Strategic planning is the art or science that involves formulation, implementation, evaluation and assessment of decisions within an organization to enable it to achieve its objectives. It can also be defined as the organizational management activity utilized in the setting of priorities to consolidate energy and resources within an organization to ensure that everyone is working towards achieving common goals. It’s a company’s way or plans to get an edge over its competitors in the market (Kabeyi, 2019). The United Nations Strategic Planning Guide for Managers defines strategic planning as looking into the future to identify the trends and issues a company or organization needs to set priorities on. The term strategic planning is believed to have originated in the 1950s and was believed to be the answer to many of the problems that organizations were facing at that time. Strategic organizational planning is set to effectively prioritize a company’s efforts and also align the organization between the employees and stakeholders to ensure that the company’s goals are based on data and sound reasoning (Kabeyi, 2019). Strategic planning has levels based on leadership and organization within a company. Since strategy is mainly about successfully competing within a competitive environment, offering different competitive products and services against other players in the same niche is important. Levels of the strategy include (Bryson, Edward & Van Slyke, 2018);
- Corporate level strategy, which is focused on the selection of markets, products and business.
- Business unit strategy, which is involved with this position a business holds within a competitive niche and its rivals and the accommodation of new technology that influence competition and enable networking.
- Operational and strategic levels are concerned with the organization of each part of the business in the delivery and achievement of the already set goals.
- Functional strategic levels are mainly related to the value chain and the processes of a business.
Strategic planning can also be classified into two levels, based on the duration the goal set can be achieved. Long- and short-range planning, where the organizations can determine what to achieve in a short period and what goals are achievable in the long run. Long-range planning covers a projection of many years and, therefore, is usually not specific. In contrast, short-term planning involves planning what is achievable over a short period of time, for example, annually and quarterly. The short-term plans are usually specific (Kabeyi, 2019). Strategic planning places emphasis on an organization to achieve its vision. Long-range panning only defines what vision a company has. Strategic planning is concerned with the development of an organization’s vision by determining the necessary priorities that need to be focused on to achieve the stated vision.
In strategic planning, SWOT analysis is essential before the plan is formulated. This is a technique to find out why the strengths, weaknesses, opportunities and threats to a business. Once all these are known, the company or organization can then go ahead and formulate a strategic plan to counter this and, therefore, effectively remain in business and make profits in the competitive environment. SWOT analysis represents the actual matters in the business environment, whether internal or external that affect the business(Miles et al., 2008). The strategic plan should also have objectives that should be specific, measurable, achievable, relevant and programmable.
Stages of strategic planning
Strategic planning stages are divided into three basic stages;
- Formulation of the strategy
The first stage in the business strategic planning process is formulating the strategy itself. This process involves the formulation of the vision of the organization. Then the external factors are considered, including the threats and competition that is expected in the environment and market the business is operating in. The internal factors can also be considered, including strengths and weaknesses (Williams, 2002). Long-term objectives of the organization can also be formulated at this stage. Strategy formulation involves decisions on what to invest in, where to invest, resources for the business, expansion opportunities, venturing into other locations like internationally and looking at other organizations in the same business environment (Kabeyi, 2019). The formulation stage of strategic planning involves multiple organization members, including the employees, executives, shareholders and sometimes the customers. At this stage, the organization can determine unfavourable internal and external factors that can affect the company in terms of reaching its objectives and goals.
- Strategy implementation
This is the second stage of strategic planning. Implementing the strategy that has been formulated is done by following the long-range and shoer range goals. Sometimes the implementation of the business strategy fails. This can be due to the organizations not linking the strategies that they come up with, with the budget that they operate on. Political interferences, situations in the global economy and limited resources, all of which are factors beyond the control of the organization, also affect the formulation and success of a strategic plan (Kabeyi, 2019). Failed business strategic plans are costly to the organization. Therefore formulation can be done carefully with full participation and projections of the expected hardships, both internal and external in achieving the set goals.
- Strategy evaluation
Evaluation of the already formulated strategy is the third stage. As time passes and the strategy is being implemented, it is important to evaluate it after a period to determine if it will be a success or a failure in the long run. Evaluation can be done by examining the bases of the organization’s strategy, comparisons between the expectations in terms of results and the actual results and corrective actions taken to ensure that the performance conforms to the plans (Kabeyi, 2019). Strategy evaluation makes it easy for the organization to adjust the strategy due to the changing situations. The business strategy should have the characteristics that ensure it is successful, including consistency, consonance, competitive advantage, and feasibility.
