The Importance of Strategic Planning & Decision Making in Achieving Organizational Objectives

Planning, in general term, is –

the most important function of management, which dictates the current state or position of an organization and where the management wants it to see in a future state whereas decision making is action oriented that involves a strong commitment to the actions necessary to make the plans successful (Weihrich and Koontz, 2005). Smith (1996) specifies that decision making involves making the best selection among the available choices that enables managers going for an effective decision making through setting organization’s goals and objectives, carrying on the tasks needed to accomplish the objectives by ensuring the commitment of the organizations’ people towards the organizations’ goals. A well number of scholars have put forward planning and decision making in the same construct.

However, the work of Ansoff (1977 cited in Mintzberg, 2000) provides a more viable characterization of planning that integrates strategy and decision making. According to author (p.8-9), planning is

… the choice of strategy and the formulation of policy chiefly as a decision process: first goals are established, after which (using a series of analytical techniques) alternatives are evolved and (still using analytical techniques) a choice made among them, possibly after some adjustments in the original goals.

 

Nevertheless, managers often find it complicated and tricky to get the plans and decisions work for them according to their expectations due to the lack of strategic involvement (Mintzberg, 1979). The above statement is advocated by Bryson (1995) who spells out that leaders, managers and planners must think and act strategically in order to get the desired result from the planning process and therefore, planning must be strategic. Bryson (1995, pp. 4-5) steps ahead and specifies that strategic planning provides the necessary concepts, measures and apparatus to help think and act strategically and defined strategic planning as

… a disciplined effort to produce fundamental decisions and actions that shape and guide what an Organization is, what is does and why it does it.

 

Strategic planning is not only important to get the desired output but also to make plans and decision effectively and manage tasks efficiently in the turbulent business environment where changes are occurring in a continuous rate (Smith, 1996). The above statement is advocated by Bhushan and Rai (2004) who spell out that managers need to be aware of the various environmental issues of business that affect the strategic planning and decision making in this highly uncertain business world and must be able to understand all the controllable and uncontrollable parameters while planning and decision making. However, the rate of changes in the forces leave managers very little time to put forward a well balanced planning and decision making.

Advancement in technology is one of the forces that have a very high impact on strategic decision making and planning. The progression in technology has faster the process of product development process, facilitates and paces up the research and development process, has brought up a highly developed eservices, ecommerce and e-governance, has created a very advanced knowledge management system for the companies and the like (Ionone et al., 2009). For example, Nokia is market leader in producing mobile phone. The company produces and offers a variety of cell phones with innovative features on a continuous basis to capture the market and to meet the needs of the customers. The force that makes it happen for them is the highly advanced technology. The company has a well rich knowledge management system which facilitates the transfer of knowledge within the company, help managers able to grasp information about the market (in terms of customer needs and competitors actions); has a very advanced research and development centre for product development to meet the demands of the market and so on. This provides the company a competitive over other companies such as Sony Ericsson, LG, Siemens, Samsung and the like (Dittrich and Duysters, 2007). Technological progression provides the company an edge over other competitors because of the top management’s ability to response to the changes quickly, to exploit the technology effectively and to think, plan, act and make decisions effectively and strategically as Hedelin and Allwood (2002) point out that the advancement in technology enables managers making strategic decisions faster because of the development in information and communication technology and computerized planning and decisions support system that help the managers making quick decisions and plan in a very short period of time in this rapidly changing business.

Another important factor that makes planning and decision making increasingly difficult for management is the governance of the institution or organization itself. According to McClure (2003), general characteristics of the organization, the nature of business the organization is involved in, the structure of the organization, the leadership and management style of the organization’s top management, the culture inhibits within the organization, the formality of planning and decision making and the like entails the features of governance. For illustration, employees are powerless and incapable to use initiatives by reason of the repetitive nature of tasks, which is certainly discouraging for them to think and perform well and thereby may hamper the achievement of organizational objectives in a highly centralized bureaucratic structure (Tiernan et al., 2002). The above example justified the proposition of Mintzberg (1979) who indicates that the structure of the organization plays an imperative role in strategic planning and decision making for managers. Furthermore, various styles of management are emerging as a result of the rapid development in management discipline and organizations have or are adopting various kinds of management styles based on the structure of the organizations. The variety in management styles dictates the relationship between managers and employees and causes various problems for managers. For example, Medvedeva (2006) denotes that the authoritarian management style is seen as a major drawback in transitioning Russian economies as Russian business enterprises are moving from an old Soviet style of management (authoritarian) to a creative and flexible style of management, which is a more market oriented management practice.

