Many organisations today spend a fortune in formal planning. In various contexts, organisations and researchers have had conflicting opinions on formal planning, with a faction affirming that it improves the overall profitability of a company (in addition to spurring project growth) while others note that it is not important at all in the realisation of organisational goals (Mintzberg 1994, p. 150).
Before sides are taken in the evaluation of the importance of formal planning, it is crucial to analyse what formal planning essentially encompasses.
In the words of Armstrong (1982) “Formal strategic planning calls for an explicit process for determining the firm’s long-range objectives, procedures for generating and evaluating alternative strategies, and a system for monitoring the results of the plan when implemented” (p. 4).
Formal planning when analysed in this context involves a clear articulation of project goals, visions, roles, location, time frames (and the likes), in a clearly developed document or semi document outlining the steps to be followed in the implementation of a given project.
Usually, formal planning has been consistently analysed alongside informal planning (a paradigm which erodes the importance of having formal plans in the first place) and many researchers have been divided between the merits and demerits of the two.
Informal planning essentially outlines all managerial elements that normally fail to be institutionalised in formal documents and in most cases; it receives less exposure because formal planning out shadows its usefulness since it is much visible and more clearly articulated (Johnson 2009, p. 66).
From this point of view, it is correct to dispute the emphasis created on formal planning because it is normally overrated at the expense of informal learning. These factors withstanding, this study advances the fact that formal learning will not provide the intended outcome at a given point in time.
Conventionally, formal planning has been based on the “process” element as opposed to the “human” element. This is a wrong basis because the success of a process is normally based on the input of the workers involved.
Moreover, humans invent “processes” and therefore the success of a process depends on the humans involved. Scientists such as Taylor (cited in Campbell 2001, p. 99) have openly noted that one of the reasons why important projects fail to attain their set out goals is because management normally focuses too much on the theoretical component of project success and fail to note the practical component of the same.
The theoretical component is normally facilitated or emphasised by the formal planning process. Conversely, the informal planning process tends to focus more on the practical aspect of project operations and this is the most basic element needed for the realisation of project success.
From the number of immense projects failing by the day, it is clear that most organisations fail to recognise the critical role humans play in the overall realisation of organisational goals and the overall long-term sustainability of business or project productivity. Campbell (2001, p. 100) also explains that in today’s fast paced world, it is the human element of organisational processes that is going to sustain and catalyse the growth and success of organisations in the 21st century.
For a long time, formal planning has been the conventional paradigm in project operations and management. Today, research studies tend to affirm the notion that a shift from this paradigm is likely to translate to positive results for organisations, in the sense that, an emphasis on informal planning is likely to improve project performance (Campbell 2001, p. 100).
It is clear from recent research studies that formal planning has a systematic articulation of roles and responsibilities that tend to be monotonous and less effective in the long run (Campbell 2001, p. 100). When this system is changed, research affirms that new skills and an improved sense of accountability will be realised (Hales 1993, p. 108).
Basically, what new research tends to portray is that a shift from conventional practices is likely to impose a new system to measure employee contribution, which will in turn increase the level of motivation and ultimately increase the performance of employees in the long run.
Formal planning is also quite monotonous with regards to the structure of control in the organisation because it advances a clearly cut out structure of authority where lower level employees are subordinates to their bosses.
This system is deemed to be less effective than a random and flexible structure where there are no clear distinctions of authority, because if such structures are abolished, all employees are made equal members of teams and work groups (encompassing peers from inside or outside of the organisation). This new paradigm is likely to instill a new spirit of cooperation in the organisation and create a hybrid system of performance which is supported and coordinated by all members of the organisation.
Formal planning essentially amounts to months or even years of endless planning to come up with specific projections; maybe encompassing financial cash flows, human capital projections, inventory requirements and the likes. However, all these estimations and years of endless planning may go to waste if the project follows a different course from that envisioned in the formal plan.
From this basis, critics have advanced the fact that experience is the best teacher and formal planning goes against this spirit (Campbell 2001, p. 102). They also advance the fact that continuous learning and experience is the key to project success and formal planning fails to merge with this spirit as well.
In this regard, there is a growing body of research advancing the fact that formal planning does not make much difference to project performance when compared to projects started without formal plans (Campbell 2001, p. 102).
Comparisons have also been made to businesses as is evidenced of Bamnson College which did a study evaluating specific business parameters such as annual revenue, employee numbers net incomes (and the likes) and found out that there was no significant difference in the above parameters, when comparing businesses which started with formal plans and those which didn’t (Wall street, 2010, p. 9).
They therefore recommend that unless a business intends to seek start up capital from a financial institution (say a bank) they do not need to come up with a formal business plan (Wall street, 2010, p. 9).
Many critics of formal planning have consistently questioned the need for formal planning if the business environment is increasingly unpredictable. They therefore advance the fact that formal planning in the determination of future project productivity is essentially fruitless if the future is unpredictable in the first place (Smit 2007, p. 113).
