Formal Strategic Planning (FSP) has been associated with the field of strategic management from its earliest roots. These early developments include that of Learned, Christensen, Andrews and Guth (1965), Ansoff (1965), and Pearce, Freeman and Robinson (1987) who define FSP as the process of determining the mission, major objectives, strategies, and policies that govern the acquisition and allocation of resources to achieve organisational aims. These authors, and others such as Mintzberg and Lampel (1999), point out that when the term formal strategic planning is used, the intent is to convey that a firm‟s strategic planning process involves explicit systematic procedures used to gain the involvement and commitment of those principal stakeholders affected by the plan (Pearce, Freeman and Robinson, 1987).
O‟Regan and Ghobadian (2002) argued that a formal strategic planning process is a deliberate means to include factors and techniques in a systematic way to achieve specified tasks. It involves the establishment of clear goals and necessary processes to achieve it (Armstrong, 1982). Prior
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empirical studies provide a mixed picture in relation to the value of formal strategic planning. For example, a study by Robinson and Pearce (1983) showed that there was no relationship between a formal strategy and financial performance. Frederickson and Mitchell (1984) also found no relationship between planning comprehensiveness and financial performance. However, the literature does suggest that there are non-financial benefits (direct & indirect) deriving from a formal planning process. Direct competitive benefits accruing from planning formalisation processes include product quality, market share performance and new product development effectiveness (Yip, 1989). Indirect organisational benefits include enhanced understanding of corporate priorities (Hofer and Schendel, 1978; McDonald, 1982); increased executive confidence in the company‟s future (Higgins and Finn, 1977); enhanced awareness of global problems, and internal strengths and weaknesses (Al-Bazzaz and Grinyer, 1980; McDonald, 1982); and better overall coordination, implementation, and control of company strategy (McDonald, 1982; Schwenk and Shrader, 1993).
The measure of formality is also another area of inconsistency in formal strategic planning literature. Written or unwritten strategic plans were used as a surrogate measure of formality (Robinson and Pearce, 1983; Bracker, Keats and Pearson, 1988). The present research requires a more comprehensive measure of formality since the intention is to assess the formality of the strategic planning formation process and the implication of that on producing quality strategic plans and also the influence of external and internal barriers on the process, rather than on the process output „strategic plan document‟. Therefore, a more detailed definition (measure) is required.
The concept of planning formality has evolved over time along two separate (but related) dimensions. These were planning completeness (what elements were included in the plan) and commitment (how rigorously planning guidelines were followed) (Chae and Hill, 2000). Sapp and Seiler (1981) referred to the degree of completeness of the planning process by using four classes to distinguish degrees of planning formality. Kallman and Shapiro (1978) used a similar categorisation using five classes of planners (from non-planners to sophisticated planners). However, as planning became more process-oriented, researchers became more inclined to view the planning process by its component parts. For example, Armstrong (1982) identified objectives, strategy generation, strategic evaluation and monitoring results as four steps of the strategic planning process. This type of approach formalised the link between strategic planning and the
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processes prescribed by most strategic management theorists (e.g. Ansoff, 1965; Andrews, 1971; Hofer and Schendel, 1978; Prescott, 1983).
A second element of planning formality was commitment to the planning process. Early researchers (e.g. Rue and Fulmer (1973) and Karger and Malik (1975)) regarded whether plans were written or not to be valid indicators of corporate commitment to strategic planning. Armstrong (1982) saw commitment at all stages of the planning processes as essential: „formal planning calls for an explicit procedure for gaining commitment to the plan‟ (pp. 200–1); and Harju (1981) included measures of commitment as well as planning formality to assess variations in corporate performance. What the literature suggests then is that planning formality is a function of both content and commitment.
In this research, content of the strategic planning process is adopted as the measure of process formality, and is defined by the degree to which the essential steps of the planning process are performed.
2.6 Summary
In this chapter the theoretical context of the research is covered through five sections. The first section starts by defining the terms strategic planning and strategy concepts as noted by the scholars in the field. Then the evolution of strategic thinking is briefly described from the early 1940s until the present, covering budgeting method, forecasting, long-range planning, strategic planning, strategic conflict approach, resource-based perspective, and multiple perspectives. Then strategy elements: content, process, context and outcome were covered.
In the second section, public management is covered from different perspectives. The purpose of public sector organisations is described first. Then the new public management is covered in terms of theoretical background, the movement toward the adoption of NPM, and a critique of NPM. The third part of this section deals with the adoption of strategic planning as core practice in public sector, this is covered through detailing strategic planning models in public sector and listing the main benefits of strategic planning practice in public sector organisations. The fourth part of this section covers the distinction between public and private sector in terms of the characteristics of PS organisations and expected difficulties associated with strategic planning in public organization.
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The last part under the public management section gives an overview of Dubai public sector as the context of this research.
The Middle Eastern context is presented in section three. This includes the literature covered of strategic planning in the Middle Eastern and Arab countries, and the differences in management style between “East and West”. In section four, strategic planning and its relation to organisational elements such as size, age, and organisational level are detailed. In the last section the formality of the planning process as described by various scholars is explained and the different measures of formality are detailed.
In the following chapter the literature in relation to the steps of the strategic planning formation process will be covered, the strategic plan document and its quality criteria will be stated, and the related literature of external and internal barriers to the planning process will be closely examined. In Chapter Four a detailed critical analysis of literature stated in this chapter and Chapter Three will be presented while developing the research propositions.
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CHAPTER THREE
STRATEGIC PLANNING FORMATION PROCESS: STEPS, STRATEGIC
PLAN, AND BARRIERS
Introduction
Chapter Two introduced the main elements of the research project that include strategic planning, public administration, the Middle Eastern context, organisational elements, as well as the formality of the strategic planning process. The intention of this chapter is to dig deep into the component parts of the strategic planning formation process (SPFP), to define the evaluation criteria for the strategic plan document, and to identify the barriers or potential barriers to the planning process. Therefore, this chapter is divided into three sections: section one (3.1) describes the steps of the strategic planning formation process; section two (3.2) details the quality criteria for the strategic plan document; section three (3.3) determines the external and internal organisational barriers to the planning process as noted in the covered literature.