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Strategic planning may be deﬁned as ‘a disciplined eﬀort to produce fundamental decisions and actions that shape and guide what an organization (or other entity) is, what it does, and why it does it’ (Bryson 1995, pp. 4–5). This deﬁnition implies that strategic planning is not a single thing, but is instead a set of concepts, procedures, and tools that must be carefully tailored to situations if desirable outcomes are to be achieved. Many authors have suggested generic strategic planning processes. Poister and Streib (1999) in a review of the ﬁeld of strategic planning and management assert that strategic planning:
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(a) Is concerned with identifying and responding to the most fundamental issues facing an organization;
(b) Addresses the subjective question of purpose and the often-competing values that inﬂuence mission and strategies;
(c) Emphasizes the importance of external trends and forces, as they are likely to aﬀect the organization and its mission;
(d) Attempts to be politically realistic by taking into account the concerns and preferences of internal, and especially external, stakeholders;
(e) Relies heavily on the active involvement of senior level managers, and sometimes elected oﬃcials, assisted by staﬀ support where needed;
(f ) Requires the candid confrontation of critical issues by key participants in order to build commitment to plans;
(g) Is action oriented and stresses the importance of developing plans for implementing strategies; and
(h) Focuses on implementing decisions now in order to position the organization favorably for the future.
It is important to highlight what strategic planning is not. Strategic planning is not a substitute for strategic thinking and acting. It may help people do that, but used unwisely it may hinder strategic thinking and acting. Strategic planning is not a substitute for leadership. At least some key actors must be committed to the process or it is bound to fail. Strategic planning is also not a substitute for an organizational or community strategy. Strategies have numerous sources, both planned and unplanned. Strategic planning is likely to result in a statement of organizational or community intentions, but what is realized in practice will be some combination of what is intended with what emerges along the way. Finally, strategic planning is not synonymous with what is called ‘comprehensive planning’ for communities in the USA, or has been called ‘structure planning’ in Europe. There may be little diﬀerence if the agency doing the comprehensive or structure planning is tied directly to governmental decision-makers. However, in practice, there may be three signiﬁcant diﬀerences.
First, the plans are often prepared to meet legal requirements and must be formulated according to a legally prescribed process with legally prescribed content. As legal instruments, these plans have an important inﬂuence. On the other hand, the plans’ typical rigidity can conﬂict with the political process with which public oﬃcials must cope. Therefore strategic plans can provide a bridge from legally required and relatively rigid policy statements to actual decisions and operations.
Second, comprehensive or structure plans are usually limited to a shorter list of topics than a government’s full agenda of roles and responsibilities. For that reason, they are of less use to key decision makers than strategic planning, which can embrace all of a government’s actual and potential roles before deciding why, where, when, and how to act.
Third, as Kaufman and Jacobs (1987) argue, strategic planning on behalf of a community is more action-oriented, more broadly participatory, more emphatic about the need to understand the com- munity’s strengths and weaknesses as well as the opportunities and threats it faces, and more attentive to inter-community competitive behavior. Strategic planning is thus typically more comprehensive than comprehensive planning or structure planning, while at the same time producing a more limited action focus.
Strategic planning also is typically distinguished from strategic management. Strategic management is a far more encompassing process ‘concerned with managing an organization in a strategic manner on a continuing basis’ (Poister and Streib 1999, p. 310). Strategic management links strategic planning and implementation by adding ongoing attention to budgeting; performance measurement, evaluation, and management; and feedback relationships among these elements.
1. Brief History Of Development And Use Of Strategic Planning
Strategic planning for organizations has primarily developed in the private sector. This history has been amply documented by others (Eden and Ackermann 1998). However, since around 1980, public and nonproﬁt use of strategic planning has skyrocketed. This experience, and a growing body of literature, have indicated that strategic planning approaches either developed in the private sector, or else strongly inﬂuenced by them, can help public and nonproﬁt organizations, as well as communities or other entities, deal in eﬀective ways with their dramatically changing environments.
