Langley (1988) the Roles of Strategic Plannng

40 Long Range Planning, Vol. 21, No. 3, pp. 40 to 50, 1988 Printed in Great Britain

00246301/88 $3.00 + .OO Pergamon Press plc

The Roles of Formal Strategic Planning

Ann Langley

Although opinion concerning the value of formal strategic planning is far from unanimous, there seems to be no doubt that many managers find it extremely useful-even essential. But what is it useful for? Basedon three case studies, this paper suggests that formal strategic planning can play a variety of znportant and useful roles peripheral to the strategy development and implementation process-roles which we label *public relations: ‘information: ‘group therapy’ and ‘direction and control’. On the other hand, planning on its own cannot produce strategic vision and direction in an organization where this is lacking.

Introduction What is formal strategic planning really useful for? The normative literature advocating planning leads one to conclude that its principal role is to help organizations make better strategies through the use of a more systematic, more logical and more ‘rational’ approach to strategic choice. For example, Henry’ describes the roles of planning as follows:

It is the function of the most fully developed strategic planning systems today to:

(1)

(2) (3) (4)

determine organizational purpose and management philosophy, identify internal strengths and weaknesses, monitor changes in the external environment, forecast future conditions and establish planning premisscs,

(5) determine threats and opportunities, (6) formulate specific goals, (7) identify and evaluate alternative policies and strategies, (8) select the best strategic plan, (9) prepare functional action plans,

(10) prepare action plans (p. 246).

So when we read that there appears to be some evidence of a correlation between the use of formal planning and performance (see Armstrong* for a thorough review of the evidence), we tend to

Ann Langley is Assistant Professor in the Department of Administrative Sciences at the University of Quebec in Montreal.

assume that better performance is caused by the development of better strategies. But as others have also noted,*+ very few writers and researchers have looked beyond the statistics to ask what roles formal strategic planning really plays in organizations and how it really contributes to strategy formation. Those that have glanced in this direction have begun to suggest that planning may play some rather different roles from those suggested in most of the normative literature. For example, based on a study of strategic decision-making in 10 large firms, Quin+ suggests that: ‘Perhaps the most important contributions of these corporate planning systems were actually in the “process” (rather than the decision) realm’ (see ref. 6, p. 53). Quinn goes on to suggest that the main roles of planning were, amongst others, to create a network of information, to force managers to focus on the future, to encourage rigorous communications about strategic issues, to raise comfort levels for managers and to confirm earlier strategic decisions. The work of Bazzaz and Grinyer7.8 based on interviews with planners in 48 U.K. companies also provides data concerning the content of planning processes and begins to suggest that planners and planning may play a variety of roles. For example, Bazzaz and Grinyer’ identify seven types of contributions of corporate planning labclled (in order of frequency of appearance) awareness of problems; strengths and weaknesses; profits and growth; information and communication; systematic resource allocation; co- ordination and control; morale and industrial relations; and quantification. This paper takes

another look at this issue using some of the results from an in-depth study of the roles of formal analysis and strategic planning in three very different organizations. We conclude that formal planning can indeed be very useful, but its contribution to strategy development is less direct than usually assumed. We identify four distinct types of roles which we label ‘public relations’, ‘information’, ‘group therapy’ and ‘direction and control’. These roles recur in different ways in the three organizations and can be recognized as underlying many of

The Roles of Formal Strategic Planning

the functions of planning identified by other writers.

Study Purpose and Methodology The data presented in this paper were collected as part of a broader general study of the role of formal analysis in organizations. The purpose of this study was to determine how, why and with what effect formal analysis was used in strategic decision- making. As these questions had been very little studied in the past, it seemed important to use a qualitative approach to obtain as rich a data base on the topic as possible. It was therefore decided to focus on understanding the role of formal analysis in strategic decision-making in three organizations in depth. The research study focused on a number of specific strategic decisions taken in each case study organization over the previous 2 years. In addition, all three organizations chosen were involved in some kind of formal strategic planning which had a more general focus-so special attention was given to examining the role of formal strategic planning. The full results of the entire study can be found in Langley.’ In this paper we restrict our attention to the data collected on the roles of formal strategic planning in the three organizations.

Three main data sources were used to evaluate the roles of formal strategic planning: documents, interviews and direct observation. Documents were of crucial importance for tracing the development of the formal planning process over time. In addition, at least 10 people in each organization were interviewed individually concerning the formal planning process. Interviews were carried out with senior managers, planners, professionals and line managers in most functional areas. They were loosely structured allowing respondents to respond in their own words and to describe as freely as possible their perceptions of the planning process. In general, interviewees were asked to give their views on the purposes of strategic planning, the roles of the CEO/planners/other managers/etc. in planning, where the orientations in the plan came from and how they felt about the planning process. Finally, the researcher was present at several planning meetings in two of the three organizations, and was thus able to observe directly how people interacted with one another and how the planning process proceeded.