Challenges in implementing strategic planning
Some of the challenges that organizations face in formulating and implementing a strategic plan include the failure of the managers to link the process to other decision-making processes within the organization that might also be critical. Poor strategy monitoring and evaluation of the strategic plan can also happen, which is the process of measuring performance (Greenley, 2016). The lack of a proper organizational structure is also a hurdle in implementing a strategic plan. An organizational structure that corresponds to the identified weaknesses and strengths, and challenges is needed to ensure the achievement of a set strategic plan. Lack of financial resources, human resources, motivation and failure to identify and develop the appropriate strategies are other challenges that face implementing a business strategy (Kabeyi, 2019). SWOT analysis looks at the organization’s ability to deliver its intended services, competencies, staffing, assets and financial resources. Vision and mission setting is also an important part of the business strategic planning. In business management, vision can be defined as the future oriented concept of the business (Greenley, 2016). Once the external factors have been evaluated, the management can set a vision of the company, which overall; has direction and goals for the organization. Vision statements always provide the organization with focus and long-term alignment; therefore the vision statement
Benefits of strategic organizational planning
Since the 1950s, when strategic planning was first introduced, the benefits witnessed have ensured that businesses have remained relevant and responsive in the business environments. There are numerous benefits to strategic business planning in businesses, for example enabling the firm or organization to predict the future and therefore be prepared, making the organization more adaptive (Kabeyi, 2019). Adaptability allows a business to remain in competition and make profits while also being able to measure its achievements in the short and long run as laid out in the strategic plan. Another benefit is that a strategic plan gives a firm or organization a tool to define the direction that is to be followed (Miles et al., 2008). The direction to be followed, in turn gives a realistic path for the company to attain its objects and goals. Successful business strategic plans also give a firm or organization a larger market share and increased profits as the firm can get information on the market trends and the available products and services so that they can become better (Kabeyi, 2019). The efficiency of the operations is increased when a strategic plan is formulated, and it’s a means to provide a clear roadmap to aid in the facilitation of aligning the available resources to raise the efficiency of business operations. Another benefit of strategic organizational planning is the fact that it facilitates new programs, products, services and business operations in line with the ever-dynamic competition and consumer or customer needs (Miles et al., 2008). The organization is able to investigate the future in a clear and systematic way when they have a well formulated strategic plan. Also, the management is able to set policies and goals to guide the organization and provide a clear focus on the management. Organizations also need creditors and donors. These will require the organization to set up clear strategic plans to benefit from the financial services offered (Kabeyi, 2019). Strategic planning is a tool that can promote motivation and innovation in an organization since everyone in the organization is involved, from the managers to shareholders and the employees.
To reduce risks in an organization, strategic planning can be implemented. Risk, a factor that all organizations face, should be expected, and one way to deal with it or prepare for risk-related occurrences is to set up a strategic plan. The information that is used to come up with a strategic plan is essential in the assessment of risks. Financially, strategic planning has been shown to bring about more profit, and this can be attributed to better sales, lowered costs of production and high profits (Greenley, 2016). The clear specifications that are provided by strategic planning provide a framework for proper administration and division of resources and hence better planning by an organization.
Limitations of strategic organizational planning
The dynamic business environment sometimes makes it hard for a business strategic plan to be implemented and actually work. Long-range plans are the most affected due to the changing business environment. Since a strategic plan is an organization’s way to compete in an environment successfully, many factors, especially external can determine the success or failure of a business strategy (Kabeyi, 2019). Some of the limitations of strategic business planning include the failure of the people involved in formulating the strategic plan to be involved in implementing and evaluating the plan as time goes by (Bryson et al., 2018). A sharp increase in mistakes due to short-term planning and new products, in a case where the investment plans can change because there are new products, meaning new business opportunities and change of plans in the investment plans. Strategic management does not provide a clear and detailed picture of the future. It only provides situations in that the organization wants to be in the future and the position it wants to be in the market (Miles et al., 2008). Strategic management has another limitation in that it is only a theory on how an organization wants to solve problems or situations and, therefore cannot be limited to routine rules or procedures or even schedules. Strategic planning is costly to perform for small and medium businesses because they need to hire managers and planners. In addition, to implement and evaluate the strategic plan would need additional resources or more people to be hired to do all the procedures. The many steps involved in the process means that the process is costly as it needs to be adjusted from time to time (Bryson et al., 2018). This can be seen in the implementation and evaluation steps. Professional training is also required to set up a strategic plan, as it requires knowledge and experience in the field. Managers should have these skills and abilities to formulate, implement and evaluate a strategic plan. Some organizations might not have the right people with the required skill and experience to formulate, implement and evaluate the strategic plan to get the desired results.
