5 Steps of Formal Planning - Revision history

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User: The formal planning process consists of five steps: specify objectives, generate strategies, evaluate strategies, monitor results, and gain commitment. Marketing planners frequently ignore steps in the formal planning process.

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The formal planning process consists of five steps: specify objectives, generate strategies, evaluate strategies, monitor results, and gain commitment. Marketing planners frequently ignore steps in the formal planning process.

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5 Steps Planning is is a Formal (Deliberate) Planning Process used for strategic planning.

The concept of the Five Steps formal strategic planning process has been developed by J.S. Armstrong in his 1982 article “The Value of Formal Planning for Strategic Decisions”, Strategic Management Journal, Vol. 3. The author started examining the efficacy of well-known planning approaches such as Porter’s 5 Forces, SWOT Analysis, Ashridge Mission Model, Experience Curve Model, Scenario Planning, BCG Matrix, McKinsey Matrix, beside performing a review of management literature on corporate planning.

While Armstrong found that many companies of all sizes are using such tools, he did not find much evidence of a guaranteed success with their use of a formalized approach to Strategic Planning. After having carried out research on many companies, and having completed 28 validation studies to evidence his early hypothesis, Armstrong explained his simple approach to formal strategic planning and underlined under which circumstances it might work well. The five process steps are:
*Set Objectives for the long run.
*Generate Alternative Strategies.
*Evaluate alternative strategies by comparison.
*Monitor strategies implementation and results.
*Obtain a high level of commitment among the Stakeholders during each step of this process.

In order to be effective, any formal planning approach requires certain circumstances or situations, as evidenced by Armstrong:
*Major changes in a company structure such as Mergers or Acquisitions, big marketing changes or New Product Development.
*A period of strong Uncertainty such as when companies are faced with a relevant Crisis, or during important economical or political changes.
*Companies competing in highly inefficient markets.
*Projects characterized by a high level of complexity, where a synergic collaboration is required from different parts of an organization.

According to Armstrong, only under such circumstances a formal approach to strategic planning can be effective for a company success. In all other
situations it is advisable to adopt a Flexible or Emergent Strategy.<ref>What is 5 Steps Planning [https://www.12manage.com/description_armstrong_five_steps_planning.html 12 Manage]</ref>

Many corporate planners argue that each of these steps should be carried out in a formal manner (that is with operational guidelines and presumably with each step written out). The relationships among the various steps are shown in the Figure below A detailed description of each of these steps is provided in Armstrong (1983).

[[File:5 Steps of Planning.png |400px|5C's Marketing Strategy]]<br />
Source: [http://www.forecastingprinciples.com/paperpdf/evidenceonthevalue.pdf Strategic Marketing and Management]

*Specify Objectives
The specification of objectives (goals) has long been regarded as a major aspect of formal planning. The objectives should be written clearly. They should start with the ultimate objectives for the organization, then should be translated into specific measurable objectives. In addition, the objectives should be challenging.
*Generate Strategies
Formal planning calls for the generation of alternative strategies. These strategies should be written in enough detail to allow for an explicit evaluation (the next step). Two guidelines are typically recommended for the development of strategies. First, an attempt should be made to provide comprehensive strategies; that is, the plan should consider all important factors.The second guideline is that the plan contain slack resources; that is, extra time, mo ney, and facilities should be held in reserve. This recognizes uncertainty and adds flexibility to the plan.
*Evaluate Alternative Strategies
Formal planning calls for a systematic procedure for evaluating the various alternatives. First the alternatives must be screened to ensure that they do not violate any constraints. The feasible strategies should then be rated against each of the listed objectives. Various procedures can be used here, such as checklists, the Delphi technique (with internal experts), or the “devil's advocate” (where one person is given the role to challenge a proposed strategy). Traditional meetings, as commonly used in informal planning, are seldom adequate.
*Monitor Results
The plan should provide for explicit feedback at given intervals. To allow for corrective action, the ollowing should be monitored:
**changes in the environment,
**changes in the organization's capabilities and in the capabilities of its competitors (strengths and weaknesses),
**actions taken by the organization,
**actions taken by competitors, and
**results.
The monitoring of results should relate to the objectives for each stakeholder. This comparison between results and objectives can provide a basis for action. The monitoring system should have explicit performance standards so that the firm can determine whether the strategies are achieving the desired results.
*Seek Commitment
It is not sufficient to develop plans. Plans are frequently ignored. Other times they are used to rationalize a course of action previously decided. Formal planning calls for an explicit procedure for gaining commitment to the plan. This implies, for example, a need for meetings; Al-Bazzaz and Grinyer (1980) found that the perceived contribution of planning was higher when the firms had more meetings. Presumably, the need for meetings carries
through all phases of planning. Commitment to objectives is expected to be higher if the various stakeholders participate in the objective
setting process. In other words, “self-set” goals are expected to be superior to goals set by others.<ref>Explaining 5 Steps of Formal Planning [https://repository.upenn.edu/cgi/viewcontent.cgi?article=1033&context=marketing_papers J.S. Armstrong]</ref>

