Strategic Planning: Levels, Schools, and Best Practices
Strategic planning is the process used to formulate and execute the strategies of an organization in order to insert it, according to its mission, in the context in which it finds itself.
An effective strategic planning process should not be formal and bureaucratic.
Planning Levels
Planning has three levels: strategic, tactical, and operational.
Strategic Planning
It is the broadest and covers the entire organization. Its characteristics are:
- Long-term projection
- Includes the organization as a whole, all its resources and areas of activity
- Generic, synthetic, and comprehensive
- It is in the hands of the organization’s senior management (at the institutional level) and corresponds to the major plan
Tactical Planning
It is the one that covers each department or area of the organization. Its characteristics are:
- Medium-term projection, usually annual
- Covers each department, with its specific resources, and is concerned with achieving its objectives
- It is less generic and more detailed than that of strategic planning
- It is in the hands of the intermediate level corresponding to each department of the organization
Operational Planning
It is the one that covers each specific task or activity. Its main characteristics are:
- Short-term projection, it is immediate
- Covers each task or activity in isolation and is concerned with achieving specific goals
- Detailed, specific, and analytical
- It is in the hands of the operational level and is concentrated on each task or activity
The Just-In-Time System
The just-in-time (JIT) system was developed in Japan by Taiichi Ono and Eiji Toyoda at the Toyota Motor Company. It arose due to the need to considerably reduce expenses. The objective was to combat waste, avoiding activities that did not add value to the final product and that consumed company resources to maintain them.
Schools of a Mandatory or Normative Nature
They involve three perspectives: planning school, design school, and positioning school.
The strategy is defined as planning focused on the long term of the organization, through prescriptive and normative characteristics with a high degree of formalization.
- Planning School: Approaches the strategy as a formal process. Strategy formulation operates as a formal and documented process to break down strategic planning into operational plans and to create a hierarchy in which they fit together. The planning school was an important contribution of neoclassical management theory and developed in parallel with the design school.
- Design School: It studies the strategy as a process of adaptation; that is, it is based on the assumption that the strategy formulation process serves to adapt and match the internal aspects of the organization (its strengths and weaknesses) and the aspects of the external environment (such as threats and opportunities).
- Positioning School: Conceives the strategy as an analytical process. According to this school, strategic planning seeks to define a strategic positioning of the organization against the external environment, which must be analyzed and known previously. The generic positions of the organization must be identified through the analysis of the sectoral competition situation. This school predominated in the 1980s, beginning with the works of Michael Porter, and is inspired by the ideas of Sun Tzu’s military strategy.
Descriptive and Explanatory Schools
Mintzberg, Ahlstrand, and Lampel rank the following seven schools:
- Entrepreneurial Initiatives School: Focuses the strategic process from the highest executive of the organization.
- Cognitive School: Approaches strategy as a mental process.
- Learning School: Approaches strategy as an emergent process.
- Power School: Approaches strategy as a negotiation process.
- Culture School: Approaches strategy as a collective and social process.
- Environment School: Approaches strategy as a process that reacts to external circumstances.
- Configuration School: Approaches strategy as a transformation process.
Best Practices in Strategic Planning
Strategic planning should:
- Be systematic
- Focus on the future
- Create value
- Be participative
- Have continuity
- Be implemented
- Be monitored