Studies have been done on Strategic organizational planning based on different cases like coordination, failures and other case studies featuring real organizations. An example of such a case study was published by Spee & Jarzabkowski (2011). This research focused on the strategic planning and business performance of micro, small and medium-sized enterprises. The authors dealt with strategic management issues, particularly strategic planning and its benefits to business performance. The study was based on another study that was done previously. It’s the big companies that create enormous output in the economy. According to this research, small business equally plays a role in the growth of the economies and bring about the competition (Spee & Jarzabkowski, 2011). The economic importance of SMEs is stated in the paper in that they are the driving force of innovations, competition and business growth. They create jobs and economic stability; therefore, they can also benefit from strategic business planning like big organizations. In the Czech Republic, it was shown that SMEs create employment in 69.9% and 49.5% of the total outputs in businesses. In Europe, SMEs are a backbone economy, employing more than 87 million citizens. Research has shown that only 50% of businesses survive the past five years of existence, as noted by the authors o this article (Spee & Jarzabkowski, 2011). For SMEs, strategic planning and management is the sole role of the owner, and management has the sole responsibility of the management or the owner. In other companies, that is large companies, an entire department should ideally run the responsibility of strategic business management and analysts who are trained and experienced in strategic business management. In the Czech Republic, where the research of this article was carried out, the authors noted that the strategic management still takes on a very low uptake (Spee & Jarzabkowski, 2011). As strategic management is used to forecast and help SMEs anticipate future opportunities and challenges, it’s then essential for any business to have a strategic plan. At the organizational level, an organization should document how it wants its goals to be achieved (Spee & Jarzabkowski, 2011). The research concluded that the more prominent companies pay more attention to the strategic business management, unlike the small companies or the SMEs.
A company can also be reviewed in real life regarding organizational strategic planning. Wells Fargo is a company that has been in operation in the United States for a long time. It is one of the leading financial services companies in the country. The success of the company can be attributed to its strategic business plan. The organization’s strategic plan and principles are well documented on its website. Their vision is to satisfy the customers’ financial needs and to help them succeed. Their values include doing what is right for the customers, taking people as a competitive advantage, ethics, leadership, diversity and inclusion (Stumpf, n.d). From their strategic plan, the organisation’s goals include innovation, shareholder values, risk management, corporate citizenship, engaging team members, and customer service and advice. The company also aims to deliver excellent customer service through collaboration across business lines, being more customer centric, simplifying the business and offerings and improving the organisation’s excellence (Ward, 2021). Strengthening the risk oversight and controls. In the organizations documented strategic plan, they note that their ability to sustain solid financial performance in times of challenges is a testament to the financial durability provided by their business. In 2013, the company faced a scandal which involved its employees. The employees were opening accounts for the customers without their consent (Ward, 2021). This was attributed to the pressure that the management was putting on these employees to make more sales. Also, the employees were being compensated for the number of services they successfully sold to the customers (Williams, 2002). This was a fraudulent activity as the customers were even issued credit cards they did not seek from the company (Stumpf, n.d). This scenario has been related to a failed strategic plan, whereby the management set goals, that is strategic plan and had ways in which to achieve the goals. One of the ways was incentive-based compensation, which features more pay or commission depending on the sales made by an individual (Spee & Jarzabkowski, 2011). The plan was to target more customers, but it failed as the employees did not stick to that plan. Also, the company’s management is said to have known about the fraudulent activities that were happening, but they did little to solve the issue.
Another study was published, attempting to find out if strategic planning improves organizational performance. According to this research, the authors found out that strategic planning is a widely used and adopted management approach by organizations (Greenley, 2016). Also, the authors noted that strategic planning has been criticized for being rational and preventing rational thinking. Through performing a random met analysis, the authors attempted to find the strategic planning improves organizational performance. The authors also note that strategic organizational planning is ranked among the top five most popular management approaches globally (Spee & Jarzabkowski, 2011). Strategic planning includes elements like mission, values, vision and analysis of the organization’s mandate. Strategic planning can be attributed to contribute to organizational performance as the strategies can be geared towards finding a balance or fit between a firm and its environment with the strategic decisions being anchored on analysis and decision making, which should also be systematic (Greenley, 2016). The plans should be devised so that they include the goals of the organization that is where it wants to be and how it wants to get there. The authors of the article were looking into three matters on strategic planning, including finding out if strategic planning is merited, to define and address the difference between the private and public organizations whether it’s a relevant management approach for both and give insights for further research. The authors also define goal setting theory, which proposes that organizations with goals perform better as the goals give them a purpose and they focus on achieving them (Steiner, 2010). Also, the employees of such organizations understand the priorities since they are set out in the company’s strategic plan and this applies for both private and public organizations.
