Printer Friendly

Top management involvement and strategic planning system performance: a validation study.

This paper reports the results of a study undertaken to determine significant differences between effective and ineffective Strategic Planning Systems (SPS). The study focused on involvement of top management or the chief executive officer in a company's strategic planning system and the impact of their involvement on the effectiveness of a company's SPS.

Using data from 63 U.S. electronic computing equipment manufacturers, the study concluded that significant differences in the roles and degree of involvement of top management (or the CEO) were strongly associated or significantly correlated with SPS's effectiveness. The study, therefore, recommended a high degree of top management involvement in the following aspects of SPS: * the development of organization climate

which supports strategic planning efforts; * clear definition of the organization's mission; * formulation of quantified goals or objectives

using the strategic plans to evaluate

managerial performance; and * acceptance of strategic planning as a major

responsibility that should not be delegated to

subordinates or planning staff.


While strategic planning as an effective management tool has received considerable and deserved attention of researchers and managers over the last two decades, much of this attention has been focused on establishing the legitimacy of SPS by linking it to financial profitability and growth. (Ansoff, et al, 1970; Thune and House, 1970; Fulmer and Rue, 1974; Kudla, 1980; Greenley, 1986; rhyne, 1986; Ramanujam and Venkatraman, 1987). Even though results from these studies and others have not produced consistent results, they have established the legitimacy of strategic planning as an effective management tool (Leontiades and Tezel, 1980). Therefore research should now examine how to make the planning systems useful to executives by improving the efficiency of the process (Schaffir, 1990).

There is no better starting point than the design and implementation of the Strategic Planning Systems (SPS). By definition, SPS is a set of interrelated organizational task definitions and procedures for seeing that pertinent information is obtained, forecasts are made, and strategic choices are addressed in an integrated, internally consistent, and timely fashion (Grant and King 1982, p. 4).

A key variable in the design of an effective strategic planning system is the role of top management or the chief executive (CEO). Throughout the process, from long-range planning to strategic management, various roles and degrees of involvement have been prescribed for management. These range from a limited role to total involvement. (Pennington, 1972; Kudla, 1976; Hall, 1977; Steiner, 1979; Lorange, 1980; Forman, 1988, Pinnell, 1986; Eigerman, 1988; Shanks, 1989). Perhaps due to the multiplicity of these roles, numerous demands on the CEO's time, and increasing complexity of most organizations, "Top management involvement in the strategic planning process is too often limited to little more than basic allocation of corporate resources among previously selected options. It is time to reassess top management's role in SPS and its contribution to the strategic management process. For the CEO's involvement to have greater effects, he/she should enter the arena at an early stage, . . ." (Hunsicker, 1980). Nevertheless, little has been done to find empirical evidence establishing whether the prescribed roles actually contribute to the effectiveness of an organization's SPS and overall performance.

Purpose of Study

This study surveyed selected companies in the electronic computing equipment manufacturing industry that utilize SPS to achieve the following objectives:

1. To determine top management perception of strategic planning system effectiveness.

2. To identify areas where significant differences exist between SPS that are considered effective and those that are not, with respect to the degree of top management involvement.

3. To determine if there is a significant correlation between the prescribed (normative) roles of top management and SPS effectiveness.

Study Design and Methodology

A 19-item questionnaire was constructed with eight questions addressing the roles of top management or the CEO as prescribed in previous works of Steiner (1979), Lorange, (1980) and Forman, (1988). eleven questions pertaining to direct measures of SPS effectiveness were drawn from the works of Steiner (1979), Henry (1979), and Forman (1988).

The questionnaire was mailed to either the CEO or the executive responsible for strategy formulation in 200 U.S. computer manufacturing companies. Of these companies, 63 responded (32%). Respondents were asked to evaluate and rate their respective SPS performance and the role of top management and the CEO on five-point scales (0-4). A zero rating meant that a particular factor was not applicable to a company's situation, and 4 meant strong agreement with a given question. Based on the rating of the SPS performance measures, a company's SPS was classified as either effective or ineffective. Areas where significant differences existed were identified by the chi-square test. Whether or not these areas of significant difference were associated (significantly correlated) with SPS performance was determined with the spearman rank correlation coefficient test.