In the USA—where strategic planning has proceeded the furthest—a substantial majority of municipal and state governments, and an overwhelming majority of federal agencies and nonproﬁt organizations, make use of strategic planning. Strategic planning has been principally applied to public and nonproﬁt organizations, but applications to communities have also increased substantially (Berman and West 1998). Other nations are also making increased use of strategic planning concepts, procedures, and tools for public and nonproﬁt organizations and communities (e.g., Osborne and Plastrik 1997, Salets and Faludi 2000).
When done well, strategic planning oﬀers a number of beneﬁts. Advocates usually point to four main potential beneﬁts. The ﬁrst is the ‘promotion of strategic thought and action.’ The second is ‘improved decision making,’ while the third is ‘enhanced organizational responsiveness and improved performance.’ Finally, strategic planning can ‘directly beneﬁt the organization’s people’ by helping them better perform their roles, meet their responsibilities, and enhance teamwork and expertise. There is no guarantee, however, that these beneﬁts will be achieved. For one thing, strategic planning is simply a set of concepts, procedures, and tools that must be applied wisely to speciﬁc situations. Also, even when applied wisely there is no guarantee of success.
3. Approaches To Strategic Planning
Strategic planning may be divided into ‘process’ and ‘content’ approaches. We start ﬁrst with broadly encompassing process approaches, then consider more narrowly conceived process approaches, and ﬁnally discuss two content approaches.
3.1 The Harvard Policy Model
The Harvard policy model was developed as part of the business policy courses taught at the Harvard Business School since the 1920s (Bower et al. 1993). The approach provides the principal (though often implicit) inspiration behind the most widely cited recent models of public and nonproﬁt sector strategic planning. The main purpose of the Harvard model is to help an organization develop the best ‘ﬁt’ between itself and its environment; that is, to develop the best strategy for the organization. One discerns the best strategy by analyzing the internal strengths and weaknesses of the company and the values of senior management, and by identifying the external threats and opportunities in the environment and the social obligations of the ﬁrm. Then one designs the appropriate organizational structure, processes, relationships, and behaviors necessary to implement the strategy, and focuses on providing the leadership necessary to implement the strategy.
Eﬀective use of the model presumes that senior management can agree on the organization’s situation and the appropriate strategic response, and has enough authority to enforce its decisions. A ﬁnal important assumption of the model, common to all approaches to strategic planning, is that if the appropriate strategy is identiﬁed and implemented, the organization will be more eﬀective. For the model to be useful for public and nonproﬁt purposes, it typically has to be supplemented with other approaches, such as the portfolio and strategic issues management approaches discussed below. A portfolio approach is needed because a principal strategic concern at the organizational level is oversight of a portfolio of agencies, departments, or programs. Strategic issues management is needed because much public and nonproﬁt work is typically quite political, and articulating and addressing issues is the heart of political decision making.
The systematic assessment of strengths, weaknesses, opportunities and threats—known as a SWOT analysis—is a primary strength of the Harvard model. This element of the model appears to be applicable in the public sector to organizations, functions, and communities. Another strength is its emphasis on the need to link strategy formulation and implementation in eﬀective ways. The main weaknesses of the Harvard model are: (a) it does not draw attention to strategic issues; (b) it does not consider the full range of stake-holders; and (c) it does not oﬀer speciﬁc advice on how to develop strategies, except to note that eﬀective strategies will build on strengths, take advantage of opportunities, and overcome or minimize weaknesses and threats.
3.2 Strategic Planning Systems
Strategic planning is often viewed as a system whereby leaders and managers go about making, implementing, and controlling important decisions across functions and levels in the organization. When viewed this way, strategic planning is synonymous with strategic management. Strategic planning systems vary along several dimensions: the comprehensiveness of decision areas included, the formal rationality of the decision process, and the tightness of control exercised over implementation of the decisions, as well as how the strategy process itself will be tailored to the organization and managed. The strength of these systems is their attempt to coordinate the various elements of an organization’s strategy across levels and functions. Their weakness is that excessive comprehensiveness, prescription, and control can drive out attention to mission, strategy, and innovation, and can exceed the ability of participants to comprehend the system and the information it produces (Mintzberg 1994, Roberts and Wargo 1994).