Our research approach can be criticized on a number of grounds. First, its lack of structure may generate concern about the statistical reliability of our results-why didn’t we use a structured ques- tionnaire? The main reason for this is that we did not wish to impose possible answers to our questions on our respondents at this stage. We felt that there was a need to allow people to speak for themselves in their own words. In fact, as we see below, their own words were often very rich and revealing in terms of

understanding how and why formal planning is used. Secondly, the research can be criticized because of the very small sample of organizations. What general conclusions can we possibly draw from a sample of three? Perhaps not very many-except that when the three organizations are quite different and the same phenomena tend to occur in different ways in all three, we naturally begin to suspect that there may be something fundamental underlying our results, especially when we fmd echoes of these phenomena in the literature (e.g. Lorange3; Quinn’), our own experience and in that of others described to us in informal contacts and discussions. The case studies presented here represent a starting point for further reflection and research on the true roles of strategic planning.

The Three Organizations The three organizations were deliberately chosen to be very different in terms of their structure, although they had two important characteristics in common. All three were subject to some form of public sector control, and all three were medium- sized organizations having between 500 and 5000 employees. Organization A was what Mintzberg”’ calls a ‘machine bureaucracy’: a traditional type of organization in which work processes are standar- dized and management is bureaucratic and top- down. The particular organization studied was involved in offering a public service which was stable, predictable and very well understood. Orga- nization B was a large city hospital. Although hospitals too have many machine bureaucratic elements related to support functions such as food services and housekeeping, the patient care func-

\. tions require a quite different structure which Mintzberg”’ has called the ‘professional bureaucracy’. Here, the operating professionals (in this case the physicans) wield considerable power resulting in a more bottom-up style of management. The work in a professional bureaucracy tends to be complex but repetitive (generating considerable bureaucracy) and is co-ordinated largely through professional standards inculcated into members of the profession through years of training. Finally, Orga- nization C was involved in a form of artistic production. It best fits the description of an ‘adhocracy’ according to Mintzberg’s’” typology. This is an organizational structure which has many features in common with the professional bureaucracy in the sense that it requires highly trained experts to carry out the operating work. However, unlike the professional bureaucracy, work in the adhocracy is oriented towards constant innovation. Here, professionals work in multi-disciplinary teams to produce one-time outputs, and co- ordination is achieved mainly through mutual adjustment between the different specialists. This generates a very fluid, organic and ambiguous structure within the organization.

42 Long Range Planning Vol. 21 June 1988

Decision-making and Formal Strategic Planning in Organization A In Organization A (the machine bureaucracy) during the period studied, the CEO was the key strategic decision-maker and seemed to have developed a personal vision of how the organization should be, as the following quotation from an interview illustrates :

Several times, the CEO thought things out after our analyses and discussions and he came with a document which he had written himself, and said, ‘Here is the strategy’. That’s very good. That’s how things ought to be. It is not the role of strategic planning to decide on strategies. That’s the surest path to extinction.

The question then arises, if the CEO makes most of the strategic decisions, essentially working from a personal vision, then why would strategic planning be needed and what is the role of strategic planners? For annual strategic planning was an important activity in this organization, and the great majority of senior managers believed in the necessity of it. The following quotations from interviews with many different people illustrate the three key roles played by planning in this organization:

Role 1. Information: Input to the CEO’s Vision

I’ve always thought that to manage means to look ahead. So we have to install a system which focuses on the future and which brings together all the information in the company

. and the best way of doing that is by organizing a planning process.

Strategic planning is principally the CEO’s job. The planning department is just an extension of the CEO’s head. As I see it, it’s the CEO who has to set the strategic orientations of the company, but he needs experts to help him people who will look at trends, who write reports. But the key role belongs to the CEO himself.

It is interesting to note that this input role seemed to be much more important in the first years of strategic planning when the CEO was new to the organization, and a really new strategic orientation was being developed. After this, planning became much more mechanical and repetitive:

It was more important at the beginning. After that, it becomes fine tuning. And if nothing fundamental changes, we continue as before. It was more important at the beginning to set an orientation, to get to know the company, the people etc.

Role 2. Group Therapy: Communication of the Vision and Participation in it

The strategic plan has generated better participation on the part of managers. Perhaps in the past, the strategic plan was all in the CEO’s head, but it stayed there. In fact, why has strategic planning emerged to such an extent? because more and more, there is room for participation by middle managers in the orientation of the company. It’s a decision

process which is more collective, collegial . that’s strategic planning. Anyway that’s a large part of what it is.

People rely a lot on the CEO’s ideas and the work presented by staff. The elements are discussed but if there are changes, they are usually minor. But at least people say, ‘Yes, that’s what’s important and based on that, we’ll define our major objectives’. So there’s a dialogue in which people endorse the content and communicate it. (. . .). They accept it. They can’t say that they didn’t have an opportunity to participate and change things. The planning process is a way of bringing people on board.

We see that the formal process here acts as a means of obtaining input and commitment from all parts of the organization while communicating primary visions down the organization in a kind of education process which legitimized the decisions made. But the role of strategic planning goes further than simply communicating and legitimizing decisions. It also plays a key role in ensuring that they are implemented.

Role 3. Direction and Control

We formed working groups to push the planning down to very precise concrete programmes with quantifiable objectives for sales, human resources etc. A strategic planning exercise it starts from a very global analysis . and if we want to give it some weight . if we want all the analyses and efforts to produce concrete results, then they must generate precise programmes. If that isn’t done, then everyone may find the analysis very judicious but the link isn’t made with what happens in practice the following year. A programme is something very concrete which can be communicated right to the bottom of the organization. (. .). People understand the objectives and they understand the means so they have the necessary tool kit to achieve something. It goes down to very concrete things.