Formal strategic planning is not expected to be useful in all situations. With the exception that formal planning tends to be useful in situations involving large changes (Armstrong, 1982), the research has been of little help in identifying the situations in which formal strategic planning is most useful. Various authors have suggested aspects of situations where planning should be valuable. For example, planning should be useful in situations that
are complex and where uncertainty is high (e.g. the introduction of a new technical product). It should also be useful where a cooperative effort is required.

===References===
<references/>

===Further Reading===
*The value of formal planning for strategic decisions: review of empirical research [https://repository.upenn.edu/cgi/viewcontent.cgi?article=1033&context=marketing_papers J. Scott Amstrong]
*Evidence on the value of strategic planning in marketing: how much planning should a marketing planner plan? [https://repository.upenn.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1031&context=marketing_papers J. Scott Armstrong and David J. Reibstein]

@@ Line 60: / Line 60: @@
 *[[Planning Fallacy]]
 *[[Planning Game]]
-*[[IT Strategy (Information Technology Strategy)|IT Strategic Planning]]
+*[[IT Strategy (Information Technology Strategy)|IT Strategy]]
 *[[E-Strategy|e-Business Strategic Planning]]
 *[[IT Governance|Governance of Information Technology (ICT)]]

@@ Line 58: / Line 58: @@
 === See Also ===
-[[Planning Fallacy]]
+*[[Planning Fallacy]]
-[[Planning Game]]
+*[[Planning Game]]
-[[IT Strategy (Information Technology Strategy)|IT Strategic Planning]]<br />
+*[[IT Strategy (Information Technology Strategy)|IT Strategic Planning]]
-[[E-Strategy|e-Business Strategic Planning]]<br />
+*[[E-Strategy|e-Business Strategic Planning]]
-[[IT Governance|Governance of Information Technology (ICT)]]<br />
+*[[IT Governance|Governance of Information Technology (ICT)]]
-[[Enterprise Architecture|What is Enterprise Architecture Planning]]<br />
+*[[Enterprise Architecture|What is Enterprise Architecture Planning]]
-[[IT Sourcing (Information Technology Sourcing)|Information Technology Sourcing (IT Sourcing)]]<br />
+*[[IT Sourcing (Information Technology Sourcing)|Information Technology Sourcing (IT Sourcing)]]
-[[IT Operations (Information Technology Operations)|Information Technology Operations (IT Operations)]]<br />
+*[[IT Operations (Information Technology Operations)|Information Technology Operations (IT Operations)]]
-[[Chief Information Officer (CIO)|Chief Information Officer (CIO)]]<br />
+*[[Chief Information Officer (CIO)|Chief Information Officer (CIO)]]
-[[Leadership|Leadership]]<br />
+*[[Leadership|Leadership]]