Studies have suggested that organizational performance is unidimensional. However, organizational performance includes many different dimensions such as efficiency, financial performance, effectiveness and society outcomes and client responses. Such a study was conducted and gave the difference between the public and private organizations. Pubic organizations are found to be more bureaucratic and the management in such organizations are shown to be less committed (Dutton & Duncan, 2007). This would definitely make it hard for the strategic plan to be formulated, implemented and evaluated. Strategic planning requires the management and employees to put in a lot of commitment for it to work and therefore, this could hinder the process in public organizations. Public employees are also shown to be less motivated by external or extrinsic factors which could make it even harder for the public organization employees to work on the strategic plan. In the private sector, which is mostly profit oriented, the management is more focused on making the organization work and so are the employees (Dutton & Duncan, 2007). The employees can be more motivated that their counterparts in public institutions, by for example incentives and commission son the business, that is earning more on making more sales for example. This would mean that the strategic plan in such cases is more likely to work out than in the public sector. This Meta analytical study showed that it is still important for the private and public sector in ensuring the success of these organizations.
A study was conducted on strategic planning for regulated companies. According to an article published, the firms can be able to achieve alignment with their environment through strategic organizational planning (Mahon & Murray, 2001). Organizations have to adapt to the environment in order to survive and prosper. Since strategic planning involves the firm’s analysis of its environment and proposing ways in which they can fit into the environment, a balance between the two can define the survivability of the organization in its environment. All organizations are regulated or operate in a regulated environment, which means that there are external bodies that are involved in these regulations (Boyne, 2010). Regulations affect the inputs the organization gets from its environment and these are relevant to goal setting in the organization. Otherwise, in a non-regulated environment, there are factors that are to be considered also. There are many players in such an environment, making the external factors more. In a regulated environment, the external factors involved are less and this would limit the organization’s ability to face external factors (Mahon & Murray, 2001). For regulated environment companies, the organizations in it must learn to co-exist according to the authors of is article. The strategic planning process would therefore be a process to manage the existing dynamic relationships between the firm and the external factors that surround it. The regulatory bodies or agencies in such environments serve as buffers and articulators in the industry. They protect the organizations and the industry at large and the competitive forces too. This is a benefit for the regulated organizations as the external factors are already buffered and all they have to deal with would be the internal factors. Many of the traditional market and competitive forces are weakened in such environments, and this makes the strategic planning process for the organization to shift from the customers and consumers to the regulatory bodies (Mahon & Murray, 2001). However, this would require more skills like politics and negotiation skills that go beyond the knowledge of planning in the organization. The regulatory agents serve as arbitrator in cases of controversies and disagreements in these environments, requiring the organizations to find a way to deal with these agencies. This might work out to the advantage of some organizations and some might be disadvantaged as compared to working in an unregulated environment.
An organization must have a purpose and ways of achieving its goals. The ongoing process of evaluating its purpose is what can be termed as the strategic planning according to the authors of an article published on the organizational stratagem structure and process. Effective organizations are able to maintain a viable market for their goods and services while the ineffective organizations find it hard to do so (Simon, 2003). To be an effective organization, there must be a strategic plan to guide it in achieving its goals. There should also be a constant modifications and redefinitions on how the organizations are planning to achieve their mandate depending on the dynamics of the external environment. The article looks into the adaptive cycle that a business needs to engage in to remain relevant in the environment (Simon, 2003). The organization’s behavior is preordained by the environment and the conditions available in that environment. The choices that are made by the top managers make up the key determinants of the organizational structure and process as well as the success that the organization can achieve. The management must solve the complex choices they need to make and therefore by carrying out strategic planning, they should be able to come up with ways in which they and make better decisions and better survive in the environment. It’s how the organizations move through the adaptive cycle that determines if the strategic planning they did will be a success or not (Simon, 2003). Organizations are also limited to the choices of adaptability and what the management believe work gear the organization towards the success of the organization. This article concludes that it is the mangers’ ability to meet the environmental conditions and requirements that can ensure the success of an organization.
