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Why should managers implement a strategic planning system?

by Dan Power

Why do most medium and large sized corporations have some type of strategic planning system? Why should managers implement a systematic strategic planning system? The answer to these frequently asked questions is drawn primarily from Chapter 3 of George Steiner's (1979; 1997) classic book Strategic Planning.

The full text of Steiner's chapter "Why Systematic Strategic Planning Pays Off" is online at BarnesandNoble.COM. This Ask Dan! lists nine important reasons for implementing a strategic planning system with some short explanatory excerpts from Steiner's book.

1. Strategic planning is an essential activity for top managers

"For those top managers who do not feel that the exercise of their own intuition is the only way to make decisions, formal strategic planning must become an integral part of their managerial activities."

2. Strategic planning asks and answers questions of importance to a company

"... strategic planning asks and answers some key questions in an orderly way, with a scale of priority and urgency. Such questions as the following come to mind: What is our basic line of business? What are our underlying philosophies and purposes? What are the company's long- and short-range objectives? Are they in balance? What products are going to be obsolete? How and when shall we replace the obsolete products?"

3. Strategic planning introduces a new set of decision forces in a business

"One of the great advantages of strategic planning is that it simulates the future -- on paper. If the simulation does not result in the desired picture the exercise can be erased and started all over again. Simulation choices are reversible; not so brick and mortar decisions made without careful examination of future circumstances."

4. Strategic planning applies the systems approach

"Strategic planning looks at a company as a system composed of many subsystems. It permits the top management of the company to look at the enterprise as a whole and the interrelationship of parts, rather than deal with each separate part alone and without reference to the others."

5. Strategic planning forces the setting of objectives

"A strategic planning process will not get very far if at some point specific objectives are not set for such things as sales, profits, and market share. There is no doubt that individuals in organizations will generally strive hard to achieve clear objectives that are set for their organizations. They will strive harder if they themselves have had a hand in setting the objectives. Quite obviously, long-range objectives are more likely to be met if plans are carefully prepared to reach them."

6. Strategic planning creates a framework for decision making

"One of the more important attributes of an effective planning program is that it gives guidance to managers throughout a business in making decisions that are in line with the aims and strategies of upper management levels."

7. A strategic plan facilitates performance measurement

"Management has available standards of both a quantitative and a qualitative nature in a strategic plan. The performance of a business should not be measured solely in quantitative financial terms, as so many companies try to do. Certainly, financial results are of great importance in gauging success or failure, but nonquantitative characteristics of a business are also of high importance. Creativity, innovation, imagination, motivation, and knowledge, for example, may be reflected in financial results. But if they are not fostered, measured, and appraised by top management, a current financial success can easily disappear. A well-conceived planning program can make it possible for managers at all levels to appraise these attributes in managers under their authority."

8. Strategic planning creates a channel of communication

"A well-organized planning system is an extremely useful communications network. The planning process is a means for communications among all levels of management about objectives, strategies, and detailed operational plans, as noted previously. As plans approach completion, common understanding is generated among all levels of management about opportunities and problems important to individual managers and to the company. The choices made in the planning process are discussed in a common language and the issues are understood (or should be) by all those participating in decisionmaking. Once plans are completed and written there should be a permanent and clear record of decisions made, who is going to implement them, and how they should be carried out."

9. Strategic planning creates a sense of participation and helps train future general managers

"A number of companies have understood that the strategic planning system is a management training process."

"Improved manager motivation and morale should accompany strategic planning. By helping to formulate plans managers should have a sense of satisfaction in at least a partial creation of their own destiny. They know what is expected of them, which when achieved brings a sense of satisfaction."

References

Steiner, G. A., Strategic Planning, New York: The Free Press, 1979.

from http://barnesandnoble.com




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