Profile of Respondents

Companies that actively participated in the study represented a cross section of the industry--from manufacturing of large mainframe computers to manufacturers of hand-held calculators. The questionnaires were completed by three groups of corporate officers: CEOs who were directly responsible for the strategic planning function; vice presidents for strategic planning, for companies with such a position; and others responsible for strategic planning but lacking special titles reflecting this duty. Analysis of the questionnaires showed that such officers were located close to the CEO and were directly responsible to him or her. Of the 63 corporate officers responding, 12 were CEOs, 27 vice presidents for strategic planning, and 24 were officers whose responsibility included strategic planning.

Summary of Results

Based on the perception of the CEOs and other executives, 71% of the strategic planning systems were considered effective in accomplishing the direct performance objectives of an effective SPS, shown in Exhibit 1. Only 29% of the 63 companies considered their SPS to be ineffective.

Exhibit 1.

Areas Addressed by the Questionnaire.

Performance Objectives of Strategic Planning Systems

1. Developing basic company mission and

lines of business.

2. Foreseeing future major threats.

3. Foreseeing future major opportunities.

4. Properly appraising company strengths.

5. Properly appraising company


6. Developing realistic current

information about competitors.

7. Clarifying priorities.

8. Developing useful long-range


9. Developing useful long-range program


10. Developing credible medium- and

short-range plans to implement SPS to

achieve goals. 11. Preventing unpleasant surprises.

Roles of Top Management

12. Top management has accepted the idea

that strategic planning is its major


13. Top management spends an

appropriate amount of time on strategic


14. The company's top management has

developed a climate that supports

strategic planning.

15. Top management has developed a

formal statement of the company's


16. Top management formulates quantified

goals for the company.

17. Line executives are fully committed to

accomplishing the strategic plan

developed by the strategic planning


18. Attempts are made by top management

to use SPS to judge managerial


19. Line executives fully participate in the

strategic planning processes.

When these results were examined using the chi-square test of statistical significance, it was found that the role of top management or the CEO was significantly different in seven of the eight prescribed roles of top management in an effective SPS. While the top management or CEO of companies with effective SPS were involved in all eight roles, companies with ineffective SPS showed little evidence of executive involvement. Table 1 presents a summary of the chi-square analysis.
Table 1
Analysis of Differences in Top
Management Roles in Effective
and Ineffective SPS.
Percentage of Respondents
Who Expressed Agreement
or Disagreement
 Effective Ineffective
Top management has 55.6(*) 19(*)
accepted the idea that (14.3) (11.1)
strategic management
is its major
Top management 45.1(*) 9.7(*)
spends appropriate (25.8) (19.4)
amount of time on
strategic planning.
Top management has 57%(*) 9(*)
developed a climate (12.7) (14.3)
which supports strategic
planning efforts.
Top management has 62.3(*) 16.4(*)
developed a formal (8.2) (13.1)
mission statement.
The line executives 54(*) 11.5(*)
are fully committed (16.4) (18)
to accomplishing the
strategic plans that
are developed with
the aid of SPS.
Top management 39(*) 6(*)
uses the strategic (33.3) (21.7)
plans to judge
Line executives fully 57(*) 14.3(*)
participate in the (12.7) (16)
strategic planning
NOTE: (*)Percentage of companies agreeing
with each statement.
( ) Percentage of companies that disagreed.

The "so what?" question was answered by determining if there were associations between the involvement of top management and the performance of the strategic planning systems. The results of the Spearman rank correlation (association) analysis revealed multiple areas where the significant roles of top management and the CEO are positively and significantly (statistically) correlated (associated) with the direct performance objectives of an effective SPS. See Table 2. [Tabular Data Omitted]

Discussion and Conclusion

The roles of top management and the CEO do not completely explain the effectiveness of SPS in some cases and ineffectiveness in others. However, the existence of significant position correlation suggests that top management involvement in crucial to the achievement of the direct performance objectives of an effective strategic planning system.

There are several reasons for this. First, one of the major purposes of strategic planning is to facilitate the decision-making process, which is the ultimate responsibility of top management or the chief executive. Secondly, it is top management's responsibility to determine and promote the strategic direction of any organization. This, coincidentally, is a major function of the strategic planning system. It is logical to conclude that the involvement of top management or the CEO is directly related to the effectiveness of SPS. Finally, the CEO has the ultimate control and authority over the organization's reward system and resources. This power should be used to focus personnel and material resources on the company's priorities. In fact, each member of the "team at the top" must totally committed to the effectiveness of the strategic planning efforts and assume the role of cheerleader for the entire process.