In the process continually, if there is one key element, this is it. . in every case, someone must be responsible. There has to be a system of follow up. If there isn’t that, there’s no system.

In fact, direction and control was very directly related to strategic planning in Organization A via a management by objectives system. The decisions in strategic plans were transformed into distinct programmes and specific objectives for individuals on which their remuneration was based:

Strategic planning, it’s an ensemble. It’s not just a cycle but the remuneration scheme and objectives are derived from it. Everything is linked together.

However, the fact that everything is linked together has disadvantages too. When a planning system becomes too control oriented, it may begin to lose its usefulness as a good source of information:

For example, people know from one year to another that what goes into the strategic plan can come back to them as an obligation they’d rather not be landed with. The human species being what it is . people can predict that winter

The Roles of Formal Strategic Planning 43

In the absence of strategic planning (and in many ways, even with it), it is essentially the individual physicians who make strategy in hospitals. Through their own decisions about who to treat and how to treat them, and through their development and investment initiatives, they determine in large part what the organization will do. Formal strategic planning did not come easily here. Physicians opposed it at first probably because they saw it as a threat to their autonomy and power in the organization. In this organization, therefore, strategic planning had to be much more participative and less directive than in Organization A. We summarize below the main roles it played.

Role 1. Public Relations: Positioning with Respect to External Organizations

will come, and faced with a process like this, there are some who are reticent about collaborating fully.

Thus, although the key strategic decisions and therefore strategy were essentially determined by the CEO, strategic planning nevertheless played important roles in this organization. In fact, during the period of study, most strategic decisions remained fairly well integrated with the strategic planning process as the CEO tended to attach his major decisions to the formal strategic plans and USC the occasion of strategic planning to focus his thinking and come up with decisions.

Decision-making and Formal Strategic Planning in Organization B In Organization B (the professional bureaucracy), the dominant direction of flow of strategic decision- making was bottom-up. The primary visions which cumulatively determined the orientation of the organization tended to come from individual physicians pursuing their profession in their nar- rowly specialized fields. A great deal of decision- making activity in this organization focused on choices about which of these initiatives should be pursued’ and encouraged, and which should be rejected. To deal with these issues, this organization had set up a formalized structure of advisory committees and peer review procedures in which priorites were determined taking into account the resources available.

The role of the administration is to take the orientations proposed in medical terms and to compare them with the resources available, and from that point make the necessary choices, and look at the possibilities of obtaining external resources to support these orientations.

Of course, certain issues had to be initiated from the top down: for example, issues concerning the possible closure or transfer of services. However even here, negotiation and persuasion between levels of the hierarchy were very important, and decisions could not easily be imposed from above. In such an environment, formal strategic planning, which implicitly appears to bring the locus of decision-making closer to the top of the organization, may be strenuously resisted:

We discussed for a whole year whether it was necessary to have a plan or not. The physicians were against it. They were on the planning committee to ensure that it didn’t happen. Their vision of planning in a hospital was . we will decide who is a good prospect and send him to the States to specialize . and when he comes back, he’ll make his own way. In other words, the clientele will adapt, the network will adapt. . what’s important is that we have the scientific superstars. . . they will decide what their priorities are. It’s for the professional physicians to say. The strategy of the hospital is just the sum of the strategies of these people. The institution has no business getting mixed up in that.

In conceptual terms, the plan is in fact directed towards the environment. It’s not an internal management plan. But it does generate a certain cohesion. It’s clear, the first time we did a plan, we had some very negative reactions from other hospitals, the government etc. They said, ‘What are you meddling in?’ But now, 5 years later everyone is hiring consultants to do strategic plans. At the time, we said, ‘Those who plan will always upset those who don’t’. In other words, we’ve let you know our position . . it’s true that it affects you. Tell us what your position is they didn’t have one. (. .). More and more hospitals are realizing that they must position themselves.

I am convinced that we should not be afraid of putting ourselves forward as the most important hospital in this field in the province.

In direct contrast with Organization A (where plans were highly confidential), the use of strategic planning as a means of publicly positioning the organization with respect to external organizations was very important in the hospital. One advantage of this approach was that the plan could focus on strategic orientations which favoured almost every medical department in the organization and would have a positive side-benefit in generating cohesion and consensus. This was particularly true of the first planning cycle in the organization. The main thrust of this plan was a recommendation that various external organizations take actions which would result in more patients coming to the hospital. Everyone was enthusiastic about this internally. The credibility of planning was in fact greatly enhanced because the external organizations in question obligingly did as was required of them over the next 5 years. However, it is difficult to tell objectively whether this was more by good luck or good planning.

