Volberda (2004) published a paper titled "Crisis in strategy: fragmentation, integration or synthesis" in this paper he proposed that "Historically an organisations strategy has been thought of as an integrated plan", well before and indeed after the paper was written, the relationship between strategy and planning has been debated at length and examined by many academics with various perspectives and positions emerging. The following essay will attempt to critically evaluate some of these positions and endeavor to draw conclusions from the literature examined.
The development of strategic management from its militaristic roots through to its managerial conception as a process of planning, design and positioning of an organisation to best exploit markets, might understandably give the impression to external observers that it is a discourse dominated by rational economic thought (Brooks, 2005). The modern theory that strategic management is based upon had evolved well before the 1960`s by a mixture of historians, industrialists and theorists such as Alfred Chandler, a business historian, Igor Ansoff, a management theorist, Kenneth Andrews, a Harvard business school business policy Professor and Alfred Sloan, an industrialist and the founder of General Motors (Segal-Horn, 2004).
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It is important to understand the definition of the term strategic management, although there are many definitions available the term is described by Chandler (1962) as:
"The determination of the basic long-term goals and objectives of an Enterpriser and the adoption of courses of action and allocation of resources necessary for these goals."
An alternative definition is given by Hill and Jones (2001) who describe it as:
"Strategic management is the process by which managers choose a set of strategies for an enterprise to pursue its vision. "
(Hill and Jones, 2001)
The two definitions from different eras give separate meanings of strategic management, Chandler`s (1962) definition was given during the early stages of strategic management development it identifies that strategy is basically a long-term direction with certain goals adopted to achieve success, while Hill and Jones`s (2001) definition identifies that strategy is a process and a choice of direction to follow, a vision set by managers.
Far from being a modern concept, the use of strategy by humans has a very long history, consistently used since very early times by leaders and prominent people within society over thousands of years. It has long been a way of thinking about survival and achieving success. The term derives from the Greek word for military commander or chief magistrate, the definition promotes the distinction, eminence and importance of the word. Segal-Horn's (2004) view of strategy supports the idea that the concept is very old indeed and a fundamental of mankind:
"The idea of strategy is very ancient indeed. It has been around for thousands of years as a way of thinking about survival and of achieving success through leadership in war or politics."
Segal-Horn (2004) goes on to add that when applied to business and management the application of strategy is however a modern concept:
"Strategic management most typical to business firms and corporations has only occurred since the twentieth century. The term strategic management only began to he popularised in the 1960`s via the American business schools."
In the immediate post-war period, strategic planning became one of the fundamental driving forces of business management and one of the capstone subjects of business schools such as Harvard University (Learned et al., 1965; Andrews 1971, 1987).
Strategic management taught by business schools and adopted by many industries and managers utilises the methodology as an effective tool to run a company. It is described by Toulmin (2001) as "The formal theory of logic supplanting the practical skills of rhetoric."
From the definitions described it can be assumed that strategic management is a choice about direction of an entity with consideration given to the resources available, effectively utilising these resources in pursuit of a defined set of objectives.
As Segal-Horn (2004) states, the philosophy of strategic management within commerce is a relatively modern business methodology that has been actively developed since the 1960`s, developed by American business schools and being a practice adopted by many international companies and organisations. Planning as a form of strategy is a subject that has been debated in depth with various positions emerging.
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Supporting that strategy is a pre-determined plan Andrews (1971) comments:
"Every business organisation, every sub-unit of organisation, and even every individual (ought to) have a clearly defined set of purposes or goals which keeps moving in a deliberately chosen direction and prevents it drifting in undesirable directions."
This suggests that Andrews (1971) believes that the application of strategic planning is important for any company or organisation and all members within it. It defines how all individuals should "buy in" to a particular set of goals and objectives and should not drift from them in other directions, this implies that Andrews (1971) did not consider or endorse flexibility within plans. The view of strategy as a system where managers set the goals and others follow, where strategy is a rational, top-down, linear process has been the subject of detailed critique from within the field for some time (Brooks, 2005). Andrews (1971) belief seems rather inflexible and can stifle original thought driven from the bottom tier of a company where many plans and ideas are put into action.
