Citation
The role of strategic planning in improving public organizations' performance

Material Information

Title:
The role of strategic planning in improving public organizations' performance
Creator:
Al-Garni, Saeed A
Publication Date:
Language:
English
Physical Description:
xii, 226 leaves : illustrations ; 29 cm

Subjects

Subjects / Keywords:
Strategic planning ( lcsh )
Public institutions -- Planning ( lcsh )
Public institutions -- Planning ( fast )
Strategic planning ( fast )
Genre:
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

Notes

Bibliography:
Includes bibliographical references (leaves 216-226).
General Note:
Submitted in partial fulfillment of the requirements for the degree, Doctor of Philosophy, Public Administration.
General Note:
School of Public Affairs
Statement of Responsibility:
by Saeed A. Al-Garni.

Record Information

Source Institution:
|University of Colorado Denver
Holding Location:
Auraria Library
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
38277601 ( OCLC )
ocm38277601
Classification:
LD1190.P86 1997d .A425 ( lcc )

Full Text
so. The premise of exercising such a policy is to improve the overall implementation
of the mandates. We must question however, the extent to which such a policy has
been implemented and what its impact could be.
It is clear from the interviews that not only does the state fail to provide clear
incentives for successful strategic planning implementation but it also rarely asks
questions about the strategic planning performance of the agency during budget
appropriation. As one manager indicated, There are no incentives from the state. It
is interesting that there is no kind of institutional-level reward system.
Mandated Policies:
Since there is no incentive, we wonder about the effectiveness of the states
requirement of performance measures and linking strategic planning strategies to
budgeting.
Performance Measures. The experience of the agency in developing
performance measures is evolving. Initially, the agency started developing
performance measures because it was required, but the agency has further realized its
importance and has therefore started improving the quality of its performance
indicators. One manager describes the agencys experience with performance
measures by indicating that we are all just in a learning curve of learning how to
structure these performance measures so that they are meaningful and measurable.
Originally, it was perhaps done because it was required, but now I think its pan of
the departmental culture. Now its viewed as a really useful tool. Although
managers see that performance measures are important because they ensure that the
agencies are doing what they are supposed to do and that the agency is doing it as
well as it should, two major issues surfaced: developing meaningful performance
measures and taking performance measures seriously.
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Developing Meaningful Performance Measures. A need exists to
develop meaningful and flexible performance measures that not only measure the
right thing but also can be changed whenever a better performance measure has been
developed. The agency, however, usually gets the opportunity to change performance
measures that are reported quarterly to the Legislative Budget Board and the
Governors Office once every two years. As one manager observed. We had a
horrible measure, we asked to get rid of it. It was worthless, and they would not let us
get rid of it. It was like, No, youre getting rid of too many measures. You have got
to have this one. That kind of stuff gives strategic planning a bad name with certain
staff. Another manager criticized the inability to change performance measures and
even the quarterly reporting to the staff in the LBB and the Governors Office who
dont have any concept of what youre talking about. He depicts the frustration not
only with developing performance measures but also with the fruitless dialogue
between agencies and the oversight bodies related to performance measures: They
want to know about those measures; if they give two percent more money, they want
to see a two percent return in our measure. They want to know how youre doing on
your performance measures. We say, Well, I dont like those performance measures
to begin with, you know. They say, But you gave them to us, and I say, Yeah, but
I didnt know what I was talking about. So you get into that kind of thing, as
opposed to trying to come up with measures that satisfy people who can hardly
relate. The LBB and the Governors Office are reluctant to change performance
measures because they wanted to develop historical data that would enable them to
evaluate the value of strategic planning and performance based budgeting. As we can
see, the agency has faced difficulty, not only in developing meaningful performance
measures but also in modifying what has been developed to be more meaningful.
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Taking Performance Measures Seriously. Agencies were required
to report performance measures as part of zero-based budgeting even before the
adoption of strategic planning. However, apparently no one at the LBB or the
Governors Office looked at them. As a budgeter recalled, Quite frankly, talking to
people who work at the LBB and the Governors Office, they did not look at them.
It has, therefore, become difficult to convince people who have been around a long
time that performance measures are seriously considered by the LBB and the
Governors Office. The agency has been audited as to how they develop and use
performance measures, but there was no relationship between how successful they
were with their performance measures and the agencys budget appropriation.
Thus the agency faces, in a sense, double negative policies regarding
performance measures: it faces the difficulty of changing its old performance
measures even if they have become meaningless, and it has never been rewarded for
its effort in developing meaningful performance measures. This reflects how
performance measures have become solely a reporting requirement instead of being
used to improve performance.
Linking Strategic Planning Strategies with Budget. The state has required the
linking of strategic planning strategies to budgeting. The state theoretically funds
strategies and not line items. Although managers at different levels of this agency
support the idea of linking strategic planning and budget, few of the interviewees
have seen value in the current linkage because, as one manager noted, I support the
concept of linking strategic planning to budgeting. The current linkage bastardized
the process because we do not have the flexibility any more, we cannot make changes
to it as readily as wed like to and, to some extent, now the budget staff drives the
strategic plan.
The agency, as a result of funding strategies and the strong link between
budgeting and strategic plan strategies, has to have two budgets. One budget consists
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of strategies which the agency submits to the LBB and the Governors Office to get
its funding. The second budget is the result of converting the first budget, as soon as
the agency receives its appropriation, into a budget that reflects the organizational
structure of the agency. Strategies are developed across units, yet each unit needs to
know its operating budget to achieve its share of the overall goals and missions. So
the linkage in a sense, at least in the experience of this agency, has led to more
bureaucratic and needless work for budgeting staff. As one budget director notes, /
support a linkage between goals and results as a linkage for accountability ...what we
have done in Texas is we ve turned it into a bit of a bureaucratic system where I think
there's so much movement of numbers to make things work out right that it defeats
itself in the process."
So, the linkage, as it has been perceived by this agency, becomes a
bureaucratic exercise which is too detailed and technical in nature. As the executive
director observes, My criticism of it would be that it goes back to bean counting, and
thats not what strategic planning is. It is not an accounting function, it is a
leadership function. Managers, therefore, support the idea of linking strategies to
budgeting but criticize the current linkage, stating it is too technical and detailed, and
it does not support strategic planning as it is supposed to be.
Strategic Planning Implementation. The agency was successful in involving
both employees and customers in the process of identifying the major strategic issues
facing the agency and in developing the agencys strategic plan. However, the failure
of the strategic plan implementation is often cited in the strategic planning literature
which, as a result, limits the value of strategic planning efforts. The success of this
agency in implementing its strategic plan is worth examining.
Although the agency was strong in developing its strategic plan, its
implementation efforts were less clear. At the early cycles of strategic planning, the
agency used extensive communications tools: a weekly newsletter, a monthly news
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report, etc. to introduce strategic planning to all employees in different levels of the
agency. It even videotaped several meetings where the executive director, division
managers and the agencys customers discussed the agencys mission and goals and
suggested strategies to achieve them. Thus, the awareness of the agencys employees
of strategic planning is apparent. As one manager puts it, Managers are very, very,
very aware. A lot of them could probably give you a lecture about strategic planning,
why they like it and why they dont like it, what our measurements are, how often we
have to report them, who looks at them, how we got them; they are very well-
informed. This statement is clearly reflected during the interviews, where I found all
interviewed participants have a clear understanding about strategic planning. They
actually provided me with similar definitions, for example, of strategic planning and
how they have developed the agencys strategic plan, which indicates the effects of
the different communications tools that have been used to introduce strategic planning
to the agencys employees and customers.
In spite of such awareness, there is no internal, formal, well-established
implementation and evaluation process of strategic planning goals at the agency level.
As one manager observed, I would say thats one of the weaknesses of our agencys
process, is that there is not a very formal evaluation mechanism. I mean, yeah, we
know if were doing a good job with [goal A], but.. .there is not some group or some
person thats saying, [executive director], look, here is a trend. It is very informal.
Two approaches, however, have emerged from the interviews of strategic plan goals
implementation at the unit level.
Performance Measures Reports. Each division is required to provide a
quarterly report of its performance compared to key performance indicators to the
budget office, which then reports it to the LBB and the Governors Office. This
formal reporting has become, in some cases, more a requirement than a tool to
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improve the agencys performance because of the many obstacles to developing
meaningful performance measures and, as a result of inflexibility of the oversight
bodies to modify performance measures, they have become in some cases fruitless.
In spite of such great limitations, performance measures have had some effect on
keeping units aware of the importance of tracking their performance and developing
internal meaningful performance measures. So, the value of performance measures in
some of the units is not in its reporting requirement but in creating awareness of
managing for accountability.
Performance Plan. Internally, the agency uses its performance plan for each
employee. The division strategic plan goals are derived from the overall agency
strategic plan goals. Each individuals performance plan is tied to his/her division's
strategic plan goals. As one manager asserts, strategic planning goals are tied to
individual performance plans so that every single employee, when he or she sits down
with his or her supervisor each year, looks up and they can see where their annual
performance plan relates to the three strategies which form the strategic plan of the
agency.
The performance plans of division managers are not only considered to be
their individual plans, but they are also the divisions strategic plan goals. A
divisions manager clarifies his performance plan by indicating that its for me as an
individual, but I would say that its very broad. So it represents kind of what the plan
is for the division, what as a division we are supposed to accomplish this fiscal year.
The performance plan at this agency is an important tool in implementing the
divisions strategic plan goals because it is tied to different rewards systems. As the
executive director explains, The rewards are there at the individual level. We have
an employee recognition program, a very, very, very well done employee award
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program, and those awards center around the strategies. So we reward the behavior
both financially and in terms of recognition in our institution.
A less formal approach to the overall agencys strategic plan goals
implementation is reflected in the executives role in allocating budgets among the
agencys divisions. The more successful a division manager is in tying his/her budget
request to the overall agencys strategic plan missions and goals, the greater the
opportunity that the division receives a higher budget. As one division manager
explains, Division directors recognized that if they want to keep their budgets, theyd
better be doing things with strategic plan. Although these different tools help in
implementing strategic plans, the agency is stronger when developing its strategic
plan than in its implementation. One explanation for this would be that the agency
is self-funded, therefore, it is important to involve its customers in the phase of
developing its strategic plan so that their goals are clearly included in the overall
agencys goals and ensure the support of its constituents.
The discussion, so far, indicates that the agency has succeeded in developing a
successful strategic plan and, to some extent, in implementing it. Also, it notes that
the states role in helping the agency in developing and implementing the strategic
plan is limited, and in some cases, as in linking strategic planning and budget, has
been viewed as negative. Examining the agencys experience with strategic planning
has revealed several factors that drive its strategic planning development and
implementation.
Success Factors. Several factors have contributed to the success of strategic
planning efforts at agency A.
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Commitment of the Executive Director
Behn (1991) concludes in his analysis of several successful case studies of
welfare reform that leadership counts. It became clear over and over again during
the interviews of the executive directors role in driving the efforts of strategic
planning. He not only refers back to the strategic plan in the agencys newsletter,
video newsletter and seminars, but he also puts effort into making it happen. The
commitment of the executive director is clearly reflected in his remarks that strategic
planning is the best means that I can recall in any institutionpublic or privatefor
organizing work, and for understanding what exactly is expected of you. Share that
success, and then implement it. The executive director is not only committed to the
process of strategic planning but he is also personally involved in it, ensuring all
division managers involvement. Many managers echoed that If he had said, Were
going to do this, but its not important, then it would not have been successful
because nobody would have seen commitment in it. But he said, Were going to do
it and he gave us a mandate to do it, and time to do it, and personal involvement. He
was very involved in making it happen well. The executive director and managers
expressed a higher level of commitment to the strategic planning process than to the
performance measures and the strategic planning budget linkage.
Management Continuity
One major obstacle to the improvement of performance in the public
organization is the high turnover of leadership. The average tenure of top
management in public organizations is almost two years. This agency, however,
enjoys stability in its executive management. The current executive director has been
directing this agency since 1989. Being committed to strategic planning efforts and
his continuity as executive director has helped strategic planning efforts, as it
becomes clear when one manager indicated that continuity has to do with it. If
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youre one of the agencies that is constantly changing executive directors, it is real
hard to get that continuity, to get a strategic plan in place."
Constituent Involvement
A successful strategic plan is a product of both an agencys employees and an
agencys customers constituents involvement. This involvement brings credibility
to the strategic plan goals. This agency did not only involve internal strategic
planning committees that were composed of the division managers and many
employees from different sections, but it also involved constituents. The input of the
customers is invaluable. As one manager put it, It is one thing to sit in our vacuum
and say what we think would be best for our customers. It is a whole other thing to
bring in your customers who say, Thats not what we want, or We would rather you
provide this than that, or This is the service that I really want that you do not have at
all. Strategic planning is a product of involvement.
Integration
Management techniques such as TQM tend to fail at the agency level because
they are not integrated with the organizations current management practices. So they
become an anomaly in the organizations culture and therefore fail. Strategic
planning, however, at this agency was integrated not only into the agency budget, but
also into other agencies processes, such as individual performance plans. Its
integration with performance plans is by far more beneficial to achieving the agencys
goals than its integration with the agency budget. The agency had TQM that never
made it due to a lack of integration with other agencies processes. As the human
resources manager explains, Weve been successful at integrating it [strategic
planning] into our other processes and other systems, and our whole planning system.
We have had quality that peaked and waned...It did not quite take as an integrated
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way of doing business. The difference between what we have done with quality and
what we have done with strategic planning was strategic planning was integrated and
runs parallel and in harmony with our other process. Quality never did that. So we
have quality programs going on. But it never quite integrated to the degree of
carrying itself on its own.
State Mandate
Although most managers have criticized the current linkage between strategic
planning and the budget, they indicate that the requirement of strategic planning
helped the agency to get serious about it. But the executive director summarizes the
main factors that affect the success of strategic planning when he explains, the law
helps us, in that we have been serious about it. We have not treated it as a burden that
we just had to do in order to meet the test of the law. We have done it, weve had
very competent people involved in organizing it, and weve made a commitment to it
and we take it seriously. Secondly, weve used our internal communication tool
effectively to support it. Thirdly, and most important reason is its tied to individual
performance plans. So the state mandate has been positive in the sense that it
introduced the strategic planning concept to public agencies. Agencies success with
strategic planning, as the executive director has noted, goes beyond perceiving
strategic planning only as a requirement to the realization that it is a management tool
that could help agencies performance.
Flexibility
The agency ensures flexibility in developing its strategic plan. The agency
succeeds in efforts not to make it too complicated and convoluted. The strategies
are very broad, which give a lot of flexibility in how you accomplish the goals. It
allows for creativity and flexibility in trying to come up with new methods that fulfill
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those strategies which then fulfill those goals. So flexibility has enhanced creativity
to develop and implement strategic planning strategies. It is the commitment and
involvement of the executive director that has emerged as a primary factor in ensuring
not only that managers and employees are committed to strategic planning, but also
that they are involved and that the strategic planning is integrated into other processes
of the agency. Strategic planning, therefore, has become part of the agency culture.
We must now ask, however, in what way has strategic planning benefited the agency.
Strategic Planning Outcomes. Examining the agency's experience with strategic
planning indicates different outcomes benefits of strategic planning. These benefits
are: clarification of agency direction, assistance on policy and budget decisions,
improvement in external relations, internal management improvement, and
reorganization.
Clarification of Agency Direction
Strategic planning helps the agency to achieve different benefits, but the most
cited benefit is the clarification of the agency direction. Strategic planning has helped
management and employees to clarify the agency's missions and goals. Strategic
planning, as one manager notes, "forces us to think longer-term and gives us a point of
focus. It tells us we are going to support these goals, how we're going to focus. "As
goals and missions have become clear, employees were able to align their efforts
towards that end. "What this process [strategic planning] has done for this agency is
aligning a whole lot of efforts toward the same vision. It's aligned resources toward the
vision. It's really aligned a whole lot of efforts that could have been counter to each
other. It aligns people, money, efforts, in a long-term direction. It helped balance the
short-term emergencies with the long-term purpose." Also, strategic planning helps in
clarifying the priorities of the agency not only to the management, but also to the
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employees. "Senior management is very clear on what our priorities are, and
communicates what the priorities are... You could ask several of us and we're going to
give the same answer as to what our priorities are."
This understanding of mission and the agencys priorities has caused employees
- as a senior budget official indicates "To think more about what the purpose of their
job is as opposed to the little job description stated when they got hired." Thus,
strategic planning has at this agency helped the entire employee pool, as the
executive director explains, in staying on message. Strategic planning has that
aspect. If it's not our message you should not be talking about it. So it's a way of
continuously focusing on what the primary objectives should be to reach our goals."
Assistance in Policy and Budget Decisions
This agency consists of several distinctive divisions. Each division has its own
budget which is part of the whole agency budget. The use of strategic planning has
helped to achieve better budget decisions in that the agency becomes more accountable.
The budget manager has noted that, "We've been more keenly aware of how we're
distributing and allocating our fiscal resources and our staff resources. One of the
primary benefits is that our whole way of doing business has become more accountable
and more efficient. "Managers of the different divisions have realized the importance of
relating their budget requests to the overall agency strategic plan which has forced them
to put proposals together that would support that strategic plan. As one manager noted,
If you don't work with the strategic plan your budget will just continually go down.
This understanding of the division managers shows how the executive management
uses strategic planning goals as justification for budget decisions.
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External Relations
One major aspect of the strategic planning process at this agency is the extensive
involvement of its customers. Although such involvement, as some managers have
observed, creates high expectations that the agency should meet all constituents' needs,
it has helped clarify the agency's goals and limitations. The agency divisions are so
diverse with so many constituents, yet the agency needs each constituent's support. As
one manager indicated, "You have to have somewhere to bring all those people together
because you need all their support The whole strategic planning does it. This
involvement as a result has contributed to a better image of the agency and the
confidence of our clients has improved because we have involved them. We ask them
to respond to our goals and our objectives. We ask them to respond to our current
programs and tell us what we should be doing. That in itself made a big difference
because then we set up the dialogue to start talking about it."
This dialogue enhanced the goal of the agency to identify of customers' needs
and their commitment to constituents' needs. It has "made for some very solid
partnerships with our constituencies." The strategic planning, therefore, clarifies to
both the agencys employees and customers the strengths, limitations and priorities of
the agency and in what way they can cooperate to advance their mutual interests.
Internal Management Improvement
The clarification of the agencys mission and goals has reflected more
employees' understanding of their goals and how they relate to the overall agency's
goals. "So more people think more about goals of this agency... think clearly about
how what they do on a daily basis ties to those goals than they did before-----That is
where the difference is. This culture change of understanding goals across divisions
has contributed to better communication and teamwork within the agency. "The
teamwork between divisions here, because of strategic planning, is pretty strong because
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goals are tied across the different divisions. Also, several managers have realized that
strategic planning has inspired the employees morale because, "You know where you
fit into the big picture and you feel like you can talk to everyone in the agency, in the
division, because you feel you know what they feel the priorities are.... If you know
that your division director thinks what you do is important, and you can communicate
freely about it when outside opportunities and barriers come up, then you just feel better
about doing your job."
Furthermore, strategic planning has made the performance plan meaningful,
which has always been looked at as a management exercise. This is because employees
"can see for themselves how what they do adds to what everyone else does to build
toward a particular end. "The goals are broad and employees have the flexibility to
achieve them. Thus strategic planning enhances the sense of achievement among
employees.
In addition to these benefits, strategic planning has helped the agency to identify
its strengths and weaknesses. The external assessment has helped the agency to
recognize not only its customers, but more importantly, "about the changing
demographics of our customers." The internal assessment "clearly lays out our
strengths and weaknesses. "It identifies where the training needs in the agency are, so
employees could acquire skills to achieve their goals.
Reorganization
Developing strategies to achieve an agencys mission may require changes in the
agencys organization to achieve alignment between strategy and structure. Although
the agency has not undergone a major reorganization as a result of strategic planning,
some divisions have reorganized their "whole structure based on" strategic planning
process results. The reorganization benefit is the least realized outcome of strategic
planning.
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The above discussion indicates that this agency has benefited from strategic
planning in creating a new organization culture where management and employees have
a mutual understanding of the agencys goals and direction.
Agency-B
The Agency B workforce consists of over 2800 employees with 26 field offices
throughout the state. It consists of several major divisions which are closely related
because of the specific nature of the overall agency functions. The agency is process
oriented in the sense that one divisions output becomes another divisions input and
that there are very clear steps to achieving many of the agencys goals. Its executive
director is an elected official who has been directing this agency since 1992, so it also
enjoys leadership stability. The agency is primarily state- funded.
Strategic Planning Development. Many agencies develop only one overall
strategic plan, and lack any kind of formal plans at the division level. Agency B,
however, has different strategic plans. It has an overall five-year strategic plan. "In
developing this plan, the agency formed a group from different divisions who put
together the plan and got management's approval. "The agency then required each
division to develop an annual business plan to support the overall agency strategic plan.
The agency also develops its annual overall business plan for the whole agency, which
is the product of the different divisions business plans. So the executive management's
role is in approving strategic plans, rather than in directly developing them. In
developing the strategic plan, there was not as great involvement of the agency's
customers as with Agency A. One possible explanation is that Agency A is self-funded
while Agency B is state-funded and therefore has limited its interaction with its
constituents.
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The overall strategic plan describes in detail the statewide philosophy, the
agency mission, philosophy, agency creed, extemal/intemal assessment, agency goals,
strategies and performance measures. The best description of the agency strategic plan
is reflected in the executive director's remarks that, "It tends to, rather than set the tone,
reflect the tone of things we've already decided to do, [ and] rather than being a planning
document, where you actually sit down and think up new directions and courses and put
them in the plan. "So the strategic plan is "more of the documentation of what we have
decided we're going to do in the future. "The agency, however, provided divisions with
very extensive guidelines explaining how they can develop their business plans. Each
division indicates its philosophy, mission, strengths/ weaknesses, goals, strategies and
performance measures, making the division business plan a reflection of the overall
agency strategic plan. Most divisions develop their business plans through extensive
broad involvement of the divisions employees. Others assign small teams for the
purpose of developing their business plans. How serious divisions are about their
business plan development and how integrated these plans are with the overall agencies
business plans depends on the commitment of the division managers to the strategic
planning process. Thus the quality of the division business plan varies. In general,
however, there is a linkage between the three different strategic plans: the overall
agencys strategic plan, the agency business plan and the divisions business plans. The
involvement of the agency, however, varies from one strategic plan to another.
The State Role. This section indicates how this agency views the state's role in
assisting public agencies to successfully implement the strategic planning mandate.
There are two parts of state strategic planning policies: the extent to which the state
provides incentives and support for agencies, and the effectiveness of the state
requirements in linking strategic planning strategies to the budget and the requirement
of performance measures.
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Incentives
The state has succeeded in requiring all state agencies to adopt strategic
planning instead of starting different pilot studies that could have delayed the
comprehensive implementation of strategic planning across the state. As the executive
director explained, "To their [the State's] credit, they decided to go ahead and join in.
They did not try another one of those never-ending pilots. The state also kept the
strategic planning requirement simple. The state "started out simple. If they hadn't, I
think it would have been a complete failure because it was so new and nobody knew
what it was. It was hard enough to understand it and get it done the first time. So every
time it's done, it is refined and each time it is done, it is done a little bit better."
The state, however, has not provided clear incentives such continuous training
and rewarding good performance to encourage agencies to implement the mandates. At
the beginning, there was some training, but "it's been pretty minimal. The state training
focused on explaining strategic planning requirements and instructions to agencies; they
were given only to those who were immediately involved in developing a strategic plan
as a budget request of the agency. So the state "just passed a law that said: "You will do
this'. Then it was left up to each agency to develop how they were going to do it".
The state also adopted the compliance accountability approach, rather than the
capacity-building and encouragement approach to enforce the implementation of the
law. The agency budget "has not withheld or awarded funds based on how well you
met your performance measures. There was no reward for good performance. Instead,
as the executive director indicates, "It's more being punished for noncompliance. That's
the incentive. Maybe somebody else out there got some incentives, but I certainly did
not see any."
Therefore, although the state adopts in its strategic planning mandate a clause to
reward high performing agencies and penalizes those agencies that did not successfully
implement the mandates, the state as it has been perceived by this agency, has not
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applied those types of incentives. This failure could be due to the difficulty in
controlling the many factors in the agencys environment which affect its success or
failure with the mandates. In spite of such difficulties, incentives may be needed to
encourage agencies to implement state mandates.
In the absence of clear incentives, therefore, one must examine the effectiveness
of State strategic planning policies such as strategic planning budget linkage and
performance measures.
Mandated Policies
Linking Strategic Planning Strategies to Budget. One downside of such a
linkage was that budget appropriation, as noted earlier, has not been related to agency
performance. This agency is process-oriented with closely related functions. So as the
budget director notes, "Seventy to eighty percent of our total appropriation is salaries."
In spite of that, as the budget director notes, the new performance budgeting was a big
improvement over the program budgeting which "told you a lot of information on how
much you spent on telephone, or on different line items, but it didn't tell you what the
results of anything were. Having agencies articulate their goals and set their objectives
and budget at a strategy level tells you something, or it should tell you something
meaningful. "This agency does not view the linkage of strategic planning strategies to
budget as negatively as in Agency A.
Performance Measures. The state has required agencies to provide quarterly
reports of their performance on a key performance indicator. Although this requirement
has forced the agency to focus on improving and measuring its performance, the
agency's experience with performance measures is frustrating. It has been difficult to
develop "meaningful performance measures. If we could develop more meaningful
performance measures, we might be able to use them as a management tool."
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This struggle to develop meaningful performance measures has been
complicated by the inflexibility of the state to change performance measures as the
agency succeeded in developing more meaningful ones. As many managers at the
agency echoed, "There is still a mind set at some level of the State that those
[performance measures] are set in stone and we have to have historical data, so it doesn't
matter whether it works or not, you can't change it". It is frustrating, as a budget
manager indicates. "Because here at our level, telling the division to look for results
and then improve your measures that you as a manager can use. Then when they come
up with better measures, then we have to ask permission to be able to change it, but we
can't do that but every two years. It's very frustrating."
So, although performance measures benefit employees in the sense that they
know what is being measured, such as "measuring customer service, and therefore
service has improved," the state policies concerning performance measures have
complicated developing meaningful performance measures. The value of these
performance measures could be in danger of being only a requirement and not a
management tool to improve the agency's performance.
Strategic Planning Implementation. The implementation of the overall agencys
strategic planning has been enforced using two approaches, the performance business
plan and the use of performance measures described below.
Performance Business Plan. The agency requires each division to develop an
annual business plan to achieve its portion or share of the overall agency goals. All
divisions' business plans then emerged to form the annual overall agency business plan.
The business plan defines the actual goals, strategies and performance measures to track
each division's performance. So, in general, there is a closer linkage between the overall
agency's strategic plan and the division's business plan. The budget director noted that
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I
"there is top-down, bottom-up, both ways linkage between the strategic plan and the
business plan, because what the divisions develop becomes a part of the strategic plan,
and what's been developed overall at the agency level filters down and is used by the
divisions as they develop their business plan. "It should be noted that the close linkage
between all these plans documents is the result of the clear role of the budget staff in
writing them. However, the divisions use their business plan to justify their budget
requests.
In spite of the limitation of all these different plans, the business plan at both the
agency level and at the division level assists the agency in implementing its overall
agency strategic plan because it clarifies the divisions and the agencys overall goals.
Performance Measures. This agency is considered to be very process-oriented.
Thus, performance measures have been utilized extensively in monitoring goals'
achievement Each division reports two kinds of performance measures. One type of
performance measures is used by the agency to report quarterly its performance on key
performance targets to the oversight body offices: the LBB and the Governors Office.
The reporting of performance measures to the oversight bodies has become, in many
cases, more a requirement than a tool of improving the agencys performance because
of the inflexibility of the oversight bodies in changing outdated performance measures
and the lack of clear reward for outperforming agencies. The other type of performance
measure, and the most important one, is reported monthly to the budget office,
explaining any variation in its performance. Monthly, the budget staff monitors the
divisions performance based on the divisions targets and compares the current year
with the same month of the previous year, prepares a year-to-date summary of where
they are in the fiscal year, and compares that to the divisions' performance targets. They
report, on a monthly basis, the division's performance on their performance indicators to
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I
the executive manager and assistants. The extensive use of performance measures in
this agency raised several criticisms such as the difficulty of developing meaningful
measures and quantifying some of the agencys performance targets. In spite of this
criticism and the limitation of performance measures, their use and the reporting
mechanism has helped both the divisions and the agency to maximize their goal
achievement.
Management Review. One of the goals of the agency is to improve the
efficiency of its internal operations. Thus, the agencys management has emphasized
monitoring the agencys performance. The deputy of the executive manager has mid-
year and end-of-year reviews with each division's management team. Although "It is
partly about budgeting, it's also about performance measures. These reviews aim to
assist each division in the achievement of its goals. The management review process
enhances managements involvement in strategic plan implementation and, therefore,
makes for better success in strategic plan goal achievement.
The Internal Audit. The internal audit division, based on the request by the
executive management, reviews divisions' performance. Instead of auditing a division
on only the extent to which they comply with rules and regulations, as many
compliance auditing divisions in government do, the audit division, in this agency, goes
beyond compliance to capacity -building auditing (Light, 1992). They audit divisions
on how successfully they used performance measures and strategies to achieve their
i
| goals, and on what kind of obstacles they are facing that may inhibit their achievement
i
| of their performance targets. So the auditing purpose, as the auditing divisions manager
|
| clarifies, is to "change the image from being a 'Gotcha,' that we're in the Gotcha
i department, to encourage divisions to call in and say, 'We've got a problem. Can you
i
| come up here and help us out to find what the problems are and make
I
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recommendations. So the internal audit, therefore, evaluates whether the division's
strategies are appropriate, and the effectiveness and efficiency of the operations that
support the strategy. This approach of auditing enhances the implementation of
strategic planning not only at the division level, but also at the overall agency level, too.
Success Factors. As discussed earlier, although the state has a limited role in
ensuring successful implementation of strategic planning mandates, there are several
factors at the agency level that have contributed to the success of developing and
implementing strategic planning at the agency level.
Management's Role
The executive management role is more obvious in the implementation process
than at the development level. The managers of each division are involved in
developing each of their business plans, which then becomes the overall business plan
of the agency. Also, the cross-division team develops the overall strategic plan which is
reviewed and approved by the executive managers. The executive managers, therefore,
are not extensively involved in the development process. However, they are involved in
monitoring the implementation of the strategic plan through the monthly reports and the
semi-annual and annual reviews of divisions' performance. The overall management
believes in the value of strategic planning and therefore, has gone beyond the state
requirement by requiring each division to develop its own business plan and report on
their performance, not only to the oversight bodies but also to the agency's executive
management.
Another aspect of the agencys leadership role in improving the agency's
performance and enhancing the implementation of strategic planning is that the
executive director "brings in independent auditors to do nothing but review our strategic
plan and structure, and review how things are being done, whether things can be done
I
109