Role 2. Information: Self-knowledge and Input for Strategic Visions

It is essential to look at ourselves a moment and see really where we want to be in a few years so that we can direct our efforts etc. So from opposition, I passed through a certain indifference and now I believe in it. As a director of


department, I have even begun to think of it as a valuable tool. I tell you, it makes me sick to do this kind of exercise, but I’ll do it with a certain enthusiasm because it will force

me to get to know my department. It is positive to know where WC are really. It’s useful to me, not just for the hospital. (. .). The planners play an extremely important

role in giving me access to certain data on which to base things (. .). Thats very enriching for me to have access to

that something solid, because you know what’s the point in making a plan for a given area if you fmd out

afterwards that it won’t exist

If I didn’t learn anything . that isn’t the case that isn’t true. But if I didn’t learn anything from all the documents, I would still be satisfied. There has been a very important

benefit in the sense that the departments have had to look at each of their services and find out about them and try to establish priorities.

As in Organization A, the planning process served an important role in generating information for strategic visions. However, as the quotations above indicate, this input was not only for the CEO’s vision, although this was very important, but also for senior medical department heads. In an organization where decisions are taken by a large number of people independently, one effect may be that no one quite knows what the organization is producing overall. In other words no one knows what current strategy is. This was quite clearly true in the hospital, and th c mere collection of information about what the organization had been doing in the past was seen as valuable in itself. Of course, the collection of this information is a very laborious process. We saw the pile of data that one of the medical department heads was expected to collate and synthesize for a planning committee during the second strategic planning exercise. It was about one foot high.

Role 3. Group Therapy: Consensus Building, Communication and Legitimization of Strategic Visions

In practice, the most important impact is to generate institutional cohesion. (. .). The plan enabled us to generate a new consensus in the hospital and I think that’s the primary objective even ifit’s implicit, not explicit. Because everyone

works on it it enables us to produce a new consensus.

If you ask me, ‘Could we have predicted could we have sat down at the beginning and written down the strategies?’

. probably for 90 per cent of them. For 90 per cent if not more, we could have written them in advance. But we could have made mistakes too. That would have been assuming that our perceptions were right. And I wouldn’t have wanted to take that chance. Then, there’s another aspect . the planning process . unless you’re just going to produce a public relations brochure it’s more important than that for me at any rate . . it has to take everyone with it . so people have to be involved.

As in the case of Organization A, the strategic planning process in Organization B was a way of generating participation in strategic orientations,

communicating them and legitimizing them. How- ever, it was naturally less of a top-down process than in Organization A as strategic visions were more likely to come from professionals. Even so, there is evidence that the CEO and/or a few key members of the senior medical staff who had theoretical formal authority over others played key roles in orienting the development of strategies in directions they favoured. The strategic planning process did involve considerable top-down education.

Things had to make their way. The CEO is brilliant. he orients the discussion. Dr Jones sees the limits of their

development. The CEO has very good ideas and succeeds in bringing people round.

The role of the CEO is to create the consensus. It’s a question of leadership. He’s also there to place importance on the

operation. And his opinion will count for a great deal in

determining content.

Having participated in a number of planning meetings, the researcher can vouch for the fact that the CEO’s opinion did indeed count for a great deal. But unlike Organization A, the CEO’s vision had to be negotiated vigorously and could not be imposed. In fact, though the idea of planning was supposed to be to create cohesion, this was not done easily, and in the short term, planning tended to raise tensions:

The plan won’t resolve tensions. In fact, it’s not inconceiv- able that the plan raises a certain aggressivity in the organization. I’m not willing to predict right now between who and who. But, I know that if we decide not to develop

in one area, and to pursue another, I will be blamed by one

side and not congratulated by the other.

If a plan is to be any use at all in a professional bureaucracy, it almost has to raise tensions. More- over, a strong position has to be adopted by the administration to ensure that some progress is made towards making real strategic choices. The researcher had a chance to examine planning efforts by other hospitals and they sometimes seemed to be the concatenation of shopping lists from various medical departments which did not eliminate any possibilities, make any difficult choices, or establish any clear consistent patterns. These plans may have made everyone very happy but they did not provide a very clear guide for future action. This tended to happen in our organization too to a certain extent. However, there was a strong effort by the senior management to go beyond this through persuasion and negotiation. For example, we saw the administration put forward a number of orientations in a more extreme form than they knew would be acceptable to professionals in the knowledge that they would have to negotiate backwards anyway. And the plan which was eventually approved by the Board of Directors did not receive total support from the medical staff. However, because of the opportunities given for participation in the plan at all levels, it did have a certain legitimacy.


Role 4. Direction and Control: Giving Management More Control Over Strategic Decisions In a hospital, in the absence of strategic planning, the natural process of strategy formation through the accumulation of individual decisions by physicians can lead to a situation in which nobody really knows where the organization as a whole is going-least of all the CEO. Because the rational evaluation of the developments proposed by physicians requires professional knowledge which is not always available to administrators, decisions about which ones to accept can become very d&cult, highly political and in the last analysis quite arbitrary. In fact, without some generally accepted way of determining priorities, administrators can become quite helpless to intervene in any coherent way, as they have no rational basis on which to take decisions and as professionals try to exert informal power by bypassing them. Strategic planning is seen as a way of taking some kind of managerial control over the organization. In our organization, the CEO agreed that it added up to a way of bringing decisions, which used to be taken by professionals in isolation, into the domain of collegial decision-making in which both professionals and managers had a part.

