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Making planning more effective
68
Long Printed
Range
Planning,
in Great
Vol. 16, No. 6, pp. 68 to 73, 1983
Britain
0024-6301/83 $3.00+ .OO Pergamon Press Ltd.
Making Planning More Effective R C Dyson, Senior Lecturer, University Senior Lecturer, Kingston Polytechnic
The authors have been carrying out a comparative study of strategic planning in a set of ten, diverse organizations from both public and private sectors. The research focused on two issues: (1) what constitutes effective planning? and (2) what is the impact of participation on that effectiveness. This paper describes those elements of the results of the research which have greatest relevance to practising planners and managers.
Introduction The authors have been carrying out a comparative study of strategic planning in 10 organizations spanning the public and private sectors. The organizations ranged from a local authority, to private through a nationalized industry, manufacturing concerns. The research was concerned with addressing the problem of what constitutes effective planning; considering the extent to which general principles for planning exist despite the highly contextual nature of planning; exploring the impact of participation on the effectiveness of planning; and finally discovering what methods and techniques were being used which constituted effective practice. The main reason for carrying out a cross-sectional study was that the central topic of the research, the relationship, if any, between participation in and the effectiveness of strategic planning was a topic which had not previously received attention. The first stage of the work was the establishment of a both framework within which to measure effectiveness’ and participation in the context of strategic planning. That done, data were collected from the 10 participant organizations by means of extended interviews and document appraisal, where appropriate. Using this information each of the organizations was assessed (on an ordinal scale) in respect of each of the attributes of effectiveness The ordinal data base thus and participation. created was then subjected to a correlation analysis, Dr. Dyson is a Senior Lecturer in the School of Industrial and Business Studies, University of Warwick and was Chairman of the School from 1977 to 1981. Mr. M. J. Foster is a lecturer in the School of Business, Kingston Polytechnic, Penrhyn Road Centre, Penrhyn Road, Kingston upon Thames, KTl 2EE. U.K.
of Warwick
and M. J. Foster,
the main results of which subsequent section.
are outlined
in a
The purpose of this paper is to present those elements of the results of the research which have planners and greatest relevance to practising managers. Particular aspects of the research have been reported in full elsewhere.lp3
Effective Strategic Planning and the General/Contextual Dichotomy There is a considerable body of literature on how to do strategic planning effectively, but there does not appear to be a concise and useful characterization of effectiveness in strategic planning. There appear to be two approaches to characterizing effectiveness, each of which could serve a different purpose. One approach focuses on the end product of planning and the other on the planning process itself. In the former approach, effectiveness might be judged by the extent to which goals set by the planning process are achieved. Such an approach might be used to appraise and control strategic planning. However, this approach can present difficulties. Firstly, unforeseen and unforseeable changes in circumstances can render goals valueless and make their attainment easy or impossible. Secondly, if assessment of effectiveness is based on goal attainment, participants in the process might collude to set easily attainable goals to give the illusion of effectiveness. The approach might be improved to overcome these difficulties and this problem has been considered by Foster and Foster.4 A major weakness of the approach is that it gives no insight into how planning might be improved. Our concern with improving effectiveness has caused us, therefore, to concentrate on characterizing effectiveness in terms of the process itself, with a view to providing a diagnostic tool which might be an aid to the engineering of effective planning systems. In this latter approach, effectiveness is characterized by a number of attributes of the planning process.
Making Planning More Effective The set of attributes proposed, with a brief description of each, is given below. The set was compiled by studying writings on strategic planning and by discussing aspects of effectiveness with a number of practising planners.
Attributes Systems
of Effective
Planning
Clear Statement of Objectives An effective system will focus on the objectives, clarify them and keep them in view throughout the planning process. Integration A strategic planning process can only be effective if the plans and analyses become the focus of the strategic decision-making of the organization. Catalytic Action Planning will be more effective if planners stimulate other participants to think strategically. Richness of Formulation An effective system will explore a wide range of possible futures rather than concentrating solely on a single history extrapolated one. Depth of Evaluation In evaluating a plan, multiple criteria including several financial measures and measures associated with other resources will be used by an effective system. Reliance on a single measure such as payback may cause important aspects to be overlooked. Treatment of Uncertainty The evaluation of plans should take account of the uncertainty in estimates of demand forecasts, costs, economic environment and other exogenous variables. Resources Planned Organizations are dependent on a number of including finance, manpower, raw resources, materials and equipment, and strategic planning should consider them all. Data It is important that adequate data is available for planning. Insufficient data can lead to unnecessary approximation or complete gaps in the planning process. Excessive data with spurious accuracy can confuse rather than enlighten. Iteration in the Process As the plans develop through the planning cycle, information will emerge that is relevant to previously completed parts. An effective system will recognize its relevance and cause appropriate modifications to be made.