differently. They use the business plan, the budget, the structure, and all those things to
evaluate how well we're doing. Obviously a clear management commitment exists
toward the improvement of agency's performance, and strategic planning is one of the
management methods that has been integrated into the overall agencys management
processes to improve agency performance.
Training
Agency B has provided training for its employees in many areas to help them
acquire needed skills of their jobs. One of the training areas included strategic planning
and how divisions could develop their business plan. The budget division, which is
responsible for implementing the mandate, provides training on how divisions can
develop their business plans. This division published a manual on how to develop a
business plan and usually brings strategic planning speakers and consultants to talk
about strategic planning. The on-going in-house training improves the employees
skills in different management areas, which helps to diminish employees resistance to
strategic planning and to enhance its implementation.
Integration
The strategic planning goals are integrated into the whole agencys management
process, thereby documenting the goals and the strategies used to achieve those goals.
The use of a business plan at the division levels to request their budget, and
performance measures as a means to report on their progress in achieving their goals,
become part of the day-to-day management practices of the agency. "So strategic
planning becomes ingrained into our way of doing business so that its just part of the
process."
What could describe the development and the implementation process at this
agency is the emphasis on the formal documentation and reporting of goals, strategies,
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and performance measures to both the oversight bodies and the executive management.
Although managers believe that such processes have helped them to focus on achieving
their goals, the risk is that such a reporting process becomes just satisfying a
requirement and never improves performance. This problem could be raised due to the
fact that, as many managers have noted, divisions cannot measure some of their
performance aspects and that may limit the use of the business plan.
Strategic Planning Outcomes. The agency has benefited from strategic planning
by clarifying agencys direction, assisting in policy and budget decisions, improving
external relations, and improving internal management. These benefits are addressed as
follows:
Clarification of Agency Direction
Developing the overall strategic plan for the agency has not only provided
direction to the overall agency, but also to the different divisions. As many managers
have noted, "We used the agency goals as a basis for building our plan. It lets you
know how your divisions fits in the big picture. "It should be noted that this agency has
not involved (as did "Agency A") its external customers in the process of developing its
strategic plan. Thus, it deprives itself of the benefits of its customers' comments that
could have been of great benefit to clarify its mandates and goals which could in turn
give the overall strategic plan the value to be a management tool that clarifies the
overall agency direction. The strategic plan in Agency B primarily documents only the
management's perspective of what the agency's overall direction should be.
In spite of such limitations, the overall strategic plan has been a valuable
management tool to focus the efforts of the agency's divisions. As the executive
director noted, "It forced us to think longer. It also gave us a framework of the annual
business plan, and the business plan review cycle, where it gave us a good framework
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for keeping up with what we are doing and keeping the whole thing fresh. It's more for
focusing and getting us to pay attention and not just get buried."
Assisting in Policy and Budget Decisions
It has not yet become clear how strategic planning helps the agency to allocate
the budget among divisions. However, division directors benefit from their business
plans which are developed on the basis of the overall business plan in making decisions.
This helps in the decision making process: as one manager asserts, It keeps me from
making rash decisions or jumping around. I know what's important." It also helps to
justify divisions' budget requests because "I could justify getting more money simply by
saying, "We are here on our strategic plan. We are going to have to get this kind of
equipment. I need this much money. So the business plan has somewhat helped
divisions to focus on their goals and justify their budget requests. What is worth noting
is that the divisions business plan are adaptive to the emerging changes in the agency
instead of being rigid.
External Relations
In conducting strategic planning, some divisions have conducted assessment of
their external environment. That analysis was limited to using customers' surveys to
identify their needs. This has helped to reorient the agency to be results-oriented and
customer-driven in much of its service delivery. However, the benefit of strategic
planning in this area is still in its early stages because of the limited involvement of
external constituents and stockholders in the process of developing the agency's
strategic plan.
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Internal Management Improvement
The most obvious benefits of strategic planning activities to this agency are in
the improvement of several aspects of its internal management. First of all, strategic
planning has improved employees' understanding of the overall agency missions and
goals. This helps employees to see how their division's goals fit into the overall goals of
the agency. As several managers indicated, "We're constantly aware of what our agency
and division philosophy is, what this division's mission is. Everything we do and how
we do it gets tied to our mission statement. So on a daily basis we have to keep in mind
what our mission statement is and what our goals are. Other managers added that,
"The most important part is the process that you go through to develop your business
plan so that everybody in the division is clear on what you are supposed to be doing."
Developing strategic planning also inspires teamwork within each division.
Each division's employees are involved to a different degree in developing their
division's business plan, which involves developing the division's philosophy, mission,
external and internal assessment, goals, strategies and performance measures. This
process has not only enhanced the understanding of the division's goals, but also helps
employees within each division to work as a team. What is lacking, however, at the
agency level, is interaction between divisions. Strategic planning processes could have
helped in breaking down barriers between divisions if there had been extensive
involvement of divisions' managers and employees to develop the overall agency
strategic plan and business plan. Instead of employees' involvement in developing an
overall business plan, the budget staff uses the different divisions' business plans to
write the overall agency business plan. Thus, the value of the overall business plan is
limited to those who care to look at it and understand it.
Another aspect of internal management benefits is improvement in the
employees' motivation. Strategic planning as experienced in this agency has helped to
motivate employees because, "It helps you become more self-motivated because each
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year you want to push yourself with your new plan". Articulating agencies' and
divisions' goals enhanced employees' motivation. As echoed by several managers. "It's
easier to get motivated if you can tie what you're doing to why you're doing it. If you
see that, it makes a difference in your job. Strategic planning helps in that matter".
Having the overall strategic plan and business plan enhances communication between
divisions and the executive management and budget staff, because the budget staff
becomes aware of each division's goals and strategies and the resources needed to
achieve them.
Finally, strategic planning encourages a result-oriented culture within the
agency. The agency, as a result of using strategic planning that incorporates
performance measures, has helped develop the agency "from an output-type measuring
system to an outcome-based system, where it doesn't matter how many you do, it
matters how well you did". So using performance measures creates awareness among
employees that there is an accountability mechanism. As the executive manager notes,
"Our managers and supervisors are probably more responsive now than they were
[before we started strategic planning] in terms of responding more critically to
customers."
Overall strategic planning has helped the agency to articulate its mission and
goals, and to focus and align all efforts towards achieving the agency's mission and
mandates.
Summary
The overall experience of the two agencies with strategic planning is positive.
Each agency approaches the development and implementation of strategic planning
differently. Agency A extensively involved its external customers in exploring the
strategic issues facing the agency. The customers were involved in developing the
agency's overall strategic plan. There was also a clear involvement of executive
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I
directors and division managers in the process of developing the agencys strategic plan.
This intensive involvement of the customers and management could be the result of the
fact that the agency is primarily self-funded. Although the agency adopted several
mechanisms to implement its strategic plan, its efforts, when compared to its effort in
developing the strategic plan, are less obvious. Yet, it adopted its performance plan
successfully into its management processes to implement strategic plan goals. On the
other hand, Agency B invested much effort in developing the agency strategic plan, and
business plans at the division level. Most of these plans were developed with minimum
i
involvement from its external customers. This could be explained by the fact that the
j agency is hilly state-funded and therefore its external customers have limited influence
I
on the agency's internal operations. The agency, however, utilized performance
measures more than Agency A in implementing the divisions goals. So the strategic
! plan was used in Agency A as a management tool to clarify the agency direction, where
i
| it was used primarily in Agency B as a tool to document what the agency is trying to
I
| achieve. A clear difference between the two agencies in this regard is that Agency A
| was committed more to the strategic planning process related to clarifying the agency's
i mission, goals, and customers,- whereas Agency B was more committed to performance
measures as a management tool to track both the divisions, as well as the whole
agencys, performance targets.
j
I
In spite of the differences between the two agencies as to how they developed
and implemented strategic planning mandates, they achieve similar benefits: (see Table
5.1). All these benefits are extremely important in helping the two agencies to improve
i
their overall service delivery. Both agencies affirmed that they would continue strategic
planning efforts, even if the state were to abandon the strategic planning requirement.
I This indicates their commitment to strategic planning as a valuable management tool.
They indicated, however, that they would adopt a more flexible strategic planning
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Table (5.1)
Comparison of Strategic Planning Benefits at the Two Agencies
Benefits Agency A Agency B
1. Clarification of agency direction and goals
a. Establish management direction +4+ +++
b. Clarify agency priorities +++ +++
2. Assistance in policy and budget decision making
a. Guide to policy decision ++ -H-
b. Guide to budget decision ++ -H-
c. Gaining support for budget decision ++ ++
3. Client and external relations
a. Improved constituent relations -H-+ ++
b. Greater commitment to customer satisfaction +++ -H-
4. Internal management improvement
a. Improved teamwork ++ ++
b. Improved internal communication +++ ++
c. Enhanced result-oriented culture -H- +++
d. Improved staff morale ++ ++
5. Reorganization +
6. Service delivery ++ ++
Note: Realized benefits level.-H-+ = more frequently realized. ++ = frequently, + = the least realized
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approach in which they would be able to change performance measures wherever they
succeeded in developing more meaningful measures from the ones that are in use.
Also, the linkage between strategic planning and budget would be of more use in the big
picture where a total appropriation is tied to achieving broad goals. So the managers
call for more result-oriented budgeting that enhances accountability to achieve broad
goals, rather than enhancing the technical and accounting linkage between strategic
planning strategies and goals and budgeting.
A major conclusion of the strategic planning experience of these two agencies is
that the process of going through developing and implementing the strategic plans is
more important and valuable in enhancing customer-oriented management and in
improving performance than the actual products of the strategic plansdocuments..
Also, the experience of strategic planning at these two agencies indicates that strategic
planning is here to stay, and is not a management fad that could disappear within a few
years. All participants indicated that their agencies should continue strategic planning
even if the state were to abandon the mandate of strategic planning.
t
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Part Two: Quantitative Analysis
In this section, the descriptive findings of the study survey are presented. The
survey consists of several components, as presented in the methodology' section: the
background of participants and agencies, strategic planning activities, developers and
monitors of strategic planning implementation, managers and organizational
commitment to strategic planning, state strategic planning policies and their
effectiveness in implementing strategic planning, strategic planning implementation,
strategic planning outcomes, and the participants perception of the value of strategic
planning in encouraging strategic thinking and improvement in agencies. The
presentation of the results will follow the above sequence.
Background: Analysis of Agencies Characteristics
The researcher sent the survey to four groups in each agency: the executives,
budgeters, planners and division managers. A statistical analysis using ANOVA was
conducted and the results indicated that there is no difference between the groups in
their perceptions of the strategic planning experience in their agencies. As a result, I
decided to combine the four groups for the statistical analysis. The perceptions of the
four groups will enhance the study findings because they reflect managers
perceptions of strategic planning at different levels of the organizations. The
classification of the respondents is as follows:
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Table 5.2
Participants Classification
Category Frequency Percentage of the respondents Percentage of 77 agencies
Executives 39 33.3 50.6
Budgeters 20 17.1 26
Planners 20 17.1 26
Divisions Managers 38 32.5 49.4
Note: 66% (51 agencies ) of the 77 agencies that composed the study sample had returned at
least one complete survey.
As Table 5.2 indicates, 39 executives (33.3 percent) have completed the
survey. Also, 20 budgeters (17.1 percent), 20 planners (17.1 percent) and 38 division
managers,(32.5 percent) completed the survey. However, examining the percentage
from the perspective of how many agencies responded to the survey, the percentages
of executives, budgeters, planners, and division managers are 50.6, 26, 26 and 49.4
respectively. It is worthwhile to note that executive composes the highest
percentage of returns of the strategic planning survey, which may indicate that
executives are more willing to share their experiences with strategic planning than
others.
Agency Type. The percentage of agencies participating in the survey, as shown in
Table 5.3 vary from 25.6 percent representing general government, to .9 percent
representing business and economic development. Although there is no equal number
of agencies in each category to facilitate statistical analysis, the survey covers all
agencies in Texas government, which strengthens the survey findings as a
representation of all agencies experiences in Texas government and not only the
experiences of sub-categories of government agencies.
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Table 5.3
Agency Type
Agency Frequency Percentage
1. General Government 30 25.6
2. Natural Resources 20 17.1
3. Education 9 7.7
4. Regulatory 27 23.1
5. Public Safety and Criminal Justice 13 11.1
6. Health & Human Services 13 11.1
7. Business & Economic Development 1 .9
Note: Four respondents did not mention their agencys function.
Agency Size. The size of agencies in this research is operationalized by the
number of full-time employees. The agency size responding to the survey varies, as
shown in Table 5.4 from less than 50 full-time employees to more than 500 full-time
employees.
Table 5.4
Number of Full-Time Employees
Less than 50 51-100 101-500 More than 500
# % # % # % # %
31 26.5 8 6.8 24 20.5 54 46.2
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So, 31 (26.5%) of agencies have less than 50 full-time employees, 8 (6.8%) between
51 and 100, 24 (20.5%) between 101-500, and 54 (46.2%) more than 500 full-time
employees.
Source of Revenue. The agencies sources of revenue as in Table 5.5 vary
between self-funded, state funded and equally funded.
Table 5.5
Source of Agency Revenue
Self-funded State-funded Equally-funded
# % # % # %
44 37.6 60 51.3 8 6.8
Note: Five respondents did not mention their agencys source of revenue.
The self-funded source of revenue category composes 44 (37.6%); the state
funded 60 (51.3%); and the equally funded from self-raised and state or federally
funded, 8 (6.8%). The self-funded source raised revenue from their fees for services.
However, this revenue is considered to be state funds and these agencies role is to
collect the revenue for the state, not to use it as part of their budget.
Strategic Planning Development Activities.
Although there are possibly as many different models of strategic planning as
there are theorists and practitioners who write about strategic planning, common steps
of developing strategic plan were indicated in the literature review chapter. Drawing
from the literature review and from the Texas strategic planning model, this survey
covered the most common activities in the development of a strategic plan. Because
there are certain activities that each agency is required by law to conduct, there is a
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reason not only to address the extent to which each activity is completed but also the
degree of benefit from completing each activity.
For ease of discussion, the five-point scale in many of the survey sections has
been condensed into three major categories to achieve a clearer presentation of the
survey results. Also, the strategic planning activities are grouped based on the
literature review into steps. Thus, the discussion will present the degree of the
completion of each activity and the degree of the perceived benefit of completing
each step in improving agencies performance. There are nine steps that compose the
strategic planning model presented in this study: plan to plan, mission statement,
external assessment, internal assessment, strategic issue identification, goal setting /
strategies formulation, action business development, strategic plan implementation,
and ongoing assessment of strategic plan implementation.
Plan to Plan. This step involves the discussion of the potential value of
strategic planning, and the process of conducting strategic planning. It introduces
strategic planning into the agency, creates awareness about it and develops
commitment from all employees to it. In spite of the importance of this step, many
agencies do no pay enough attention to it, particularly when strategic planning is
mandated, as it is in Texas.
Table 5.6
Degree of Completion and Benefits of Strategic Planning Activities
Activities Item No. Degree of Completion Minimally Moderately Mostly d-2) (3) (4-5) # % # % # % Degree of Benefits Minimally Moderately Mostly (1-2) (3) (4-5) # % # % # %
1-Plan to Plan 1 18 15.8 19 16.7 77 67.6 13 20.7 29 59 53.1
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2-Mission Statement 2 - - 4 3.4 12 96.5 12 7.8 22 19.1 81 70.5
3-Externai Assessment a. citizens' needs assessment 3 10 8.8 15 13.3 88 77.9 16 14.1 21 18.6 76 64.9
b. assessment of collaboration with other agencies 4 16 14.3 31 27.7 65 58.1 20 17.1 36 30.8 55 49.5
c. overall external environment assessment 5 8 7.1 15 13.4 89 76.1 12 10.8 26 23.4 73 65.7
4-Internal Assessment
a. employees competencies 6 28 24.6 36 31.6 50 43.9 27 24.1 34 30.4 51 45.5
assessment
b. strategies assessment 7 12 7.9 21 18.4 81 71.1 15 13.4 29 25.9 68 60.7
c. overall internal assessment 9 9 7.8 27 23.5 79 68.7 14 12.5 37 33.0 61 54.5
5-Strategic Issue Identification 8 4 3.5 18 15.8 92 80.7 9 8.1 22 19.8 80 72
6-Goals Achievement a. goals & objectives formulation 10 4 3.5 8 7 103 89.5 8 7.1 23 20.5 64 72.3
b. strategies formulation 11 6 5.2 17 14.7 93 80.2 12 10.7 29 25.9 71 63.4
c. performance measures 12 10 6.9 12 10.3 94 81.1 25 21.9 23 20.2 66 57.9
d. strategic planning strategies budget linkage 13 12 10.5 8 7 94 82.5 26 23 22 19.5 65 57.5
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7-Action/Business Plan Development 14 16 23 22 19.5 65 57.5 12 20 30 27.3 58 52.7
8-Strategic Plan Implementation 15 10 8.8 26 23 77 68.1 12 10.8 36 32.4 63 56.7
9-Ongoing Assessment of Strategic Plan Implementation 16 26 22.8 16 14 72 63.1 25 22.3 23 20.5 64 57.1
Note: Item No. refers to the item number in the questionnaire. refers to the frequency of
responses per choice. refers to the valid percentage which accounts for the missing value.
Although the plan-to-plan step is not included in Texas strategic planning
model, 67.6 percent of the participants indicate that their agencies mostly completed
the step and 53.1 percent of all participants noted that their agencies realized
significant benefits of conducting this activity. Almost 82.1 percent of the surveyed
respondents report that their agencies have realized moderate to significant benefits
from completing to different degrees the plan-to-plan step. This supports the
importance of including this step in any strategic planning model if an agency wants
to achieve success with strategic planning efforts.
Mission Statement. Developing a mission statement is a main component of
Texas strategic planning model requirement. So it may not be surprising that all
agencies have indicated that they moderately to mostly have completed developing
their mission. AJmost 70.5 percent of the participants perceive significant benefit
from conducting a mission statement. Also, 98.6 percent of all the participants have
noted that mission statement development degree of benefit was moderate to
significant in helping them to improve their agencies performance. This mission
benefit may be realized in the category of providing direction to the agency.
External Assessment. External assessment includes assessing many aspects
outside the agency, such as political and economic conditions, collaboration with
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other agencies and identification of customers' needs. Because public organizations
receive their funds from the state, it is extremely important that each agency
understands its external environment so that it can succeed in meeting its mandates
through successful collaboration with other agencies and understanding its clients'
needs.
Out of the three activities of external environment assessment, citizens needs
assessment was the highest in the degree of completion, with 77.9 percent of the
participants indicating that their agencies have mostly completed this activity. This
shows how public agencies have begun emphasizing surveying customers to seek
their needs, which would help to deliver the service customers (clients) value.
Only 58.1 percent of the participants note that their agencies mostly
completed assessment of collaboration with other agencies to improve inter-agencies
communication and collaboration to meet their mandates. Although 58.1 percent may
look high, collaboration between agencies is extremely important because no agency
functions in a vacuum; thus, such a step needs more emphasis. The significant
benefit of conducting external assessment is clear in both assessing the citizens'
needs, 64.9 percent and in the overall assessment 65.7 percent, while it is less clear in
the case of assessing the collaboration with other agencies, 49.5 percent. This reflects
that the higher the degree of completion of an activity, the higher the benefits of
completing such a step.
Internal Assessment. The internal assessment step in the survey consists of
assessing the employees competencies, the agencies strategies and an overall
internal assessment. The success of an agency in achieving its goals depends on
many factors, among which is having competent employees that are capable of
carrying out the agencys goals and mission. Thus, it is extremely important for an
agency to analyze the skills of the employees that are necessary to achieve the
agencys goals. Despite such importance, only 43.9 percent of the participants
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indicate that their agencies mostly completed the employees competencies
assessment. This somewhat moderate percentage may reflect the difficulty of
identifying the skills each employee would need to achieve a given goal. The degree
of benefit compared with the degree of completion of conducting employees
competencies assessment is higher, 43.9 percent vs. 45.5 percent, indicating that
agencies benefit from assessing their employees competencies to achieve their goals.
Strategic Issue Identification. The heart of strategic planning is identifying
strategic issues and managing them. Identifying strategic issues is not a component
of Texas strategic planning, yet 80.7 percent of participants note that their agencies
have mostly completed this step. A successful organization needs to identify strategic
issues that positively or negatively affect its mission and future. Agencies have found
that strategic issue identification is beneficial. Almost 91.8 percent of all participants
express that conducting this activity has provided their agencies with moderate to
significant benefits.
Goal Setting and Strategies Formulation. The goals achievement step consists
of several activities, such as goals and objectives formulation, strategies formulation,
performance measures and linking strategic planning strategies with budget. All these
activities are requirements in Texas strategic planning model. Thus, over 95 percent
of the participants indicate that their agencies have moderately to mostly completed
these activities. Although these agencies have noted they benefited from completing
these activities, only 57.9 percent and 57.5 percent have indicated that their agencies
benefited significantly from conducting performance measures and linking strategic
planning strategies, respectively. Although these percentages are higher than fifty
percent, they are at the low end of the significant benefit of conducting strategic
planning activities. This indicates the difficulty of developing meaningful
performance measures and beneficial linkage of strategic planning and budget.
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Action Plan Development. Although many benefits of strategic planning
result from the strategic planning process, it is important to develop an action plan
that will help the agencies in achieving their formulated goals and objectives.
However, only 57.5 percent of the respondents have indicated that their agencies have
mostly completed their action plans, and 52.7 percent indicate that conducting this
activity was significantly beneficial to them in improving their agencies
performance. Developing a flexible and meaningful action plan is extremely
important yet difficult to achieve. Many view an action plan as a rigid plan which
contributes to its early failure.
Strategic Plan Implementation. A strategy that has never been implemented
has limited value. Almost 91.1 percent of the participants expressed that their
agencies have moderately to mostly completed strategic plan implementation, and
89.1 percent believe that completing this activity was of moderate to significant
benefit in improving their agencies performance. Strategic implementation is where
most strategies fail because it demands not only more effort and commitment to it but
also an effective integration with the other management processes of the agency.
Review of Strategic Plan Implementation. Ongoing assessment of strategic
plan implementation enhances the success of strategic planning efforts because it
helps to identify obstacles to implementation and provides implemented with
valuable information that betters not only the process of implementation but also that
of strategy formulation. Almost 63.1 percent of the participants express that their
agencies have mostly conducted ongoing assessment of their strategic plan
implementation. The process was beneficial, as the survey results indicate.
Examining the overall agencies degree of completion of strategic planning
steps and benefit, we find that the participants responding to the survey believe that
their agencies have achieved a higher degree of completion and have also perceived
high benefits from conducting these steps. None of the steps that are completed have
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been perceived to be of little value to public organizations and should therefore be
eliminated from the suggested common strategic planning steps offered in the
literature review section. The high degree of completion of strategic planning steps
can be viewed not as the result of mandating strategic planning but the benefit
agencies have perceived to accrue from conducting these activities.
Developers and Implementers of Strategic Planning
As indicated in the literature review, many strategic planning experts attribute
some of strategic planning implementations failure to the lack of executive
management commitment, and as a result the lack of overall organizational
commitment, in developing and implementing strategic plans. Strategic planning
tends to be more successful whenever there is a wide involvement across the
organization in developing the strategic plan.
Table 5.7
Developers of Strategic Plans
Developer Frequency Percentage
1. Executive Director 6 5.2
2. Executive Director & Program Managers 38 32.8
3. Planning & Budgeting Staff 19 16.4
4. Executive Director, Program Managers, Planning & Budgeting Staff & Employees Across the Agency 53 45.7
As Table 5.7 indicates, 45.7 percent of the respondents expressed that their
strategic plans have been developed by executive management, planning and
budgeting staff and employees across their agencies, showing that there is some
involvement from all employees in these agencies in strategic planning development.
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Almost 32.8 percent of the respondents pointed out that the executive directors and
division managers are the developers of strategic planning. In some agencies, 5.2
percent of the respondents expressed that the executive directors are the primary
developers of strategic plans. Although strategic plans used to be developed solely
by the planning staff, in the Texas agencies experience only 16.4 percent of the
participants indicated that the planning and budgeting staff are the primary developers
of their agencies strategic plans. These results show that executives are highly
involved individually or with other employees, 83.6 percent, in developing strategic
plans for their agencies. This shows the shift in strategic planning practices where
plans used to be developed only by planners with minimum involvement of executive
management, to the new reality where the role of planners is to be facilitators of the
process, while executives are the primary developers of strategic plans.
Although executive involvement in developing strategic plans is important, it
is critical that they are involved in implementing them. It is the executive managers
and their assistants and the division managers who have authority within agencies,
and therefore they are accountable to achieve the mandates and missions of their
goals. Their involvement encourages the overall organizational commitment to the
strategic planning process. The planning and budgeting staff are primarily facilitators
and assistants to the executive management in achieving their goals. Thus, we would
expect that successful implementation would require executive management
involvement in the implementation process.
But, as Table 5.8 shows, 40 percent of the participants have indicated that the
primary monitors and evaluators of strategic plan implementation, in their agencies,
are the planning and budgeting staff. The requirement of linking strategic planning
strategies to the budget has led to the involvement of the budget staff in the
implementation process. The planning and budget staffs involvement could be
I
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Table 5.8
Who Monitors and Evaluates Strategic Plan Implementation
Monitor & Evaluate Strategic Planning Implementation Frequency Percentage
1. Planning & Budgeting Staff 46 40
2. Executive Director and Assistants 39 33.9
3. Division Managers 22 19.1
4. An external body/group 1 .9
5. No formal monitoring & evaluation of Strategic planning implementation 7 6.1
beneficial only if they approach their role in the strategic planning process as
facilitators to the executive management. That is to say, that the monitoring and
evaluation results will successfully be communicated to the executive managers, who
will take effective actions to enhance the strategic plan implementation. If, however,
the members of the planning and budgeting staff who monitor the strategic plan
implementation fail to communicate the implementation findings to the executive
management or have perceived that their role is to direct the implementation process
by themselves, then such activities will usually lead to a failure of strategic planning
activities.
The second primary monitors and evaluators of strategic plans are executive
directors and their assistants-33.9 percent. Some participants, 19.1 percent, noted that
the division managers are the primary monitors and evaluators of strategic plan
implementation. Although budgets and planning staff are primarily the monitors of
strategic planning efforts in the view of 40 percent of the respondents, executive
manages and division managers, as expressed by 53 percent of the participants, are
involved in the implementation process, which enhances their strategic planning
efforts. Other agencies, as respondents have expressed, either have an external
oversight body (.9%) to monitor their plan, or no formal (6.1%) evaluation of their
strategic planning efforts.
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Commitment to Strategic Planning
Commitment at the different levels of an organization is necessary to achieve
success with any management initiative. Thus, many have attributed the failing of
TQM and strategic planning, be it in the private or public sector, to the lack of
commitment of agencys management (Bimbaum, 1990; Berman and West, 1995).
As Table 5.9 shows, there are two types of commitment surveyed in this study:
commitment at the individual level (executives, budgeters, planners and the division
managers) and commitment at the agency level.
Table 5.9
Commitment to Strategic planning
Level of Commitment
Type low moderate high 0-2) (3) (4-5) # % # % # % Mean
Management Commitment* 9 7.8 16 13.8 91 78.5 4.1
Agency Commitment 28 24.1 34 29.3 54 46.6 3.3
Commitment level of survey respondents to strategic planning
The level of commitment of both is relatively high where 92.3 percent of the
respondents indicate that their level of commitment is moderate to high and that their
agencies, 75.9 percent,, are moderately to highly committed to strategic planning. It
is worthwhile to note that individuals perceive their commitment as much higher than
their organizations commitment. In spite of that, the overall commitment to strategic
planning at Texas government agencies is encouraging.
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State Policies and Strategic Planning Efforts
Successful implementation of any mandate demands a certain organizational
capacity in the form of skilled employees. Also, providing incentives (financial
incentives or other) and recognizing the better performing agencies so that they can
serve as an example for the rest is an important element in encouraging successful
implementation of, in this case, strategic planning. Thus the question is: to what
extent do agencies in Texas government perceive the effectiveness of the role of the
state in providing incentives to encourage successful implementation of strategic
planning, and the effectiveness of the requirement of performance measures and
linking strategic planning with budget?
Table 5.10
State Strategic Planning Incentives
Level of Effectiveness
Incentive No* Yes* Minimal Moderate Significant
(1-2) (3) (4-5)
# % # % # % n % # %
Training 23 19.7 90 79.6 26 28.9 34 37.8 30 34.3
Financial 67 57.3 47 40.2 16 34.0 20 42.6 11 23.4
Recognition of
successful 70 59.8 44 37.6 11 25 20 45.5 13 29.5
performance
Flexibility with budget execution 54 46.2 57 48.7 16 21.1 21 36.6 20 35.1
Flexibility with strategic planning development 17 14.5 98 83.8 17 17.3 28 23.9 53 54.0
Linkage of budget appropriation and agency performance 26 22.6 89 77.4 28 31.5 26 29.2 35 39.4
*No indicates absence of an incentive. Yes indicates presence of an incentive. % indicates the valid
percentage which accounts for the missing value.
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I


