Strategic Planning and Organizational Performance

Journal of Management 1984, Vol 10, No 2, 149-171

Strategic Planning and Organizational Performance: A Critical Appraisal Charles B. Shrader Texas Tech University

Lew Taylor University of Nebraska

Dan R. Dalton Indiana University

The literature addressing the empirical relationships between strategic planning and hard measures of organizational performance is examined. Distinctions are drawn among formal strategic planning: strategic planning content; and research linking strategic planning, environment, and organizational performance. Implications of the extant research and recommendations for future research are offered for theorists and practitioners alike.

From a relatively modest beginning (e.g., Ansoff, 1965; Chandler, 1962; Learned, Christensen, Andrews, & Guth, 1965), business policy and strategic planning have played increasingly important roles in developing formal alternatives for improving organizational performance. More recently, we have seen a proliferation of major works (Andrews, 1980; Christensen, Andrews, & Bower, 1978;Hofer&Schendel, 1978;Leontiades, 1980, 1982;Lorange, 1980; Porter, 1980; Quinn, 1980; Schendel & Hofer, 1979; Steiner, 1979; Summer, 1980) and professional journals (e.g.. Strategic Management Journal, Journal ofBusiness Strategy). These, of course, are only representative; but they clearly underscore the interest and importance of the discipline. This is not surprising. Steiner (1979), for example, has observed that "strategic planning is inextricably interwoven into the entire fabric of management" (p. 3). Several recent works have highlighted the criticality of performance as a dependent variable. Hambrick (1980) persuasively argues that the most obvious and useful set of research questions should address the linkage between strategy The authors wish to thank Philhp Bimbaum, David Jemison, Paul Gordon, and Cynthia Spanhei for their comments on early drafts of this manuscnpt. An earlier version of this paper was presented at the J984 meetings of the Southwest Division of the Academy of Management in San Antonio. TX. Address all correspondence to Charles B. Shrader, who is now at the School of Business Administration, 300 Carver Hall, Iowa State University, Ames, IA 50011. Copyright 1984 by the Southern Management Association 0149-2063/84/$2,00. 149

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and performance. Work by Lenz (1981) further acknowledges the need to identify enterprise level factors which influence organizational performance. A recent review of organizational structure (Dalton, Todor, Spendolini, Fielding, & Porter, 1980) argues that organizational performance is the single most important dependent variable in both the public and private sector. There is, however, some doubt concerning the efficacy of strategic planning as an influence on bottom line performance. Scott, Mitchell, and Bimbaum (1981), for instance, conclude that the research on strategic planning is inconclusive. They observe further that it is the act of planning, not the plan itself, which is important for practitioners. Quinn (1980) has argued that the most important strategic decisions are made outside the formal planning process. Furthermore, formal planning is often considered to be a rigid, bureaucratic, idealistically rational, and sometimes dysfunctional exercise having less to do with the actual political decision-making process than previously thought (Bresser & Bishop, 1983; Narayanan & Fahey, 1982). Others (e,g,, Lorange, 1980; Steiner, 1979) have a decidedly different view. They hold that strategic planning is a critical process for top management. Given the apparent controversy concerning strategic planning as an appropriate vehicle for developing alternatives and making strategic decisions and the emphasis on organizationlevel performance, it would appear necessary to subject to review the empirical research which examines the planning-performance link. Planning Categories To facilitate an orderly review and evaluation three areas of strategic planning have been identified. First, those studies relating formal strategic planning to organizational performance will be examined. This area includes long-range planning, planning typologies, and planning salience as subcategories. Second, the strategic planning content and performance literature will be reviewed. Included in this category are business-level strategy, corporate-level strategy, and strategic positioning within industries. Lastly, the research linking strategic planning, environment, and performance will be considered. While these categories represent dimensions of planning which appear consistently in the literature, they were chosen largely for the purpose of organization and were not selected from any particular model. Additionally, we are taking a rather broad view of the independent variable. We view planning in a broad, descriptive sense, as did Jauch & Osbom (1981). They define planning as a profile of decisions and predispositions of the dominant coalition with respect to environment, context, and structure. Our purpose in taking this broad view is to allow the identification of general similarities among studies without imposing a normative framework on existing research streams. It is acknowledged that some strategies are planned while others are inferred from the actions of management (Mintzberg, 1981), Likewise, it is difficult at times to distinguish between strategic planning and strategic choices or factors controlled by management (Child, 1972; Khandwalla, 1977), Therefore, this paper attempts to review those studies considering