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Assumptions Planning is necessarily based on assumptions. These must be explicit so that unrealistic and inconsistent assumptions are avoided. Quantijkation of Goals An effective system will quantify goals where this is appropriate and recognize qualitative goals. Control Measures A static plan rapidly becomes valueless in times of change. An effective system will include a feedback mechanism leading to modifications of the plans. Feasibility of Implementation. An effective system will anticipate barriers to the implementation of any given plan and avoid them, remove them, or accept that they cannot be surmounted. Assessing feasibility may include such factors as: negotiations obtaining planning perwith the workforce; mission; securing supplies; and satisfying environmental constraints. Each of the attributes was found to be relevant to all the 10 organizations in the study, despite their lack of homogeneity. Each attribute gives a particular focus on the planning process and allows those concerned with developing planning systems to assess the effectiveness of the system on that dimension. Then, if the system appears unsatisfactory, attempts can be made to improve it by the introduction of new techniques, by the provision of or by a change in the new information, organization of the planning process. Appropriate changes will, of course, be strongly related to the and it is here that the general/ context contextual dichotomy in planning emerges. The attributes of effectiveness represent general principles of planning. To some extent, they will be relevant in all situations. Putting the principles into practice, however, depends heavily on the context and is likely to change from situation to situation. Nevertheless, some methods and techniques will be effective even in highly diverse situations. This general/contextual dichotomy can be illustrated by reference to the attribute ‘Integration’. The purpose of strategic planning is to improve strategic decision-making so that the achievement of high integration is universally desirable. How this is achieved can, and does, vary from context to context. In one organization there may be no separate planning function so that integration is automatic; in a second the planning function may be geographically placed close to the chief with considerable formal executive, and informal interaction taking place; in a third, the planning function may just coordinate and collect information, being the information arm of the board or management team. Each of these approaches can ensure that planning does not become an isolated function, but each is different yet appropriate to its context.
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Long Range Planning Vol. 16
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An example of a ubiquitous technique would be contingency planning. This was developed in a military context, is recognized as valuable in commercial contexts, and from our observations is ripe for greater use in other parts of the public sector. In summary, the adoption of a process view of effectiveness in strategic planning has led to the proposal of a multi-attribute framework for effectiveness which has general applicability. This framework allows designers of planning processes to take a multi-faceted view of a planning process, and hence identify the strengths and weaknesses of the process. The identification ofweakness becomes the first step in the search for ways of improving the planning process. The way in which an aspect of a particular process can be improved will depend on the context, but some methods and techniques will be applicable in a variety of contexts.
Effectiveness
and Participation
Participation in strategy and decision-making is a contentious issue. There is a range of conflicting standpoints. ‘Decision-making is the prerogative of ‘All stakeholders affected by a management.’ decision have a right to participate in decisionmaking.’ In most private organizations the degree of participation of the interest groups can be controlled by one of those groups. In the public sector, wider participation often obtains, yet some organizations appear immune to outside influence. Our concern was not with what is the ‘right’ amount of participation in strategic planning but with the interaction between the extent of participation and effectiveness. What are the benefits to be gained from participation? What are the disbenefits? Can the disbenefits be avoided? To address these questions, participation was characterized in terms of: the interest groups nominally participating in the planning process; degree of involvement by those interest groups in strategic and the extent of communidecision-making; cation. A study was then made of the relationships between these participation variables and the attributes of effectiveness. As indicated in the introduction, this involved ranking the organizations in terms of each variable and attribute and carrying out a correlation analysis. In addition to those relationships suggested by the correlation analysis, we postulate a small number which were not supported by the analysis based on a priori reasoning. The overall findings were that the nominal involvement of interest groups in the planning process had no measurable impact on effectiveness. Different levels of communication and degrees of involvement in decision-making, however, did have an impact. These two variables were highly
1983
inter-related and behaved consistently with regard to the effectiveness attributes. The nature of the impact was considered to be a propensity or tendency. A greater level of participation might tend to increase effectiveness across some of the attributes. More often, the tendency was for participation to reduce effectiveness. The existence ofboth direct and inverse relationships means that a less (or more) participative process is not automatically more effective than one with greater (or lesser) levels of participation. It also means that the weaknesses in the planning process of a participative organization are likely to be different, relating to different attributes, than those in a less participative system. The organizations are, therefore, likely to be facing different kinds of problems in seeking to improve their planning systems. It was found that the effectiveness attributes directly related to participation included integration and resources planned. In more participative organizations the planning function will inevitably be well-integrated with the decision-making process. Also as participation extends throughout an organization, the possibility of some resource being overlooked diminishes. However, because the direct relationship is only a tendency, the converse does not necessarily follow. Where strategic decisions are taken by a small group of senior managers, it is possible for a planning function to be well-integrated, and it is also possible for the planning to include a full set of resources. Indeed, in the organizations included in the research project, the less participative ones had successfully integrated their planning functions, although they were less successful at including all the resources. In resource was often particular, the manpower overlooked or given scant attention in the planning process. The attributes related inversely to the participative variables included richness of formulation, depth of evaluation, treatment of uncertainty, data used, assumptions, quantification of goals, control measures and feasibility of implementation. Several of these attributes were also highly inter-related and have a strong analytical component. One factor which goes some way to explaining these relationships is that relatively simple levels of analysis tend to be adopted in the more participative systems This may be due to a conscious effort to avoid making the planning incomprehensible to the participants. If this is the case, then planners in such organizations wishing to adopt a deeper level of analysis are faced with the problem of how to communicate their findings to an audience with no great analytical facility. Difficulties of communication certainly seem to lie behind the inverse relationship between richness of formulation and participation. Communicating a variety of strategies to participants can lead to an ‘information overload’. As a result there appears to be a tendency in the participative systems to converge quickly to a single plan with alternative
Making Planning More Effective possible strategies being given scant attention. This is ironical as it could be postulated that the potential for a richer variety of strategies should increase with the number of participants. There appears to be little evidence at present of this potential being realized. The inverse relationship between participation and feasibility of implementation also seems anomalous. Again a direct relationship might have been conjectured on the grounds that the wider participation should ensure that all aspects of implementation are thoroughly explored. In this case the anomaly may be explained by the extremely effective way that the less participative organizations (in particular the private manufacturers) had explored their implementation problems.