The state policies section in the survey has two objectives. First, it
investigates the existence (Yes) or lack of an incentive (No). Second, it measures the
perceived effectiveness of each incentive in helping agencies to implement strategic
planning on a five point scale where 1 = minimal effectiveness and 5 = significant
effectiveness. As Table 5.10 shows, the state has provided several incentives to help
agencies implement strategic budgeting which is a linkage of strategic planning and
budgeting. Almost 70.6 percent of the participants indicate that the state has provided
training related to strategic planning. Although only 34.4 percent perceived the
effectiveness of training as significant, 72.2 percent perceived it as having moderate
to significant effectiveness. The state, as the qualitative analysis show was
concentrating at the beginning to help agencies to understand the mandate goals and
how agencies can comply successfully with the mandate requirement. Most
participants, 57.3 percent, noted that there is no financial incentive for successful
performance. However,40.4 percent of the participants in the survey, in contrast to
the two exemplary agencies, indicate that the state has offered financial incentives
and almost 66 percent of them perceived the incentives as moderate to significant in
helping agencies to implement the strategic planning mandate. It is not clear,
however, what kind of financial incentives the participants have perceived. One
possible explanation is that the legislature becomes more flexible in their budget
appropriation with agencies that are perceived as outperforming ones. One of the
incentives advocated in public management literature (Behn, 1990) is recognizing
publicly the agencies with good performance. However, only 37.6 percent have noted
that the state has recognized publicly the agencies that have achieved success with
strategic planning. Given the difficulty of rewarding successful agencies financially
in public sector, this percentage is quite low compared to the other percentages and
what the state could have done. Another incentive that budget reformers advocate
(Cothran, 1993, Schick, 1973 ) is flexibility with budget execution. The state of
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Texas has adopted strategic budgeting, that is, linking strategic planning with
budgeting to enhance accountability for performance. To what extent has the state
allowed for some flexibility of the budget regulations to enable agencies to achieve
the agreed performance targets? Almost 48.7 percent of participants indicate that the
state has provided such flexibility. The budget flexibility was perceived by 71
percent of participants as moderate to significant effectiveness in assisting the
implementation of the strategic planning. One major strength of strategic planning
mandate in Texas is the flexibility in how agencies go about developing their strategic
plan. The state has provided broad guidelines for strategic plan development. Almost
83.8 percent of participants recognize such flexibility and almost 80 percent perceive
such a policy as of moderate to significant effectiveness in developing their strategic
plans. The flexibility with strategic planning development appears to be a very
effective incentive in developing successful strategic plans. Do oversight bodies take
into account, during the budget appropriation, the performance of agencies in
strategic planning? Almost 77.4 percent perceive that there is a linkage between how
well an agency performs and the budget appropriation and 68.6 percent of the
agencies perceive such incentive as having moderate to significant effectiveness.
This finding has not been indicated by the two exemplary agencies. This perception
of the linkage between the agencys success with strategic planning and the
appropriation process may have enhanced the seriousness of agencies in
implementing strategic planning. In spite of the level of incentives perceived by the
agencies, the state still needs to broaden its incentives such as recognizing the efforts
of the agencies that have succeeded with strategic planning efforts. Broadening
incentives will assist agencies in benefiting from strategic planning and strategic
budgeting to enhance accountability for performance.
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!
Table 5.11
State Strategic Planning Mandated Policies
Mandated Policy Percentage Level of Effectiveness Minimal Moderate Significant # % # % % (1-2) (3) (4-5)
Performance measures 96.5 35 31.5 29 26.1 47 42.30
Strategic planning budget linkage 95.6 29 26.9 27 25.0 52 48.1
The state also has required each agency to use performance measures to track
their performance and linking strategic planning to budget. Although performance
measures are not new in Texas government, the states incorporating them into
strategic planning and budget is a unique aspect of strategic budgeting in the Texas
strategic budget mandate. Table 5.11 indicates that almost 68.4 percent of the
participants noted that the use of performance measures has moderate to significant
effectiveness in helping agencies achieve success with strategic planning. This
percentage, as well as the experience of the two agencies, shows how difficult it is to
successfully use performance measures in public organizations. Contrary to the
qualitative analysis, almost 73 percent indicated that the linkage between strategic
planning and budgeting has had moderate to significant effective in implementing
strategic planning in their agencies. This finding reflects the positive perception of
the idea of linking strategic planning and budget. However, there is a concern about
the close linkage between the two so that the linkage requirement becomes an end in
itself.
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Strategic Planning Implementation
How successful is the implementation of strategic planning at Texas
government agencies? As Table 5.12 shows, 60.4 percent of the agencies have
indicated that they have achieved very successful implementation, while 90.1 percent
of the surveyed agencies perceived their implementation process as moderate to very
successful.
Table (5.12)
Level of Success of Strategic Planning Implementation
Level of Success
Very Unsuccessful (1-2) Moderately Successful (3) Very Successful (4-5) Mean
# % # % # %
10 9.9 30 29.7 61 60.4 3.64
I
i
i Only 9.9 percent of the participants in the survey have perceived their
strategic planning implementation process as unsuccessful. On a scale of 1-5 where 1
= very unsuccessful and 5 = very successful with strategic planning implementation,
the average implementation was 3.64, which reflects a moderate success with
strategic planning implementation. This perception of implementation success is
worth noting. A major factor of the previous failing effort of strategic planning was
i
attributed to the failure of the strategic planning implementation process. The
experience of these agencies, however, indicates that they have achieved success in
their strategic planning implementation, which could enhance their actual realized
benefits of adopting strategic planning into their agencies.
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Outcome of Strategic Planning
What is the impact of strategic planning on improving public organizations'
performance?. The best method to measure the impact of strategic planning is to
compare the performance of agencies on clearly defined performance measures such
as profit in the private sector or the reduction in cost for delivering the same quantity
and quality of service. It is very difficult to achieve such goals in the public sector.
So, the survey measures the perceived outcomes of strategic planning. One way to
analyze the perceived outcomes is to compare the expected outcome of initiating
strategic planning at agencies with the realized perceived outcomes.
The survey addressed twenty potential positive outcomes of strategic planning
for public organizations derived from reviewing the strategic planning literature.
These outcomes have been classified into six major categories: 1) Agency direction;
2) Decision making; 3) External relations improvement; 4) Internal management
improvement; 5) Reorganization; and 6) Overall service delivery. The discussion of
strategic planning outcomes is based on the descriptive analysis presented in Table
5.13.
Table 5.13
Outcomes of Strategic Planning
Outcome Classification Item No. Expected Level of Improvement Minimal Moderate Significant (1-2) (3) (4-5) #%#%#% Actual Level of Improvement Minimal Moderate Significant (1-2) (3) (4-5) # % # % # %
1-Agency Direction a. mission & direction clarification 1 11 9.5 19 16.4 86 74.1 17 14.7 29 25 70 60.4
b. goals clarification 2 8 6.8 24 20.5 85 72.6 18 9.4 40 34.2 59 67.5
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c. priorities clarification 8 3 6 25 21.6 77 66.4 13 11.2 32 27.6 55 47.4
2-Decision Making a. better budget decisions 16 15 12.9 47 40.5 54 46.5 35 30.4 40 34.8 40 34.7
3-External Relations Improvement a. customers needs identification 10 13 11.3 34 29.6 68 59.2 18 15.7 38 33 59 51.3
b. commitment to customers(citizens) satisfaction 11 11 9.4 29 24.8 77 65.9 14 20.5 32 27.4 61 52.1
c. responsiveness to stakeholders 13 10 8.7 32 27.8 73 63.5 15 13.2 37 32.5 62 54.4
d. better public image 14 12 10.3 37 31.9 67 57.8 14 20.9 37 32.2 54 47
e. oversight bodies support 15 17 14.8 32 27.8 66 57.4 25 31.1 40 35.4 38 33.6
f. coordination with other agencies 18 17 14.9 49 43 48 42.1 28 24.3 48 41.7 39 34
4- Internal Management Improvement a. employees understanding of mission & goals 4 12 10.4 28 24.3 75 65.2 32 27.8 29 25.2 54 46.9
b. teamwork 5 11 9.6 32 28.1 71 62.2 27 23.7 40 35.1 47 41.2
c. strengths/ weaknesses identification 6 9 7.7 34 29.1 74 63.2 17 14.5 43 36.8 57 48.7
d. problem identification 7 10 8.5 36 30.8 71 60.7 27 23.1 35 29.9 55 47.1
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e. new strategies/policies development 9 21 1S.1 37 31.9 58 50 33 28.4 30 25.9 53 45.7
f. employee morale 12 24 20.9 40 34.8 51 44.3 41 35.7 48 41.7 26 22.6
g. internal communication 17 10 S.7 43 37.4 62 53.9 28 24.3 40 34.8 47 40.8
h. performance measure development 19 17 14.7 20 17.4 78 67.9 24 20.7 35 30.2 57 49.1
5-Reorganization 3 25 22.7 33 30.1 52 47.3 42 37.8 41 30.9 28 25.2
6-Overall Service Delivery 20 10 8.6 29 25 77 66.4 20 17.2 39 33.6 57 49.1
Note: "Item No. refers to the item number in the questionnaire. "# refers to the frequency of
responses per choice. refers to the valid percentage which accounts for the missing value.
Agency Direction. This category consists of three outcomes: Mission and
direction clarification; goals clarification; and priorities clarification. In general,
comparing the expected and actual realized benefits indicates the high expectation of
strategic planning outcomes. So, 74.1 percent of the respondents expected significant
improvement in mission and direction clarification. The actual perceived outcomes,
however, indicate that 60.4 percent of the respondents state that their agency has
realized significant improvement in its direction.
Also, 72.6 and 65.4 percent of the respondents expected significant
improvement in their goals and priorities clarification, respectively. Agencies have
realized actual improvement in their goals and priorities clarification, so 67.5 and
47.4 percent of these respondents indicated that their agencies achieved significant
improvement in these areas. Although comparing significant expected improvement
with significant actual improvement may indicate that the actual realized
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improvement is not high, examining the moderate to significant expected
improvement with its counterparts indicates that 85.4, 91.7 and 75 percent of the
respondents expressed that their agencies have realized improvement in mission and
direction, goals, and priorities clarification, respectively. The highest benefit was
realized in clarifying agencies goals (91.7%). Goals in public organizations tend to
be vague, multiple and conflicting, which has contributed to the difficulty not only in
measuring performance in public organizations, but in satisfactorily meeting all the
competing goals. So, it is a an important contribution of strategic planning to clarify
agencies goals and direction.
Budget and Policy Decisions. One of the objectives of adopting strategic
planning is to clarify an organizations priorities and improve its budget allocation.
Although clarification of agencies priorities, as indicated earlier, has been realized,
improvement in budget decision making was less obvious. Almost 87 percent of the
participants have expected moderate to significant improvement in budget decision
making, but 69.5 percent of these respondents have indicated that they have achieved
moderate to significant actual improvement in their budget decision making. These
results raised the question of the value of linking strategic planning strategies to
budgeting as it has been mandated in Texas. The goal of that linkage is to improve
goal achievement and budget decisions. Taking those results into account, we may
deduce that budget decisions made in agencies are not primarily based on using
strategic plan priorities; rather, they are based on other factors. In spite of the big
difference between the expected outcome improvement of budget decisions and the
realized ones, strategic planning has contributed to the improvement of budget
decision making.
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External Relations Improvement. One major component of strategic planning
is conducting external environment assessment where agencies recognize threats and
opportunities in their environment and benefit from such assessment in improving
their performance. The external relations improvement category consists of several
issues such as customers (clients) needs identification, commitment to customers
satisfaction, responsiveness to stakeholders, better public image, oversight bodies'
support and improvement in coordination with other agencies. As many as 88.8
percent of the respondents expected moderate to significant improvement in their
customers needs identification. Although many public organizations assume that
they understand their clients needs, it is necessary that organizations clarify their
mandates and identify their primary clients and their needs. It is true that public
organizations have many different clients with conflicting goals and expectations, but
that is not to say that public organizations have to shoot in the dark with their
service delivery in the hope of satisfying as wide a range of customersclientsas
possible. Strategic planning was helpful to the public organizations, as 84.3 percent
of the respondents said that it has helped them to achieve moderate to significant
improvement in identifying their clients needs.
Identifying public organizations clients is an important element of service
delivery, but commitment to those customers is what counts; therefore, 90.7 percent
of the respondents expected moderate to significant improvement in their
commitment to their clients satisfaction. The realized improvement 84.3 percent of
the respondents expressed that their agencies have achieved moderate to significant
improvement in their commitment to customers satisfaction as the result of using
strategic planning- is extremely beneficial. Improving agencies responsiveness to
their stakeholders is essential for their survival. Stakeholders are individuals, groups
or agencies that affect or are affected by the agencies actions. Strategic planning has
helped as many as 86.9 percent of the respondents indicate that their agencies have
141