This study supports the personal commitment of the CEO and top executives to the design and implementation of SPS and recommends the following types of involvement:

1. Acceptance of strategic planning as its

major responsibility.

2. Assignment of appropriate amount of time

to strategic planning.

3. Development of a climate which supports

strategic planning.

4. Development of a formal corporate

mission statement.

5. Commitment of resources to the

implementation of plans that are developed with

the aid of the planning system.

6. Evaluation of managerial performance with

the results of the strategic planning


7. Full participation of line executives in the

strategic planning process.


Ansoff, et al, "Does Planning Play? The Effect of Planning

on Success of Acquisitions in American Firms", Long-Range

Planning, March, 1971. Eigerman, M.R., "Who Should Be Responsible for

Business Strategy?", The Journal of Business Strategy,

Nov-Dec, 1988 pp. 40-44. Forman, Roy, "Strategic Planning and The Chief

Executive", Long-Range Planning, Vol. 21 Aug. 1988 pp. 57-64. Fulmer and Rue, "The Practice and Profitability of Long-Range

Planning", Managerial Planning, Vol. 22 1974

pp. 1-7. Grant, John H. and King, William R., The Logic of

Strategic Planning, Boston, Mass. Little and Brown

Company, 1982 p. 4. Greenley, G.E., "Does Strategic Planning Improve

Company Performance?" Long-Range Planning, Vol.

19 No. 2 April 1986 pp. 101-109. Hall, William K., "The Impact of Managerial Behavior on

Planning Effectiveness" Managerial Planning, Sept--Oct

1977, pp. 19-24. Henry, Harold, W., Commentary in Schendel and Hofer,

Editors, Strategic Management: A New View of

Business Policy and Planning, Boston, Mass., Little and

Brown Company, 1979 pp. 245-248. Hunsicker, Quincy J., "Can Top Managers Be Strategists?",

Strategic Management Journal, Vol. 1 1988 pp. 77-83. Kudla, Ronald, "Elements of Effective Corporate

Planning", Long-Range Planning, Aug 1976. Kudla, Ronald, "The Effects of Strategic Planning on

Common Stock Returns", Academy of Management

Journal, 23 1980 pp. 5-20. Leontiades and Tezel, "Planning Perceptions and Planning

Results" Strategic Management Journal, 1. 1980. Lorange, Peter, Corporate Planning; An executive

Viewpoint, Englewood Cliffs, New Jersey, Prentice-Hall

Inc. 1980. Pinnel, Blake, "The Role of the Board in Corporate

Planning", Long-Range Planning, Vol. 19 No. 5 Oct.

1986 pp. 27-32. Ramanujam and Venkatraman, Planning and Performance:

A New Look at an Old Question", Business Horizons,

May-June 1987 pp. 19-25. Rhyne, Lawrence, "The Relationship of Strategic Planning

To Financial Performance" Strategic Management

Journal, Vol. 7 pp. 423-436 1986. Schaffer, Walter, Introductory Remark in Reiman

Bernard's Report, Getting Value From Strategic

Planning, Planning Review, March-April 1990 pp. 28-33. Shanks, David, "The Role of Leadership in Strategy

Development" The Journal of Business Strategy, Jan-Feb,

1989. Steiner, George, A. Strategic Planning: What Every

Manager Must Know, New York, N.Y., The Free Press

1979. Thine and House, "Where Long-Range Planning Pays Off,"

Business Horizon, Aug. 1970. Isaiah O. Ugboro, Assistant Professor, North Carolina A & T State University Dr. Ugboro's principal teaching and research interests are organization theory and strategic management.
COPYRIGHT 1991 Society for the Advancement of Management
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Ugboro, Isaiah O.
Publication:SAM Advanced Management Journal
Date:Sep 22, 1991
Previous Article:Rethinking the manufacturing focus: an overlooked strategic tool.
Next Article:Organizational productivity 2000: a work force perspective.

Related Articles
Comparative analysis of export-oriented and foreign production-oriented firms' foreign market entry decisions.
The control of strategy in dynamic versus stable environments.
Strategic Role and Contribution of Purchasing in Singapore: A Survey of CEOs.
Modern strategic management: balancing strategic thinking and strategic planning for internal and external stakeholders.
Linking strategy processes to performance outcomes in dynamic environments: the need to target multiple bull's eyes *.
Strategic sourcing: an empirical investigation of the concept and its practices in U.S. manufacturing firms.
Strategic planning-firm performance linkage: empirical investigation from an emergent market perspective.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters