Problems and barriers to strategic planning and proposals for solutions

The paper has the objective to analyse and to summarize existing problems and barriers related to the strategic planning process which have been identified in both the academic and the business literature. In the last two decades a large number of articles and books related to this matter have been published. Due to the richness of available literature it is not possible to deliver an extensive overview about every opinion from strategic process research^{^[1]}. Taking the number of publications into consideration it could be argued that the relevance of strategic planning process is unquestioned and would need no further explanation.

But still research results – including new ones - from different studies express that a “duality” of strategic planning still exits. On one side the relevance of the strategic planning process for developing organization’s strategy is described as very important. On the other side a number of concerns and problems when running that process can be found[2]. Identified problem areas include in particular strategy implementation, communication of strategic planning results and monitoring of strategy execution.

To present the topic this paper will use a three step approach. The first part discusses existing problems and barriers in brief. The second part will summarize and discuss ideas to overcome these problems and barriers. The third part will summarize the benefits of a customized and improved strategic planning process.

2 Existing problems and barriers in corporate practice

The concept of strategic planning can be described as relatively new both in terms of corporate experience and as object within scientific research^{^[3]}. For the purpose of this paper problems and barriers concerning strategic planning have been divided into delimitation and definition related issues, issues related to corporate practice and general planning related issues.

Delimitation and definition. In both the academic literature and the business literature very different definitions and delimitations of the term “strategic planning” can be found. LOMBRISER and ABPLANALP (2005) state as major reason that the terminology to describe the strategic planning process is inconsistent, often using different terms and definitions like “long term planning”, “strategic planning” “financial planning” and “strategic management”. Due to those differences a variety of expectations related to process, tasks, responsibilities and results can be found in organizational practice.

Corporate practice. In both the academic literature and the business literature the process sequence, its formal organization and strategy implementation in practice have been described as difficult areas. FARREL and ASSOCIATES (2002) argue that most organizations see strategic planning as a separate activity from management’s prime responsibilities and duties. Management focus is described as top-down and start-to-finish; commitment to strategic planning is absent. Furthermore strategic planning is described as an internal battle ground for inter-departmental conflicts; negotiations and bargaining take place to achieve “organizational peace until the next planning session”[4]. THOMMEN and ACHLEITNER (2006) describe within their strategic problem solving process that in practice the allocation of resources is more based on distribution of power rather then developed corporate strategies[5]. This critical observation is in line with the content of strategy change process research that describes those processes and negotiations as political processes. WELGE and AL LAHAM (2003) confirm this since they describe strategy as a result of a negotiation process for rare resources. ROTHSCHILD et al (2004) see blue-sky planning and strategy by spreadsheet[6] as typical problems.

THOMMEN and ACHLEITNER (2006) argue that a clear concept and other factors steer and control the strategic problem solving process. They see corporate culture and corporate structure as major impact factors[7]. This is in line with RÜHLI (1991) and STRONG (2005), who describe the existence of interrelationships between strategic processes and structure, participant mix, and institutional culture[8]. MACHARZINA and WOLF (2005) make the general suggestion that organizations should tune the development of strategy content with the development of strategy process[9].

General planning related issues. In addition to these problems and barriers there are other critical issues, too. Planning assumptions, e.g. prediction of future development, focus on formalization – which can have a negative impact on creativity and lateral thinking – as well as a focus on hard data have been described as barriers for strategic planning. Most planning models also do not consider the irrational behaviour of employees, groups and organizations[10].

Considering this brief overview about barriers and problems the next chapter will summarize and discuss ideas to overcome them

3 Overcoming problems and barriers

3.1 General recommendation for practical application

Before starting with specific recommendations it is crucial to understand delimitations of scope and some general recommendations, which one should have in mind when improving the strategic planning processes in an organization. There are large numbers of options and ways to overcome existing barriers and problems and so to improve the process of strategic planning. Hence determining the best method for every strategic planning process in every industry goes far beyond the scope of this paper.