achieved moderate to significant improvement in their responsiveness to their
stakeholders. Creating a good image of an organization, be it in the private or public
sector, is extremely difficult yet very important. It is good reputationimagethat
helps agencies to gain support from their customers and overall controllers. Although
there is a difference between expected versus actual improvement, where 89.7 versus
79.2 percent of the respondents indicate that their agencies have realized moderate to
significant improvement in achieving a better image, strategic planning has helped
these agencies to better their image.
At least in the Texas government, the oversight bodies, be they the Governors
Office and the Legislative Budget Board or others, are the ones who have mandated
and monitored strategic planning activities in state government. Gaining their support
is an important objective of many agencies. The question, however, is the extent to
which strategic planning has helped these agencies gain the oversight bodies support.
To the contrary of the expectation, only 69 percent of the respondents expressed that
their agencies have actually realized moderate to significant improvement in gaining
their oversight support compared with 85.2 percent who expected it. This result
indicates that oversight bodies need to communicate better with agencies and to
increase their incentives and supports for all agencies so they can successfully
implement strategic planning and realize its benefits.
In the public sector, it is collaboration and coordination, rather than the
competition between public organizations, that is the primary prerequisite for
delivering better service. Public organizations complement each other to achieve the
overall goals of their mandates. Thus, clear and continuous coordination among them
is extremely important. Of all participants in the survey, 75.7 percent indicated that
strategic planning has helped to achieve moderate to significant improvement in
coordination between agencies.
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Internal Management Improvement Conducting external and internal
assessment of an agencys environment should not only improve external relations
with other agencies and customers, but also contribute to the improvement of the
internal management. Several elements of internal management have been addressed,
such as employers understanding of mission and goals, teamwork, strength and
weakness identification within the agency, new strategies and policies development,
employee morale, internal communication and performance measures development.
Although strategic planning has contributed to the improvement of all these elements
of internal management, the improvement varies among them.
As many as 72.1 percent of the respondents indicate that their agencies
realized moderate to significant improvement with their employees understanding of
the agencies mission and goals. Teamwork within the agencies has improved, where
76.3 percent of the respondents noted that their agencies achieved moderate to
significant improvement in this area. The identification of the strengths and
weaknesses of the agencies policies, procedures, employees skills and other aspects
was a major contribution of strategic planning, where 85.5 percent of the respondents
expressed that their agencies achieved moderate to significant improvement in
identifying their strengths and weaknesses. Not only is identifying the weaknesses
and strengths of agencies important, but also knowing the obstacles that inhibit
agencies from addressing their weaknesses or benefiting from their strengths. Out of
all the participants, 77 percent noted that their agencies gained moderate to significant
improvement in identifying problems that may inhibit the achievement of their goals.
Public organizations are in need of developing new policies and programs to deliver
needed services. Recognizing the customersclientsneeds and the strengths and
weaknesses of itself should help the agency to develop new policies that should
contribute to the improvement of achieving goals. As a result, 71.6 percent of the
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participants noted that their agencies have perceived moderate to significant
improvement in developing new policies and programs.
Goal-setting theory indicates that clarifying goals and identifying agencies
clients and missions should improve employee morale. Although there is some
improvement, as 64.3 percent of the respondents say that their agencies perceived
moderate to significant improvement in employees morale, the result is still puzzling
because it is the lowest improvement within the internal management category. One
explanation is that agencies did not address this issue in their assessment of their
internal environment, and therefore such realized benefit was only a byproduct of the
improvement in agencies goals and policies.
Improving internal communication facilitates better teamwork within the
agency and encourages mutual understanding between employees of the agencys
mission and goals. Although 91.3 percent of participants expected to achieve
moderate to significant improvement in their internal communication, 75.6 percent
have perceived moderate to significant improvement in their agencies internal
communication. Improvement in internal communication in agencies using strategic
planning has mostly been realized when agencies involve employees across the
agency in the strategic planning process. Each unit within an agency will understand
how it contributes to the overall goals of the agency, and when integrated with other
units, will understand how they will achieve together the common mission and goals
of the overall strategic plan of the agency. So, although there is an improvement in
internal communication as a result of the strategic plan, we may have expected a
higher percentage of agencies to realize more benefits in their internal
communication, particularly that strategic planning would assess overall goals and
each units goals and how they integrated together to achieve the overall agency
mission.
I
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I
Developing performance measures is not only an element of Texas strategic
planning model, but also a state requirement that has been used to measure strategies
that link strategic planning and budget. Developing meaningful performance
measures in public organizations is essential but extremely difficult because of the
public nature of public organization environments and their criteria of success
(Lynch, 1995). It is not only efficiency and effectiveness which are important, but
also other values such as fairness, equity and responsiveness, even to captive clients
who are not of less importance. Given these obstacles in public organizations
settings, how useful is the adoption of strategic planning in improving the
development of performance measures? Fully 85.3 percent of the respondents
expected their agencies to achieve moderate to significant improvement, but only 79.3
percent have realized that their agencies achieved moderate to significant
improvement in developing their performance measures. Although this percentage
may look somewhat low, compared with the other realized benefits percentages, it is a
major improvement given the difficulty of developing meaningful performance
measures.
Reorganization. A major outcome of strategic planning efforts is alignment
between agencies missions and goals, as well as between strategy and structure.
Strategic planning goals, if agencies have a mismatch between their strategies and
structure, may not be realized. Whether structure should follow strategy (Chandler,
1962) or neither proceeds the other but emerge together (Mintzberg, 1994), there is an
agreement on a match between them. If strategic planning has helped agencies to
develop new strategies to achieve their missions, then we would expect strategic
planning would help them to reorganize their units to achieve better their clarified
mission. The survey results, however, show that 77.4 of the respondents expected
moderate and significant improvement in reorganization in their agencies. However,
only 62.1 percent noted that their agencies have achieved actual moderate to
145