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the effect of some general strategic planning variable on hard performance measures such as profit or sales. The dependent (performance) variables relied on by the empirical literature are noted as well. As one would expect, there have been numerous ways that bottom-line performance has been measured. It may be, for example, that some performance variables are more susceptible than others to strategic planning intervention. Consistent with suggestions by Dalton et al, (1980), more reliance will be given to those studies using hard performance measures such as sales and profit. Formal Strategic Planning and Organizational Performance Table 1 summarizes the stream of research relating formal strategic planning to organizational performance. Included in this table are studies treating formal planning (independent variable) as a measure of comprehensiveness, completeness, and salience. The focus of these studies is to distinguish differential performance among firms according to the degree they practice and value formal planning. Traditionally, the basic premise is that the more formal and comprehensive the plan, the better the performance. This literature reflects three general approaches to this question. Accordingly, the studies are divided into those assessing the benefits of long-range planning, those examining formal planning typologies and performance, and those relating planning salience and performance. Formal Long-Range Strategic Planning and Performance Several early studies reported a simple, positive relationship between formal long-range planning and organizational performance. Baker and Thompson (1956), Warren (1966), Henry (1967), Stagner (1969), and Gunness (1971), concluded that many aspects of financial performance were associated with long-range planning. Rhenman (1973) and Grinyer and Norbum (1975), however, argue that long-range planning and financial performance are not related. They credit environmental phenomena and information processing with more impact on performance than formal planning, Kallman and Shapiro (1978), in a study of motor-carrier firms, also found that long-range planning was no guarantee of high financial performance. They concluded that managerial skill and short-run strategies were of more importance to these firms than were long-run strategies. Long-range planning has been seen to facilitate growth, Steiner (1969), Eastlack and McDonald (1970), Guth (1972), and Sheehan (1975) found that growth in terms of size and assets was influenced by strategic planning, Steiner, Eastlack and McDonald, and Guth also reported that strategic planning facilitated growth, Sheehan, however, found that formal planning and growth were not related. Recently, Robinson (1982) found that small firms which used outsiders to assist in the formal planning process financially outperformed two Control groups.


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included that relate general business level, corporate level, and strategies for competitive positioning within industries to organizational performance. Business-Level Strategies and Performance Business-level strategy is defined as decisions that guide a firm in competing in a given business (Hambrick, 1980), A body of literature relating businesslevel strategies to organizational performance has focused on those activities that differentiate firms in terms of competitive strategies and performance. Using the PIMS database, Schoeffler, Buzzell, and Heany (1974) and Buzzell and Farris (1977) found that a collection of strategic planning variables explain a great deal of the variance in the financial performance of large corporations. Another study which examined the relationship of strategy content to financial performance was done by McCammon and Bates (1977), Their examination of 391 retailing firms indicated that well-developed distribution strategies lead to higher profits and sales, Datta (1979) found that strategic planning decisions on quality and pricing affected performance. Datta reported that successful firms in the television industry characteristically exhibited strategic concern for product quality, pricing, and advertising, Fruhan (1972), however, found that among air carriers government regulation was more critical in determining firm profitability than were intra-industry competitive strategies. Beard and Dess (1981) defined business-level strategy as administrative decisions that attempt to maximize an organization's performance potential through the structuring of resources. The variables they chose for study were capital intensiveness, relative size, and debt leverage. Beard and Dess demonstrated that business-level strategy was significantly related to profit performance for a sample of manufacturing firms. But, conversely, Unni (1981) reported that for small firms business-level strategies were of less value than were managerial skill and expertise. In a recent PIMS study, Hambrick (1983) found that the nature of the environment had a more critical impact on hard performance measures than did business-level strategy. Corporate-Level Strategies and Performance In 1962 Chandler demonstrated that diversification guided firms toward adopting organizational structures which allowed top managers to concentrate on strategic planning at the corporate level. These corporate-level strategies deal with attempts to diversify organizational activities through mergers and acquisitions to obtain growth and profit. The following studies examine firms which plan these activities and the extent to which this planning leads to improved organizational jjerformance, Gutman (1964) found that manufacturing firms concentrating in a few selected areas of expertise exhibited relatively high performance and growth for their industries, Ansoff et al, (1970) found that firms which planned expansion into new markets and acquisition of other firms financially outperformed firms that did not plan these activities, Rumelt's (1974) research charted the change in strategy for 200 of the Fortune