Strategic planning systems are applicable to public organizations (and to a lesser extent communities), for, regardless of the nature of the particular organization, it makes sense to coordinate decision making across levels and functions and to concentrate on whether the organization is implementing its strategies and accomplishing its mission (Boschken 1988, p. 1994). However, it is important to remember that a strategic planning system characterized by substantial comprehensiveness, formal rationality in decision making, and tight control will work only in an organization that has a clear mission, clear goals and objectives, relatively simple tasks to perform, centralized authority, clear performance indicators, and information about actual performance available at reasonable cost. While some public and nonproﬁt organizations—such as hospitals and police and ﬁre departments—operate under such conditions, most do not. As a result, most public and nonproﬁt sector strategic planning systems typically focus on a few issues, rely on a decision process in which politics plays a major role, and control something other than program outcomes (e.g., budget expenditures) (Osborne and Plastrik 1997).
3.3 Stakeholder Management Approaches
Freeman (1984) states that strategy can be understood as an organization’s mode of relating to or building bridges to its stakeholders. For Freeman, a stakeholder may be deﬁned as any individual, group, or organization that is aﬀected by, or that can aﬀect, the future of the organization. He argues, as do others who emphasize the importance of attending to stakeholders, that a strategy will only be eﬀective if it satisﬁes the needs of multiple groups. Because it integrates economic, political, and social concerns, the stakeholder model is one of the approaches that is most applicable to the public sector. Many interest groups have stakes in public organizations, functions, and communities. If the model is to be used successfully, however, there must be the possibility that key decision-makers can achieve reasonable agreement about who the key stakeholders are and what the response to their claims should be.
The strengths of the stakeholder model are its recognition of the many claims—both complementary and competing—placed on organizations by insiders and outsiders and its awareness of the need to satisfy at least the key stakeholders if the organization is to survive. Because of its attention to stakeholders, the approach may be particularly useful in working collaboratively with other organizations, since each party to a collaboration must be viewed as a stakeholder (Huxham 1993). The weaknesses of the model are the absence of criteria with which to judge competing claims and the need for more advice on developing strategies to deal with divergent stakeholder interests. A number of other encompassing process approaches to strategic planning have been developed primarily in the UK in the ﬁeld of operations research. These include Journey Making (Eden and Ackermann 1998) and Strategic Choice (Friend and Hickling 1997). They are now beginning to be used more widely around the world.
3.4 Strategic Issues Management Approaches
These approaches are process components, pieces of a larger strategic planning process. The concept of strategic issues ﬁrst emerged when practitioners of corporate strategic planning realized a step was missing between the SWOT analysis of the Harvard model and the development of strategies. That step was the identiﬁcation of strategic issues, or crucial challenges facing the organization. Many organizations now include a strategic issue identiﬁcation step as part of full-blown strategy revision exercises, and also as part of less comprehensive annual strategic reviews between major strategy revisions. In addition, many organizations have developed strategic issue management processes actually separated from annual strategic planning processes. Many important issues emerge too quickly to be handled as part of an annual process.
Strategic issue management is clearly applicable to public organizations, since the agendas of these organizations consist of issues that should be managed strategically (Eden and Ackermann 1998). The strength of the approach is its ability to recognize and analyze key issues quickly. The approach also applies to functions or communities, as long as some group, organization, or coalition is able to engage in the process and to manage the issue. The main weakness is that in general the approach oﬀers no speciﬁc advice on exactly how to frame the issues other than to precede their identiﬁcation with a situational analysis of some sort. Nutt and Backoﬀ (1995) have gone the furthest in remedying this defect. The ﬁnal two process approaches to be discussed are ‘process strategies.’ They are logical incrementalism and strategic planning as a framework for innovation. Process strategies are approaches to implementing a strategy that already has been developed in very broad outline and is subject to revision based on experience with its implementation. Other important process approaches not discussed in this research paper, due to space limitations, include total quality management (Cohen and Brand 1993), strategic negotiations (Susskind and Cruikshank 1987), collaboration (Gray 1989), and the management of culture (Schein 1992).
3.5 Logical Incrementalism
In incremental approaches, strategy is a loosely linked group of decisions that are handled incrementally. Decisions are handled individually below the organizational level because such decentralization is politically expedient—organizational leaders should reserve their political clout for crucial decisions. Decentralization also is necessary since often only those closest to decisions have enough information to make good ones.