significant improvement in reorganization. This is the least actual improvement in all
outcomes of strategic planning. Two possible explanations are that, first of all, major
reorganization within an agency may not be easily achieved due to the limited
authority of public organizations executive directors compared with their
counterparts in the private sector. Agencies that aim to reorganize some of their
functions may need to obtain the support and authorization of the oversight bodies,
which is sometimes a difficult and time-consuming process. Another explanation is
that reorganization in the public sector is largely achieved at the macro level where
certain departments or functions situated in different agencies are merged together to
a new agency or absorbed by a major agency. This is a clear case in Texas where
there is a fragmented executive branch. However, there is a need to have successful
reorganization at the agency level so that both agencies strategies and structure are
aligned together to better achieve the agencies missions and goals.
Overall Service Delivery. All the previous benefits should contribute to the
improvement of service delivery. Thus, the higher the degree of realized benefits in
the different potential strategic planning outcomes, the higher the expected and actual
improvement of service delivery. So, service delivery improvement is reflective of
the improvement in the other aspects of improvement discussed earlier. Thus, 82.7
percent of the participants noted that strategic planning has helped agencies to achieve
a moderate to significant improvement service delivery. This result clearly shows
that strategic planning is of great benefit to public organizations in improving their
performance.
Although agencies have noted significant improvement due to strategic
planning in the wide variety of outcomes discussed in this section, the question that
needs to be addressed is how participants have perceived improvement in their
agencies overall effectiveness as a result of strategic planning. Public agencies are
146
i


continuously striving to improve their performance, and therefore the question as to
the extent to which strategic planning effort has contributed to the improvement of the
effectiveness of these agencies is worth addressing.
Table 5.14
Overall Agencys Effectiveness Improvement as a Result of Strategic Planning
Minimal Improvement (1-2) Moderate Improvement (3) Significant Improvement (4-5) Mean
# % # % # %
30 26.1 41 35.7 42 38.3 3.12
As Table 5.14 shows, 74 percent of the respondents noted that their agencies
have achieved moderate to significant improvement in their overall effectiveness as a
result of adopting strategic planning. This result is of importance to the value of
strategic planning (particularly when strategic planning is mandated) which could be
perceived as a management tool of little value to public agencies.
What can we deduce from the above perceived benefits? In addressing the
value of the subjective measures of organizational performance, Dess and Robinson
(1984) in a well-cited study, compared the subjective measures of organizational
performance as perceived by top management with the objective measures of their
organizations performance and concluded that there is strong correlation between the
two measures. In other words, as they put it, the top managements perception of
how well their firm had performed measured in a subjective and relative sense was
consistent with how the firm actually performed (Dess and Robinson, 1984, p.271).
Although the authors result did not suggest that subjective measures are preferable to
objective measures of organizational performance, the strong correlation between the
subjective and objective measures indicates the importance of the top managements
perception of their organizations performance as indicators of the actual
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organizational performance. The benefits of the strategic planning, in this study, is in
the perceptions of the top management in public organizations in the Texas
government. They have perceived varieties of significant strategic planning benefits
for public organizations which can be interpreted as strong indicators, as Dess and
Robinsons study has shown, of the actual benefits of strategic planning. Thus, these
perceived benefits are clear indicators that strategic planning is a successful
management tool that benefits public organizations and helps improve their
performance.
Strategic Planning is Dead !
Mintzberg (1994a, 1994b) has argued that strategic planning does not
contribute to the improvement of organizations performance and does not encourage
strategic thinking within agencies; rather, it emphasizes formal analysis and
inflexibility at the expense of improving organizations performance and, therefore, it
is dead. Although some of these claims have been refuted, if we accept the discussion
of the perceived outcomes of strategic planning for public organizations, several
issues related to the value and cost of strategic planning to public organizations are
addressed to further refute this view.
Table 5.15
Respondents Attitudes Toward Strategic Planning
Extent of Agreement with the Statement
Classification Item No. Disagree (1) # % Uncertain (2) # % Agree (3) # %
1-Innovative Thinking a. Strategic planning encourages innovative thinking. 1 13 11.2 13 11.2 90 77.6
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b. Strategic planning encourages learning over formal planning. 2 46 39.3 44 37.6 27 23.1
c. Strategic planning introduces cultural changes into an organization that improves its performance. 9 30 25 32 27.6 54 46.6
d. Strategic planning encourages in-depth thinking. 10 10 8.5 11 9.4 96 82.1
2-Strategic planning Analysis a. Strategic planning analysis contributes to organizational performance improvement 3 16 13.7 15 12.8 86 73.5
b. Strategic planning analysis benefits decision makers. 5 15 12.8 16 13.7 86 73.5
3 -Management Control a. Strategic planning discourages management control at expense of improving performance. 4 26 22.4 55 47.4 35 30.2
b. Strategic planning is flexible and is not too procedural. 6 47 40.2 14 12 56 47.9
Strategic Planning Value and Cost a. Strategic planning demands little time from management 7 96 811 16 13.9 57 4.3
b. Strategic planning has great value to public organizations. 8 19 16.2 10 8.5 88 75.2
c. Strategic planning benefits are greater than its costs. 11 22 18.8 25 21.4 70 59.8
4 -Commitment to Strategic planning a. My agency should continue strategic planning efforts even if it were abandoned by the state. 12 13 11.1 13 11.1 91 77.8
b. Im proud that my agency has implemented strategic planning. 13 9 7.7 25 21.4 85 70.9
Note: Item No refers to the item number in the survey. # refers to number of responses for each
choice. % refers to the valid percentage.
These issues, as Table 5.15 shows, are grouped into major categories, such as
innovative thinking, strategic planning analysis, management control, value and cost,
and respondents' commitment to strategic planning efforts in their agencies.
\
i
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Respondents are presented with opposite statements and have been asked to indicate
which statement they do agree with or if they were uncertain (see Appendix for
questionnaire items).
Innovative Thinking. The experience of the respondents shows that they
believe that strategic planning encourages innovative thinking (77.6 percent),
introduces culture that promotes performance (46.6 percent) and encourages in-depth
thinking within agencies (82.1 percent), respectively. It should be noted, however,
that only 46.6 percent of the respondents noted that strategic planning introduces
cultural change that encourages improving performance, and that as low, compared
with other percentages, as 23.1 percent view strategic planning as encouraging
learning over formal planning in their agencies. So, although strategic planning in
general encourages innovative thinking, the application of it may lead to formal
planning that limits learning, particularly if it does not allow for flexibility in the
formulation and implementation process of strategic planning goals. Conducting
ongoing strategic planning in organizations should question the status quo and
introduce new ideas to achieve the agencies goals, but the nature of many public
organizations with limited management authority and lack of incentives may have de-
emphasized the learning aspect of strategic planning and resulted in emphasizing the
strategic planning procedures and formal, rigid planning.
Strategic Planning Analysis. A major component of strategic planning is
assessing the internal and external environment of organizations performance. This
requires not only skilled analysts, but it also produces a lot of analyses. How useful
are such assessments to organizations management and performance improvement?
Does strategic planning analysis contribute to organizations performance
improvement? Does it benefit decision making? Some of the criticism of strategic
iso


