Question

Describe the benefits of the formal planning process with supporting evidences. Illustrate how the value of formal planning benefit for strategic decisions benefits.

Answer 1

Benefits of formal planning process are as follows-

1. Managers can examine the critical issues which can an organization may face in near future instead of waiting for issues to blow up automatically suddenly on their business.

2. It increases the likelihood of long-term survival of an organization

3. It provides a sense of vision and purpose of planning process. And it can easily and effectively communicated to other members of an organization

4. By implementing it, achievements of an organization’s goals are outlined

5. Targets and plans would be developed at each stage of planning

6. Efficiency and effectiveness of financial and operations performance are improved

7. It provides direction and motivation to employees

8. Better allocation of resources will be there

9. It provides the standard of assessment

10. It ensures that internal policies and performance are in alignment with goal of an organization.

Formal planning seems valuable for strategic decision making because so much money is spent on it. Some companies which use formal planning believe that it improves profit and growth of the business. Formal planning process is explicit process for determining the firm’s long-range objectives, procedures for generating and evaluating alternative strategies. Alternative strategies can improve the adaptability of the organization. Organizational psychology suggests that formal planning should be useful for strategic decision making.

Reference-

Armstrong, J.s. (1982). The value of formal planning for strategic decisions: review of empirical research. Published in Strategic Management Journal, Volume 3, Number 3, July-September 1982, pages 197-211.

Elbanna, S. and Elsharnouby, T. (2018), “Revisiting the relationship between formal planning process and planning effectiveness: Do organizational capabilities and decision-making style matter?”, International Journal of Contemporary Hospitality Management, Vol. 30 No. 2, pp. 1016-1037.