Hamel and Prahalad (1994) believe that strategic planning leads to ambitious long-term goals of a company that are not backed up by practical thinking and fall short in the near-term. No consideration is given to the mid-term or the gap at the beginning, this gap being practically unfilled by any strategic plans, the authors argue that effective strategic plans are not a long-term plan that starts at the end of a given period but one that must start right at the beginning:
"We often come across companies that have set an ambitious long-term goals, perhaps to double revenue or profit over five years, or too dramatically increase the proportion of revenues coming from new business, but have devoted almost no intellectual effort to thinking through the medium term capability building program that is needed to support that goal. In too many companies, there is a grand, and overly vague, long-term goal on one hand with nothing in between too link the two together. There seems to be, in many companies, an implicit assumption that the short term and long term are not about each other, rather than being dovetailed together. However, the long-term does not start at year five of the current strategic plan, it starts right now."
(Hamel and Prahalad, 1994)
Hamel (1996) in further work strongly argues against planning as part of a strategic approach, the following statement illistrates his strong feelings associated with strategic planning, he compares it to an annual event, adding that it`s direction is specified by only a few individuals within a company or organisation. He doubts that strategic planning has ever been effective and comments that it is no surprise why many companies and organisations have disbanding planning departments. He also considers that strategic planning only draws upon a limited amount of experience or talent within a company or organisation making it somewhat elitist, he states:
"Strategic planning isn`t strategic, strategic planning is a calender driven ritual, not an exploration of the potential for revolution. The strategy planning process tends to be reductionalist, based on simple rules and heuristics. It works from today forward, not from the future back, implicity assuming whatever the evidence to the contary, that the future will be more or less like the present. Futher, the planning process is generally elitist. Harnessing only a small proportion of the organisations creative potential. How often has strategic planning produced true strategic innovation, no wonder that in many organisations, corporate planning departments are being disbanded. The essential problem in organisations today is a failure to distinguise planning from strategising. Planning is about programming, no rediscovering. Planning is for technocrats, not dreamers, giving planners the responsablity for creating strategy is like asking a bricklayer to create Michelangelo`s Pieta."
Burgelman (1983) argued that strategic planning can be driven from the frontline, the bottom up, as well as from the top down:
"In large diversified firms, strategy planning often emerges from the bottom-up from the initiatives of frontline managers."
This view implies that Burgelman (1983) considered that strategic planning can developed from the bottom up and is a product of the process or service offered in a particular organisational surroundings. Whittington (1993) suggests that this way the classic strategic sequence of formulation first, implementation second gets reversed, strategy is discovered in action flexibility is introduced and encouraged.
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In addition, Fredrickson and Mitchell (1984) are also not particularly impressed by strategic planning and the inflexibility associated with it, they also imply that the rigidity can stop the frontline affecting future strategic planning and the flow of strategy driven form the bottom simply dry up, they conclude that:
"In turbulent environments planning is often insufficient and leads to rigidity this propositions that upheaval can stop the flow of strategy driven from grassroots or frontline levels. "
(Fredrickson and Mitchell, 1984)
An alternative view is given by Bryson (1996), he states that strategic planning is a management tool used for one purpose only, to help an organisation do a better job, to focus its energy and ensure that members of the organisation are working toward the same goals, assessing and adjusting an organisation's direction in response to a changing environment. He believed strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organisation is, what it does, and why it does it, with a focus on tomorrow (Mintzberg, 1993).
Daft (2008) is a supporter of strategic planning, he believes the process of effective strategic planning is the central function of management because it sets the pattern for the others activities to follow. Daft (2008) explains:
"Planning means defining goals for future organisational performance and deciding on the tasks and use of resources needed to attain them."
Pearce and Robinsons (1987) views also supported strategic planning, they proposed that strategic management traditionally incorporates a process of planning, but also considered directing, controlling and organising all functions that can fall under an effective strategic management umbrella their thoughts were:
"Strategic management has traditionally been perceived as involving the planning, directing, organising, and controlling of organisation strategy."
(Pearce and Robinson, 1997)
Hofstede (1980) had yet different views, he goes to the length to explain that effective strategic plans are not what counts, and he declares having a planning system "Allows managers to sleep more peacefully, even if it does not really work".
The view that strategic plans are simply motivating methods is emphasised by Gimpl and Dakin (1984) who proclaimed "don't expect the plans to be accurate", they go on to add "Another reason for planning, is it boosts confidence and reduces anxiety."