planning analysis stems from the argument that it is difficult to assess organization
strengths and weaknesses because what can be strengths today may be weaknesses
tomorrow. Although the argument has some merit, strategic planning analysis in the
private sector has helped in providing valuable analysis for decision makers (Ansoffi
1990). However, what would be the value of strategic planning analysis to public
organizations? Some 73.5percent of the respondents indicated that strategic planning
analysis contributes to organizations improvement and benefits decision makers.
These results enhance the importance of the value of analyses that resulted from
conducting strategic planning.
Management Control. Does such analysisand the whole strategic planning
process encourage management control at the expense of improving performance at
agencies? Management control is not negative per se, but it is essential in any agency
if it is to achieve its goals (Stout, 1980). However, management control that
emphasizes rules and regulations regardless of their negative impact on employees
and performance is a great obstacle to performance improvement. Strategic planning
as a management tool aims to clarify goals and strategies to achieve them and sets
performance measures to assess the achievements of individuals as well as units
within an agency. Therefore, it helps to achieve accountability for performance. The
experience of as many as 30.2 percent of the respondents show that strategic planning
does encourage management control at the expense of performance improvement.
Also, 47.4 percent of the respondents indicate that they are uncertain. This result
shows that management may look to strategic planning analysis not as indicators and
guidelines to encourage learning within agencies as a way to improve performance,
but rather as a mechanism to control the behavior of individualsas well as units
within agencies. If this is the case, as this analysis may suggest, then strategic
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planning would be in the long run not only of little value but would also provide
negative results to organizations.
Has strategic planning been flexible or too procedural? Almost 47.9 percent
(compared to 40.2 percent) perceive strategic planning as flexible. The state has kept
strategic planning simple, providing only instruction and guidelines to agencies to
conduct their strategic plan, thus providing agencies with great freedom to develop
their strategic plan within the mandated parameter. This approach may have
encouraged the flexibility within strategic planning practices in agencies.
Value and Cost of Strategic Planning. Strategic planning requires a lot of time
for management, as 82.1 percent of respondents have indicated. In addition to the
time cost, there is the occasional cost of having full-time individuals within some
agencies whose primary responsibility is facilitating the strategic planning process.
Given these costs and other costs, has strategic planning provided sufficient value to
public organizations to outweigh its costs? As many as 75.2 percent of the
respondents believe that strategic planning has provided great value to public
organizations, and up to 59.8 percent (compared to 18.9 percent) of the participants
have indicated that strategic plannings benefits outweigh its costs. So, in general,
strategic planning is a successful management tool as it has been perceived by
agencies in the Texas government.
Commitment to Strategic Planning. Management commitment affects the
future of strategic pitinning at Texas government agencies because, after all, they are
the ones who implement the state strategic planning mandates. Two statements have
addressed the commitment issues:
Should the respondents agency continue strategic planning efforts, even if they
were abandoned by the state?
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How proud is the respondent that his/her agency has adopted and implemented
strategic planning?
As the results in Table 5.15 show, 77.8 percent compared to 13 percent
believe that their agencies should continue strategic planning efforts even if the state
abandoned its strategic planning requirement. Also, 70.9 percent compared to 7.7
percent feel that they are proud that their agencies are adopting strategic planning.
These results indicate clearly that strategic planning is not a management fad in Texas
government; rather, it enjoys the agencies management commitment.
The state strategic planning mandate started in 1991. This study which
surveyed the experience of strategic planning at public organizations, was conducted
during January and February of 1997. Almost six years of strategic planning mandate
implementation has provided us with rich results that strategic plannings future in
public organizations is promising.
Survey Content Analysis
The study survey included two open-ended questions which deal with the
participants experiences with strategic planning as it has been used in their agencies
and their views of what should be done differently to improve the process. Almost
fifty percent of the respondents had some comments. Examination of their comments
reveals that in general they support adopting strategic planning in their agencies, but
some expressed concerns with how strategic planning is used in Texas government
agencies. Several issues can clearly be identified.
State Mandate. The state required each agency to link its strategic planning to
its budget and required development of performance measures. There is clear
dissatisfaction reflected in the comments related to the close linkage between strategic
planning and budget. Instead of having strategic planning as a management tool that
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could improve performance, it becomes in some cases a lead document for budget
requests. The linkage between strategic planning and the budget becomes an end in
itself and becomes inflexible and a waste of time and effort. Thus, some view such
linkages as a new budget game. As one manager comments, Since our budget is tied
to strategic planning, we feel this is the newest budget game. Without additional
funds, it doesnt matter what the priorities are, it is a matter of constantly doing more
with less. Priorities are nice to identify, but we are still required to do the same or
more work.
Some comments express concern that the oversight bodies neither understand
strategic planning nor encourage positive changes in agencies. The rigidity of the
process of tying strategic planning and budget and the lack of clear role of the
oversight bodies in strategic planning implementation was echoed: State legislators
do not understand strategic planning and are not capable of making non-political
decisions. Therefore strategic planning has been a failure in Texas because it is used
as a budget structure and not a planning document. Thus, strategic planning as
implemented in Texas is inflexible, bureaucratic and time consuming.
Strategic planning should encourage organizations to introduce new changes
to their management practices that would improve their performance. Although many
of the respondents accept the value of strategic planning, they believe that
inflexibility of the oversight bodies has limited its value. Strategic planning is a
great tool except when there is no flexibility for state agencies to respond to actual
circumstances. Once established, the strategies become static and the LBB and State
Auditors Office strongly discourage change in strategies and performance measures.
When change is sought, the oversight agencies lack the ability or the authority to
operate.
Another concern with the state mandate is related to the use of performance
measures. Although developing meaningful performance measures is difficult, the
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concern centers on the inflexibility of the oversight bodies to change these measures
and therefore its limitations. The process as required by the state leadership (the
Legislature and the Governor) is in need of improvement. Performance measures are
inflexible, and it is difficult to get changes made. Thus, the overall perception of
these respondents is the inflexibility of the process of changing performance
measures. Some respondents noted the lack of clear incentives for good performance.
There should be rewards and penalties for exceeding or not meeting performance
expectations.
Also, many perceive the value of strategic planning but linkage with the
budget process creates bureaucracy. Whether oversight bodies primary goal of
linking strategic planning to the budget is to improve agencies performance or only
to control their spending, these comments reflect some concerns that the oversight
bodies are for control and function to uphold the status quo rather than encourage
positive change and improvement. In discussing the mandate with some of the LBB
and the Governor Office staffs, I realized that they are clearly in full support of
strategic planning and have realized that linking it with budget has created difficulty
for many agencies. Such linkage aims to improve accountability for performance.
So, it seems that lack of continuous communication between the oversight bodies and
agencies concerning the value and the purpose of introducing strategic planning
mandates and the unwillingness, sometimes, on the part of the oversight bodies to be
tolerant of changing performance measures creates the picture that the Legislature
doesnt want strategic planning, they want a whip to use against agencies.
Organizations Management Role. Achieving success with strategic planning
depends not only on a positive state role to encourage its use as a management tool to
improve performance, but also on the agencies commitment to the process. The
importance of organizational commitment becomes clear in many comments, such as:
Involve more employees, not just management Ensure buy-in by top
I
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management. Allow for more participation and inclusion from front line workers
from the beginning. Ensure a buy-in by executive management rather than
delegation of the task to a lower level simply to meet requirements. If I had the
authority, I would demand involvement of executive directors and board members or
not do it at all. More top to bottom involvement. Useful tool vs. mandated
paperwork.
These different comments of some of the participants clearly show the
importance of building commitment to the process not only from the top management
but across the agency. Commitment in Texas agencies is extremely important
because of the fragmentation of the executive branch. Many agencies are run by
boards who are either elected or appointed and who have strong authority as to how
their agencies should be run. Their influence as well the influence of the executives
directors on the success of strategic planning is more than the influence of the
Governors Office because of the weak position of the latter to direct the executive
branch. So, the commitment of all employees, and board members, enhances the
opportunity of benefiting from strategic planning. However, commitment requires
understanding of the value of strategic planning and acquiring the needed skills to
develop and implement it successfully. Lack of training and understanding enhances
resistance to accepting new management methods, as one manager asserts clearly:
Full utilization of strategic planning will only improve as agencies become more
knowledgeable and comfortable with the process and how to fully utilize aspects of
it. That is, strategic planning will not be realized in the absence of effective training.
One manager commented that you have to provide training to staff to help them
think strategically. They will be resistant until they can learn skills. So training
enhances understanding about strategic planning, which will improve commitment of
employees across agencies levels.
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Value of Strategic Planning. Despite the shortcomings of the close link
between strategic planning and budget and the inflexibility in changing performance
measures, the common message is not to abandon strategic planning but rather to use
it as a management tool to benefit agencies in improving their performance. Strategic
plannings major benefits are in the process itself and not in the document. The
process was a catalyst for team building and improving agency morale and
effectiveness.
The overall analysis of respondents comments shares common themes with
the experiences of the two agencies analyzed earlier. First, both analyses reflect the
shortcomings of the close linkage between strategic planning and the budget. They
believe, however, that a better linkage between strategic planning and budget can be
achieved at a more macro-level where the oversight bodies and agency directors agree
on meeting broad goals resulting from the strategic planning process and utilizing a
more flexible budget to achieve them. This approach would improve accountability
for performance rather than trying to comply with the technical requirement of linking
strategic planning and budget. Surely the linkage between strategic planning and the
budget has an impact on strategic planning, as Dale Craymer, Director of Budget and
Planning during the initial stages of implementing the mandate noted, the merging of
budgeting and strategic planning tends to take a lot of the poetry out of strategic
planning... some of the idealism normally associated with the establishment of goals
is taken away, but it seems to have resulted in the creation of more attainable goals
(Broom, 1995, p.4).
Second, there is the importance of establishing a more effective and visible
reward system. The agencies indicate that they do not expect monetary incentives for
performance since the current trend in Texas is to give agencies less money. They do,
however, expect more credibility and less micro-management and reporting for the
successful agencies with strategic planning. It becomes clear, from my discussion
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with some of the oversight bodies staff, that the oversight bodies are more
comfortable with disincentives, such as public testimony and budget cuts, than with
incentives that an agency could earn and then offer but poor performance afterwards.
This disincentives approach is reflected in the analysis of the experience of the two
agencies that there is no positive reward for success with strategic planning. Rather,
it is the non-compliance consequencessuch as being called into a hearing for heavy
criticism which has helped some agencies to take the mandate seriously. However,
agencies prefer an incentives-based approach. The oversight bodies disincentives-
based approach has created the perception that they are more for control of spending
and micro-managing than for the real goal of assisting agencies to improve their
performance.
Third, the most frequently recurring observation is that, regardless of the
state role, the success of strategic planning at the agencies depends strongly on how
much the organization is committed to the process. Thus, respondents indicate that
they have realized benefits of conducting strategic planning which, as a result,
enhanced commitment to it. However, many indicate the importance of achieving
more commitment to strategic planning to achieve more of the potential benefits of
adopting strategic planning into their management practices.
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Part 3: Inferential Statistics and Hypotheses Testing
In the previous section, the discussion centered around the description of the
experience of the two agencies with strategic planning and the descriptive analysis of
the survey results. In this section, I will discuss inferential analysis related to the
agencies characteristics and the research model and hypotheses presented in Chapter
3.
Agencies Characteristics
Although the agencies of this study share similarities, they differ in many
aspects. The most strongly differentiating characteristics are size and source of
revenue. The size of the agencies is measured by the number of full-time employees.
The agencies size ranges from fewer than 50 full-time employees to over 500
employees. Does size of the agency affect its strategic planning efforts and potential
outcomes?
Table 5.16
Analysis of variance: Revenue, size, and overall agencys performance improvement
resulting from strategic planninj % activities
Agencys Characteristics Measure F P
Size Strategic Plan Quality 3.69 .07
Organizational Commitment 1.7 .19
Implementation .26 .61
Organization Performance .049 .825
Revenue Completion 1.074 .363
Organizational Commitment 1.076 .362
Implementation 1.44 .234
Organization Performance .587 .625
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Several analyses of variance tests (ANOVA) as shown in Table 5.16 have
demonstrated that there is no difference in strategic planning efforts as the strategic
plan quality (the degree of completion of strategic planning steps), strategic planning
implementation and outcomes, and agencys size. These results go along with
research findings in the private sector that strategic planning helps all organizations in
improving their performance regardless of their size (Miller and Cardinal, 1994).
Another difference between agencies is their sources of revenue. Some
agencies raise revenue charging fees for their operations. Some of these agencies
raise more money than their budget. Other agencies do not raise revenue through
their operations. The agencies that raise revenue using their operations share this
characteristic with private organizations in the sense that both try to identify their
customers needs and try to meet them. Thus, I would expect these public agencies to
be more involved in strategic planning activities than those that are not raising funds
and, for that reason, benefit from their strategic planning activities more than the
others. However, analysis of variance tests indicate that there is no difference
between the two groups when it comes to the degree of completing strategic planning
activities, implementation and strategic planning outcomes.
After examining the process of budget appropriations to all agencies, it
becomes clear why there is no difference. Although these agencies raise considerable
revenues, they do not keep any of the money. Instead they receive appropriations
with the same process as those agencies that do not raise funds. So raising revenues
does not help those agencies to get bigger budgets or more favorable treatment in
their budget appropriations. The heavy hand of bureaucracy is equally felt by both
groups of agencies, and thus there is no encouragement for those agencies raising
revenue to be more effective than those which do not. These survey results and the
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case studies reached the same conclusions of the similar strategic benefits realized by
agencies regardless of their source of revenue.
Relationships
In analyzing different aspects of the survey results, I will use different
statistical methods, such as correlation and regression, to assess the degree of
association between variables and its significance. It is important to point out at the
beginning a few points about correlations and their interpretation in this study.
Correlation measures the strength and direction of linear relationships that
may exist between two sets of variables. The correlation used in this study is the
Pearson Product Moment which takes the coefficient of correlation, denoted by r.
The value coefficient of the r ranges from +1 to -1, indicating a strong (positive or
negative) linear relationship between the two sets of variables under examination.
Values of Y close to zero are interpreted to indicate no linear association between
the variables. However, a strong linear relationship does not necessarily indicate any
causality between the two variables because a third variable could cause both the two
sets of variables. So correlation between variables expresses the extent of linear
association between them but not any type of causality.
Furthermore, for the purpose of interpreting and comparing correlation results,
I adopted throughout the study the Guildord Guideliner (1984) concept which
indicates the strength of correlation as follows:
Table 5.17
Pearson r Category
+/- .71 to 1.00 strong relationship
+/- .41 to .70 moderate relationship
+/- .21 to .40 weak relationship
+/- 00 to .20 no relationship
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Strategic planning literature and requirements suggest several activities that
agencies adopting strategic planning need to conduct to benefit from strategic
planning in improving their performance. The question is what relationship these
public agencies perceive between conducting these suggested strategic planning
activities and the benefit of such activities. Also, has strategic planning fulfilled the
expectations of these agencies in improving their performance? To address these
issues, I conducted several correlational tests of the survey results to investigate the
association between conducting strategic planning activities and their potential
benefits for the agencies.
Strategic Planning Activities and Their Benefits
Do public organizations perceive benefits from completing strategic planning
steps? The survey addressed sixteen items of strategic activities that agencies may
conduct to develop and implement strategic plan. The sixteen items correspond to the
common strategic planning steps suggested in the strategic planning literature and
Texas strategic planning elements. In conducting the correlation analysis and the
subsequent analysis, I created indices of this section and subsequent sections of the
survey using combined related items and averaging their scores.
With reference to the degree of completion, the sixteen items have been
collapsed to nine major steps as Table 5.18 shows. The associations between
conducting these nine steps and their benefits ( see Appendix for the steps and their
benefits measurement) for improving agencies performance shows overall strong
associations and significance at P < 0.01. The strongest association, which equals 1, is
shown between conducting the activities of identifying strategic issues and the
perceived benefit of conducting such activities in improving agencies performance.
This high association is of great interest for two reasons. First, the Texas strategic
planning model does not require these activities, in spite of the benefit these agencies
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Table 5.18
Correlation between the degree of completion of strategic planning activities (steps) and
their benefits to improve the agencys performance_______________________________________
Strategic Planning Activity Mean Mean Correlation Coefficient Correlation Strength
Completed Benefit
1. Planning to Plan: agreement on the value and the process of strategic planning 3.79 3.29 .673** Moderate
2. Mission development 4.74 3.94 .322** Weak
3. External assessment (index) 3.96 3.67 .569** Moderate
4. Internal assessment (index) 3.76 3.66 .364** Weak
5. Identification of strategic issues 4.19 4.17 1.00** Strong
6. Goals setting and strategies formulation (index) 4.33 3.72 .390** Weak
7. Action plan development 3.49 3.30 .622** Moderate
8. Strategic plan implementation 3.61 3.41 .614** Moderate
9. Ongoing assessment of strategic plan 3.62 3.41 .614** Moderate
** P < 0.01
have indicated. Second, this result confirms the strategic planning theorists (Bryson,
1995, Nutt and Backoff, 1992) arguments that identifying strategic issues in the
organizations environment is the heart of strategic planning management. Other
activities correlation with benefits such as external environment assessment
(r = .569), action plan development (r = .622), strategic plan implementation
(r = .614) and assessment of strategic plan (r = .614) is moderate and worth of note.
However, mission development (r = .322) and goal setting and strategy formulation
(r = .390) correlation results are positive yet surprisingly low Participants perceive the
relationship between, conducting mission statements and setting goals and
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formulating strategies and their benefits to be not as high as the other strategic
planning activities in improving agencies performance. In spite of these results,
clarifying agencies mandates and goals and setting strategies are major steps of
strategic planning, and their benefits have been supported in the strategic planning
literature (Bryson, 1995; Nutt and Buckoff, 1992).
Strategic Planning Outcomes
Although Public agencies are required to adopted strategic planning, they
expect that it would improve their performance. So have agencies realized the
expected benefits?
Table 5.19
Correlation between expected and realized benefits of strategic planning
Strategic Planning Outcome Mean Expected Mean Actual Correlation Coefficient Correlation Strength
1. Clarification of agency direction (Index) 3.88 3.44 .677** Moderate
2. Better budget decisions 3.42 3.00 .625** Moderate
3. External relation improvement (Index) 3.60 3.28 .671** Moderate
4. Internal management improvement (Index) 3.58 3.18 .636** Moderate
5. Reorganization 3.27 2.78 .651** Moderate
6. Service delivery improvement 3.73 3.36 .627** Moderate
** P < 0.01
Correlations between expected and actual outcomes benefits indicated in
Table 5.19 show there is moderate and close to strong association between the two.
In other words, what agencies expected to achieve was mostly realized, and those
areas in which they expected no benefits realized minimal positive outcomes. So the
means of expected and actual benefits of the index of clarification of agency direction
show that agencies were expecting significant benefits and actually realized such
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expected benefits. On the other hand, agencies neither expected nor realized great
benefits of strategic planning in reorganizing agencies structures. Overall, agencies
expected benefits from adopting strategic planning are higher than the perceived
realized benefits.
Strategic Planning Activities and Strategic Planning Outcomes. Agencies
conduct strategic planning in the hope of achieving certain outcomes. Thus, the more
an agency completes its strategic planning activities, the higher the related outcomes.
In other words, the relationship is expected to be a positive and linear. There are
several strategic planning activities and potential benefits, and the question would be:
which strategic planning activities have stronger associations with the different sets of
outcomes benefits.
Examining the correlations in Table 5.20 shows the contrary of my
expectation that there should be strong relationship between the level of strategic
planning activities completion and the perceived actual benefits. Overall, there is
significant but weak positive correlation between the degree of completion of the
strategic planning activities and the actual benefits.
Table 5.20
Correlation of completion of strategic planning activities (steps) with strategic planning
outcomes
Strategic Planning Activity (Step) Outcome Correlation Coefficient
I. Agreement on the value 1. clarification of agencys direction .424**
and the process of strategic 2. better budget and policy decisions .352**
planning-planning to plan. 3. external relations improvement .328**
4. internal management improvement .408**
5. reorganization .291**
6. service delivery improvement .441**
7. overall effectiveness .508**
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2. Mission development 1. clarification of agencys direction 1. better budget and policy decisions 2. external relations improvement 3. internal management improvement 4. reorganization 5. service delivery improvement 6. overall effectiveness .241** M2** .092** .191* .199* .125 .164
3. External assessment 1. clarification of agencys direction .319**
2. better budget and policy decisions .302**
3. external relations improvement .275**
4. internal management improvement .373**
5. reorganization .133
6. service delivery improvement .275**
7. overall effectiveness .244**
4. Internal assessment 1. clarification of agencys direction .307**
2. better budget and policy decisions .298**
3. external relations improvement .287**
4. internal management improvement .567**
5. reorganization .129
6. service delivery improvement .317**
7. overall effectiveness .281**
5. Identification of strategic 1. clarification of agencys direction .319**
issues 2. better budget and policy decisions .337**
3. external relations improvement .270**
4. internal management improvement .433**
5. reorganization .247**
6. service delivery improvement .306**
7. overall effectiveness .416**
6. Goals setting and 1. clarification of agencys direction .288**
strategies formulation 2. better budget and policy decisions .288**
3. external relations improvement .269**
4. internal management improvement .398**
5. reorganization .122
6. service delivery improvement .294**
7. overall effectiveness .253**
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7. Action plan development 1. clarification of agency s direction 2. better budget and policy decisions 3. external relations improvement 4. internal management improvement 5. reorganization 6. service delivery improvement 7. overall effectiveness .296** .235** .244** .394** .253** .322** .321**
8. Strategic plan 1. clarification of agency s direction .253**
implementation 2. better budget and policy decisions .227**
3. external relations improvement .197**
4. internal management improvement .346**
5. reorganization oo
6. service delivery improvement .237*
7. overall effectiveness .324**
9. Ongoing assessment of 1. clarification of agency s direction 253**
strategic plan 2. better budget and policy decisions .227**
3. external relations improvement .197**
4. internal management improvement .346**
5. reorganization .187*
6. service delivery improvement .237*
7. overall effectiveness .335**
Note: ** correlation is significant at the 0.01 level (2 failed)
* correlation is significant at the 0.05 level (2 failed)
The only moderately strong correlation is between conducting internal
assessment and the improvement of internal management. (r= .567). The surprising
result is the weak and sometimes non-significant relationship between developing a
mission statement and the improvement of service delivery and the overall
organization performance. Why, then, do agencies need mission statements?
Although there are no clear findings from the private sector that either confirm or
refute the significance of conducting mission statements on improving organizational
performance, most management theorists advocate developing clear mission for
organizations (Drucker, 1973; Behn, 1991). In general, strategic planning activities
have the strongest relationship with the strategic planning outcome of clarifying the
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agencys direction index and the overall effectiveness of strategic planning. The
weakest association is between conducting strategic planning activities and the
perceived benefits of reorganization within the agency. These results, as the results
of the interviews have indicated, show that the true value of strategic planning is not
primarily in the degree of the completion of strategic planning activities but rather it
is in the process itself which creates a result-oriented culture in the internal
environment of organizations.
Hypothesis Testing
The success of strategic planning efforts in organizations depends on many
factors. In this study I present a research model that hypothesizes a positive
relationship among several variables and strategic planning benefits. These variables
are managers commitment, organizational commitment, strategic plan quality,
strategic plan implementation, strategic planning benefits and improved overall
organizational performance as a result of using strategic planning. This study asserts
that managers commitment contributes positively to the overall organizational
commitment (the commitment of the employees across the agency to strategic
planning). So, commitment to strategic planning activities should improve the
quality of the strategic plan, which has been operationalized in this research as the
degree to which each organization has completed each of the strategic planning
activities. As a result of such improvement in strategic plan quality, the
implementation of the strategic plan would be improved, too. The improved quality
of strategic plan formulation and implementation would improve the strategic
planning outcomes realized by organizations involved in adopting strategic planning.
There are many potential benefits of strategic planning which contribute to the overall
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improvement of an organizations performance. The study investigates the extent to
which such improvements in organizational performance contribute to enhancing
managers as well as overall organization commitment to strategic planning activities
in their organizations. So to what extent have such hypothesized relationships been
reflected in strategic planning experience in Texas government agencies?
In examining the relationship between the research model variables, which are
measured using an interval scale, I will use regression analysis. First, however, the
descriptive statistics analysis of the variables used in the regression analyses is
reported as follows.
Table 5.21
Descriptive Statistics of the research model variables
Variable Mean St. Dev. Range
Managers commitment 4.13 .98 4.00
Organization commitment 3.31 1.09 4.00
Strategic plan quality 4.05 .69 3.41
Strategic plan implementation 3.58 .89 4.0
Strategic planning benefits 3.24 .80 3.70
Organization performance 3.24 .97 4.0
*Scale ranges from 1 to 5
Management Commitment and Strategic Plan Quality. Strategic planning
deals with clarifying organizations directions, priorities and goals and how to go
about achieving them. Some organizations might view strategic planning only as a
requirement, and therefore emphasize the compliance with the mandate, without
viewing strategic planning as a management tool that could improve their
organizations performance. Others would view it not as a burden and requirement.
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but as an opportunity to clarify their organizations direction and priorities and thus
would commit their effort and encourage the employees in the organization to be
committed to the process. So, does commitment matter? The qualitative findings of
this study show that it does. Thus the role of the top management to commit
themselves as well as to build commitment throughout the organization is extremely
important. However, the most influential role of top management to the rest of the
organization is to manage by example (Behn, 1991, Hesselbein, et. al, 1996). The top
managers need to show how committed and involved they are in trying to achieve the
organization goals and, as a result, other managers and employees will invest their
time and effort to achieve the shared goals and mission. As the qualitative analysis of
Agency A has shown us, the primary reason for the employees commitment and
involvement in strategic planning efforts can be attributed to the clear commitment
and involvement of the executive directors. Organizations are reflections of their top
managers. Thus, we could expect that public organizations commitment to strategic
planning is affected by the extent to which their top management is committed to it.
H, = There is a positive relationship between variations of managers'
commitment and the variation in the overall organizations' commitment.
Table 5.22
Summary of simple regression test of organizational commitment on managers
commitment (independent variable)
Measure B P R R2 F P
Management Commitment .507 .457 .457 .209 30.3 .000
The regression test results support the hypothesis, showing statistically
significant positive association between managers commitment and overall
organizational commitment (p = 457, R2 = .209, F =. 30.3, P <.05). The managers
commitment variation explains almost 21 percent of the variation in the overall
170