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500 organizations for the years 1949-1969, His major interest was in diversification strategy and its effect on financial performance. The strategies were categorized and analyzed in terms of product diversification and organization structure implications. He found that organizations which diversified by taking advantage of some particular resource, strength, or skill associated with the organization's primary activity financially outperformed other organizations. Performance was found to be more a function of relating the new activity to old or current activities than to overall diversity, A series of related studies performed in England, France, Germany, and Italy reported results similar to those of Rumelt (Channon, 1973; Dyas, 1972; Pavan, 1972; Thanheiser, 1972), Likewise, Amdt (1977) studied retail industries in Norway for the years 1963 to 1968 and found that concentrated trade strategies resulted in profits higher than those associated with nonconcentrated strategies. When top management is heavily involved in the long-range planning process, diversifying firms tend to experience high performance in terms of sales growth and return on sales was a conclusion reached by Horovitz and Thiehart (1982) from a study of European industrial firms. While the works of Amdt and of Horovitz and Thiehart are clearly supportive of Rumelt's study, Christensen and Montgomery (1981), using 128 firms of Rumelt's original sample, found that market structure variables moderated the effect of diversification strategy on performance for some of the categories, Christensen and Montgomery argued that performance is a function of both market structure and strategies designed to take advantage of opportunities within that structure, Hofer's (1973) work is related to that of Christensen and Montgomery, In a study of the financial performance of Fortune 500 firms, he found that when opportunities are good, firms diversify and grow; and performance reflects ability to capitalize on the opportunity. This may indicate that market structure represents a strategic challenge to a firm. If the market stmcture represents opportunities and strategic responses take advantage of the opportunities, then greater financial performance is the result, Schendel, Patten, and Riggs, (1974); Schendel and Patten (1975); and Hofer (1980) reported that benefits accrued to firms which adopted tumaround strategies when opportunity was less inviting. Specifically, using COMPUSTAT data, Schendel et al, and Schendel and Patten found that strategic planning and management action were more important in the improvement of declining profits than were market structure changes. Similarly, Hofer (1980), in a study often firms in ten industries, found that firms focusing on one or two substantive, overall, tumaround strategies were more likely to pull out of decline than those adopting operating changes or those attempting to liquidate assets. Beard and Dess (1981), in a longitudinal study of manufacturing firms, found that corporate-level strategy was a significant criterion for explaining firm profitability. Strategic Positioning Within Industries At a somewhat different level of analysis, a few studies investigated the effect of strategic positioning on organizational performance. These studies (Hatten, Schendel, & Cooper, 1978; Newman, 1978; Porter, 1979) attributed high