Aspects of Effective Practice In the course of the research, various aspects stood out as not only being good examples of effective practice in their context, but also as examples of practices which deserve wider acceptance. In this section some of the most interesting aspects are presented. A fuller discussion appears in Dyson and Foster.3 Planning and decision-making in organizations is guided by objectives. These include high level objectives such as ‘the successful continuity of the business’, or ‘to retain technological leadership’. Such objectives on their own provide only a weak guidance to planners and decision-makers. An improved guidance is given where the high level objectives are supported by a set of goals or targets. Most of the organizations studied did provide such a set, although often gaps were evident or objectives were not clearly stated. The most impressive example we encountered concerned a public sector organization whose planning system was based on PPBS (Planning, Programming and Budgeting clear overall System). The system included objectives which were cascaded down through the different functions and levels of the organization to provide a fully comprehensive set of sub-objectives. These sub-objectives appeared throughout the planning documents and provided ideal guidelines for the planning. This comprehensive approach to objective setting should be a good example both to other public sector organizations and to the private sector. The nature of the objectives may change from context to context, but their value as guides to planning and decision-making does not. In general, we considered that the organizations were weak in their ability to formulate possible strategies. Two organizations were rated highly on the ‘richness of formulation’ attribute, however. One, a holding company, started off by postulating several alternative market strategies. These were
71
then subjected to a number of possible phasings giving a large number of possible strategies to cope with the various scenarios which had been generated previously from different macroeconomic views of the economies in which the company operates. The other organization was a technical leader in a particular industry. It had developed a strong range of potential strategies, based on product and process innovations made possible by heavy investment in research and development. Where this attribute was less welldeveloped, a common tendency was to ‘take a view of the future’ and then explore the area around a single strategy. This tended to be linked with an assumption that no dramatic divergence from current practice need be considered. This may prove a reasonable assumption but, if and when some dramatic change in the environment does occur, such a view will ensure that no contingency plans are available. In the public sector, generation of strategies appeared to be inhibited by two factors. In some organizations it was felt that some possible futures could not be explored for political reasons. The second reason was that the bureaucratic structure of the organization simply could not cope with a range of options. This problem might be circumvented by formulating alternatives for discussion in outline only. A general problem related to formulating strategy seems to lie with the difficulty of identifying what potential problem areas should be addressed which might result in important alternative strategies for evaluation. At present, the nature of strategies that are considered and the way that they are generated is not well-understood and, in particular, planning systems tend not to include any formal mechanism for ensuring that key problems are not completely overlooked by the strategic planning process. Some research has taken place recently6 but it is still an area awaiting satisfactory resolution. The planning processes studied did not generally perform well with regard to the attribute ‘treatment of uncertainty’. This was not due to ignorance of the possible impact of uncertainty on strategic decisions, but rather to the inherent difficulty of measuring uncertainty and taking account of it within the planning process. The approach of several of the organizations was to test the sensitivity of selected strategies to changes, from their most likely levels, in certain key variables such as exchange rates, interest rates, oil price rises, demand and costs. The best practice we observed consisted of a very comprehensive and systematic included sensitivity analysis. One organization probabilities of success in winning contracts in their analysis whilst another included subjective risk economic, ratings on various socio-political, commercial and technical aspects. Another organization set out to increase its flexibility or ability to respond to change: this may be seen as another means of treating uncertainty in the planning environment.
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The development of strategies to achieve greater corporate flexibility is an area which seems to merit more prominence than it presently enjoys. Financial flexibility can be achieved by electing for low gearing-provided this is acceptable in the circumstances. Flexibility in production can be achieved by having facilities capable of producing a variety of products, or able to be run efficiently at different levels of output, while marketing flexibility may be achieved by having a diverse product range or by selling to different geographical markets. In uncertain times flexibility may be no less than the key to success or survival: hence its importance.