organizational commitment. This result shows that there are other factors that
contribute to the improvement in overall organization commitment. Yet the
association between managers commitment and organizational commitment indicates
the importance of managers commitment to the overall organizational commitment.
This supports the qualitative analysis that shows how managers commitment helps in
achieving success with strategic planning.
What is the impact, however, of the management commitment and overall
organizational commitment on achieving success with strategic planning
development? The qualitative findings have indicated that both managers
commitment and overall organizational commitment is needed to achieve success
with strategic planning development. However, the qualitative analysis and the
literature review indicate that although managers commitment is a prerequisite to
overall organization commitment, it is the latter that counts most. Thus, the success
of completing strategic plan activities would vary between agencies as the agencies
commitment and organization commitment to strategic planning differ.
H:: There is a positive relationship between the variation of the organization
commitment and the variation in the level of the strategic plan quality.
H} : There is a positive relationship between the variation of the managers'
commitment and the variation in the level of the strategic plan quality.
Table 5.23
Summary of multiple regression test of the quality of strategic plan development
managers commitment and organizational commitment (indeoendent variables
on
Measure B P r Partial r F P
Managers commitment .051 .072 .325 .079 .726 .396
Organization commitment .353 .554 .554 .521 42.66 .000
df = R2 = .349, F = 30.64, P = .000
171


The result in Table 5.23 shows that there is a positive relationship between
organizational commitment ( r = .554 ) and managers commitment ( r =.325 ) with
the improved quality of strategic plan development. The partial correlation, however,
of the organizational commitment with the quality of strategic plan when the effect of
the managers commitment has been removed from both the strategic plan quality and
the managers commitment is .521, which is a strong association, while managers'
commitment association is only .079. The managers commitment thus becomes
statistically insignificant in the presence of the overall organizational commitment.
That does not mean that managers commitment is of limited value but rather that
overall organizational commitment matters more to the success of strategic planning.
This result supports the hypothesis that organizational commitment has a statistically
positive association with strategic plan quality and contributes more than managers
commitment to the success of developing a strategic plan. This confirms the previous
qualitative analysis that the overall organizational commitment counts a lot more than
managers commitment. The overall model is significant (R2 = .349, F = 30.64, P <
.05) and explains 35 percent of the variation in the quality of strategic plan.
Therefore, managers commitment alone is not enough to achieve success with the
strategic planning effort, there is also a need to ensure buy-in by all employees to the
value of strategic planning. Does managers commitment lead to their involvement in
the strategic planning process? In their study of the role of middle managers in
developing strategy, Wooldridge and Floyd (1992) show that managers commitment
contribute to managers involvement in the process of strategy formulation. The
result of the qualitative data of this study support strongly that there is a strong
association between managers commitment and their involvement in strategic
planning process. Managers in both Agency A and Agency B were not only
committed to the strategic planning process, they were also involved in developing
and implementing strategic plan goals.
172


Strategic Planning Implementation. Implementation of strategies is the key to
success for the achievement of organizational goals. However, the success of
implementation is affected by how well the strategies are formulated. Thus, a failure
of implementation is just a reflection in many cases of failure in strategy formulation.
However, even in the case of developing high quality strategic plan, the managers' as
well as overall organizational commitment are essential to achieve success with
implementing a strategic plan. As the previous analysis has shown, although
managers commitment is necessary to build overall organizational commitment, it
becomes statistically insignificant in the presence of an overall organizational
commitment. Thus it is expected that both improvement in strategic quality and
organizational commitment would improve the success of strategic plan
implementation.
H4 : There is a positive association between variation in the quality of the strategic
plan and variation in the success of strategic plan implementation.
Hs: There is a positive association between variation in organizational commitment
and variation in the success of strategic plan implementation.
H6: There is a positive association between the variation of managers commitment
and the variation in the success of strategic plan implementation.
Table 5.24
Summary of multiple regression of strategic plan implementation on organizational
commitment, managers commitment, and strategic plan quality (independent variables)
Measure B P Correlation r Partial correlation F P
Organizational commitment .216 .263 .487 .241 6.96 .009
Managers commitment -.044 -.048 .208 -.053 .326 .568
Strategic plan quality .540 .121 .557 .386 19.8 .000
173


The results of the regression analysis Table 5.24 show important findings.
The quality of the strategic plan is the most important predictor of the improved
strategic plan implementation (as the partial correlation of .386 shows). Therefore, it
is extremely important that organizations invest time and effort to develop successful
strategic plans. The importance, however, is not in producing the document, which is
useful, but in the process of developing a plan that is understood by all employees
who are responsible for its successful implementation. This result confirms the
strategic management theorists (Mintzberg, 1990, Lorange, 1991, Bryson, 1995) who
suggest that successful formulation of strategic plan is achieved by involving as many
people as possible in the development process. Such a process enhances
understanding of the agencys goals and the implementing strategies that would
achieve such goals. Also, the findings show the importance of overall organizational
commitment, which (as the partial correlation of .241 indicates) becomes the second
predictor of the success of strategic planning implementation. Both strategic plan
quality and organizational commitment are statistically significant ( P < .05 ). The
model is statistically significant (R2=. 351, F= 20.40, P <.05) and explains 35 percent
of the variation in the success of strategic plan implementation. Again, the managers
commitment is not significant in the presence of the organizational commitment.
Strategic Planning Benefits. There are different benefits, as they have been
presented in the foregoing qualitative and the descriptive analyses. The question,
however, is what factors of the research model contribute to achieving benefits from
the strategic planning process? Although many organizations face difficulty in
achieving success with strategic planning implementation, agencies in Texas, as the
survey results indicate, have achieved moderate success with strategic planning
implementation. Thus, I would expect that such a success with strategic planning
174


implementation will have positive impact on realizing benefits from strategic
planning. The process of going about developing a strategic plan is extremely
beneficial for employees because they gain understanding of their agencys goals and
direction, which in turn helps them to align their efforts towards achieving their
agencys goals. Thus, variation in the quality of the strategic plan will influence the
outcomes of strategic planning. Neither the quality of the strategic plan nor its
implementation will help in achieving success with strategic planning if
organizational commitment is lacking.
H7 There is a positive association between the variation in the quality of the
strategic plan and the variation in strategic planning benefits.
Ha : There is a positive association between the variation of organizational
commitment and the variation in strategic planning benefits.
H9 :There is a positive association between the variation of managers' commitment
and the variation in strategic planning benefits.
H,0 There is a positive significant association between strategic plan
implementation and the variation in strategic planning benefits.
Table 5.25
Summary of multiple regression of strategic planning benefits on organizational
commitment, manager commitment, strategic plan quality and implementation (independent
variables)
Measure B P Correlation r Partial correlation F P
Organizational commitment .401 .543 .698 .503 37.9 o o o *
Manager commitment .110 .134 .423 .170 3.37 .069
Strategic plan quality .008 .007 .473 .007 .006 .93
Implementation .166 .184 .481 .211 5.260 .02*
175


