?Whatarestepsforimplementation?Who E isaccountableforthisprocess?Howdoestheorganizationkeeptrackofexecutionand success? ­ ommitment.Howcantheorganizationachievecommitmentamongthemanagement C teamandallemployees?Howcantheorganizationinformemployees? ­ unding.Whatwilltheoutcomeofthestrategicplanningcostintotal?HowwilltheorgaF nizationfundtheplanningresults?Whatistheexpectedreturnandwillitmeettheinternal hurdleratesforreturn? Takingintoaccountthebroadperspectiveforstrategicplanningandconsideringexecution, monitoringandfundingissues,theorganizationanditsmanagerscangainaclearviewof wheretheyaregoingandwhy.Theywillalsoknowhowtomonitortheprogressandcan assessthepayoff.Monitoringofbothmarketdataandoperationaldataagainstplanning assumptionsaswellassustainingorganizationalflexibilityrepresentsanotherfieldofstrategicplanningimprovements.Duetoconsiderationofcapitalallocationandfundingissues itisalsoclear,whichothercriticalcorporateprocesseswillbeinfluencedfromthestrategic planningoutcome.Summarizingandbundlingthisoutcomeinsocalled,,strategiccampaigns"or,,strategicinitiatives"helpstheorganizationtofocusandimprovesintra-organizational communication. 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Summary Thispaperanalysesandsummarizesexistingproblemsandbarriersrelatedtothestrategicplanning process.Toanalysethetopictheauthorusesathreestepapproach.Thefirstpartdiscussesexisting problemsandbarriersinbrief.Thesecondpartsummarizesanddiscussesideastoovercomethese problemsandbarriers.Thethirdpartgivesanoverviewaboutthebenefitsofacustomizedandimproved strategicplanningprocess.Theauthorarguesthatinparticularprogressmonitoringandbundlingofstrategicmeasuresto"strategiccampaigns"canhelporganizationsfocusandimprovecommunication.

Journal

Economics and Organization of Enterprisede Gruyter

Published: Jan 1, 2008

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