Summary of Results Implications
and Their
In this final section we summarize the main results set out in the earlier sections and comment briefly on their implications for the practising planner or decision maker: (i) Effectiven ess of strategic planning can be usefully characterized in terms of a number of attributes of the planning process. The set of attributes may be seen as a ‘diagnostic check list’ for use in the identification of the need for process changes. (ii) There is no single ‘ideal corporate planning system’ with a universally optimal level of participation. This reflects the highly contextual nature of the planning process. (iii) The relationships found to exist between participation and effectiveness are summarized in the following diagram:
High Participation
Tends to -
Integration Range of Resources Planned
-
Richness of Formulation Depth of Evaluation Treatment of Uncertainty Data Used Assumptions Quantification of Goals Control Measures Feasibility of Implementation
High
Low Participation
Tends to
Figure 1. Participation/effectiveness
These are examples which relationship, ‘propensity’.
relationships
of a form of weak may be described
causal as a
(iv) Two areas in which performance was found to be consistently weak amongst the sample organizations were the (richness of) formulation of alternative strategies and the treatment of un-
1983
certainty. It seems reasonable to suppose that such weakness might apply more widely than in the sample of organizations looked at in this study. What then may be the implications of these findings for senior managers and planners? Looking at the last point, the conclusion which suggests itself is that the areas of formulation and treatment of uncertainty are ones to which planners and decision makers must devote more attention than hitherto. As indicated earlier, it is not suggested that these are easy problems to tackle and, because of the highly contextual nature of the planning process, it is difficult to give generally applicable guidance on how to proceed. In the case of formulation, it may be that simply having an awareness of the need to focus attention in that area may be an important factor in the resolution of the problem. We would also suggest that this is an area in which the participation of as wide a group as possible within a given organization may be beneficial. To exclude the contribution of those other than top management may be to ignore a rich source of ideas. ‘Suggestion schemes’ in various forms can be useful as one of our participant organizations found, (of course, it should not be expected that the use of such schemes will provide other than a small proportion of really useful ideas)! As for the treatment of uncertainty, it seems that there are a number of useful techniques which, whilst not panaceas, are underutilized at present. One such is Decision Analysis which, whilst it certainly has defects, has the capability to provide a useful framework within which to view decision making in conditions of uncertainty.’ Turning to item (iii) above, it may be seen that participation is inversely related to the majority of our effectiveness attributes which suggests that if strategic planning is to be effective it should be maintained as the exclusive concern of top management. On the other hand, we noted in the course of our research a feeling that some increase in the level of participation (compared with the present position) may be desirable. We did not, in general, find any desire to widen the involvement in decision-making amongst interest groups but there was a note of concord on the need to improve communication in the planning process. The principal benefit anticipated by many was that wider understanding of the organization’s aims and strategies would lead to a commitment which would facilitate smooth implementation. The problem is to determine whether the inverse nature of most of the relationships shown in Figure 1 means that any such move to increase participation will lead to a reduction in effectiveness. Our belief is that this need not be so because the relationships are propensities rather than strict causal relations. This means that participation (or its elements) is only one of a number of possible influences on effectiveness. By working simultaneously on some of these other influences, it may therefore be possible to increase participation with little or no loss of effectiveness.
Making Planning More Effective Finally, throughout the research we have been clear that strategic planning is a process aimed at improving strategic decisions and not just concerned with the compilation of a strategic plan. The organizations we judged to be most effective clearly recognized this. The planning processes were supported by documentation as a necessary aid to communication, but the processes were dynamically linked to the decision-making process. In contrast, some organizations performed largescale, one-off exercises leading to a single, total plan for the next 5 years or so, which was likely to be dated by events even before it had been printed. Acknowlegment-The authors wish to acknowledge the financial support of the SSRC for the research reported on in this paper.
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References (1)
R. G. Dyson and M. J. Foster, Effectiveness in strategic planning, European Journal of Operational Research, 5. 163-l 70 (1980).
(2) R. G. Dyson and M. J. Foster, The relationship of participation and effectiveness in strategic planning, CIEBR Discussion Paper No 91, University of Warwick. Revised version to appear in Strategic Management Journal.
(3) R. G. Dyson and M. J. Foster, Strategic planning-effective practice, CIEBR Discussion Paper No 92, University of Warwick. (4)
M. J. Foster and D. N. Foster, Assessing the effectiveness of strategic planning, Omega, 10, 19-23 (1982).
(5)
R. A. Howard, An assessment of Decision Analysis, Operations Research, 28, 4-27 (1980).
(8)
M. A. Lyles, Formulating strategic problems: empirical analysis and model development, Strategic Management Journal, 2, 61-75 (1981).
