IMPACT OF STRATEGIC PLANNING AND MANAGEMENT ON CORPORATE PERFORMANCE
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IMPACT OF STRATEGIC PLANNING AND MANAGEMENT ON CORPORATE PERFORMANCE
CHAPITRE ONE
INTRODUCTION
Background of The Study
Since Armmd 1999, empirical researchers have begun to investigate the performance and outcomes of formal strategic planning (Thune and House, 1999; Ansoff et al., 2000; Herold, 2001), and over 40 planningperformance studies have been published.
This line of research, however, has slowed to a trickle in recent years, and for good reason: previous studies lacked theoretical grounding, produced a bewildering array of contradictory findings,
drew heavy criticism for inadequate methodologies, and had little or no discernible net impact on strategic management research or practise (Shrader et al., 1984; Pearce et al., 1987a, b).
Nonetheless, it becomes clear that the planning-performance relationship has a considerable impact on strategic management study and practise, and scholars should not forsake this line of inquiry entirely.
This study re-evaluates the planning-performance research; the critical evaluation of strategic planning and its impact on organisational performance, which has an effect on the organization’s survival.
Strategic planning is defined as the process of developing, implementing, and controlling a strategy while formally documenting organisational expectations (Higgins and Vincze, 1993; Mintzberg, 1994; Pearce and Robinson, 1994). Strategic planning is a process that allows us to foresee the future and establish the procedures and activities required to influence and attain that future.
Strategic planning specialists, like those in many other industries, frequently wrap their job in pseudo-scientific jargon in order to glorify their work and foster client dependence. Strategic planning techniques are neither scientific nor complex in reality.
Organisations can design and run an ongoing and effective planning programme with minimal upfront support and the occasional services of an outside facilitator. Strategic planning is a set of underlying processes designed to generate or manage a scenario in order to produce a more advantageous outcome for a firm.
This differs from traditional tactical planning, which is more defensive in nature and relies on the movement of competitors to drive the company’s move. Strategic planning in business gives overarching guidance for individual units such as financial priorities, projects, human resources, and marketing.
When there is agreement on the mission and the majority of work operations are based on technical or technological factors, strategic planning may be beneficial to productivity improvement. This study goes beyond the findings of previous studies that questioned the presence of direct causal linkages between strategic planning and enhanced performance.
This study draws on some of the numerous publications on the use of strategic planning in the commercial sector, as well as an increasing number on its applications and possibilities in the public sector.
One of the primary goals of strategic planning is to encourage adaptive thinking, or thinking about how to achieve and maintain firm environment alignment (Ansoff, 1991). Finns, on the other hand, tend to profit more since they can obtain significant gains not only from adaptive thinking, but also from integration and control.
Small businesses can profit significantly from adaptive thinking, but they are likely to benefit less than large businesses from the integration and control parts of strategic planning.
According to Evered (2000), the various applications of the phrase strategic planning range from broad (which encompass the purposes of defining purpose, objectives, and goals) to very limited (which deal with the means for attaining certain objectives). Given Evered’s distinction between broader and narrower definitions of strategy, Bozeman’s definition is narrow; it implies an organization’s ultimate objective.
According to Bozeman’s definition, changes in policies and priorities initiate the strategic planning/management process (Bozeman, 2003). As a result, strategic planning can be defined widely or narrowly, according to (Eadie, 2004).
However, this definition does not assist public-sector managers, who must now determine not only whether to establish strategic plans, but also whether to approach such plans from a global or a narrower viewpoint.
As a result, what appears to be a semantic issue conceals a fundamental dilemma about the inclusion or absence of goal definition from the strategic planning process. Berry (1997) defines strategic planning as a tool for determining the best future for your organisation and the best path to get there.
Many times, an organization’s strategic planners already know a large portion of what will be included in a strategic plan. However, while developing the strategic plan helps to define the organization’s intentions and ensure that key leaders are all on the same page, the strategic planning process itself is considerably more significant than the strategic plan paper.
The process of strategic planning begins with an assessment of the existing economic condition. In most circumstances, it makes reasonable to focus on national, local, or regional, and industry economic forecasts when considering issues outside of the company that can affect the company’s success.
This stage of the analysis should begin as soon as possible, at least a quarter before the formal planning process begins. As a result, it has been argued that strategic planning improves organisational performance, or more specifically, the amount of strategic planning an organisation does improves its financial performance.