However, the question remains as to how a strategic plan can be implemented in an organization of this type where initiatives still generally come from the bottom up, and where many decisions are still being made autonomously by individual professionals in their own speciality areas. Direction and control mechanisms such as management-by-objectives programmes can be useful in administrative areas but are less easily implemented for orientations concerning professionals; in the Province of Quebec where this hospital was located, most physicians are not even on the hospital’s payroll. Mechanisms for direction and control in professional bureaucracies must often be more indirect. One important contribution of planning is that the strategic orientations developed in the plan now provide legitimate criteria on which senior managers can base their decisions of whether or not to accept development proposals in certain areas. This creates a ‘favourable prejudice’ towards certain areas and encourages people to gravitate towards them in the knowledge that resources will be forthcoming. It also forewarns those in unfavoured areas that their proposals will not be accepted.

Decision-making and Formal Strategic Planning in Organization C In Organization C (the adhocracy) over most of the period studied, the dominant direction of flow of decision-making activity was neither top-down nor bottom-up but could perhaps best be characterized as circular. For many of the most important issues, several people in the organization held strong but distinct and contradictory viewpoints. Decision-

making activity revolved around their attempts to make their own visions prevail and attempts by others to make issues go away, often by studying them. All this took place simultaneously with informal pressuring at all levels both internally and externally to the organization. With a tradition of decision-making by mutual adjustment and participation, and a CEO who was unwilling or unable to take a very strong and clear position, issues were rarely resolved internally. The organization essentially went round in circles . . . until by its own inaction, decisions were forced on it from the outside. As one interviewee expressed it: ‘We didn’t take decisions. Decisions took us.’

Unlike the other two organizations, Organiza- tion C had no commonly accepted structured approach for dealing with the major issues encoun- tered. Moreover, divergence and indecision was so prevalent and so chronic in this organization, that people not only argued vigorously about substance, but they were not even able to decide on how to approach issues. This organization had degenerated into what Mintzberg” calls a ‘political arena’. Almost inevitably, this chaotic situation eventually led to the imposition of several decisions from outside and a change in the leadership of the organization during the period studied. One of the requirements from outside in fact included the preparation of a plan.

In our discussion of Organization B, we described how management tried to use formal strategic planning as one means of regaining some kind of control over their organization and their management task. In Organization C, formal strategic planning was also attempted. However, the situation is confused by a large number of different meanings given to the term planning over the period of the research study. This is somewhat symptomatic of the confusion reigning over all issues in this organization. We attempt to disentan- gle some of this confusion here. We can in fact identify three different instances and uses of the term ‘formal strategic planning’:

(a) Instance 1: Statutory ‘Strategic Planning’ The organization had to produce a ‘strategic plan’ for the government every year. This so-called plan was essentially nothing more than a document. It was prepared by accountants and its content bore very little relationship to reality:

Before, planning was done merely to present a certain image to the government. It was decided what image was required and a text was invented to go along with it and some figures were put on it. But it didn’t bear any relationship to reality. It wasn’t done to guide action. The results diverged more and more from reality and it became more and more untenable.

(b) Instance 2: Programme Planning So-called ‘programme planning’ was first intro-


duced by management locally in one of the production areas, and its focus was on programming decisions i.e. decisions about which artistic production projects should be undertaken. Given that such decisions would cumulatively determine the pro- duct/market configuration of the organization, they were of considerable strategic importance. As in Organization B, most initiatives in this area came from professionals, leaving management the final choice as to which projects should be accepted. The planning process here played in many ways similar roles to the strategic planning process discussed for Organization B, and as in Organization B initially, the process introduced was not popular with professionals because it placed restraints on their freedom :

I remember, for example, when I announced that I was going to start to discuss with people what our priorities would be and start to come up with plans-this was in a planning meeting-one person was very upset with this. (. .). He said to me that this was a terrible thing, that the wisdom and greatness of the organization lay in the ability of artists to individually come up with projects (. .). But meanwhile, the crisis developed, and people knew that despite everything they were in trouble-and they decided to I was able to use that and say, ‘Listen, you guys, you see what’s happening. Ifwe don’t get our act together, we’re going to be in trouble, we’re going to have to start to make changes . .’

When the CEO of the organization was replaced, along with a number of other managers, the planning process originally developed locally was finally formalized as part of a global organizational policy.

(c) Instance 3: the 5 Year Plan The so-called 5 year plan was initiated when the new CEO entered his job. It was essentially this individual’s first assignment-this 5 year plan had been requested by the government to implement a new policy which concerned the entire role and future of the organization. The new CEO took the opportunity to attempt to conduct a complete strategic planning effort which was to go much further than the public relations exercise of instance 1, and was to encompass the programme planning elements of instance 2. The main issues covered by the plan were however those concerning greatly modified resource allocations to the various functions, overall organizational structure, market- ing and distribution methods, and the relationship with outside organizations. Although certain key elements of the strategic plan were dictated by the government, there was considerable scope in other areas for taking some significant strategic decisions. So an all-encompassing integrated strategic planning process was initiated probably for the first time in the organization’s history. We now examine the roles of all three instances of planning and compare them with the roles suggested for strategic planning in the other organizations.