Long Printed
Range
Planning,
in Great
Vol. 16, No. 6, pp. 68 to 73, 1983
Britain
0024-6301/83 $3.00+ .OO Pergamon Press Ltd.
Making Planning More Effective R C Dyson, Senior Lecturer, University Senior Lecturer, Kingston Polytechnic
The authors have been carrying out a comparative study of strategic planning in a set of ten, diverse organizations from both public and private sectors. The research focused on two issues: (1) what constitutes effective planning? and (2) what is the impact of participation on that effectiveness. This paper describes those elements of the results of the research which have greatest relevance to practising planners and managers.
Introduction The authors have been carrying out a comparative study of strategic planning in 10 organizations spanning the public and private sectors. The organizations ranged from a local authority, to private through a nationalized industry, manufacturing concerns. The research was concerned with addressing the problem of what constitutes effective planning; considering the extent to which general principles for planning exist despite the highly contextual nature of planning; exploring the impact of participation on the effectiveness of planning; and finally discovering what methods and techniques were being used which constituted effective practice. The main reason for carrying out a cross-sectional study was that the central topic of the research, the relationship, if any, between participation in and the effectiveness of strategic planning was a topic which had not previously received attention. The first stage of the work was the establishment of a both framework within which to measure effectiveness’ and participation in the context of strategic planning. That done, data were collected from the 10 participant organizations by means of extended interviews and document appraisal, where appropriate. Using this information each of the organizations was assessed (on an ordinal scale) in respect of each of the attributes of effectiveness The ordinal data base thus and participation. created was then subjected to a correlation analysis, Dr. Dyson is a Senior Lecturer in the School of Industrial and Business Studies, University of Warwick and was Chairman of the School from 1977 to 1981. Mr. M. J. Foster is a lecturer in the School of Business, Kingston Polytechnic, Penrhyn Road Centre, Penrhyn Road, Kingston upon Thames, KTl 2EE. U.K.
of Warwick
and M. J. Foster,
the main results of which subsequent section.
are outlined
in a
The purpose of this paper is to present those elements of the results of the research which have planners and greatest relevance to practising managers. Particular aspects of the research have been reported in full elsewhere.lp3
Effective Strategic Planning and the General/Contextual Dichotomy There is a considerable body of literature on how to do strategic planning effectively, but there does not appear to be a concise and useful characterization of effectiveness in strategic planning. There appear to be two approaches to characterizing effectiveness, each of which could serve a different purpose. One approach focuses on the end product of planning and the other on the planning process itself. In the former approach, effectiveness might be judged by the extent to which goals set by the planning process are achieved. Such an approach might be used to appraise and control strategic planning. However, this approach can present difficulties. Firstly, unforeseen and unforseeable changes in circumstances can render goals valueless and make their attainment easy or impossible. Secondly, if assessment of effectiveness is based on goal attainment, participants in the process might collude to set easily attainable goals to give the illusion of effectiveness. The approach might be improved to overcome these difficulties and this problem has been considered by Foster and Foster.4 A major weakness of the approach is that it gives no insight into how planning might be improved. Our concern with improving effectiveness has caused us, therefore, to concentrate on characterizing effectiveness in terms of the process itself, with a view to providing a diagnostic tool which might be an aid to the engineering of effective planning systems. In this latter approach, effectiveness is characterized by a number of attributes of the planning process.
Making Planning More Effective The set of attributes proposed, with a brief description of each, is given below. The set was compiled by studying writings on strategic planning and by discussing aspects of effectiveness with a number of practising planners.
Attributes Systems
of Effective
Planning
Clear Statement of Objectives An effective system will focus on the objectives, clarify them and keep them in view throughout the planning process. Integration A strategic planning process can only be effective if the plans and analyses become the focus of the strategic decision-making of the organization. Catalytic Action Planning will be more effective if planners stimulate other participants to think strategically. Richness of Formulation An effective system will explore a wide range of possible futures rather than concentrating solely on a single history extrapolated one. Depth of Evaluation In evaluating a plan, multiple criteria including several financial measures and measures associated with other resources will be used by an effective system. Reliance on a single measure such as payback may cause important aspects to be overlooked. Treatment of Uncertainty The evaluation of plans should take account of the uncertainty in estimates of demand forecasts, costs, economic environment and other exogenous variables. Resources Planned Organizations are dependent on a number of including finance, manpower, raw resources, materials and equipment, and strategic planning should consider them all. Data It is important that adequate data is available for planning. Insufficient data can lead to unnecessary approximation or complete gaps in the planning process. Excessive data with spurious accuracy can confuse rather than enlighten. Iteration in the Process As the plans develop through the planning cycle, information will emerge that is relevant to previously completed parts. An effective system will recognize its relevance and cause appropriate modifications to be made.