← Older revision		Revision as of 13:42, 23 September 2019
Line 56:		Line 56:
	*The value of formal planning for strategic decisions: review of empirical research [https://repository.upenn.edu/cgi/viewcontent.cgi?article=1033&context=marketing_papers J. Scott Amstrong]		*The value of formal planning for strategic decisions: review of empirical research [https://repository.upenn.edu/cgi/viewcontent.cgi?article=1033&context=marketing_papers J. Scott Amstrong]
	*Evidence on the value of strategic planning in marketing: how much planning should a marketing planner plan? [https://repository.upenn.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1031&context=marketing_papers J. Scott Armstrong and David J. Reibstein]		*Evidence on the value of strategic planning in marketing: how much planning should a marketing planner plan? [https://repository.upenn.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1031&context=marketing_papers J. Scott Armstrong and David J. Reibstein]
		+
		+	=== See Also ===
		+	[[Planning Fallacy]]
		+	[[Planning Game]]
		+	[[IT Strategy (Information Technology Strategy)\|IT Strategic Planning]]<br />
		+	[[E-Strategy\|e-Business Strategic Planning]]<br />
		+	[[IT Governance\|Governance of Information Technology (ICT)]]<br />
		+	[[Enterprise Architecture\|What is Enterprise Architecture Planning]]<br />
		+	[[IT Sourcing (Information Technology Sourcing)\|Information Technology Sourcing (IT Sourcing)]]<br />
		+	[[IT Operations (Information Technology Operations)\|Information Technology Operations (IT Operations)]]<br />
		+	[[Chief Information Officer (CIO)\|Chief Information Officer (CIO)]]<br />
		+	[[Leadership\|Leadership]]<br />

