The Fall and Rise of Strategic Planning

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Table of Contents

Introduction
The Fall of Strategic Planning
Theoretical Underpinning
Practical Implications
Strengths and Weaknesses
Conclusion
References

Introduction

For almost half a century strategic planning has been a major part of the corporate world. But this is not the main argument of Henry Mintzberg when he wrote about creating strategies. Mintzberg pointed out that strategic planning has been misused by managers and executives when planning for their respective firms. Mintzberg asserts that what they are actually doing is strategic programming which is fundamentally different from strategic planning. Since the foundation of strategic planning is flawed from the very beginning there is a need to correct that and according to Mintzberg the best place to start is in redefining strategic planning to determine what it is and what it is not.

The Fall of Strategic Planning

Strategic planning as a management tool was introduced as early as the mid-1960s. But it did not take long before corporate leaders – as well as the workers and even mid-level managers – to come to realize that strategic planning did not create long lasting and significant changes to their respective companies. Mintzberg argued that the reason for this failure is due to the misconception regarding strategic planning; a misconception that led to wrong practice. This is Mintzberg’s first position with regards to strategic planning’s role in strategy making.

There is a wealth of evidence out there that supports the conclusions made by Mintzberg. For instance one study (Cowley, 1997) revealed the following problems encountered when it comes to strategic planning:

Forecast or predictions made by the management team are frequently unrealistic;
Goals are set arbitrarily without a clear link to need, means, and feasibility;
There is a tendency to select the wrong goals;
The failure to differentiate between strategic planning and operational planning. Many planners embark on strategic planning exercises using the methodologies of operational planning; and most importantly; and most importantly
Planning is regarded as an event rather than an ongoing process (Cowley, 1997).

The above-mentioned findings support Mintzberg’s claim that strategic planning has not only been misused but also abused. This is expected because there is already a fundamental error in understanding what strategic planning is all about. Thus, it is easy for planners to make the mistake of forcing a defective system to do wonders for the company. It is no longer a secret that the typical planning process “… is more about making the numbers add up … than it is about developing industry foresight” (Hamel, 1994). The long list of corporate misconduct attests to this fact.

There is nothing wrong with aspiring for greater margins of profit and improving products and services but Mintzberg cautions that companies should stop labeling these methods as strategic planning because it will merely confuse mid-level managers and the workers. But if properly understood strategic planning will not only make the company profitable but it will also assure that the organisation can sustain its competitive edge.

Theoretical Underpinning

Mintzberg was able to show that the root cause of the problem emanates from three widely held fallacies surrounding strategic planning as currently understood in the corporate world and these are:

fallacy of prediction;
fallacy of detachment; and
fallacy of formalization.

Mintzberg was adamant that no one can predict the future; even experts could not predict the future. The current global financial crisis is the proof of that. Yet if one listens to highly-paid strategists it is as if they have a “crystal ball” that they can use to see what will happen just around the corner.

With regards to the fallacy of detachment there are experts who would love to bring the idea of compartmentalization to the next level. But Mintzberg argues that this is counterproductive especially if this means isolating the planners from the workers below. More and more studies reveal that, “Inclusiveness generated more information, perspectives, and input to the process. It also generated a sense of ownership and legitimacy among the constituents who would be affected by the plan” (Smart, 1999). This will not only allow planners to gain insight regarding the operation but it will also energize the whole team, from the workers up to the managerial level.

When it comes to the third fallacy Mintzberg argues that sometimes there is a need to act before one can think. But too often the planners are thinking inside their private lairs and become oblivious to the real conditions of the outside world or even the conditions of the workplace a short distance from their offices. Thus, their plans will come across as commands that are made worse by the fact that there is no link to the current operational processes. Mintzberg adds that there is must be flexibility and a readiness to use intuition aside from merely analysing hard data.

Aside from doing the wrong thing (prediction), being isolated from those who could have contributed much to the information gathering phase of planning (detachment) and becoming rigid (formalization) another major thing that is hurting corporations is the lack of strategic thinking. Unfortunately, there is no established process that will guide strategic thinking (Robert, 1998). The same sentiment is being echoed in Mintzberg’s article.