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performance to strategic positioning of firms within industries. As a group, these studies posit that the structure within industries is characterized by clusters of firms or strategic groups, A strategic group is a collection of firms that employ similar strategies. The strategic groups create a within-industry structure that determines firm profitability. According to Porter (1980), there are three sets of determinants of profitability. The first set deals with market structure or common-industry characteristics. Secondly, strategic group characteristics such as vulnerability to substitute products, competition, and mobility barriers influence potential profit performance. Finally, the firm's position within its strategic group affects profit potential, A favorable interaction among the three classes of determinants (or, in other words, a favorable strategic position as defined by industry structure) leads to high profit performance. Summary: Strategic Planning Content There seems to be relatively strong evidence that strategic planning, both at business and corporate levels, is associated with improved performance in growing and diversifying firms. It should also be noted that an appreciation of the interacting nature of business- and corporate-level strategy, market stmcture, strategic positioning, and environmental variables adds to the understanding of the planning content-performance relationship. Further research in this area should consider the numerous moderators in this regard. The proposition then, relevant to this section, is given as: P2: The value of strategic planning to organizational performance increases as congruity among firm growth and diversification, market structure and industry structure, and environmental characteristics increases.

Strategic Planning, Environment, and Performance A growing body of literature is accumulating which argues that the overriding determinant of organizational performance is a contingent relationship between strategy and environment. In Table 3, studies which examine the strategyenvironment contingencies are summarized. For the most part, the focus of this research has evolved around environmentstrategy-performance linkages proposed by Child (1972), Aldrich (1979), and others. Child and others, such as Miles and Snow (1978), have offered conceptual models stressing the importance of strategic choice in determining performance relative to environmental factors and firm capabilities. However, Aldrich (1979) has promulgated a counterconceptual argument that the opportunities for strategic volition to affect performance are largely constrained by environmental exigencies. Aldrich argues that ultimate organizational performance is a function of the selective forces of the environment. Therefore, the central questions of this research stream deal with the extent to which accurate environmental perceptions affect performance and with the relative degree of importance of strategy as opposed to environment in the determination of performance, A plus sign ( + ) in the relationship column of Table 3 indicates that


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Strategic planning was instrumental in perceiving the environment or was of relatively more importance than environment in the environment-strategyperformance relationship, A zero (0) suggests that environmental forces are concluded to be more instrumental in bringing about performance than is strategic planning. Planning Accuracy and Performance If one of the purposes of strategic planning is to guide the organization in its relationships with the environment (Hambrick, 1980), then organizations that accurately project and anticipate environmental changes should exhibit an uncommon or distinctive level of performance. There are several empirical investigations which have sought to examine this proposition, Vancil (1970) reported no relationship of planning accuracy and sales revenue projections to return on investment for large firms. Bowman (1978) found measures of success such as return on sales and return on investment were associated with planning variables obtained from the annual reports for computer companies. He argued that corporate strategy leads to better and more accurate environmental scanning and boundary spanning, and eventually to organizational success. Bourgeois (1978) also found that organizations in which the uncertainty in the environment was accurately perceived performed better than those in which it was not, Environment-Strategy-Performance A stream of research that began with Child (1972) has dealt with the question of whether strategic planning or environment has the greater impact on organizational performance. Strategic planning is conceptualized as those objectives and activities resulting from managerial discretion; environment is normally taken to mean those forces acting on the firm beyond the control of management. This discretion versus environment question has generated a number of conceptual/ theoretical works either supporting the role of managerial discretion in guiding the organization (e.g., Bobbitt & Ford, 1980) or pointing out its limitations (e,g,, Aldrich, 1979, pp, 149-158), The empirical studies included here, however, are confmed to those positing linkages among various strategic and environmental constructs and organizational performance. Child (1974, 1975) in a study of the environment, organization size, technology, and performance relationships for 82 British companies found that chief executives formulate objectives and plans in advance of performance rather than simply responding to the environment or performance achieved. Child contends that strategic planning is the ultimate determinant of company fmancial performance. Likewise, Verbrugge, Schick, and Thygerson( 1975), and Verbrugge and Goldstein (1978) argued that the performance of savings and loan institutions depends much more on managerial planning than on environmental factors. Grinyer, Yasai-Ardekani, and Al-Bazzaz (1980) reported fmdings different from those of Child, Grinyer et al, found that British firms perceived a less

