Strategic Planning Futile in a Turbulent Environment - Coursework Example

Is Strategic Planning Futile or Beneficial to Organisational Performance in a Turbulent Environment? Introduction Several of the aspects of the notion of turbulence in strategic planning, particularly those linked to the complexity of the environment, have been recognised in the initial phases of the discipline. Emery and Trist, for instance, formed a classification of environments, explaining the notion of ‘turbulent environments’ in their work on the ‘causal texture of organisational environments’ (Hurtado 2006, 175). Scholars of strategic management, such as Mintzberg and Whittington, have created and employed concepts linked to the idea of environmental complexity, such as the notion of environmental turbulence related to tempo of change and unpredictability. Other theories of environmental complexity adopt a distinct ontological model of the environment, namely the social construction of reality (Hurtado 2006). This model has been formed by K. Weick with his ideas of sense-making and performed environment, and other theorists have explained the repercussions of Weick’s ideas of strategic management (Grant 2007). In recent years, the idea of complexity has gained revitalised attention in the disciplines of Complexity Theory and Chaos Theory (Monin 2004). Also there have been other efforts indirectly or directly linked to the idea of turbulence in general. In this essay, the argument that strategic planning is useless in uncertain times will be analysed and discussed. This study will show that a firm cannot depend entirely on formal structures to create organisational strategy. Even though empirical studies indicate a positive relationship between organisational performance and strategic planning, these analyses endure several methodological weaknesses (Grant 2007). Moreover, this essay will demonstrate that due to the fact that strategic management is not a perfect approach, strategy formulation necessitates a good deal of perception and organisational performance depends partly on chance. Nevertheless, this does not mean that strategic planning as a recognised practice is useless. Strategic planning is important for first-rate and stable organisational management. Not as a way to design the direction for the future, but as a means to be capable of predicting the changeability of external forces. The Argument for Strategic Planning The argument that strategic planning, typically, has a beneficial effect on organisational performance has two premises that have to be explained before it can be evaluated: organisational performance and strategic planning (Elkin 1998). Hill and colleagues (2004) describe strategy in relation to its purpose as: “an action a company takes to attain superior performance (p.5).” Nevertheless, practical descriptions are not appropriate to evaluate the argument for strategic planning. When strategy is identified as the step(s) carried out to enhance performance, the argument that strategy enhances performance turns out to be a repetition (Lowson 2002): steps carried out to achieve better performance, typically, have a favourable effect on organisation performance (Monin 2004). In order to evaluate the argument for strategy planning, a distinct type of description is needed. Mintzberg (1979) claimed that strategic planning is an intricate concept which is not possible to explain in a brief basic definition. He refutes any description of strategy that limits it to clear, a priori courses of action and enlarges limiting definitions by considering developed, a posteriori, steadiness in decisional actions as strategy. He supports a phenomenological model and describes strategy as a “plan, ploy, pattern, position and perspective” (Mintzberg 1987, 11). The many-sided model of Mintzberg is more appropriate to evaluate the argument for strategy planning because it clarifies what strategic planning really is or can become, not what it is designed to become. Strategic planning is the recognised procedure, or group of steps, employed to establish the strategies for the firm (Wilson 2003). Nevertheless, not all strategy is obtained from a formalised procedure (Mintzberg 2000). Hill and colleagues (2004) differentiate, after Mintzberg, between emergent strategy and intended strategy. In the latter, or also referred to as the ‘formal strategic planning process’ (Sanchez & Heene 1997, 21), strategic decisions are rooted in thorough examination of internal and external influences. On the contrary, emergent strategies stemmed from corporate grassroots (Georgantzas & Acar 1995). Such strategies are not enhanced, but develop in an organisation on account of steps that the organisation adopts in response to external and internal factors (Hurtado 2006). The argument for strategy planning emphasises the implication on organisational performance of strategic planning as a standardised procedure (Hurtado 2006). The argument for strategy planning will be assessed from both approaches. Organisational performance is habitually associated with the growing shareholder value (O’Shannassy 2003). Nevertheless, organisational performance