Page 158 - Fundamentals of Management Myths Debunked (2017)_Flat

CHAPTER 5 • Foundations of Planning 157
Does Formal Planning Improve Organizational Performance?

DOES it PAY to PLAN?

Does it pay to plan? Or have the critics of planning won the debate? Let’s look at the
evidence.
Contrary to what the critics of planning say, the evidence generally supports the position
that organizations should have formal plans. Although most studies that have looked at the
relationship between planning and performance have shown generally positive relationships,
2
we can’t say that organizations that formally plan always outperform those that don’t. But
what can we conclude?
• Formal planning generally means higher profits, higher return on assets, and other positive
financial results.
• The quality of the planning process and the appropriate implementation of the plan probably
contribute more to high performance than does the extent of planning.
• In those organizations where formal planning did not lead to higher performance,
the environment—for instance, governmental regulations, unforeseen economic chal-
lenges, and so forth—was often to blame. Why? Because managers have fewer viable
alternatives.
One important aspect of an organization’s formal planning is strategic planning, which
managers do as part of the strategic management process.

What Do Managers Need To Know About Strategic

Management?

• The Chicago Cubs have put together a new strategic
5-2 Explain what plan that managers hope will help the team achieve
managers do in success after many decades of struggling. 3
the strategic • IBM reached a deal with The Weather Company to
exploit opportunities for providing and distributing
management weather data. This type of data partnership is part of
process. IBM’s long-term strategy. 4
• After a three-year freeze on new plant construction, Toy-
ota announced that it would spend over $1 billion to build
two new car plants, one in Mexico and one in China. 5
• For its 20th anniversary, ESPN.com announced a makeover of its highly popular sports Web
site and mobile apps. ESPN.com is the most visited sports site, with a record 126.5 million
people globally logging on the site in early 2015. 6
• Taco Bell has fired another volley in its breakfast war against Mickey D’s (McDonald’s):
the Biscuit Taco. It tastes like a biscuit but is shaped like a taco. 7
• Mercedes-Benz announced plans for its first “luxury” pick-up. Executives said the vehicle
is expected to contribute to the company’s global growth targets. 8
These are just a few of the business news stories from a single week, and each one is about a
company’s strategies. And yes . . . strategic management is very much a part of what managers do.
strategic management
What managers do to develop an organization’s
What Is Strategic Management? strategies
strategies
Strategic management is what managers do to develop an organization’s strategies. What Plans for how the organization will do what it’s in
are an organization’s strategies? They’re the plans for how the organization will do what business to do, how it will compete successfully,
it’s in business to do, how it will compete successfully, and how it will attract and satisfy its and how it will attract its customers in order to
customers in order to achieve its goals. achieve its goals