Ethics is another important issue in strategic planning and decision making. Ethics, if not incorporated, in the strategic planning and decision phase and if not considered by managers as an important factor may lead to poor image and performance for the company (Ferrell and Hartline, 2007). For example, Primark is alleged of unethical practices in its business for not having a fair trade agreement with its suppliers in developing countries, especially in Bangladesh that saw a very low wage paid to the workers and the work environment is not complacent. Furthermore, the company is accused of not having a code of conduct and selling environmentally damaging PVC products and the like (Armstrong, 2008).

Others factors like global economy, the emergence of knowledge management system, culture and diversity and the like have a profound impact on the strategic planning and decision making process. For example, the uncertainty in the global business environment due to the current global economic crisis cause the most successful automotive company, Volkswagen Group, a loss in their operating profit in the first quarter of 2009 and the case is not different for other automotive companies (Volkswagen, 2009).

References:

• Armstrong, L. (2008), The dilemma of ethical clothing at Primark, June, [online], Available: http://women.timesonline.co.uk/tol/life_and_style/women/fashion/article4150771.ece.
• Basu, R., (2001), “New criteria of performance management”, Measuring Business Excellence, 5, 4, pp. 7-12.
• Bhushan, N. and Rai, K. (2004), Strategic Decision Making, Springer London Ltd., England.
• Bryson, J. M. (1995), Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, Jossey –Bass Publishers, San Francisco.
• CIPD (2007), Change Management, Chartered Institute of Personnel and Development,[Online],Available:http://www.cipd.co.uk/subjects/corpstrtgy/changemmt/chngmgmt.htm?IsSrchRes=1.
• Coulson- Thomas, C. (1997), “The Future of the Organizations: Selected Knowledge Management Issues”, The Journal Of Knowledge Management, Vol. 1, No. 1, pp. 15-26.
• Dittrich, K. and Duysters, G. (2007), “Networking as a means to strategy change. The case of open innovation in mobile telephony”, Journal of Product Innovation Management, 24(6), pp. 510-521.
• Ferrell, O. C. and Hartline, Michael D. (2007), Marketing Strategy, Thompson South- Western.
• Hedelin, L. and Allwood, C. M. (2002), “IT and Strategic Decision Making”, Industrial Management and Date System, 102(3), 125-139.
• Ionone, Christos A., Panagiotopoulos, P. and Stergioulas, L. (2009), “Roadmapping as a Collaborative Strategic Decision-Making Process: Shaping Social Dialogue Options for the European Banking Sector”, World Academy of Science, Engineering and Technology, 54 [Online], Available: http://www.waset.org/journals/waset/v54/v54-136.pdf.
• McClure, P. A. (2003), “Organizing and managing information resources on your campus”, Jossey-Bass, San Francisco, CA.
• Medvedeva, T. A. (2006), “Innovative Influence”, Kybernetes, Vol. 35, No. 7/8, pp. 1126-1135.
• Mintzberg, H. (1979), The Structuring of Organizations: A Synthesis of Research, Prentice-Hall, Englewood Cliffs, NJ.
• Mintzberg, H. (2000), The rise and fall of strategic planning, Pearson Education Limited, Harlow.
• Smith, J. (1996), Planning and Decision Making: An Active Learning Approach, Blackwell Publishers, Oxford.
• Tiernan, S. D., Flood, P. C., Murphy, E. P., and Carroll, S.J. (2002), “Employee Reactions to Flattening Organizational Structures”, European Journal of Work and Organizational Psychology, Vol. 11, No. 1, pp. 47–67.
• Volkswagen (2009), Investor Relations, Volkswagen, [Online], Available: http://www.volkswagenag.com/vwag/vwcorp/info_center/en/news/2009/05/AAK_April.html.
• Weihrich, H. and Koontz, H. (2005), Management: A Global Perspective, 11th Edition, McGraw-Hill Education, New York.


Posted by: Farid Ahmed
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