Because the case study for this research study is a bank, there is a need to comprehend the linkages between strategic planning and financial success in banks. Previous research found that the intensity with which banks participate in strategic planning has a direct positive influence on financial performance and modulates the effect of management and organisational characteristics on bank performance. The findings also revealed a symbiotic relationship between strategic planning intensity and performance.
That is, increased strategic planning intensity leads to improved performance, and improved performance leads to increased strategic planning intensity (Hopkins and Hopkins, 1997). Organisations, particularly financial institutions such as banks, must always think strategically about what is going on (Sclnneumer, 1995).
This looks to be exactly what banks have begun to do in recent years. Banks have turned to strategic planning in response to increased complexity and change in the financial services industry. The relatively new tendency in banking towards strategic planning is seen as a step meant not just to help banks better manage their environment,
but also to improve their financial performance (Bettinger, 1996; Bird, 1991; Prasad, 1999). However, consistent findings from bank-related studies have not entirely answered the question of whether strategic planning leads to increases in bank financial performance. Managerial (e.g., strategic planning knowledge and attitudes about planning-performance links),
Environmental (e.g., complexity and change), and Organisational (e.g., size and structural complexity) factors all influence how intensely managers engage in strategic planning. Several research have suggested that these elements have an impact on strategic planning intensity (Kallman and Shapiro, 1990; Unni, 1990; Robinson and Pearce, 1998; Robinsonet al., 1998; Watts and Ormsby, 1990b).
The intensity with which banks engage in the strategic planning process intervenes, causing an indirectness and lack of one-to-one correspondence between factors such as strategic planning expertise and beliefs about planning performance relationships (managerial factors), environmental complexity and change (environmental factors), bank size, and structural coherence.
Previous studies have misspecified the relationship between strategic planning and financial performance in banks, as evidenced by inconsistencies in research findings. This misspecification may be related to previous studies’ failure to pay attention to the link between these managerial, environmental,
and organisational elements and their potential impact on planning intensity and performance (Hopkins and Hopkins, 1997). As a result, the inclusion of such aspects in the current study is regarded as a serious issue with ramifications for future research as well as planning practises.
1.2Statement of the Problem
Previous and recent research investigations have revealed that there is an increasing internal and external certainty as a result of new possibilities and dangers, a lack of awareness of needs, facility-related concerns and the environment, and a lack of direction. Many organisations spend the majority of their effort recognising and responding to anticipated changes and difficulties rather than predicting and planning for them.
This is referred to as crisis management. Organisations that are caught off guard may spend a significant amount of time and energy catching up. They expend all of their energy dealing with inundated difficulties, leaving little energy to foresee and prepare for the next obstacles. This vicious cycle forces many organisations to be reactive.
The purpose of this research is to evaluate the impact of strategic planning on organisational performance, which in the long run improves organisational survival. Following the fast rise of formal strategic planning in the 1960s, the first planning-performance studies arose (Hemy, 1999).
Although the studies used different methodologies and measures, they all had a common interest in investigating the financial performance implications of the fundamental tools, techniques, and activities of formal strategic planning,
such as systematic intelligence gathering, market research, SWOT analysis, portfolio analysis, mathematical and computer modelling, formal planning meetings, and written long-term plans.
The research did not generally investigate the association between performance and planning competence, but rather the relationship between performance and the level of formal planning, often known as comprehensiveness, rationality, formality,
or simply strategic planning. Strategic planning, on the other hand, is:… a continuous and methodical process in which people make decisions about expected future objectives, how these outcomes will be achieved, and how success will be measured and evaluated.
Strategic planning will assist the organisation in capitalising on its strengths, overcoming its shortcomings, capitalising on opportunities, and defending against threats to the organisation.
Previous research on manufacturing firms (Ansoff et al., 2001; Eastlack and McDonald, 2002; Herold, 2001; Karger and Malik, 2000; Thune and House, 1999) has found that strategic planning leads to superior financial performance, as measured by commonly accepted financial measures (e.g., sales, net income, ROI, ROE, ROS).
Subsequent research (Armstrong, 1999; Greenley, 1996; Mintzberg, 1990; Shrader et al., 1984; Akinyele, 2007) has challenged the concept of a strategic planning-superior performance relationship.