can also be assessed in terms of curbing of environmental trail, enhanced safety and health performance, improved customer satisfaction and others (Papenhausen 2006). All theorists mentioned in this paper make use of the limited explanation of organisational performance, such as financial performance. A major premise in the argument for strategy planning is that organisational performance is commonly favourably influenced by proper strategic planning (Papenhausen 2006). The researchers mentioned in this paper examined whether a positive relationship between organisational performance and strategy planning is present; the more appropriate strategic planning, the more effective and successful an organisation will be. The Argument against Strategic Planning A number of scholars place emphasis on the essence of emergent strategy formulation and overlook the use of intended strategic planning. They claim that ‘chance’ takes in a crucial role in whether a company is thriving or not (Huff, Huff & Barr 2000). As argued by Mintzberg (2009) strategy formation is the interchange between the informal, emergent strategies and formal, intended strategies, arbitrated by leadership. He stresses that strategy is not a rigid scheme, nor does it transform steadily at predetermined moments at the resolve of management. Mintzberg (2009) stresses the turbulence or unpredictability of the outside environment. A company can be situated in a secure environment for extended durations of time, without the exigency to adjust its strategy. However, at times the environment can become quite turbulent that even the most favourable planning procedures are futile due to the considerable level of volatility (Mintzberg 2009). This seems to refute the claims of Rogers and associates (1999) that firmer correlations between planning and profitability surface when organisations confront turbulent environments. Organisations that perform strongly in a volatile environment recognise that situations are in permanent unrest. Both Mintzberg and Rogers are accurate, the world is impossible to predict, but appropriate strategic planning involves conditions for this unpredictability, like scenario planning. Some scholars, such as Hamel (1996), claims that strategic planning as it is carried out in organisational management, is not premeditated whatsoever. They argue that strategy management has a tendency to be a reductionist mechanism, rooted in basic heuristics and principles, operating from the present to the future (Sanchez & Heene 1997), instead of the other way around. The process of strategic planning is mostly predictive and it is believed that the future will bear resemblance to the past, an idea that David Hume has manifested to be illogical more than two centuries ago (Monin 2004). Hamel (1996) stresses the ingenious feature of strategic management and indicates that it is not a learning mechanism that can be processed in orderly systems, but a ‘pursuit’ that should be a dissident transformation to enhance organisational performance. In order to put everything in perspective, Richard Whittington (2002) developed four distinct models of strategy: ‘the classical planning approach; the efficiency-driven evolutionary approach; the craft-like processual approach; and the internationally-sensitive, systemic approach’ (ibid, p. 36). For classicists, as argued by Whittington (2002), profitability is the greatest objective of rational and managerial planning as the way to achieve it. On the other hand, evolutionary thinkers do not depend on the ability of top management to plan and behave in a rational way. Rather than relying on managers, they think that markets will establish capitalisation of profit and not the managers (Whittington 2002). No matter what techniques the managers will employ, the optimal performance will be the ones that will always live on. Rational strategies are not the groundwork for this model because it is ‘evolution that is nature’s cost-benefit analysis’ (ibid, 43). Similar to the Evolutionary model the Processual model of strategy does not agree with rational creation of strategy by proponents of the Classical school (Hill et al. 2004). Nevertheless they do not subscribe to the evolutionary approach either of relying the profit-capitalisation performance on the market. According to them, markets and firms are troubled with turbulence and disorder (Hill et al. 2004). The most favourable processual step is not to persevere for the best but to operate within what reality presents (Grant 2007). In a quite similar way, proponents of the systemic model argue that the organisation has the capacity to plan and behave productively (Monin 2004). Economic activity, as claimed by them, cannot be detached from social units such as religion, government, or family. These social forces affect the strategies and objectives of a systemic model and explain what the appropriate behaviour is for their members (Monin 2004). By proposing these typologies of strategy-making, Whittington has initiated a holistic view of the usefulness of strategic planning in uncertain or turbulent environments. Reconciling Conflicting Arguments Hill and