The incremental approach is identiﬁed principally with Quinn (1980), although the inﬂuence of Lindblom (1959) is apparent. Quinn developed the concept of ‘logical incrementalism’—or incrementalism in the service of overall organizational purposes—and as a result transformed incrementalism into a strategic approach. Logical incrementalism is a process approach that, in eﬀect, fuses strategy formulation and implementation. The strengths of the approach are its ability to handle complexity and change, its emphasis on minor as well as major decisions, its attention to informal as well as formal processes, and its political realism. A related strength is that incremental changes in degree can add up over time into changes in kind (Mintzberg 1987). The major weakness of the approach is that it does not guarantee that the various loosely linked decisions will add up to fulﬁllment of corporate purposes.
Logical incrementalism would appear to be very applicable to public and nonproﬁt organizations, as long as it is possible to establish some overarching set of strategic objectives to be served by the approach. When applied at the community level, there is a close relationship between logical incrementalism and collaboration. Indeed, collaborative purposes and arrangements typically emerge in an incremental fashion as organizations individually and collectively explore their self-interests and possible collaborative advantages, establish collaborative relationships, and manage changes incrementally within a collaborative framework (Stone 2000).
3.6 Strategic Planning As A Framework For Innovation
As noted in Sect. 3.5, strategic planning systems can drive out attention to mission, strategy, and innovation. The systems, in other words, can become ends in themselves and drive out creativity, innovation, and new ventures without which the organization might become irrelevant or die. Many organizations, therefore, have found it necessary to emphasize innovative strategies as a counterbalance to the excessive control orientation of many strategic planning systems (Light 1998). The framework-for-innovation approach relies on many elements of the approaches discussed above, such as SWOT analyses and portfolio methods. This approach diﬀers from earlier ones in four emphases: (a) innovation as a strategy; (b) speciﬁc management practices to support innovation; (c) development of a mission or ‘vision of success’ that provides the decentralized and entrepreneurial parts of the organization with a common set of super-ordinate goals toward which to work; and (d) nurture of an entrepreneurial organizational culture (Light 1998, Osborne and Plastrik 1997).
The main strength of the approach is that it allows for innovation and entrepreneurship while maintaining central control. The weaknesses of the approach are that typically—and perhaps necessarily—a great many, often costly, mistakes are made as part of the innovation process and that there is a certain loss of accountability in very decentralized systems (Mintzberg 1994). Those weaknesses reduce the applicability to the public sector, in particular, in which mistakes are less acceptable and the pressures to be accountable for details (as opposed to results) are often greater (Light 1998). Many nonproﬁt organizations will also have trouble pursuing this approach because a shortage of important resources will magnify the risks of failure. ‘Process’ approaches do not prescribe answers, though good answers are presumed to emerge from appropriate application. In contrast, ‘content’ approaches do yield answers. In fact, the models are antithetical to process when process concerns get in the way of developing the ‘right’ answers. In the next two sections, we discuss two content approaches: portfolio models and competitive analysis. Other important content approaches not covered in this research paper, due to space limitations, include ‘reinventing government’ (Osborne and Gaebler 1992), systems analysis (Senge 1990), and reengineering (Linden 1994).
3.7 Portfolio Models
The idea of strategic planning as managing a portfolio of ‘businesses’ is based on an analogy with investment practice in which an investor manages a portfolio of stocks to balance risk and return. Although the applications of portfolio theory to the public sector may be less obvious than those of the approaches described above, they are nonetheless just as powerful (Nutt and Backoﬀ 1992). Many public and nonproﬁt organizations consist of ‘multiple businesses’ that are only marginally related. Often resources from various sources are committed to these unrelated businesses. That means public and nonproﬁt managers must make complex portfolio decisions, though usually without the help of portfolio models that frame those decisions strategically. The strength of portfolio approaches is that they provide a method of measuring entities of some sort (e.g., programs, proposals, or problems) against dimensions that are deemed to be of strategic importance (usually attractiveness of the option versus capability to implement it). Weaknesses include the diﬃculty of knowing what the appropriate strategic dimensions are, diﬃculties of classifying entities against dimensions, and the lack of clarity about how to use the tool as part of a larger strategic planning process.