Role 1. Public Relations Both instances 1 and 3 were initiated by the government, and therefore public relations was an important factor in both cases, even though in instance 3, the CEO attempted to go beyond this. This plan had been requested after many years of lack of confidence in the organization’s management and in many ways it was a crucial test of the new CEO, and of the organization’s ability to take the decisions required of it on its own.

I want to remove the impression that the government has always had of us that we are very good at discussing the sex of the angels, but when it comes to managing the organization, we are incapable.

Although efforts were made to undertake a planning process which was more than a mere public relations exercise, the need to demonstrate com- petence both to the government and to the Board could affect the usefulness of the plan in other areas:

Is the plan really a help in our planning as it should be. Or is it just to impress the Board? And if it’s the second, maybe some things have been exaggerated and are more or less realistic.

Role 2. Information: Input for Strategic Visions Of the three instances of planning, only instance 2 really involved any attempt to collect information from outside the organization for input into strategic visions. However, even here, the impact of this information on strategies is difficult to assess. As in Organization B, key strategic visions came from professionals rather than management, and the professionals had their own agendas:

I alternate between thinking the production planning process is absolute rubbish and not a bad idea. I think it’s valid to try and develop programmes while taking the market into account. (. .). But it must not exclude the possibility of original ideas where there’s apparently no public demand . or market analysis may not reveal it. We’ve got to be on the leading edge. My concern is that the process is becoming bureaucratic and has little to do with reality. For example, the way we work, someone will have an idea, and to get it approved he’ll bend the idea to fit it to a priority programme.

The questions raised by the last quotation strike at the heart of the issue concerning the role of strategic planning in adhocracies . . . organizations which by definition are designed to innovate. The fear expressed by interviewees was that planning which was too closely based on analytical research would restrict the creativity of professionals, and in the long run eliminate the organization’s innovative- ness, turning it essentially into a professional bureaucracy which produces routine outputs to satisfy stable needs.

In instance 3, the formal planning process as such was only marginally useful to provide input for strategic visions, as the CEO had already developed


a fairly clear strategic vision prior to the beginning of formal planning. This vision had even been written down in a published document some time previously and was seen by organization members as a kind of unofficial election platform on the basis of which the new CEO had obtained his present position. Everyone knew that this vision would be critical in the definition of formal strategy. More- over, in many ways this document was part of an unofficial planning process which had begun several months prior to the formal process.

People know what I’m looking for and I’m not going to diverge from what I said in that document. Well I’ll diverge

for some small things . but the main principles . people

know where I’m going with that. And in the organization, that helped certain people come together . . here’s someone who has a vision, so why not go with him rather

than somewhere else?

However, individual functional areas were nevertheless asked to contribute their own information in the context of the formal process. This information was actually more important in defining the parameters of secondary operational decisions in a direction and control mode than in providing input for strategic visions.

Role 3. Group Therapy: Participation in and Communication of Strategic Visions The planning processes of instances 2 and 3 in this organization were organized so that professionals could participate or at least put forward their viewpoints. However, especially for instance 3, from the beginning there was little hope of obtaining 100 per cent consensus as the plan necessarily involved a significant reallocation of resources. So communication and participation was somewhat ritualistic and top-down. At senior levels, this took place in the form of negotiation using documents. The CEO would produce a draft plan in which his strategic vision was rather overstated, and wait for people to react to it, most often in writing. He would then negotiate backwards a little, but throughout the process, he kept the initiative, and the potential for influencing the CEO’s vision in any dramatic way seemed to be limited to one or two experienced senior managers. At lower levels, participation and communication in the functional areas was carried out in very different ways in the different areas :

My staff had no input at all. That is to say I did not form a In the last three sections, we have described the roles

committee, but I told the truth to people about the general played by formal strategic planning in the three principles and there was acceptance. I know fairly well what organizations. These can essentially be summarized is going on in my area and how people feel. So there were under four headings: public relations, information, few surprises in the final document. I prefer to get a draft group therapy, and direction and control. We re- done and then discuss it. I then manipulate people less. examine the four roles briefly here:

I gave everyone a mandate to write their own report. (. . .). I included all their reports in their entirety in our document because I wanted to show the development and emotion behind all that. It’s artificial to present a short dry document

that’s not how things are in reality.

However, in the end all the participation in the world could not change the fact that some very unpopular decisions had to be made. While efforts were made to legitimize and justify these decisions through the various means described above, this never really succeeded totally. Many people were dissatisfied because they felt they had not been sufficiently consulted, while many others were dissatisfied because they had been consulted and ignored. The formal strategic planning processes in this organization were often perceived as bureaucratic rituals-this organization was divided to such an extent that ‘group therapy’ could not repair all the breaches.

Role 4. Direction and Control The management of Organization C desperately needed to take some kind of control over the organization which had been drifting without direction for many years. As in Organization B, instance 2 of planning is clearly an attempt to develop legitimate and coherent criteria for strategic choices about which production proposals to accept and which to refuse, and as in Organization B, this type of planning is a rather blunt instrument for direction and control. As indicated above ‘priority programmes’ can be interpreted in a wide variety of ways to suit the needs of individual professionals.