Weick (1990) also supports the position that having an effective strategic plan is not what counts it's the thought. He uses an interesting analogy where a group of Swiss Soldiers were lost in the Alps, they had all but given up hope of being saved and were resigned to their fate that was too freeze to death. One member was lucky enough to find a map and the Troops were soon in high spirits, they managed to get motivated, walked many miles against the odds and were fortunate enough to find an isolated Village. The map turned out to be of the Pyrenees but it was the thought that gave the Troops determination and hope that they could overcome the odds and survive. Weick (1990) believes it is the thought of an effective plan that makes things work and motivates members of companies and organisations even if the plan is wrong, he adds that waiting for a plan not matter how ineffective can be perilous adding that direction and experience will be acquired and opportunities will arrive, he explains:
"Strategic plans are often like maps, it does not matter much if they are wrong, so long as they give managers the confidence and sense of purpose to act, if a firm sits and waits for the right map it will freeze, if it gets up and moves, it will somehow or other find direction, acquire experience and make its own opportunities."
Whittington (1993) has another prospective, he thinks the world is too complicated and changes too often to plan, his view is that planning can be interpreted as almost grand and arrogant, a sign of excessive pride and self-confidence, he encourages flexibility and awareness, proposing:
"In a world too complex and full of surprised to predict, the strategist needs to retain the closeness, the awareness and adaptability, rather than indulging in the hubris of grand long-term planning."
Segal-Horn (2004) indicated that large world changing events that are not anticipated can upset strategic plans, the oil shocks of the 1970`s and the "turbulence" that caused made planning yet more misty and ineffective. Mintzberg (1994) proclaimed "Every time the sheikhs raise the price of oil or the Japanese introduced a better product at a lower price, the planners ran around crying turbulence". Both Mintzberg (1994) and Segal-Horn's (2004) views suggest that planners are not prepared for unexpected events and the inflexibility of planning often lead to excuses being made to cover up the lack of affectivity and vision.
Mintzberg (1994) commented that planning is counter-productive to a good strategy and suggests that planning is all about control and practically an obsession to some, he is critical of the inflexibility of strategic planning systems that he felt do not anticipate turbulence and change, he writes:
"Control of workers, control of markets, control of the future, control of whatever might control them including if necessary owners and elected governments. Bringing things under control is exactly what their planning systems are designed to do. (In fact it is an obsession with planning as a form of control that explains all the fuss in society about `turbulent` conditionsâ€¦what they really are that something happened which was not anticipated by their inflexible systems."
Mintzberg (1993) in earlier works had also commented:
"An obsession with control leads to all kinds of behaviours, one is aversion to risk, which means a reluctance to consider truly creative ideas and truly quantum changes, both of whose effects are unpredictable and so beyond formal planning. Another is conflict with the subjects of the planning, who don't appreciate their own loss of control. Planners may see their procedures as merely bringing order and rationality, in effect co-ordination to decision making."
Co-ordination is considered control, as Worthy (1959) had earlier noted:
"The obsession for control springs from the failure to recognise or appreciate the value of spontaneity, either in everyday work or in economic processes, hence the need for planning. Hence the machine as the idea for human organisation. For the machine has no will of its own. Its parts have no urge to independent action. Thinking, direction, even purpose, must be provided from outside or above."
Mintzberg and Waters (1985) argued that strategies can be delibrate or emergent or a stage in-between, there is a corporate intent followed by it interpretation. Sometimes this intent is not formally written down but emerges over time as part of the culture.
An alternative method of strategic planning a more gradial smoother form that incorpurates flexiblity and is a considered a more step-by-step approach is called logical incrementalism a term that is defined as:
"A management philosophy of achieving broad organisational goals by making strategic decisions in small steps. The small steps attempt to resolve conflicting views of participants and reduce risk by capitalising on knowledge that is gained during the process. Logical incrementalism benefits from flexibility, but is likely to be time-consuming and inefficient."
(The American Heritage Dictionary of Business Terms, 2010)
According to Quinn (1980), strategy has its own rationality in the approach of logical incrementalism. Quinn (1980) was a supporter of logical incrementalism and he believed a policy of small strategic decisions within a framework provided a general sense of strategic direction. Whittington (1993) thought were that the smart strategist is honest about his or her limits; the logical incrementalist is committed to a process of experimentation and learning. He added that incrementalist approach is not necessarily a tactical one, it may be informed by underlying logic, or "strategic intent", that is both sufficiently clear to provide a sense of direction and sufficiently broad to allow flexibility and opportunism along the way. Mintzberg`s (1989) view was that "smart strategist appreciated that they cannot always be smart enough to think through everything in advance."
Wrapp (1967) also had other views citing disjointed incrementalism, he commented "Good managers don't make policy decisions", he goes on to argue that "Disjointed incrementalism is also found in business firms" this advocates that the step-by-step changes to strategy are not planned. Quinn (1980) decided that "Non-rational incrementalism is logical because of the inherently iterative nature of strategic decisions and the resultant need to make and remake them" again this implies that strategy planning should not be rigid and would benefit from flexibility.