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hostile environment when strategy and structure were logically linked, but they could not conclude that a rational strategy-structure match leads to higher performance, Jauch, Osbom, and Glueck (1980) examined the short-term performance of Fortune 500 firms. They reported that certain strategic actions such as mergers and retrenchment were influenced by environmental factors and that various environmental changes determine financial success. They also found financial and production strategies to be related to performance and concluded that strategy-environment relationships are not simple interactions but complex phenomena, Lenz (1980) studied 50 firms in the savings and loan industry to examine the hypothesis that the environment-strategy-structure-performance configuration for high-performing firms would be different than the configuration for lowperforming firms, Lenz's study indicated that high-performance firms held a greater percentage of liquid assets, advertised less, and had higher loan prices than low-performance firms. Low-performing firms, on the other hand, were situated in more developed environments, charged lower prices, used a greater amount of media advertising, and exhibited peaked organizational structures, Lenz concluded that "neither environment, strategy, nor organization structure acting alone is sufficient to explain differences in performance" (p, 220), In a PIMS study, Hambrick (1983) found the effects of environmental variables such as product innovation and product life cycle to be more critical determinants of hard performance than the strategic profile of the company. Strategic Planning-Management Skills-Environment-Performance The degree of managerial skill and experience could greatly infiuence the environment-strategy-performance relationship (Bobbitt & Ford, 1980), Khandwalla (1977) incorporated managerial skills and style into a study of the financial performance of 103 Canadian manufacturing firms in seven industries. He found that the neoscientific management style (which included a heavy reliance on long-range strategic planning) outperformed six other management style categories on five financial performance measures in his sample. Khandwalla concluded that managerial abilities, skills, and values are critical to firm performance. Other studies (Fulmer & Rue, 1974; Jauch et al,, 1980; Unni, 1981) provided conclusions similar to Khandwalla's, Summary: Strategic Planning, Environment, and Performance Strategic forecasting and assessment of the accuracy of forecasts are major concerns for strategic planners (Paul, Donavan, & Taylor, 1978; Rowe, Mason, & Dickel, 1982), Yet, very few empirical investigations have attempted to examine the relationship between planning accuracy and performance. While it seems reasonable that accuracy in planning should be related to performance, this has not been demonstrated convincingly. It should be noted that some of these studies attempted to measure accuracy by asking if high-performing firms planned well. This measurement method may be misleading and may reflect a tendency on the part of high perfomwrs to rationalize their actions. As pre-


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viously noted, planning is concerned with forecasting (Rowe et al., 1982) and planning accuracy often refers to accurate forecasts of key environmental or competitive conditions (Paul et al., 1978; Vancil, 1970), The accuracy of these forecasts can only be determined after the fact. Therefore, future studies on this issue should carefully measure environmental forecasts and managerial assumptions prior to performance measurement. Explicit planning projections, longitudinal design, and generalizable measures of planning accuracy would enhance the ability to determine the performance-planning accuracy linkage and facilitate comparison among firms. The strategic planning-environment-performance relationship is vexing as well. There is little evidence to justify the conclusion that one factor (environment or strategic planning) is a better predictor of organizational performance than the other. Indeed, Lenz's (1980) conclusion that neither is sufficient to explain differences in performance seems warranted. Here again, few researchers have studied the strategic planning-management skills-performance relationship. Those who have examined this linkage are consistent in their conclusions: managerial skills are critical to the performance of the firm. While not specifically examined, it could be expected that managerial skills would act as a moderator in any of the strategic categories identified for this review. Certainly, the efficacy of any strategic-planning program would be at least partly a function of the competence of its planners, top-level management, and those charged with implementation of the strategy. Also, the overall ability of the firm to adapt to changes in environment may be important in determining performance (Chakravarthy, 1982), Consequently, P3: The value of strategic planning increases as congruity among planning accuracy, managerial skill, and ability of the organization to adapt to the environment increases.