Practical Implications

One of the most impressive insights that can be found in the article is the realization that the misuse of the concept – strategic planning – has created strategies that are actually visions rather than plans. The planners are painting a picture of what the organization should look and behave in the near future – without doing the dirty work, without consulting the people involved if the said goal is realistic or not. Moreover, the primary work of a planner is not to create strategies but to help implement the strategies formulated by corporate leaders.

Another practical implication is the realisation that leaders, managers, and workers are allowed to fail – to a certain extent. According to Purington, “Aim for success, not perfection. Never give up your right to be wrong, because then you will lose the ability to learn new things and move forward with your life” (Purington, 2003). The same can be applied to organisations. But a rigid system brought about by defective planning techniques can effectively suffocate the process of learning because according to Mintzberg formal systems could not internalise, comprehend, and synthesise.

Strengths and Weaknesses

Due to the impact of this article to the study of corporate strategy, Mintzberg was able to make a convincing argument that corporate success requires more than sophisticated planning techniques. There is a need for creativity, imagination, and intuition. There is also a need to harness the human potential residing in every employee, including the workers in the factory floor. Gary Hamel made a study of highly successful firms that used to occupy the last place in their respective industries but are now dominating the market. According to Hamel if German engineers took the time to visit Honda in its early years they would surely ridicule their early car models, but now Honda is considered a quality brand.

Mintzberg’s article also contributed in the area of information gathering. Aside from passion and a sense of purpose, one important function of planners is to get correct information and Mintzberg argues convincingly that useful information can be found in places where managers and planners least expect it. Thus, according to Mintzberg, great leaders understand that strategy making is complex and requires sophisticated, subtle and sometimes subconscious elements of human thinking. There should be no over reliance on hard data such as numbers coming from sales and marketing department and even those that are coming from the accounting department. The planners should leave their comfort zone and begin to investigate.

This thought provoking article made a significant contribution to organizational management. But if one will be forced to find fault in it then it would be in Mintzberg’s confidence that planners can be transformed from someone who merely focuses on the results and profits to someone that suddenly is eager to listen to the inputs of ordinary workers. Everyone is familiar with the overbearing, college graduate stereotype who loves to listen to the sound of his own voice. For these types of professionals, years of conditioning and training that reinforce their belief in their own importance will make it very hard to break the habit.

Herein lies the weakness of the article, because there is no assurance that specialists, hired to specifically create plans, make projections, and make changes to the overall corporate strategy will suddenly turn around and change their tactics. Moreover, it is not clear how organizations can experience a paradigm shift. Theoretically, it is possible to transform the mindset from one that uses planning to program the organization to one that encourages intuition but in the real world this is easily said than done.

Conclusion

Mintzberg made his point very clear regarding the misuse of strategic planning as a tool for corporate management. He was able to point out the fallacies that surround strategic planning that resulted in erroneous thinking. If there are misconceptions in the beginning then the byproduct of the thought process would be ineffective, substandard, and counterproductive. It is a good thing that Mintzberg was able to also present a rough guide that will help organization transition from one that misuses strategic planning concepts to one that will be able to do it correctly.

Mintzberg made it clear that instead of forcing planners to predict, to isolate themselves and to formalize strategies, it is better to accept that the strategy making process is complicated and rely not only on hard data but even other sources of information such as gossip and hearsay so that the corporate leaders will have an in-depth understanding of the real situation within the firm. It is only when they have this complete picture that they can move on to form effective strategies.

References

Cowley, M. (1997). Beyond Strategic Vision. MA: Elsevier Publishing. Web.

Hamel, Gary. (1994). Competing for the Future. MA: Harvard Business School Press. Web.

Mintzberg, H. (1994) The Fall and Rise of Strategic Planning. Harvard Business Review.

Purington, C. (2003) Built to Learn. New York: American Management Association. Web.

Robert, M. (1998). Stretegy Pure & Simple II: How Winning Companies Dominate Their Competitors. New York: McGraw-Hill. Web.

Smart, J. & W. Tierney. (1999). Higher Education. New York: Agathon Press. Web.

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