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Assumptions Planning is necessarily based on assumptions. These must be explicit so that unrealistic and inconsistent assumptions are avoided. Quantijkation of Goals An effective system will quantify goals where this is appropriate and recognize qualitative goals. Control Measures A static plan rapidly becomes valueless in times of change. An effective system will include a feedback mechanism leading to modifications of the plans. Feasibility of Implementation. An effective system will anticipate barriers to the implementation of any given plan and avoid them, remove them, or accept that they cannot be surmounted. Assessing feasibility may include such factors as: negotiations obtaining planning perwith the workforce; mission; securing supplies; and satisfying environmental constraints. Each of the attributes was found to be relevant to all the 10 organizations in the study, despite their lack of homogeneity. Each attribute gives a particular focus on the planning process and allows those concerned with developing planning systems to assess the effectiveness of the system on that dimension. Then, if the system appears unsatisfactory, attempts can be made to improve it by the introduction of new techniques, by the provision of or by a change in the new information, organization of the planning process. Appropriate changes will, of course, be strongly related to the and it is here that the general/ context contextual dichotomy in planning emerges. The attributes of effectiveness represent general principles of planning. To some extent, they will be relevant in all situations. Putting the principles into practice, however, depends heavily on the context and is likely to change from situation to situation. Nevertheless, some methods and techniques will be effective even in highly diverse situations. This general/contextual dichotomy can be illustrated by reference to the attribute ‘Integration’. The purpose of strategic planning is to improve strategic decision-making so that the achievement of high integration is universally desirable. How this is achieved can, and does, vary from context to context. In one organization there may be no separate planning function so that integration is automatic; in a second the planning function may be geographically placed close to the chief with considerable formal executive, and informal interaction taking place; in a third, the planning function may just coordinate and collect information, being the information arm of the board or management team. Each of these approaches can ensure that planning does not become an isolated function, but each is different yet appropriate to its context.
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Long Range Planning Vol. 16
December
An example of a ubiquitous technique would be contingency planning. This was developed in a military context, is recognized as valuable in commercial contexts, and from our observations is ripe for greater use in other parts of the public sector. In summary, the adoption of a process view of effectiveness in strategic planning has led to the proposal of a multi-attribute framework for effectiveness which has general applicability. This framework allows designers of planning processes to take a multi-faceted view of a planning process, and hence identify the strengths and weaknesses of the process. The identification ofweakness becomes the first step in the search for ways of improving the planning process. The way in which an aspect of a particular process can be improved will depend on the context, but some methods and techniques will be applicable in a variety of contexts.
Effectiveness
and Participation
Participation in strategy and decision-making is a contentious issue. There is a range of conflicting standpoints. ‘Decision-making is the prerogative of ‘All stakeholders affected by a management.’ decision have a right to participate in decisionmaking.’ In most private organizations the degree of participation of the interest groups can be controlled by one of those groups. In the public sector, wider participation often obtains, yet some organizations appear immune to outside influence. Our concern was not with what is the ‘right’ amount of participation in strategic planning but with the interaction between the extent of participation and effectiveness. What are the benefits to be gained from participation? What are the disbenefits? Can the disbenefits be avoided? To address these questions, participation was characterized in terms of: the interest groups nominally participating in the planning process; degree of involvement by those interest groups in strategic and the extent of communidecision-making; cation. A study was then made of the relationships between these participation variables and the attributes of effectiveness. As indicated in the introduction, this involved ranking the organizations in terms of each variable and attribute and carrying out a correlation analysis. In addition to those relationships suggested by the correlation analysis, we postulate a small number which were not supported by the analysis based on a priori reasoning. The overall findings were that the nominal involvement of interest groups in the planning process had no measurable impact on effectiveness. Different levels of communication and degrees of involvement in decision-making, however, did have an impact. These two variables were highly
1983
inter-related and behaved consistently with regard to the effectiveness attributes. The nature of the impact was considered to be a propensity or tendency. A greater level of participation might tend to increase effectiveness across some of the attributes. More often, the tendency was for participation to reduce effectiveness. The existence ofboth direct and inverse relationships means that a less (or more) participative process is not automatically more effective than one with greater (or lesser) levels of participation. It also means that the weaknesses in the planning process of a participative organization are likely to be different, relating to different attributes, than those in a less participative system. The organizations are, therefore, likely to be facing different kinds of problems in seeking to improve their planning systems. It was found that the effectiveness attributes directly related to participation included integration and resources planned. In more participative organizations the planning function will inevitably be well-integrated with the decision-making process. Also as participation extends throughout an organization, the possibility of some resource being overlooked diminishes. However, because the direct relationship is only a tendency, the converse does not necessarily follow. Where strategic decisions are taken by a small group of senior managers, it is possible for a planning function to be well-integrated, and it is also possible for the planning to include a full set of resources. Indeed, in the organizations included in the research project, the less participative ones had successfully integrated their planning functions, although they were less successful at including all the resources. In resource was often particular, the manpower overlooked or given scant attention in the planning process. The attributes related inversely to the participative variables included richness of formulation, depth of evaluation, treatment of uncertainty, data used, assumptions, quantification of goals, control measures and feasibility of implementation. Several of these attributes were also highly inter-related and have a strong analytical component. One factor which goes some way to explaining these relationships is that relatively simple levels of analysis tend to be adopted in the more participative systems This may be due to a conscious effort to avoid making the planning incomprehensible to the participants. If this is the case, then planners in such organizations wishing to adopt a deeper level of analysis are faced with the problem of how to communicate their findings to an audience with no great analytical facility. Difficulties of communication certainly seem to lie behind the inverse relationship between richness of formulation and participation. Communicating a variety of strategies to participants can lead to an ‘information overload’. As a result there appears to be a tendency in the participative systems to converge quickly to a single plan with alternative
Making Planning More Effective possible strategies being given scant attention. This is ironical as it could be postulated that the potential for a richer variety of strategies should increase with the number of participants. There appears to be little evidence at present of this potential being realized. The inverse relationship between participation and feasibility of implementation also seems anomalous. Again a direct relationship might have been conjectured on the grounds that the wider participation should ensure that all aspects of implementation are thoroughly explored. In this case the anomaly may be explained by the extremely effective way that the less participative organizations (in particular the private manufacturers) had explored their implementation problems.