Recent research (Miller and Cardinal, 1994; Schwenk and Shrader, 1993) provides solid evidence that strategic planning does result in greater financial success.
Objectives of The Study
The study’s objectives are to examine knowledge and understanding of the idea of strategic planning and management as it relates to business performance. These objectives include, but are not limited to;
To determine the extent to which an organisation engages in strategic planning.
To examine if organisations adhere to plans in order to assure performance.
To determine whether strategic planning and management have a major impact on corporate performance.
Research Questions
How far does the organisation go with strategic planning?
To what extent does the organisation adhere to performance-related plans?
How much influence does strategic planning and management have on corporate performance?
1.5 Research Theories
Strategic planning and management have no discernible effect on organisational performance.
The impact of strategic planning and management on company success is enormous.
1.6 Importance of the research
The fact that these studies adjusted for the elements that caused previous research discrepancies (e.g., methodological problems, lack bust statistical procedures) lends credence to their findings. One line of inquiry into strategic planning has asked whether the length of time a corporation or organisation has been active in the strategic planning process has any effect on performance.
Gup and Whitehead (2000) examined the assumption that strategic planning only pays off after a length of time in their research of the banking business (Burt, 1998; Kuala, 1996; Lenz, 1990; Leontiades and Tezel, 1994). They discovered no statistically significant association between the length of time banks spent on strategy planning and their financial performance.
Many banks have recently expanded into new markets. This has raised the pressure on banks to provide new and improved services to their consumers, requiring them to become more focused on their market niche as well as their financial policies.
Furthermore, bank managers are paying more attention to their bank’s external and internal environments, emphasising setting direction (articulating a vision and mission) and carefully evaluating strategy alternatives (Hector, 1991; Robinson, 1994; Shepherd, 1997; Steiner, 1997; Thompson and Strickland, 1997; Armstrong, 1995).
These tasks precisely match to the strategic planning process components (i.e., strategy formulation, implementation, and control). The fact that bank executives are becoming more involved in these activities suggests that they recognise (consciously or unconsciously) a link between strategic planning intensity and improved financial performance (Hunger, 1990; Johnson, 2002; Kauman and Shapiro, 1998; McCarthy, 1997; Paley, 2004; Porter, 1989).
Indeed, a recent study evaluated this link and discovered that banks that planned with greater intensity outperformed those that planned with less intensity, regardless of whether their strategic planning method was formal or unstructured (Hopkins and Hopkins, 1994).
Recent research (Miller and Cardinal, 1994; Chandler, 1998; Davis, 2004; Denning, 1997; Haveman, 1993; Hax and Majluf, 1991; Hayes, 2003; Hilt et al., 1990; HumSaker, 2001) set forth and tested the notion that the amount of strategic planning a firm or organisation conducts positively affects its financial performance, with affirmative results.
Strategic planning intensity is defined as the relative importance placed on each component of the strategic planning process for the purposes of this study. To summarise, the majority of research that have evaluated the relationship between strategic planning and performance have concluded that organisations that have a systematic strategic planning process outperform those that do not.
Furthermore, firms that take a proactive strategic approach outperform those that take a reactive strategic approach. This evidence demonstrates the importance of having a formal, proactive strategic planning process in any organisation,
large or small (Beamish, 2000; Allison and Kaye, 2005; Anthony, 1999; Aram and Cowen,l990; Bradford and Duncan, 2000; Bryson, 2004; Ahnyele, 2007).
1.7 Scope and Limitations of the Study
The impact of strategic planning and management on company performance is studied using GTB Plc as a case study.
limitations
Financial constraint- A lack of funds tends to restrict the researcher’s efficiency in locating relevant materials, literature, or information, as well as in the data collection procedure (internet, questionnaire, and interview).
Time constraint- The researcher will conduct this investigation alongside other academic activities. As a result, the amount of time spent on research will be reduced.
1.8 Definition of Terms
Strategic planning is the process by which an organisation defines its strategy or direction and decides how to allocate its resources to pursue that strategy.
Management is the function that coordinates people’s efforts to achieve goals and objectives by making efficient and effective use of available resources.
Corporate Performance Management (CPM) is the domain of business intelligence (BI) concerned with monitoring and managing an organization’s performance based on key performance indicators (KPIs) such as revenue, ROI, overhead, and operating costs.
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