Strategic Management: Formulation and Implementation

Planning Traps

Ringbakk and Steiner have documented several reasons why formal strategic planning might fail. The following list focuses on major pitfalls of the strategic planning process as a whole:

  1. Failure to develop throughout the company an understanding of what strategic planning really is, how it is to be done in the company, and the degree of commitment of top management to doing it well.
  2. Failure to accept and balance interrelationships among intuition, judgment, managerial values, and the formality of the planning system.
  3. Failure to encourage managers to do effective strategic planning by basing performance appraisal and rewards solely on short-range performance measures.
  4. Failure to tailor and design the strategic planning system to the unique characteristics of the company and its management.
  5. Failure of top management to spend sufficient time on the strategic planning process so that the process becomes discredited among other managers and staff.
  6. Failure to modify the strategic planning system as conditions within the company changes.
  7. Failure to mesh properly the process of management and strategic planning from the highest levels of management and planning through tactical planning and its complete implementation.
  8. Failure to keep the planning system simple and to weight constantly the cost-benefit balance.
  9. Failure to secure within the company a climate for strategic planning that is necessary for its success.
  10. Failure to balance and link appropriately the major elements of the strategic planning and implementation process.

Many firms also have two problems in planning: (1) they have difficulty in producing reasonably accurate forecasts, (2) they tend to misuse the strategic plan as an operating document.

Paul, Donavan, and Taylor have proposed specific ways to overcome planning problems:

  1. Emphasize the process of planning, not the financial details of the plan.
  2. Differentiate between the more serious risks to the balance sheet and risks to the profit-and loss statement.
  3. Measure the total market and competitive market shares as accurately as possible.
  4. Gear the plan, especially spending, to the occurrence of major events, rather than to time periods.
  5. Plan to expend money step by step as events warrant, rather that up front.
  6. Build a second plan based on time periods.
  7. Decide in advance the criteria for abandoning a project.
  8. Set up a monitoring system.
  9. Make a new five-year plan every year.
  10. Avoid excessive publicity about long-term financial goals. (They may not materialize.)