Aspects of Effective Practice In the course of the research, various aspects stood out as not only being good examples of effective practice in their context, but also as examples of practices which deserve wider acceptance. In this section some of the most interesting aspects are presented. A fuller discussion appears in Dyson and Foster.3 Planning and decision-making in organizations is guided by objectives. These include high level objectives such as ‘the successful continuity of the business’, or ‘to retain technological leadership’. Such objectives on their own provide only a weak guidance to planners and decision-makers. An improved guidance is given where the high level objectives are supported by a set of goals or targets. Most of the organizations studied did provide such a set, although often gaps were evident or objectives were not clearly stated. The most impressive example we encountered concerned a public sector organization whose planning system was based on PPBS (Planning, Programming and Budgeting clear overall System). The system included objectives which were cascaded down through the different functions and levels of the organization to provide a fully comprehensive set of sub-objectives. These sub-objectives appeared throughout the planning documents and provided ideal guidelines for the planning. This comprehensive approach to objective setting should be a good example both to other public sector organizations and to the private sector. The nature of the objectives may change from context to context, but their value as guides to planning and decision-making does not. In general, we considered that the organizations were weak in their ability to formulate possible strategies. Two organizations were rated highly on the ‘richness of formulation’ attribute, however. One, a holding company, started off by postulating several alternative market strategies. These were
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then subjected to a number of possible phasings giving a large number of possible strategies to cope with the various scenarios which had been generated previously from different macroeconomic views of the economies in which the company operates. The other organization was a technical leader in a particular industry. It had developed a strong range of potential strategies, based on product and process innovations made possible by heavy investment in research and development. Where this attribute was less welldeveloped, a common tendency was to ‘take a view of the future’ and then explore the area around a single strategy. This tended to be linked with an assumption that no dramatic divergence from current practice need be considered. This may prove a reasonable assumption but, if and when some dramatic change in the environment does occur, such a view will ensure that no contingency plans are available. In the public sector, generation of strategies appeared to be inhibited by two factors. In some organizations it was felt that some possible futures could not be explored for political reasons. The second reason was that the bureaucratic structure of the organization simply could not cope with a range of options. This problem might be circumvented by formulating alternatives for discussion in outline only. A general problem related to formulating strategy seems to lie with the difficulty of identifying what potential problem areas should be addressed which might result in important alternative strategies for evaluation. At present, the nature of strategies that are considered and the way that they are generated is not well-understood and, in particular, planning systems tend not to include any formal mechanism for ensuring that key problems are not completely overlooked by the strategic planning process. Some research has taken place recently6 but it is still an area awaiting satisfactory resolution. The planning processes studied did not generally perform well with regard to the attribute ‘treatment of uncertainty’. This was not due to ignorance of the possible impact of uncertainty on strategic decisions, but rather to the inherent difficulty of measuring uncertainty and taking account of it within the planning process. The approach of several of the organizations was to test the sensitivity of selected strategies to changes, from their most likely levels, in certain key variables such as exchange rates, interest rates, oil price rises, demand and costs. The best practice we observed consisted of a very comprehensive and systematic included sensitivity analysis. One organization probabilities of success in winning contracts in their analysis whilst another included subjective risk economic, ratings on various socio-political, commercial and technical aspects. Another organization set out to increase its flexibility or ability to respond to change: this may be seen as another means of treating uncertainty in the planning environment.
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Long Range Planning Vol. 16
December
The development of strategies to achieve greater corporate flexibility is an area which seems to merit more prominence than it presently enjoys. Financial flexibility can be achieved by electing for low gearing-provided this is acceptable in the circumstances. Flexibility in production can be achieved by having facilities capable of producing a variety of products, or able to be run efficiently at different levels of output, while marketing flexibility may be achieved by having a diverse product range or by selling to different geographical markets. In uncertain times flexibility may be no less than the key to success or survival: hence its importance.