Portfolio approaches can be used in conjunction with an overall strategic planning process to provide useful information on an organization, function, or community in relation to its environment. However, unlike the process models portfolio approaches provide an ‘answer’; that is, once the dimensions for comparison and the entities to be compared are speciﬁed, the portfolio models prescribe how the organization or community should relate to its environment. Such models will work only if a dominant coalition is convinced that the answers they produce are correct.
3.8 Competitive Analysis
Another important content approach that assists strategy selection has been developed by Michael Porter (1998a) and his associates. Porter (1998a) hypothesizes that ﬁve key competitive forces shape an industry: relative power of customers, relative power of suppliers, threat of substitute products, threat of new entrants, and the amount of rivalry activity among the players in the industry. For many public and nonproﬁt organizations, there are equivalents to the forces that aﬀect private industry. An eﬀective organization in the public and nonproﬁt sector, therefore, must understand the forces at work in its ‘industry’ in order to compete eﬀectively, and must oﬀer value to its customers that exceeds the cost of producing it. On another level, planning for a speciﬁc public function (health care, transportation, or recreation) can beneﬁt from competitive analysis if the function can be considered an industry.
In addition, Porter (1998b) points out that for the foreseeable future self-reinforcing agglomerations of ﬁrms and networks are crucial aspects of successful international economic competition. In eﬀect, not just ﬁrms or nations, but metropolitan regions (Shanghai, the Silicon Valley, New York, London, and Paris) are key economic actors. Regions interested in competing on the world stage should therefore try to develop the infrastructure necessary for virtuous (rather than vicious) cycles of economic growth to unfold. In other words, wise investments in education, transportation and transit systems, water and sewer systems, parks and recreation, housing, and so on, can help ﬁrms reduce their costs—particularly the costs of acquiring an educated labor force—and thus improve the ﬁrms’ ability to compete internationally.
The strength of competitive analysis is that public and nonproﬁt organizations can use competitive analysis to discover ways to help the private ﬁrms in their regions. When applied directly to public and nonproﬁt organizations, however, competitive analysis has two weaknesses: it is often diﬃcult to know what the ‘industry’ is and what forces aﬀect it, and the key to organizational success in the public and nonproﬁt world is often collaboration instead of competition. Competitive analysis for the public organizations, therefore, must be coupled with a consideration of social and political forces and the possibilities for collaboration (Huxham 1993, Osborne and Plastrik 1997).
It should be noted that careful studies of corporate-style strategic planning in the public and nonproﬁt sectors are few in number. Nevertheless, it is possible to reach some tentative conclusions. First, it should be clear that strategic planning is not a single concept, procedure, or tool. In fact, it embraces a range of approaches that vary in their applicability to the public and nonproﬁt sectors and in the conditions that govern their successful use. Second, while any generic strategic planning process may be a useful guide to thought and action, it will have to be applied with care in a given situation, as is true of any planning process (Christensen 1999). Because every planning process should be tailored to ﬁt speciﬁc situations, every process in practice will be a hybrid. Third, public and nonproﬁt strategic planning is well on its way to becoming part of the standard repertoire of public and nonproﬁt leaders, managers, and planners. Because of the often dramatic changes these people and their organizations confront, we can hypothesize that the most eﬀective leaders, managers, and planners at the beginning of the twenty-ﬁrst century are, and will be increasingly in the future, the ones who are best at ‘strategic’ planning.
Finally, research must explore a number of theoretical and empirical issues in order to advance the knowledge and practice of public-sector strategic. In particular, strategic planning processes that are responsive to diﬀerent situations must be developed and tested. These processes should specify key situational factors governing their use; provide speciﬁc advice on how to formulate and implement strategies in diﬀerent situations; be explicitly political; indicate how to deal with plural, ambiguous, or conﬂicting goals or objectives; link content and process; indicate how collaboration as well as competition is to be handled; and specify roles for those involved in the process. Other topics in need of attention include: the nature of strategic leadership; ways to promote and institutionalize strategic planning across organizational levels, functions that bridge organizational boundaries, and intra and interorganizational networks; and the ways in which information technologies can help or hinder the process. Progress has been made on all of these fronts, but work is clearly necessary if we are to understand better when and how to use strategic planning.
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