Instance 3 of planning had a stronger direction and control role. One should remember that the main elements of this plan did not concern the content of work by operating professionals as this was the subject of the programme planning process. It was more concerned with overall structure, and the organization of distribution methods and support functions. Direction and control in the style of Organization A was therefore very appropriate here. The orientations expressed in the plan became mandates for managers to implement, and in fact, towards the end of the process, the plan was developed into detailed action plans and budgets which were assigned to individuals for implementation. However, this organization was not used to this style of management and the challenge of implementation was enormous.

The Four Roles of Formal Strategic Planning

Role 1: public relations. In this role, formal strategic planning is intended to impress or influence out- siders. Some so-called strategic plans serve only this purpose, as occurred for a long period in Organiza-


tion C. Some organizations do not need this kind of public relations-in fact they would rather keep their strategic intentions secret as occurred in Organization A. However, especially in the public sector, this is probably a very common motivation for ‘strategic planning’. In the private sector, the same kind of role is played by subsidiaries and/or autonomous divisions who have to produce ‘strategic plans’ for their parent firms. This suggestion is confirmed by Bazzaz and Grinyer.H As suggested by the experience of Organization C, when strategic plans arc required for public relations purposes, more substantive roles for the strategic planning process may bc driven out as the focus becomes more on producing an impressive document than in developing a useful strategy. Firms which need plans for public relations purposes might do well to attempt to dissociate their internal, private formal strategic planning process from the public relations document-producing process, because the public relations orientation tends to drive out a critical perspective which may be crucial to more substantive planning.

Role 2: information. Here the formal planning process is used to provide input for strategic visions: this role most closely corresponds to the view expressed in the normative literature on planning. This role appeared to occur in all three organizations. However, it is difficult to measure its importance. For, as many of our quotations above suggest, strategic visions were derived from many informal sources too, and it is never quite clear to what extent senior managers really knew what they wanted and where they were going prior to the process, and to what extent they could really be influenced by the information collected in planning. The ambiguity surrounding this role of formal strategic planning is illustrated by the following comments :

You have to have some prior input from the direction (. .)-where do we want to go? Because if you don’t have that, the people responsible for planning, they set the wheels in motion, and they turn a bit falsely. I say, ‘Let’s start with a few conclusions .‘.

Ideas don’t come out of planning ideas are in the air. But the plan will force us to make an effort to group things together and to define these orientations more clearly. I don’t think the plan will be a surprise. For most people, its just a chance to articulate their ideas. I’ve done research work and I think there’s an analogy here. At some point, you have a done a lot of work and collected a lot of data. Then the time comes when you have to present it somewhere you don’t do anything new, but it forces you to put the data together, to synthesize it to discuss things based on the synthesis. And often, just getting the data together generates new ideas-I’m contradicting myself a bit but the strategic plan may do that. It’s not impossible that by carrying out this exercise, we may generate new ideas . . .

In fact, a great deal of information collection seemed ritualistic, especially in Organizations B and C.

Often, it seemed more oriented towards education, communication and ‘group therapy’ or direction and control than towards obtaining new input to strategic visions. In the organizations studied, senior managers and other key strategists developed rather firm strategic visions very early in the process-long before all the information was in.

Role 3: group therapy. This involves the communication of strategic visions and participation in them by people at all levels in the organization with a view to creating consensus. Based on the three organizations studied, this appears to be one of the most important, if not the most important role of formal strategic planning. In all three organizations, both top-down and bottom-up communication were important with perhaps greater emphasis on top-down communication in Organization A (the machine bureaucracy) and Organization C (instance 3) than the other cases. However, even in Organization B, top-down communication of strategic visions was very important. In fact, we believe that successful strategic planning in all organizations depends on the CEO’s ability to develop a coherent vision based on the input received, and then to sell it to the rest of the organization. As many of our interviewees indicated, the selling process is a large part of what formal strategic planning is about.

Role 4: direction and control. This is an extension of the role of strategic planning to implementation. It was very important in Organization A, with control mechanisms being fully integrated with the planning system in a ‘management-by-objectives’ scheme. In Organization C, there was some attempt to introduce direction and control elements into the 5 year plan which dealt with the more technical aspects of the organization’s operations. Organiza- tion B also developed objectives based on their plan. However, for key areas concerning physicians, and for the programme planning process in Organiza- tion C, direction and control was necessarily more indirect. Initiatives still had to come from professionals, but the plans served as a kind of filter to determine which initiatives should be favoured and which discouraged.

Conclusions It should be clear from the above that formal strategic planning and strategic planners do not make strategic decisions. People and organizations make strategic decisions, and sometimes they use strategic planning as a discipline within which to do this, or to seem to do this. Strategic planning supplies a forum for announcing, selling, negotiating, rationalizing and legitimizing strategic decisions, and it also offers means for controlling their implementation. These roles are as important if not more important than the more usually noted role of providing information to improve the content of strategy. In fact, judging by the experience of the


three organizations studied, it appears that formal strategic planning is as much a social process as a rational analytic process, although the form of the process varies somewhat with the type of organization. Lorange’ also notes the importance of this.