Conclusion This review has addressed the relationships between various aspects of strategic planning and bottom line organizational performance. The aim of the review was to examine directly the question "Does strategic planning lead to improved organizational performance?" The existing literature, however, allowed limited conclusions; and those offered were made with some reticence. Thus, some authors argue that strategic planning is an ill-structured phenomenon that is not amenable to experimental design and empirical techniques suited to well-structured problems (Mitroff & Mason, 1981). Conversely, it may be viewed as a multidimensional activity requiring very powerful statistical methods. Therefore, concluding recommendations for future research are presented not as inevitable prescriptions, but rather in the interest of better answering the strategic planning-performance question with more authority in the future. We suggest that future research should shift from a focus on "Does planning lead to performance?" to "How, when, and why does strategic planning lead to performance?" In effect, strategic planning as a multi-

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dimensional activity deserves a thorough examination before the fundamental question regarding its usefulness can be addressed. Accordingly, some very general research needs identified by the policy literature (Hofer, 1976; Lenz, 1981; Schendel & Hofer, 1979) and pertinent to this question are presented. These general recommendations could be applied to any future research effort. Also presented are specific research questions and practitioner considerations. The specific questions are drawn from the three basic sections of the paper and were generated to help identify appropriate issues and directions for future research. General Research Needs First, as one would expect, much more longitudinal research in this area is required. Most of the studies which have been reviewed are cross-sectional in design. While this can be a problem at any level of analysis, it is particularly disappointing in strategic planning. As Lenz (1981) and Jauch, Osbom, and Glueck (1980) have noted, the effects of strategic planning on organizational performance may be apparent only after long periods of time; shorter time frames may actually misrepresent the relationship. Hofer (1976) suggested the use of longitudinal designs to allow for more control of the many possible moderating variables in planning-performance research. Ordinarily, there are relatively severe pragmatic problems associated with longitudinal research, not the least of which are cost and patience. This is less a concem in many aspects of strategic-planning research. In most cases, the introductions of strategic plans can be thought of as field interventions. This makes them classic candidates for naturally occurring field experiments (e,g,. Cook & Campbell, 1979). Suppose, for example, that it is known that a company introduced strategic planning in 1980, By treating strategic planning as an intervention, performance in the years 1970-1979 can be considered as multiple time-interval pretest measures. Performance in the years 1980, 1981, and 1982, etc., of course, would be considered posttest measures. The analytical question is what changes, if any, are evident in the years postintervention from those preintervention. Naturally, there are other factors besides the intervention itself that could affect the subject company's performance: changes in market structure, economic conditions, and so forth. This can be handled relatively easily by selecting a comparable company (periiaps by SIC code). Presumably, this control company would be subject to the same forces which operate on the subject company. The object would be to find a comparable company that did not adopt a similar form of strategic planning. This comparative company is essentially a notreatment control organization (Cook & Campbell, 1979; Huck, Cormier, & Bounds, 1974), The statistical analysis of such an experimental design is straightforward. Extrapolated trend analysis (Cook & Campbell, 1979; McDowall, McCleary, Meidinger, & Hay, 1980) is appropriate and requires few data points. It is, however, less powerful than ARIMA (autoregressive integrated moving average) techniques (Box & Jenkins, 1976; McCleary & Hay, 1980; McDowall et al., 1980). The ARIMA technique would require some 60


