Advantages ND Disadvantages of Strategic Planning
By far the most common model of how strategies are developed in organisations is based on the notion that strategies are systematically and formally planned following a set of relatively rigid steps and procedures. Some refer to this notion of strategy development as a ‘design’ view of strategy. Most text books and courses on strategic management and planning have adopted and promoted the design view of strategy.
There are a number of claimed advantages of developing strategies through highly structured and formal planning systems and steps in an organisation.
The main advantages are as follows: First, formalised planning provides what many would term a logical and certainly a structured means of analysis and thinking about complex strategic problems. There is no doubt that strategy development is complex and formal planning systems attempt to help resolve and deal with this complexity by following a series of distinct steps and stages which the manager can follow in this complex area. · Secondly, it is argued that formal planning systems force managers to take a longer term view of strategic options and directions than would otherwise have been the case.
In particular, the stages of environmental and competitor analysis which form a key part of most formalised corporate planning systems encompass planning horizons of three years at the minimum, and in some cases up to 20 years. · Formal planning systems also tend to facilitate the process of control and evaluation. So, for example, because objectives in formal planning systems are required to be specified and because strategic direction is determined in advance, the measurement of performance against these is facilitated. Another claimed advantage is that co-ordination between different functions and managers throughout the organisation can be increased with formal planning systems. This is because very often a formal planning system will require the different functions/managers to work together towards the achievement of corporate objectives in a manner specified in the corporate plan. · Finally, formal planning is claimed to help to motivate individuals towards the achievement of strategic objectives particularly where they are nvolved in the planning process and feel, therefore, that they have some degree of ownership and commitment to the process.
On the other hand there can be disadvantages to formal planning as follows: · Firstly, formal planning can mean that strategies may not adequately reflect the people and cultural elements of the organisation. Individual managers may feel absolved from any strategic planning responsibilities, these being left to the specialist strategic planners. As a result, line managers may not feel they ‘own’ strategic plans. Formal strategic planning can also sometimes be restrictive and inflexible, particularly where the environment is changing rapidly. This may result in lost opportunities and a gradual loss of strategic fit. · Formal strategic planning can become very cumbersome and over-detailed requiring large amounts of analysis and information, often resulting in information overload. · Finally formal strategic planning can become a substitute for in that it can become an activity in its own right divorced from the actual activities and plans of the organisation.
We can see that formalised strategic planning has both advantages and disadvantages. Although the design model of strategy development is still the most prevalent model in text books and most organisations, it is increasingly recognised that, particularly because of an increasingly dynamic and unpredictable environment, highly formalised and structured approaches to developing strategic plans are becoming less appropriate and effective.
Planning systems now need to be more ideas-based and flexible with less formalisation and adherence to strict procedures and steps. In addition, and related to this, is the increasing emergence of strategies from various levels of the organisation rather than the top-down approach to strategic planning which tends to accompany the highly formalised and structured approaches. Probably the best approach is to have some structure to the planning process whilst remaining flexible, and above all not allowing the strategic planning process to become an end in itself.