Strategic analysis, agenda setting, strategy implementation including progress monitoring are confronted with barriers very often. Typically some barriers have a strong link with specific phases and their attributes. Opposite and important as well are those barriers that can be found in the organizational context, e.g. in corporate culture[11]. Furthermore one should also consider that overcoming identified barriers cannot guarantee in general that the right strategic decisions will be made or that strategic implementation will be better executed. Most organizations would see this as desirable outcome, but there is a number of overlapping features (e.g. creativity, organizational learning, and capital resources) that also have an impact on the planning results. Organizations have to accept the counterintuitive notion that the strategic planning process is not able to design strategy[12]. Nevertheless there are three major benefits when overcoming identified barriers and problems.

Prepared minds. The first benefit is to ensure that all participants of the planning process (e.g. senior managers, planners, decision makers) have a solid understanding of the business, its strategy as well as the assumptions behind that strategy. This understanding enables them to identify and to respond quickly to chances and challenges as they occur in real time.

Innovation intensifier. The second benefit is to increase the innovativeness of the organization’s strategy. A strategic planning process cannot guarantee creative insight or excellent ideas in general; however the process can increase probability that they will occur by opening up participants to new thinking and challenging assumptions.

Appropriate process. Overcoming selected problems and barriers enables the organization to consider own planning demands best and to focus on important issues of its organization, industry and environment. Hence organizations can create their customized strategic planning process, which offers the most benefits.

Taking into account these general recommendations the next subchapters will suggest improvements on planning cycle, cultural context, strategic analysis, agenda setting, strategy finding, as well as strategy implementation and strategy execution.

[1] Note: LECHNER and MÜLLER-STEWENS (1999, page 4) highlight this matter in their research.

[2] Compare MCKINSEY (2006): In a survey about strategic more than three quarters of the participants confirmed that their organization has a formal strategic-planning process. Fewer than 25 % of participants confirmed that this process would be key to making their most important decisions. Furthermore managers raised significant concerns about the way their organization communicates strategy and execute it as well as measures performance against it. Compare HUBER (2006): Around 95 % of participants of this survey confirm that it is very important to implement and to execute a strategic planning process. Despite this importance around 39 % of participants were not able to differentiate the terms “strategy”, “strategic planning” and “strategy development”. Participants stressed the need to improve implementation and executing monitoring.

[3] Compare Bea, Haas (2004), page 50, compare Baum, Coenenberg, Günther (2004, page 13). BAUM et al argue that a change from a seller market to a buyer market, an increase in structural changes in the market place, a starting internationalisation and an increasing complexity in the 1960 caused to a focus on external analysis and hence to the emergence of strategic planning. This is in line with WELGE, AL-LAHAM (2003, page 9) who see strategic planning as response to the dynamic changes in environment of the organisation.

[4] Farrell and Associates (2005), page 2

[5] Compare Thommen, Achleitner (2006), page 920

[6] Note: Rothschild et al (2004) describe blue sky planning as a vision with little attention paid to rigorous homework; the outcome of the planning process is in the no man’s land between vision statement and concrete action. The strategy is described as vague, hence it does not force the organization to establish commitment. Furthermore blue sky planning does not tie strategy to financial performance. Strategy by spreadsheet highlights that some organizations run their strategic planning a sterile budgeting exercise with a very strong focus in financial details. Those organizations fail to anticipate changes in the competitive environment and in customer expectations.

[7] Compare Thommen, Achleitner (2006), page 921

[8] Compare Rühli (1991), page 16 f, compare Strong (2005), page 5

[9] Compare Macharzina, Wolf (2005), page 266

[10] Compare Lombriser, Abplanalp (2005), page 61

[11] Note: A corporate culture, which does not allow raising the right questions and that does not have an appropriate debate culture, will deny an honest internal analysis in most cases.

[12] Compare Beinhocker, Kaplan (2002), page 51

1 Preamble

2 Existing problems and barriers in corporate practice

3 Overcoming problems and barriers

3.1 General recommendation for practical application