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data points. If, however, monthly performance data were collected to examine the efficacy of some strategic-planning program the research would only require 5 years of data. The real advantage is that the analysis can be applied retrospectively. Again, if the introduction of the strategic-planning intervention occurred in 1980, the 3 prior years and the 2 following years could be analyzed to determine the efficacy of the program. This intermpted time-series model has several important assumptions outlined by Cook and Campbell (1979). Most importantly, it assumes that the values and timing of strategic planning and performance can be accurately identified, and that the time series relevant to these variables exhibits stability. Additionally, data beyond 2 years following the intervention may be important to examine to assess the longer range effects of planning on performance (Jauch et al., 1980), Longitudinal research, therefore, is suggested because it provides a time lag in which long-range effects of strategic plans and tumaround strategies can be observed, and because the direction of causation issue can be approached. In addition to longitudinal research, other methodologies should be applied to the planning-performance question. For example, Schwenk (1982) has argued for laboratory studies of policy issues to supplement field research. Laboratory planning-performance studies should be performed because, as Schwenk notes, the researcher would be able to control for many variables not controlled for in field research. Perhaps planning-performance relationships may then be more specifically identified and compared to findings of similar field studies. There is also a need for commonality of definitions of constructs (Schendel & Hofer, 1979), Comparisons of research findings would be enhanced. Aid in overcoming this problem could come from new techniques such as the planning scale developed by Wood and LaForge (1981) and the environment scale proposed by Klein and Newman (1980), In summary, longitudinal designs could help improve planning-performance research by providing unbiased estimates of performance changes in the posttreatment, or after-planning, time series (Cook & Campbell, 1979). By employing other methodologies, research can home in on specific strategic planning and performance relationships. Comparison of planning across firms could be accomplished by defining common constructs. Future Research Questions One theme drawn from this review that appears to be consistent with other current conceptual writings is that future research needs to deal with variables upon which effective strategic planning is contingent for specific industries and organizations. That is, we need to ask how, why, and when strategic planning leads to better performance and what conditions make planning effective. Schendel and Hofer (1979) and Jauch and Osbom (1981), for example, have called for contingency-theory research that identifies variables affecting the planning-performance relationship in specific situations. Most current planning and performance studies have not made any reference to theory. Contingency

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theory may be useful in identifying important variables and conditions under which planning is effective (Schendel & Hofer, 1979). Variables for consideration in determining the efficency of formal planning may include technology and control systems (Mahoney & Frost, 1974), stage of organization life cycle (Aplin & Cosier, 1980), strategic capability and corporate culture (Lenz, 1981), organization stmcture (Miles & Snow, 1978) and environment (Jauch et al,, 1980), In addition to competitor strategies, future research on planning content should consider industry and market stmcture (Porter, 1980), intemal resources and experience with planning (Lenz, 1981), size (Robinson, 1982), and govemment regulation (Kallman & Shapiro, 1978). Likewise, research identifying situations in which planning has little effect is also important (Quinn, 1980), Identifying variables that moderate the planning-performance relationship would be helpful to both academics and practitioners. The complexity of the relationship, as demonstrated by the issues raised here, makes research focusing on specific contingencies necessary before concrete conclusions and statements about planning and performance can be made. Future research must also address the issue of strategic time horizon. What length of time is appropriate for a given strategic planning intervention to take effect? Over how many years can we expect a plan to influence performance? Steiner (1979) argues that strategic planning has no specific time horizon, Lorange (1980) and Taylor (1984) argue that research must focus on the nature of the strategic decision rather than on a limiting time frame. Many past studies have used 3- to 5-year periods as measures of long-range planning. Future research on planning and performance, then, must make time horizon assumptions very situation-specific. For example, a strategic plan for a firm competing in a dynamic computer-chip industry may have immediate performance implications or may be outdated within weeks or months. Stable companies may be able to look at longer time periods, Consequently, future studies in this area must address planning-performance relationships in relative time-horizon terms. Another question is how flexible the strategic planning concept is across industries. Can similar planning techniques be applied by large and small companies with similar performance results? Is it possible to expect planning typologies to translate across firms or to expect formal planning techniques to mean the same thing to different firms? Is there a set of criteria that denotes a quality planning system, and can it be applied in different contexts with success (Schendel & Hofer, 1979)? Research, in the future, should also address the question of how different top managers operate with respect to planning. For example, which managers make better decisions or strategic choices when using very formal planning methods? Which managers make better quality decisions when not involved in a formal planning system? What role does management implementation of planning play in overall company performance? What effect does top management style (Khandwalla, 1977) or composition and stmcture of the board of directors have on the planning-performance relationship? Industry and company differences should also be considered in this regard. In summary, future research should be more attuned to the complex nature of


