Strategic planning best practices: strengthening the planning-performance relationship

Abstract

PurposeThis study builds on the practice-based view of strategy to examine whether the three most commonly prescribed strategic planning best practices – scanning, communication openness and participative decision-making – actually strengthen the planning-performance relationship.Design/methodology/approachThe study uses objective performance data and data from a survey of 159 managers from 43 publicly listed US firms to test the hypothesized moderation effects of best practices. The analysis uses hierarchical regression.FindingsAt high levels of planning, firms high in participative decision-making and low in openness and scanning outperform firms low in participation and high in openness and scanning. The results reverse at low levels of planning.Research limitations/implicationsThis is a cross-sectional study with a small sample. The response rate was modest; hence, the results should be treated as exploratory. Since the sample is not random, the results may not be generalizable.Practical implicationsWhile managers may find a best practice label helpful, the best practices implemented within a firm need to fit existing planning processes in order to increase planning effectiveness.Originality/valueWhile academic scholarship sometimes struggles with generating actionable prescriptions for improving strategic planning, recommendations by practitioners lack empirical backing. This study builds on the practice-based view of strategy to bridge this gap. These results are consistent with both academic and practitioner literature on strategic planning in finding that the best practices of scanning, openness and participative decision-making strengthen the planning-performance relationship at different planning levels, possibly by underpinning the firm’s dynamic capabilities.