Summary of Results Implications
and Their
In this final section we summarize the main results set out in the earlier sections and comment briefly on their implications for the practising planner or decision maker: (i) Effectiven ess of strategic planning can be usefully characterized in terms of a number of attributes of the planning process. The set of attributes may be seen as a ‘diagnostic check list’ for use in the identification of the need for process changes. (ii) There is no single ‘ideal corporate planning system’ with a universally optimal level of participation. This reflects the highly contextual nature of the planning process. (iii) The relationships found to exist between participation and effectiveness are summarized in the following diagram:
High Participation
Tends to -
Integration Range of Resources Planned
-
Richness of Formulation Depth of Evaluation Treatment of Uncertainty Data Used Assumptions Quantification of Goals Control Measures Feasibility of Implementation
High
Low Participation
Tends to
Figure 1. Participation/effectiveness
These are examples which relationship, ‘propensity’.
relationships
of a form of weak may be described
causal as a
(iv) Two areas in which performance was found to be consistently weak amongst the sample organizations were the (richness of) formulation of alternative strategies and the treatment of un-
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certainty. It seems reasonable to suppose that such weakness might apply more widely than in the sample of organizations looked at in this study. What then may be the implications of these findings for senior managers and planners? Looking at the last point, the conclusion which suggests itself is that the areas of formulation and treatment of uncertainty are ones to which planners and decision makers must devote more attention than hitherto. As indicated earlier, it is not suggested that these are easy problems to tackle and, because of the highly contextual nature of the planning process, it is difficult to give generally applicable guidance on how to proceed. In the case of formulation, it may be that simply having an awareness of the need to focus attention in that area may be an important factor in the resolution of the problem. We would also suggest that this is an area in which the participation of as wide a group as possible within a given organization may be beneficial. To exclude the contribution of those other than top management may be to ignore a rich source of ideas. ‘Suggestion schemes’ in various forms can be useful as one of our participant organizations found, (of course, it should not be expected that the use of such schemes will provide other than a small proportion of really useful ideas)! As for the treatment of uncertainty, it seems that there are a number of useful techniques which, whilst not panaceas, are underutilized at present. One such is Decision Analysis which, whilst it certainly has defects, has the capability to provide a useful framework within which to view decision making in conditions of uncertainty.’ Turning to item (iii) above, it may be seen that participation is inversely related to the majority of our effectiveness attributes which suggests that if strategic planning is to be effective it should be maintained as the exclusive concern of top management. On the other hand, we noted in the course of our research a feeling that some increase in the level of participation (compared with the present position) may be desirable. We did not, in general, find any desire to widen the involvement in decision-making amongst interest groups but there was a note of concord on the need to improve communication in the planning process. The principal benefit anticipated by many was that wider understanding of the organization’s aims and strategies would lead to a commitment which would facilitate smooth implementation. The problem is to determine whether the inverse nature of most of the relationships shown in Figure 1 means that any such move to increase participation will lead to a reduction in effectiveness. Our belief is that this need not be so because the relationships are propensities rather than strict causal relations. This means that participation (or its elements) is only one of a number of possible influences on effectiveness. By working simultaneously on some of these other influences, it may therefore be possible to increase participation with little or no loss of effectiveness.
Making Planning More Effective Finally, throughout the research we have been clear that strategic planning is a process aimed at improving strategic decisions and not just concerned with the compilation of a strategic plan. The organizations we judged to be most effective clearly recognized this. The planning processes were supported by documentation as a necessary aid to communication, but the processes were dynamically linked to the decision-making process. In contrast, some organizations performed largescale, one-off exercises leading to a single, total plan for the next 5 years or so, which was likely to be dated by events even before it had been printed. Acknowlegment-The authors wish to acknowledge the financial support of the SSRC for the research reported on in this paper.
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References (1)
R. G. Dyson and M. J. Foster, Effectiveness in strategic planning, European Journal of Operational Research, 5. 163-l 70 (1980).
(2) R. G. Dyson and M. J. Foster, The relationship of participation and effectiveness in strategic planning, CIEBR Discussion Paper No 91, University of Warwick. Revised version to appear in Strategic Management Journal.
(3) R. G. Dyson and M. J. Foster, Strategic planning-effective practice, CIEBR Discussion Paper No 92, University of Warwick. (4)
M. J. Foster and D. N. Foster, Assessing the effectiveness of strategic planning, Omega, 10, 19-23 (1982).
(5)
R. A. Howard, An assessment of Decision Analysis, Operations Research, 28, 4-27 (1980).
(8)
M. A. Lyles, Formulating strategic problems: empirical analysis and model development, Strategic Management Journal, 2, 61-75 (1981).