@@ Line 1: / Line 1: @@
-Steps Planning is is a Formal (Deliberate) Planning Process used for strategic planning.
+Steps Planning is is a Formal (Deliberate) Planning [[Process]] used for strategic planning.
-The concept of the Five Steps formal strategic planning process has been developed by J.S. Armstrong in his 1982 article “The Value of Formal Planning for Strategic Decisions”, Strategic Management Journal, Vol. 3. The author started examining the efficacy of well-known planning approaches such as Porter’s 5 Forces, SWOT Analysis, Ashridge Mission Model, Experience Curve Model, Scenario Planning, BCG Matrix, McKinsey Matrix, beside performing a review of management literature on corporate planning.
+The concept of the Five Steps formal strategic planning process has been developed by J.S. Armstrong in his 1982 article “The [[Value]] of Formal Planning for Strategic Decisions”, Strategic [[Management]] Journal, Vol. 3. The author started examining the efficacy of well-known planning approaches such as Porter’s 5 Forces, [[SWOT Analysis]], Ashridge [[Mission]] [[Model]], [[Experience Curve]] Model, [[Scenario Planning]], [[BCG Matrix]], [[McKinsey Matrix]], beside performing a review of management literature on corporate planning.
-While Armstrong found that many companies of all sizes are using such tools, he did not find much evidence of a guaranteed success with their use of a formalized approach to Strategic Planning. After having carried out research on many companies, and having completed 28 validation studies to evidence his early hypothesis, Armstrong explained his simple approach to formal strategic planning and underlined under which circumstances it might work well. The five process steps are:
+While Armstrong found that many companies of all sizes are using such tools, he did not find much evidence of a guaranteed success with their use of a formalized approach to [[Strategic Planning]]. After having carried out research on many companies, and having completed 28 validation studies to evidence his early hypothesis, Armstrong explained his simple approach to formal strategic planning and underlined under which circumstances it might work well. The five process steps are:
 *Set Objectives for the long run.
 *Generate Alternative Strategies.
@@ Line 11: / Line 11: @@
 In order to be effective, any formal planning approach requires certain circumstances or situations, as evidenced by Armstrong:
-*Major changes in a company structure such as Mergers or Acquisitions, big marketing changes or [[Product Development|New Product Development]].
+*Major changes in a company structure such as Mergers or Acquisitions, big [[marketing]] changes or [[Product Development|New Product Development]].
 *A period of strong Uncertainty such as when companies are faced with a relevant Crisis, or during important economical or political changes.
 *Companies competing in highly inefficient markets.
-*Projects characterized by a high level of complexity, where a synergic collaboration is required from different parts of an organization.
+*Projects characterized by a high level of complexity, where a synergic [[collaboration]] is required from different parts of an [[organization]].
 According to Armstrong, only under such circumstances a formal approach to strategic planning can be effective for a company success. In all other
-situations it is advisable to adopt a Flexible or Emergent Strategy.<ref>What is 5 Steps Planning [https://www.12manage.com/description_armstrong_five_steps_planning.html 12 Manage]</ref>
+situations it is advisable to adopt a Flexible or Emergent [[Strategy]].<ref>What is 5 Steps Planning [https://www.12manage.com/description_armstrong_five_steps_planning.html 12 Manage]</ref>
 Many corporate planners argue that each of these steps should be carried out in a formal manner (that is with operational guidelines and presumably with each step written out). The relationships among the various steps are shown in the Figure below A detailed description of each of these steps is provided in Armstrong (1983).
@@ Line 26: / Line 26: @@
 *Specify Objectives
-The specification of objectives (goals) has long been regarded as a major aspect of formal planning. The objectives should be written clearly. They should start with the ultimate objectives for the organization, then should be translated into specific measurable objectives. In addition, the objectives should be challenging.
+The specification of objectives ([[goals]]) has long been regarded as a major aspect of formal planning. The objectives should be written clearly. They should start with the ultimate objectives for the organization, then should be translated into specific measurable objectives. In addition, the objectives should be challenging.
 *Generate Strategies
-Formal planning calls for the generation of alternative strategies. These strategies should be written in enough detail to allow for an explicit evaluation (the next step). Two guidelines are typically recommended for the development of strategies. First, an attempt should be made to provide comprehensive strategies; that is, the plan should consider all important factors.The second guideline is that the plan contain slack resources; that is, extra time, mo ney, and facilities should be held in reserve. This recognizes uncertainty and adds flexibility to the plan.
+Formal planning calls for the generation of alternative strategies. These strategies should be written in enough detail to allow for an explicit [[evaluation]] (the next step). Two guidelines are typically recommended for the development of strategies. First, an attempt should be made to provide comprehensive strategies; that is, the plan should consider all important factors.The second [[guideline]] is that the plan contain slack resources; that is, extra time, mo ney, and facilities should be held in reserve. This recognizes uncertainty and adds flexibility to the plan.
 *Evaluate Alternative Strategies
 Formal planning calls for a systematic procedure for evaluating the various alternatives. First the alternatives must be screened to ensure that they do not violate any constraints. The feasible strategies should then be rated against each of the listed objectives. Various procedures can be used here, such as checklists, the Delphi technique (with internal experts), or the “devil's advocate” (where one person is given the role to challenge a proposed strategy). Traditional meetings, as commonly used in informal planning, are seldom adequate.
 *Monitor Results
-The plan should provide for explicit feedback at given intervals. To allow for corrective action, the ollowing should be monitored:
+The plan should provide for explicit [[feedback]] at given intervals. To allow for corrective action, the ollowing should be monitored:
 **changes in the environment,
 **changes in the organization's capabilities and in the capabilities of its competitors (strengths and weaknesses),
@@ Line 38: / Line 38: @@
 **actions taken by competitors, and
 **results.
-The monitoring of results should relate to the objectives for each stakeholder. This comparison between results and objectives can provide a basis for action. The monitoring system should have explicit performance standards so that the firm can determine whether the strategies are achieving the desired results.
+The monitoring of results should relate to the objectives for each [[stakeholder]]. This comparison between results and objectives can provide a basis for action. The monitoring [[system]] should have explicit performance standards so that the firm can determine whether the strategies are achieving the desired results.
 *Seek Commitment
 It is not sufficient to develop plans. Plans are frequently ignored. Other times they are used to rationalize a course of action previously decided. Formal planning calls for an explicit procedure for gaining commitment to the plan. This implies, for example, a need for meetings; Al-Bazzaz and Grinyer (1980) found that the perceived contribution of planning was higher when the firms had more meetings. Presumably, the need for meetings carries
-through all phases of planning. Commitment to objectives is expected to be higher if the various stakeholders participate in the objective
+through all phases of planning. Commitment to objectives is expected to be higher if the various stakeholders participate in the [[objective]]
 setting process. In other words, “self-set” goals are expected to be superior to goals set by others.<ref>Explaining 5 Steps of Formal Planning [https://repository.upenn.edu/cgi/viewcontent.cgi?article=1033&context=marketing_papers J.S. Armstrong]</ref>
 Formal strategic planning is not expected to be useful in all situations. With the exception that formal planning tends to be useful in situations involving large changes (Armstrong, 1982), the research has been of little help in identifying the situations in which formal strategic planning is most useful. Various authors have suggested aspects of situations where planning should be valuable. For example, planning should be useful in situations that
-are complex and where uncertainty is high (e.g. the introduction of a new technical product). It should also be useful where a cooperative effort is required.
+are complex and where uncertainty is high (e.g. the introduction of a new technical [[product]]). It should also be useful where a cooperative effort is required.