Interestingly strategic planning in companies and organisations can also be affected by other factors, Mintzberg (1994) concluded that cultural backgrounds can also be an influencing factor on the desire to engage in planning, he states:
"The cultural background can also influence propensity to engage in planning."
Mintzberg (1994) goes on to suggest:
"There is evidence that some nations are more inclined to favor it than others, perhaps because of a pre-description to certain replaced forms of organisation. He states an example of Japanese enterprises which, by favoring strong internal culture seen to discourage action planning somewhat."
Ohmae (1982) also had an opinion on cultural influences on strategic planning system adoption, he associated Japanese firms less with planning and Soviet (at the time of writing the paper in 1982, the Soviet Union was still in existence) and American business with more of it, he comments "This can be expected by defunct communist regimes who's political systems were predicted on such planning, we would however not expect this from pragmatic Americans whose political systems is so opposed to central planning". Our view is often that Communist regimes were strictly planned and the Capitalist economies are flexible, Ohmae (1982) proposes that this view is not necessarily correct.
There are many different views on whether strategic planning is or is not effective within companies and organisations and beneficial to them. There are various ways of introducing and executing strategic plans, academics have many different views and much debate has occurred over the years and will indeed continue for countless years in the future..
While Andrews (1971) thought of strategic planning as essential, Burns and Stalker (1961) believe that no particular system should be adopted as none are regarded as optimum, they comment:
"The beginning of administrative wisdom is the knowledge that there is no optimum type of management system."
(Burns and Stalker, 1961)
Steiner (1979) believes that "Formal strategic planning is very complex; there is even a need to develop a concept of planning for the planning". Camerer (1985) proposed that "It is the lack of a disciplined methodology that is the cause of the fragmentation in strategic management" this suggests that lack of planning results in the strategic management process breaking down due to flawed methods of implementation or execution.
Segal-Horn (2004) suggested that during the 1970`s a shift occurred, what had been an emphasis on planning dominated by corporate planning departments focusing on long range planning and using mainly quantative analysis techniques as the basis for strategic decision making, suddenly began to break down with the increasingly mechanical and formulaic application of some analytical techniques by many firms. Segal-Horn (2004) adds "Corporate planning was out and strategic thinking and strategic management with the emphasis on competitive advantage were in".
Gray (1986), states that strategic planning can be described as a separate discipline of management function emphasising the point that a great deal of resource and structured activities are required to achieve any organisational aims and objectives not just a plan. He also states that strategic planning is seen as a two part process breaking down into development and implementation, Gray (1986) proposes that strategic management evolves in conjunction with organisational change, culture and direction; therefore it needs to be dynamic and declares "There is nothing wrong with formal strategic planning if you do it right."
Research is very important to any form of methodology, the research that strategic management is based upon has also been debated by many, Volberda (2004) suggested that that most research in strategic management is inductive and mostly based on a limited number of case studies. The result of this "weak" methodological basis is that in the field of strategic management there is no accumulation of knowledge, only a substitution of theories and schools of thought (Volberda, 2004).
Camerer (1985) argued for a strictly hypothetical deductive approach to research in strategic management. In contrast to Camerer (1985), Teece (1990) argued that within strategic management progress could only be made by developing dominant research programs like the traditional "competitive forces" perspective or the "resource-based" perspective. While Camerer (1985) chooses a disciplined methodological approach and Teece (1990) is for dominant research programs, Mahoney (1993) chooses the opposite, the more pragmatic approach of methodological pluralism under the pretext of "Good science is good conversation".
No matter what approach that is taken, the importance of getting strategy right and maintaining morale and drive is of huge importance and large significance for success in any company or organisation.
Interestingly, research by Kotter and Heskett (1992) found that over an eleven year period in a range of companies that had all met a healthy culture criteria they proposed, where employees were considered happy, included, productive, motivated and believed in future success of a company or organisation, sales increased by an average of 682%, this was compared to just 166% for companies that did not qualify for the healthy culture criteria.
This emphasises the importance of getting any strategy correct whether the company or organisation is engaged in strategic planning or not. To back this view up Johnson et al. (2003) proposed that strategy as a practice not only impacts organisational performance but the people contained within, implying that a good strategy will keep employees happy and productive and a bad will have the opposite effect.
In essence, the application of a strategy no matter what direction or methodology is adopted is thus of paramount importance to any company. A company or organisations future depends on getting things right and any strategy should be administered with caution.
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