Another article published on the strategy and organizational evolution was in agreement with the other articles that strategic organization planning is essential in ensuring the organization survives in the competitive niche. Strategic planning by the management is the way organizations prepare to sustain and overcome competition in the market (Berry, 2007). The authors of this article also note that the effective strategic planning process should begin with a SWOT analysis to enable the organizations to build in the strengths and to utilize opportunities while also controlling threats and weaknesses. The organizations should do a self-assessment to reorganize themselves to be in a competitive environment (Berry, 2007). The right peole in the organization, starting rom the managers to the employees and shareholders should also be more proactibve in the formulation, implementation and evaluation of a strategic plan to stay in the line and achieve their goals. The authors of this article also not that strategic plan formulation and implementation should be linked to an evaluation strategy to ensure the success of the strategic plan. Without an evaluation strategy, the strategic plan would just remain a strategy, written but not implemented. The organization should also recruit competent employees and retain them so that those who started with the organization as the strategic plan was being formulated are also there as it is being evaluated and implemented (Galbraith, 2013). Investing in market research, adequate budgeting and forecasting also go hand in hand with the recruitment for the success of the strategic plan in achieving the organization’s goals. The authors of the article note that having a strategic plan is not always a guarantee that the company would be successful.
Strategic organizational planning has been shown to be one of the most important steps in the business environment. It helps companies get a glimpse of what the future looks like and therefore plan for any eventualities and changes in the business environment. All the studies that revived in the above literature review section have shown the importance of the strategic plan to businesses and organizations. It has been suggested that the management can set both long- and short-term goals and work towards achieving them (Boyne, 2010). This will be possible only if the engagement and everyone else involved in the formulation of the strategic plan in the organization including the employees and the shareholder all work together to achieve the goals. Another factor that is noted is that in a regulated business environment, the companies or organizations have little to do with the external market factors because the regulators are already acting as a buffer between the organization and the external markets. Also, the private and public organizations have differences in terms of the motivation to make the strategic plans work. This can be attributed to the fact that the private sector is more profit oriented and therefore everyone knows their role in the strategic plan, unlike the public sector where the employees and managers lack such motivation. The main reason to come up with a strategic plan is therefore to make the organization more suited to perform in a competitive environment and have a line to follow so that they can achieve their targets and goals. The strategic plan can also fail, for example, in the case given above that is the Wells Fargo company. It is not a measure of success, but the planning can help companies and organizations to succeed. Swot analysis also needs to be done so that the company can identify the strengths and weaknesses and also threats that are available internally and externally so that they can be able to formulate the strategic plan perfectly. Strategic organizational planning should also be incorporated into SME, however hard it is. A strategic planning team or company can be hired to facilitate the formulation, implementation and evaluation of the strategic plan.
Recommendations for successful strategic management
Various measures can be put in place by organizations to ensure that the strategic plan that they have in place is successful. To do this, the organization can budget in relation to the strategic plan to ensure that there are adequate finances for the strategic plan. The employees that are working in the organization should be made aware of the strategic plans so that they can contribute towards the organizational goals as stipulated by the strategic plan. Understanding the dynamics of the business that the organization is involved in is also important in the success of a strategic business plan. It’s essential for a company to understand the global dynamics of their business so that external factors do not get them by surprise and affect the implementation of their strategic plan. There should be motivation within the organization, adequately to encourage everyone at the organization to work towards achieving the organization’s goals (Steiner, 2010). Organizations should also hire and train qualified staff as well as try to retain those that are competent as this will ensure that the people who started the strategic business plan are the same people working when it’s being implemented and evaluated. Such a move will ensure the success of the strategic plan. Finally, the organizations should identify the strategies that are correct and they should be implemented and executed to avoid mistakes along the way.
Strategic organizational planning forms a basis of survival in a competitive business environment and therefore its important for it to be developed. Unless the plan is specifically implemented, it will always remain a plan, just on paper. After implementation, an evaluation should be done to find out if it is working or if changes need to be don on it. Recruitment of capable and oriented personnel is also essential in the process since it’s the motivation and dedication that would ensure the success of the organizational plan. The managers should also be goal oriented and create a culture that is goal oriented in order to motivate the other employees. The business strategy should be creative and innovative to be efficiently executed. To effectively deal with competition, organizations should be customer oriented and analysis of the environment can be done periodically as it is ever changing. The organizational strategic plan can be built on the organization’s strengths and should be able to mitigate the weaknesses and also the threats that face the organization. A well-crafted and executed strategic plan is what ensures the success of an organization and not just having a strategic plan.
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Ward, M. (2021, March 10). A top Wells Fargo exec shares a strategy any leader can use to create an inclusive workplace culture. Business Insider. https://www.businessinsider.com/wells-fargo-exec-shares-her-no1-leadership-strategy-2021-3