This is not an infomercial

This is not an infomercial

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Use our free spring water as instructed and you will not only be cured of any and all ailments but you’ll also become debt-free.

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Do you get as tired as I do listening to infomercials and pitchsters claiming extraordinary benefits from use of their product?

I don’t want to make the same mistake when advocating use of strategic planning and strategic management.

Looking for proof

For my recent Association for Strategic Planning strategy webinar and for my next book, I have been taking a hard look at the large body of research that has been conducted on the benefits of strategic planning and strategic management.  Scores of studies have been published in recent decades, many definitive, some inconclusive.

What I’ve seen previously has generally supported strategic planning and strategic management as important for promoting survival and extending organizational longevity, producing growth, and increasing financial results.

Eureka!

Electrical_Experimenter_1916_05Good news!  In my current “deep dive” into the evidence about the effects of strategic planning, I’ve discovered the topper. I’ve uncovered a scholarly analysis I’ve not seen referenced elsewhere, conducted by a Danish researcher, published in 2010.  It’s a “meta-analysis” of 45 years of research involving 88 studies of the impact of strategic planning involving 32,472 organizations. The study concludes definitely that strategic planning improves performance, both in quantitative and qualitative terms.

The research was conducted by Anders McIlquham-Schmidt of the Aarhus School of Business at Aarhus University, Denmark.  His published work has the imposing title, “A meta-analytical review of the relationship between strategic planning and corporate performance.”  You can read it yourself at http://www.hha.dk/man/cmsdocs/WP/2010/2010_01.pdf.

For the data geeks in the crowd, here are the correlation coefficients.  For the normal people, what you need to know is that the greater the positive number (with 1.00 being the maximum possible), the greater the favorable relationship that shows that conducting strategic planning produces the resulting performance measure.

In McIlquham-Schmidt’s analysis, qualitative performance measures (non-data geeks, that means measurable stuff), had very high correlation coefficients, r.   To be specific, the analysis shows high positive correlations between planning and key quantitative measures of performance, from earnings per share to return on net worth, as follows:

  • Earnings per common share +0.79
  • Return on invested capital +0.64
  • Return on owner’s investment +0.58
  • Change in return on invested capital +0.56
  • Return on net worth +0.42

Impact is more than financial

Even better, from my perspective as a person educated in quantitative analysis but as much a “soft measures” person, the analysis also shows positive correlations between planning and performance for less tangible but very important qualitative measures, including attainment of the organization’s objectives.  (Non-data geeks, here’s an example of using a qualitative measure.  When a supervisor is asked to evaluate an employee’s attitude on a 1-5 scale, that’s using a qualitative performance measure.)

  • Attainment of profit objectives +0.51
  • Community acceptance +0.48
  • Service efficiency +0.47
  • Attainment of corporate objectives +0.44

Planning and implementation quality ignored

Watson_and_SmithLet’s note that this conclusive evidence about the efficacy of strategic planning does not even look at the the quality of the planning and implementation process that the organizations studied used.

I think we can surmise that the “better” planners and implementers were more likely to drive desired, positive results than those who indeed planned but planned and implemented poorly.  Certainly some of the underlying studies considered in McIlquham-Schmidt’s meta-analysis show this to be the case.

Debate settled?

Can we now agree that any past debate about the positive impact of strategic planning has been put to rest?   Can we get on with making smart and effective planning and implementation a core process in the organizations we care about?

I would hope so!