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the planning-performance question. The question is very complex and difficult, and our knowledge respective to it is limited. This should not deter further study, but encourage it. For academicians, the opportunities for contribution in this area are many. As previously noted, Hambrick (1980) argued that, for the practitioner, no question with respect to strategic planning is more fundamental than "How do different strategies relate to organization performance?" There is also, then, an important implication for practicing managers. Organizational performance is the result of many variables. Also, the effect of strategic planning may be decoupled from performance by many variables. Therefore, too much attention to one variable or one technique could be misleading. The issues and variables outlined here should give the practicing manager a partial list of things to consider when evaluating the effectiveness of strategic plans. References Aldrich, H,E. (1979). Organizations and environments. Englewood Cliffs, NJ: Prentice-Hall. Andrews, K,R. (1980). The concept of corporate strategy. Hotnewocxl, IL: Irwin. Ansoff, H.I. (1965). Corporate strategy: An analytic approach to business policy for growth and expansion. New York: McGraw-Hill. Ansoff, H,I., Avner, J., Brandenburg, R.G., Portner, F.E., & Radosevich, R. (1970). Does planning pay? The effect of planning on success of acquisitions in American firms. Long Range Plannmg, 3, 1-7. Aplin, J.C., & Cosier, R.A, (1980, Spring). Managing creative and maintenance organizations. Business Quarterly, 56-63. Amdt, J. (1977). Exploring the relationships between market structure and performance in retailing. In H.B, Thorelli (Ed.), Strategy + structure = performance (pp. 237-248). Bloomington, IN: Indiana University Press. Baker, A.D., & Thompson, G.C. (1956). Long range planning pays off. Conference Board Business Record, 8, 435-443. Beard, D.W., & Dess, G.C. (1981). Corporate-level strategy, business-level strategy, and firm performance. Academy of Management Journal, 24, ^3-688, Bobbitt, H.R., Jr., & Ford, J.D. (1980). Decision-maker choice as a determinant of organization structure. Academy of Management Review, 5, 13-24. Bourgeois, L.J. (1978). Strategy making, environment, and economic performance: A conceptual and empirical exploration. Unpublished doctoral dissertation. University of Washington, Seattle. Bowman, E.H. (1978). Strategy, annual reports, and alchemy. California Management Review, 20, 64-71. Box, G,E.P., & Jenkins, G.M. (1976). Time series analysis: Forecasting and control. San Francisco: Holden-Day. Bresser, R.K., & Bishop, R.C. (1983), Dysfunctional effects of formal planning: Two theoretical explanations. Academy of Management Review, 8, 588-599, Burt, D.N. (1978). Planning and performance in Australian retailing. Long Range Planning, 2, 62-66. Buzzell, R.D., & Farris, P.W. (1977). Marketing costs in consumer goods industries. In H.B. Thorelli (Ed.), Strategy + structure = performance {pp. 122-145). Bloomington, IN: Indiana University Press. Chakravarthy, B.S. (1982). Adaptation: A promising metaphor for strategic management. Academy of Management Review, 7, 35-44. Chandler, A,D, (1962). Strategy and structure: Chapters in the history of the American irulustrial enterprise. Cambridge, MA: MIT Press.

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