Some formal plans may therefore render some projects utterly useless because they may fail to consider the unpredictable nature of future project environment. For instance, Smit (2007, p. 113) notes that it is quite difficult to apply formal planning to tourism projects in Africa because of the political uncertainty of the continent.
He makes reference to the war uncertainty in Congo and the lack of petrol in Zimbabwe which makes formal planning an impossible process because these uncertainties are essentially unforeseeable in the long run and short run. Smit (2007) further affirms that “Setting oneself on a predetermined course in unknown waters is the perfect way to sail straight into an iceberg” (p. 114).
It is therefore important for project managers to acknowledge the level of uncertainty, complexity and ambiguity of the project environment because these elements have a very unpredictable and immense impact on the overall outcome of the project. In this context, it is correct to note that even the most carefully thought out formal plans are not immune to being rendered totally useless by random and unpredictable changes in the project environment.
When this type of unpredictable and unprecedented changes are evident, project managers are supposed to be on toes by being able to effectively and promptly adjust to changes in the project environment by altering their project strategies to suit the new environments.
This kind of flexibility essentially lacks in formal planning because formal planning is very rigid and involves clearly articulated project steps; regardless of the nature of the project environment. This is likely to lead to high levels of project productivity; an element which may be easily brushed off at the initial stages of formal planning processes.
Hill (2008, p. 11) makes reference to this situation by citing Microsoft’s Chief executive officer, Bill Gates’ dramatic change of strategy, prompted by the 1994 – 1995 unprecedented emergence of the world wide web (www) where he dramatically changed the company’s strategy to effectively deal with the new operations environment (which later ultimately turned out as the antidote for Microsoft to deal with the new changes in the information technology environment).
Critics of formal planning processes say that such a dramatic change of strategy was not possible if Bill Gates operated under a formal planning process because under the paradigm, Bill gate’s new strategy could not be accommodated within that specific time period (Hill 2008, p. 11).
This is true because usually under formal planning processes, the formal plan can only be reviewed annually and before such a time reaches, the overall project strategies cannot be changed (Hill 2008, p. 11).
Many critics of the formal planning process have pointed out the fact that many formal plans emphasise a lot on the input of top-level managers and rarely factor in the potential lower level managers can bring into project operations (Hill 2008, p. 11).
New research studies point out that formal planning can probably plunge project operations processes into low levels of productivity because lower level managers have a profound degree of influence over the overall realisation of project productivity (Bass 2008, p. 315).
For instance, Robert Bulgelman of Stanford University cited in (Hill 2008, p. 11) gives an instance where Intel’s CEO; Andy Grove, together with his top level management team devised a strategy to enter the DRAM memory chip market (a move which was to plunge the company into financial problems because of the unreliability of the market) but was talked out of it when lower level managers discouraged the top level management team and the company’s CEO out of the move (thereby saving the company millions of dollars in investments which was to be lost in the venture).
Instead, they advised the company to venture into the market of RISCH-based microprocessors; a move which saw the company soar into high levels of profitability. This move also saw Microsoft Company move its strategies to be of conformance to internet innovation (Hill 2008, p. 11).
From this analysis, formal planning therefore makes many project managers rigid to the input of lower level managers (a move which may potentially be fatal for the company as can be evidenced in the Intel case study analysis) and project managers need to change tact to avert such eventualities.
This study notes that formal planning can potentially render projects utterly useless if they are followed to the latter. Basically, this study sources its strengths and arguments from the fact that the project environment today is very unpredictable and requires a lot of flexibility by project managers to attain optimum levels of project success.
Formal planning’s greatest weakness comes from its high level of rigidity and its high emphasis on top level management’s decisions (and more so, the CEO’s); an attribute which is potentially dangerous for project operations. From this point of view, it is correct to note that formal planning will not always provide the outcomes required at a given moment in time.
Bass, B. (2008) The Bass Handbook Of Leadership: Theory, Research, And Managerial Applications. New York, Simon and Schuster.
Campbell, S. (2001) New Developments In Reengineering Organizations. Management Research News, 24(3), 99–103.
Hales, C. (1993) Managing Through Organisation: The Management Process, Forms Of Organisation, And the Work of Managers. London, Taylor & Francis.
Hill, C. (2008) Essentials of Strategic Management. London, Cengage Learning.
Johnson, P. (2009) Fundamentals of Collection Development and Management. New York, ALA Editions.
Mintzberg, H. (1994) The Rise and fall of Strategic Planning: Reconceiving Roles For Planning, Plans, Planners. New York, Free Press.
Smit, P. (2007) Management Principles: A Contemporary Edition for Africa. London, Juta and Company Ltd.
Wall Street. (2010) Do Start-Ups Really Need Formal Business Plans? [Online]
Available at: http://forum.visitsierraleone.org/do-startups-really-need-formal-business-plans_topic3644.html
[Accessed 14 December 2010].