The literature on formal planning stresses time and again that top management support and involve- ment is crucial for its success (see for example Ringbakk12; Steiner3 etc.). Our research data sup- ports this conclusion too. However, we would go further than this. The ‘success’ of strategic planning depends on the willingness and ability of senior managers to make strategic decisions in the first place. We suspect that strategic planning is often felt necessary by managers, analysts and professionals lower down in the organization because of a leadership vacuum; people perceive that strategic decisions need to be taken, but they arc not presently being taken by the current leadership. The call for strategic planning is really a plea for leadership and direction. Because strategic planning is universally viewed primarily as a means of making strategic decisions, people imagine that a mere formal process can generate a strategy. For example, in Organiza- tion C, during its periods of chronic indecision and political crisis prior to a change in leadership, various people (including a firm of consultants) suggested the need for strategic planning. But this is the wrong solution to the problem. The CEO may agree to do it, but this will not transform him or her into a person capable of taking strategic decisions. Strategic vision from above was crucial to the planning process in all three organizations. Strategic planning cannot provide this strategic vision on its own, and is totally useless without it. In Organiza- tion A, an earlier attempt at formal strategic planning was initiated by an analyst in just such circumstances. But it did not work:

I think they wanted to get the project going, they worked with resource people in each functional area to try to get things moving like we do now . but at the time it didn’t work because it didn’t come top-down.

Formal strategic planning is useful in many ways but it cannot make strategic decisions.

Implications What does all this mean for planners, managers and management researchers? For planners, the main implication is that their role is important-but it can usually only be peripheral to strategy-making. Planners act as guardians and co-ordinators of the four roles of planning described in this paper. They supply themselves some of the information which acts as input for strategic visions, and when the information must come from elsewhere they ensure that it arrives and is collated according to sche&le. When decisions are made, planners write them down, disseminate them and in some cases elaborate

them into specific objectives which are recorded. They may then also be responsible for following up on the performance of the organization in a control mode:

First, planners are the guardians of the orthodoxy of the cycle. Something has to be started at this time and finished at this other time here is the document. That is their first role. Then they also serve a function of elaboration we have a discussion . we identify the broad outlines. They write it all down. In terms of content, they do a lot of work at the beginning for the analysis of the environment and less and less after that. (. .). They play a co-ordination role too as things have to be integrated together.

One problem which appears to afflict some people in planning roles, especially in Organizations A and B was a preoccupation with completeness and detail in collecting and evaluating information according to the previously designated schedule-a preoccupation which often seemed to get out of phase with management needs, and which probably lies at the root of many management complaints that planning is bureaucratic and irrelevant. For example, the planning process in Organization B took 2; years to complete-even when a new planner found a way to shorten the process which had originally been proposed. While senior managers and professionals were ready to put forward their visions, planners were still collecting information. While it is part of the planner’s role to stimulate reflection by bringing in information, weariness and impatience can dampen enthusiasm for planning very quickly. Planners in some organizations probably need to be more aware of the importance of the social interactive rather than formal analytic roles of planning even though their own input into the social interactive aspects of planning may be more limited and less glamorous.

For managers, we conclude that formal strategic planning is no substitute for strategic decision- making-but it can be of value if used in some of the ways suggested in this paper: to provide information on which to base strategic decisions, and to provide a forum for input into and communication of strategic visions. If it is carried out, it has to be taken seriously to be of any value at all. If senior management does not submit its decisions to it, no one else will either. One danger with formal strategic planning is that if carried out too fre- quently, it becomes mechanical and repetitive- strategic reorientations do not have to be made every year. It then loses its impact as senior managers lose interest. Of course, annual budgeting and readjustments will always be needed, but complex strategic planning processes should probably be reserved for special occasions when major strategic changes need to be considered.

For management researchers, this paper suggests several avenues for future work. First, our results need to be verified on larger samples of organizations of various types, and the relative importance of


the four roles needs to be examined. Secondly, our conclusions raise questions about the possible links between formal planning and performance. Most obviously, if a good deal of planning is done mainly for public relations purposes, its use may not be related in any way to performance. When planning is statutory, as it is for many government organizations and subsidiaries and divisions of larger firms, it may often be little more than an exercise on paper designed to impress head office. But setting this case aside, why would one expect organizations who plan to perform better than those who do not? Is it because they make better strategic decisions-or is it simply that they have better ‘group therapy’ and direction and control, to ensure that those strategic decisions are accepted and implemented? We suspect that the latter proposition may be of considerable importance. Thirdly, our case studies reveal that a wide variety of activities come under the heading of formal strategic planning. As suggested also by Armstrong,* researchers need to describe more carefully the elements of planning in conducting studies on it-it clearly may mean a variety of different things in different contexts. In particular, different types of organizations may use planning for quite different types of purposes as we noted in comparing our three organizations. The role of formal planning in professional bureaucracies is a particularly interesting research field as WC appear to have an attempt to impose a top-down procedure on a bottom-up organization-we need to examine how this works.

In summary, our case studies suggested that formal strategic planning plays four different roles in organizations: public relations, information, group therapy, and direction and control. The importance of these different roles varies with context and type of organization. However, group therapy and direction and control appeared to be at least as important, if not more important than the informa-

tional role-as the planning process is used as a forum for announcing, selling, negotiating, rationalizing and legitimizing strategic visions.

References

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