colleagues (2004) assert that, even though ‘chance’ may be a basis for the success of an organisation in specific instances, it is an unpersuasive clarification for the unrelenting accomplishment of an organisation. They experience difficulty in envisioning how continued excellence may lead to anything other than deliberate attempt (Hill et al. 2004). Nevertheless, there are numerous cases of how ‘chance’ has favourably affected the direction of organisations remarkably, and the other way around how turbulent external situations have adversely affected the performance of an organisation. Existing empirical evidence reveals a positive relationship between the level of intended strategic planning and organisational performance in turbulent times (Grant 2007). Nevertheless, this does not verify a causal connection between organisational performance and strategic planning in uncertain environments. From an evolutionary point of view, as aforementioned, just those organisations that retain an optimal performance will live on. Current studies did not include an assessment of unsuccessful organisations and their strategic planning (Hurtado 2006). Moreover, studies concentrate on strategies that have been implemented. Mintzberg (2000) asserts in this case that implemented strategies are consistently a mixture of formal and informal strategies. Reflecting Mintzberg’s (2009) classification of strategy formulation, the affirmative relationship between organisational performance and strategic planning in turbulent environments is not merely rooted in intended, formal, strategy. Informal, emergent strategy, and hence luck or chance strategy formulation, fulfil a vital function in attaining good performance (Wilson 2003). This also clarifies the apparent conflict between Mintzberg and Rogers concerning the effect of turbulent environments. Whittington (2002) acknowledges the mutual value of emergent and intended strategy and emphasise that management has to identify the emergent process and mediate when necessary. Although these strategies develop without undergoing the formal procedure, management has to assess these and choose those that adapt to the organisation’s vision. Hart (1992) sums up the debate between advocates of rigid intended planning and those that emphasise the weaknesses of this approach in turbulent environments. He talks about intended planning as the rational approach to strategy formulation. The rational approach appeals to take into account all existing alternatives, determine and assess all the implications of each option and afterwards choose the appropriate alternative (Hart 1992). Scholars criticising this model assert that organisations can attain only imperfect rationality due to individual cognitive confines, predispositions and heuristics in individual judgment (Wilson 2003). Hart (1992) recommends an integrated model of strategy formulation. Hart (1992) claims that earlier research on the issue has concentrated on a specific subject area and has fell short in capturing the entire array of the concept of strategic planning. A consolidated model of strategic planning is needed to acquire the entire advantages. Strategic planning will not routinely favourably affect organisational performance when initiated it necessitates consistent modification to confront unpredictable or turbulent environments. Conclusions This essay has analysed and discussed the issue whether strategic planning has, mostly, been useful to organisations facing turbulent environments. It has been asserted that this is certainly the case, but an organisation cannot depend solely on intended strategy planning to favourably influence organisational performance. Even though studies have shown a positive relationship between organisational performance and strategic planning, it has not verified a positive correlation between intended strategic planning and enhanced organisational performance in turbulent environments. However, this does not imply that strategic planning is a useless process in uncertain times. Even in unknown environments a direction has to be chosen, although there are no guidelines for direction. Strategic planning is important for guaranteeing sustained superior organisational performance. Only organisations that employ some kind of strategic management will live on. It should not be a strategy as a rational approach to plan the direction for the future, but as a storyline between the environment and the organisation, predicting the turbulence of external forces. References Elkin, P., 1998. Mastering Business Planning and Strategy: The Power of Strategic Thinking. London: Thorogood. Georgantzas, N.C. & Acar, W., 1995. Scenario-Driven Planning: Learning to Manage Strategic Uncertainty. Westport, CT: Quorum Books. Grant, J.H., 2007. Advances and Challenges in Strategic Management. International Journal of Business, 12(1), 11+ Hamel, G., 1996. Strategy as revolution. Harvard Business Review, 69-82. Hart, S.L., 1992. An Integrative Framework for Strategy-Making Processes. Academy of Management Review, 17(2), 237-351. Hill, W., Jones, G.R. & Galvin, P., 2004. 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