Sunday, January 9, 2011

Is Business Planning Overrated?

In a 2004 article in the Academy of Management Executive, entitled ‘If You Fail to Plan, Do You Plan to Fail?; Brett Matherne mentions that “faced with a multitude of forces encouraging speedy action, many firms respond to the pressure by reducing or even eliminating the time allocated to planning. In a nutshell, it seems as if the pressures of the new competitive landscape are pushing planning aside and forcing companies to simply act faster,” (p.156).

In most organisations, but especially SME’s, the availability of time, or the perceived amount of time required to complete a business task, is the single most common reason given by management for not planning properly. So is it really surprising when so much management time is spent on reactive problem solving.

Yet, in a study by Frederic Delmar and Scott Shane they found that planning before action leads to three major benefits;

1) Speedier decision making;
2) Better management of resources; and
3) Clearer identification of the action steps needed to reach important goals.

“Building on prior studies Delmar and Shane suggest that planning facilitates speedier decisions by identifying missing information about the assumptions and consequences associated with possible business actions before funds are actually committed to these actions. Second planning improves the management of resources by identifying specific action steps and the timing of their execution, allowing required resources to be brought to bear in a more effective manner. Third, planning helps focus firm management on action steps necessary to attain the stated goal and minimise distractions,” (cited in Matherne, 2004, p.156)

In fact to be effective, organisational and/or departmental planning should end up in writing and be used as a source document for periodic review. The advantages of a written plan are that it:

1) Forces the organisation to think more realistically, objectively and unemotionally about their business;
2) Leads to the questioning of past and future assumptions;
3) Makes it easier to communicate planning objectives and strategies to stakeholders, employees, suppliers (or other collaborative partners), financial backers etc;
4) Helps to ensure that all aspects of the plan are clear and integrated (something that is very often lacking);
5) Serves as a reference point when determining the effects of alternative courses of action on business operations;
6) Provides a basis for review;
7) Offers a framework for analysis, especially where objectives have not been achieved.

And while it has been acknowledged that business planning does not guarantee success, studies show that organisations which consistently undertake planning perform better than those where planning is lacking.

Why? Because an effective planning process produces a number of benefits for your organisation, including;

1) Forces an early consideration of essential goals and basic policies;
2) Helps to challenge old ideas and create a climate for new initiatives;
3) Gives you a clear focus;
4) Enables problems to be recognised that call for external sources of information and assistance;
5) Increases your objectivity by converting everything to numbers, planning prevents you viewing the future in ways that the facts do not support;
6) Increases personal motivation throughout the organisation;
7) Enables growth to be planned and associated capital requirements to be determined in advance;
8) Provides feedback of information and periodic reappraisal against established objectives and performance standards.

The benefits cited above are just as true for the large multi-national as they are for the sole proprietor and hence planning before you act is likely to reduce the amount of time management waste on reactive tasks. So it’s worth asking, how efficient is your organisational planning process and how effective do you think your current plan for 2011 will be?


Department of Economic Development. Planning Your Business Success. website:

Matherne, B.P. (2004). If You Fail to Plan, Do You Plan to Fail? Academy of Management Executive, Nov, p.156-157.

No comments:

Post a Comment