These results, as in Table 5.25, indicate that all variables-organizational
commitment, managers commitment, strategic plan quality and strategic plan
implementationhave a positive association with strategic planning benefits.
However, only organizational commitment and strategic plan implementation are
statistically significant (F = 37.9, P <.05, and F= 5.26, P= <.05). Although strategic
plan quality has positive association (r = 473) with a realization of benefits from
strategic planning, it is not statistically significant in the model. This finding
complements the qualitative findings which indicate that although producing a
strategic plan is important, what counts most is the process itself and therefore
completing the steps of strategic plans per se does not contribute significantly to
realizing benefits from strategic planning. This result does not support the research
hypothesis. The overall organizational commitment factor by far has the most
importance in predicting strategic planning benefits with a partial correlation of .503.
The second most important factor in the model (partial correlation =.211) that plays
an important role in realizing benefits from strategic planning is the quality of the
implementation process.
So, ensuring organizational commitment and success with strategic planning
implementation improves the realized strategic planning benefits. Therefore, these
findings support the above research hypotheses that there is a significant relationship
between both organizational commitment and strategic planning implementation and
strategic planning benefits. The overall model is statistically significant (R2 = .528, F
= 31.4, P < .05) and explains almost 53 percent of the variation in strategic planning
benefits among agencies.
Strategic Planning and Organization Performance. Strategic planning, as
shown through this study, yields benefits to public organizations. The question,
176


however, is to what extent such benefits do contribute to overall organizational
performance improvement. The ultimate aim of adopting strategic planning is to
improve public organization performance. Thus, it is expected, as the literature
review shows, that strategic planning benefits contribute to the improvement of the
overall organization performance.
H,,: There is a positive relationship between strategic planning benefits and
agencies overall performance improvement.
Table 5.26
Summary of simple regression of overall organizational performance on strategic
planning benefits index (independent variable)
Measure B P R R2 F P
Strategic planning benefits (index) 1.06 .878 .878 .771 388 .000
The regression results, shown in Table 5.26, indicate that there is a statistically
significant, positive association between the strategic planning benefits index and the
overall organizational performance improvement index (P = 878, R2 = .771, F =
388, P < .05). The benefits of strategic planning discussed in this study explain 77
percent of the variation in the overall organizational effectiveness improvement as a
result of strategic planning. This result supports the strategic planning advocates as
well as the qualitative results that strategic planning benefits organizations. This
result is important because strategic planning has been mandated by the state and
therefore such results should encourage not only public organization leaders but also
the executive and legislative leadership to continue supporting the effort of strategic
planning.
Public organizations using strategic planning have realized different benefits,
such as clarification of agencies directions, budget and policy decisions, external
177


Full Text
THE ROLE OF STRATEGIC PLANNING IN IMPROVING PUBLIC
ORGANIZATIONS PERFORMANCE
by
Saeed A. Al-Gami
B A., King Saud University, 1981
M. A., Indiana University, 1985
M. P.A., Indiana University, 1985
A thesis submitted to the
University of Colorado at Denver
in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
Public Administration
1997


1997 by Saeed A. Al- Garni
All rights reserved


This Thesis for the Doctor of Philosophy
in Public Administration
degree by
Date


Al-Gami, Saeed A. (Ph.D., Public Administration)
The Role of Strategic Planning in Improving Public Organizations Performance
Thesis directed by Professor Franklin J. James.
ABSTRACT
Strategic planning has been widely used in the private sector to improve
organizations performance. Several states have encouraged their agencies to adopt
strategic planning. In 1991, the Texas government mandated that each agency adopt
strategic planning. It makes budget appropriations on the basis of agency strategies
for implementing strategic plans. This study examines the strategic planning
experience of Texas government agencies and addresses the question: to what extent
has strategic planning benefited agencies by improving their performance?
Based on strategic planning literature (e.g.,. Bryson,1995, Eadie, 1993; Nutt
and Backoof, 1992), the dissertation develops a research model of the expected
effects of strategic planning. Variables in the model are top managers commitment
to strategic planning, organizational commitment, the quality of the strategic plan,
strategic plan implementation, strategic planning benefits and organizational
performance. Qualitative methods are used to investigate the experience of two
exemplary agencies utilizing strategic planning. Executive, planning and budget and
division managers of 77 Texas agencies are surveyed. The data are analyzed using
the theoretical framework of the model, and different statistical techniques such as
correlation, multiple regression, and path analysis.
IV


Although all the variables in the model contribute significantly to the success
of strategic planning, the organizational commitment variable emerges as the most
important factor. Another factor that contributes to the success of strategic planning
is the integration of strategic planning into an agencys management processes, such
as performance plans, business plans, and performance measures. This analysis
shows that the most important strategic planning benefits, ordered according to their
degree of significance, are: 1) clarifying agencies missions, goals and priorities; 2)
improving external management relations through commitment to the satisfaction of
customers and stakeholders, and through communication and coordination with other
organizations; 3) improving internal management through improvement in
employees understanding of organizations missions, teamwork, development of new
programs and policies, and internal communication and coordination. These benefits
have a statistically significant positive association with improvement in overall
organizational effectiveness.
V


DEDICATION
TO ALL MY FAMILY MEMBERS


ACKNOWLEDGEMENT
I greatly acknowledge contribution of many individuals who directly or
indirectly contributed towards my achievement of this piece of work. Above all, my
thanks to Allah, the Almighty God, for his blessings and guidance and for enabling
me to use my mind wisely in my life. My deepest appreciation goes to my family
members and friends in Saudi Arabia for their unlimited support. Special
appreciation goes to my family members who joined me in the USA: My mother,
Fatimah, wife Salha, children Omar, Khalid, Sumiah. Sarah, and Maha for their
prayers for my success, putting up with my limited time for them, and tolerating the
constant pressures and difficult times during my study.
I greatly acknowledge the contribution of all my committee members. My
deepest gratitude goes to my thesis director, Professor Franklin James for his
unlimited support and guidance. Special appreciation goes to Professor Linda
deLeon, who in spite of her busy schedule gave, a lot of time to this work. My thanks
and gratitude go to Professor Richard Stillman whose support from the first seminar I
took with him is avid. Also, appreciated is the support of Professor Kathy Boyd,
whose comments were invaluable. Special thanks go to Professor Julio DeCastro
from the Business School, University of Colorado for being an invaluable member of
my committee. Finally Without the support of my family and all my committee
members this work may not have been completed.


CONTENTS
CHAPTER
1. INTRODUCTION........................................................1
Purpose, Significance, and Scope of the Study...................2
The Problem Statement...........................................4
Limitations.....................................................5
2. LITERATURE REVIEW.....................................................6
Performance Improvement in Public Organizations.................6
Strategic Planning in Private and Public Sectors...............10
Strategic Planning Definitions...........................11
Strategic Planning Development...........................12
Strategic Planning Approaches......................12
Strategic Planning Models..........................15
Common Strategic Planning Process Steps............19
Strategic Planning Implementation........................28
Reasons for Strategy Failure.......................29
Strategic Planning and Budgeting.........................35
Performance Measures...............................35
Performance Based Budgeting........................41
Strategic Planning and Organization Performance..........45
Barriers to Performance Improvement in Public Organizations.48
viii


Critique of Strategic planning
.49
3. THE RESEARCH CASE STUDY : STRATEGIC PLANNING IN TEXAS
GOVERNMENT.......................................................54
Overview of Strategic Planning in Selected States.............54
Strategic Planning and Texas Government........................55
Definition of Texas Strategic Planning Elements.........59
Synthesis and Research Model..................................65
Research Hypotheses....................................69
4. RESEARCH METHODOLOGY..............................................71
Research Design............................................71
Variables and Measurement..................................73
Management Commitment...............................74
Organizational Commitment............................74
Strategic Plan Quality..............................74
Strategic Plan Implementation.......................74
Strategic Planning Benefits.........................75
Organizational Performance..........................75
Validation of survey Instrument............................77
The Sample.................................................78
Data Collection............................................79
Response Rate.......................................80
Data Analysis..............................................81
Limitation.................................................82
IX


5. RESEARCH FINDINGS...................................................84
Part One : Qualitative Analysis..................................84
Agency A..................................................85
Strategic Planning Development.....................85
Strategic Planning Implementation..................91
Success Factors....................................94
Strategic Planning Outcomes........................98
Agency B.................................................102
Strategic Planning Development....................102
Strategic Planning Implementation.................106
Success Factors...................................109
Strategic Planning Outcomes.......................Ill
Summary..................................................114
Part Two : Quantitative Analysis................................118
Background : Analysis of Agencies Characteristics.......118
Agency Type.......................................119
Agency Size.......................................120
Source of Revenue.................................121
Strategic Planning Development Activities................121
Plan to Plan......................................122
Mission Statement.................................124
External Assessment...............................124
Internal Assessment...............................125
Strategic Issue Identification....................126
Goal Setting and Strategies Formulation...........126


Action Plan Development..............................127
Strategic Plan Implementation........................127
Review of Strategic Plan Implementation..............127
Developers and Implemented of Strategic Planning..........128
Commitment to Strategic Planning..........................131
State Policies and Strategic Planning Efforts.............132
Strategic Planning Implementation..........................136
Outcomes of Strategic Planning.............................137
Agency Direction.....................................139
Budget and Policy Decision...........................140
External Relations Improvement.......................141
Internal Management Improvement......................143
Reorganization.......................................146
Overall Service Delivery.............................146
Strategic Planning is Dead !..............................148
Innovative Thinking..................................150
Strategic Planning Analysis..........................150
Management Control...................................151
Value and Cost of Strategic Planning.................152
Commitment to Strategic Planning.....................152
Survey Content Analysis....................................153
State Mandate........................................153
Organizations Management Role.......................155
Value of Strategic planning..........................157
Part Three: Inferential Statistics and Hypotheses Testing.........159
XI


Agencies Characteristics..............................159
Relationships..........................................161
Strategic Planning Activities and Their Benefits.......162
Strategic Planning Outcomes............................164
Strategic Planning Activities and Strategic Planning Outcomes.. 165
Hypotheses Testing.....................................168
Management Commitment and Strategic Plan Quality... 169
Strategic plan Implementation...................173
Strategic Planning Benefits.....................174
Strategic Planning and Organization Performance.176
Summary of the Research Model Hypotheses Testing. ...179
Organizational Performance and organizational
Commitment......................................183
6. CONCLUSION : LESSONS LEARNED AND RESEARCH
IMPLICATION......................................................188
Strategic Planning Experience..........................189
Success Factors........................................193
Lessons Learned........................................197
Recommendation.........................................199
Research Implications..................................201
APPENDIX............................................................204
BIBLIOGRAPHY........................................................216
xii


CHAPTER 1
INTRODUCTION
The increasing shortage of resources at all government levels forces public
organizations to reinvent their management practices. At the federal level, the
National Performance Review (NPR, 1993) aims to create a government that works
better and costs less. Many of NPRs ideas are adapted from the private sector, such
as requiring agencies to develop mission statements and to manage for results.
Initiatives for improving government performance are also widespread at the local
and state levels. The small size of government agencies at these levels compared to
those at the federal level, and the greater pressure brought by citizens at these levels,
have forced public officials to be more creative in addressing the performance deficit
(Dilulio, Garvey and Kettl, 1993). Most public organizations look at the private
sectors experimentation with different management methods and try to adapt them
into the public sector. The seeping of these management methods from the private
sector to the public is not new. One method which has been increasingly used in the
public sector is strategic planning (Berry,1994; Denhardt.1993, Nutt and Backoff,
1992).
Strategic planning has been used in the private sector to improve
organizational performance by finding the best fit between an organization and its
environment. It aids an organization in examining the opportunities and threats in the
external environment, as well as the strengths and weaknesses of its internal
environment (Andrew, 1987). Such an assessment aims to enable an organization to
benefit optimally from its internal and external resources in order to meet its
l


customers expectations. The increasing fiscal pressure on public organizations and
the increasing demands by citizens, not only for more services but also for services of
higher quality, have encouraged many public organizations to adopt strategic
planning. This study addresses how strategic planning has been used in public
organizations and how they have benefited from its use.
Purpose. Significance and Scope of the Study
The governments of several states, including Missouri, Virginia, Texas, and
Utah, have adopted strategic planning. Some of them, particularly Missouri and
Virginia, aim to link strategic planning with the budgetary process. Texas is by far
the leading state in its use of strategic planning and in its attempt to link it with its
budgetary process (Carter, 1993). The Texas state legislature enacted a law in 1991
requiring each state agency to develop strategic plans that would indicate the agencys
goals and priorities, and its strategies for realizing them (Richards, 1995). The
purpose of this study is to examine the strategic planning experience in Texas
government agencies. 1 have used both qualitative and quantitative methods. Using
qualitative methods, I have thoroughly examined the experience of two agencies that
are considered by the Governors Office and the Legislative Budget Board (LBB) in
Texas to be the leading agencies to have benefited from strategic planning
(Governors Office, 1996). In keeping with the confidential agreement between me
and these two agencies, I will refer to them hereafter as Agency A and Agency B.
Using a quantitative method, I have surveyed the planning and budgeting directors
division director, and the executive managers in 77 executive agencies. The purpose
of the survey is 1) to examine the extent to which managers in surveyed agencies are
committed to and involved in developing and implementing strategic plans, 2) to
2


solicit their perception of the benefits of strategic planning for their agencies, and 3)
to judge whether strategic planning is successful in Texas government.
The performance of public organizations needs to improve, and strategic
planning is one of the management techniques that could help in this matter
(Denhardt, 1993). Thus, it helps to know how these two exemplary agencies
formulate and implement strategies and what kinds of benefits have been realized
from strategic planning. There is a lack of empirical analysis of strategic planning
experience in the public sector (Berry and Wechsler, 1995). Establishing causal
linkage between strategic planning practices and organizational performance is
difficult (Rainey, 1996). Thus, this study examines the views of executive directors,
planning and budget managers, division managers as well as related documents to
assess the perceived benefits of strategic planning. In view of the limited studies of
strategic plannings benefits for public organizations and the recent increase in its use,
this study will fill in the gap in the strategic planning literature for public
organizations. Achieving successful strategic planning depends on how top
management are committed and involved in it (Steiner, 1979; Ansoff,1990; Lorange,
1990 and Mintzberg, 1994a). The commitment of top management enhances their
employees commitment and therefore the organizational commitment to strategic
planning. Public organizations in Texas are required to adopt strategic planning.
Whether agencies have conducted strategic planning as a requirement in compliance
with the law or as a commitment to strategic planning as a management tool that may
help improve the agencies performance is a main factor in determining the benefits
of strategic planning for public organizations in Texas. This examination of the
experience of strategic planning in these two agencies and the analysis of the survey
results enhances our understanding of the relationship between strategic planning and
an organizations performance and the potential adoption of strategic planning in
public organizations in other government agency settings.
3


This study addresses several questions. The main question is: To what extent
has strategic planning benefited agencies by improving their performance? Other
related questions are: What are the main perceived strategic planning benefits?
How is strategic planning developed and implemented in the two agencies? How
committed and involved are executive managers in the strategic planning process?
How committed are agencies to strategic planning ? What are the major factors
contributing to the success of strategic planning? What is the impact of strategic
plan development and implementation on the perceived benefits ?
The Problem Statement
In the private sector, some argue that strategic planning may not be effective
in some organizations because there was a separation between formulation and
implementation. Planning staffs would formulate strategies, while line executive
and program managers implement them. It is a separation between thinking and
doing (Mintzberg, 1990, 1994a, 1994b; Peters, 1987). However, reviewing strategic
planning literature in the private sector for the last two decades, Miller and Cardinal
(1994) have found that strategic planning has improved organizations performance.
The focus of this study is exclusively on public agencies and hypothesizes, as
many strategic planning advocates claim, that strategic planning helps agencies to set
their direction, goals, and priorities to meet customers needs, improves resource
allocations and introduces positive changes to agencies that would enhance their
continuous improvement efforts (Bryson, 1995; Koteen, 1991, Nutt and Bakoff,
1992). These benefits and others will be realized more effectively if executive
managers as well as all agencys employees are committed and involved in
formulating and implementing strategic plans rather than involving only planning
staffs. The top management commitment and involvement in the strategic planning
4


process will improve the overall organizations commitment, which will enhance the
success of strategic planning in their organizations. There is a lack of research on
strategic planning experience in public organizations. This study attempts to enrich
the public management research by shedding light on strategic planning experience in
public organization settings.
Limitations
This study has several limitations. First, although Texas adopted strategic
planning in 1991, it may be too early to measure its beneficial impact on
organizations performance. The strategic planning initiative is still evolving, and it
may be some time before the positive impact of such an initiative is realized. The
second limitation stems from the study sample. I have examined two exemplary
agencies. Though the experience of such agencies will be invaluable, they may not,
however, be generalized to other agencies contexts. I have, however, used several
data collection strategies. In addition to the conducted interviews, I have collected
several related documents, such as strategic plans from the two agencies, and
surveyed the experience of 77 central agencies in Texas government with strategic
planning. Despite the above limitations, the study sample and methodology, which is
a combination of qualitative and quantitative analyses, has strengthened the study
results. Thus, the study findings will be of a great contribution to the field of public
management in understanding the role of strategic planning in improving the
performance of public organizations.
5


CHAPTER 2
LITERATURE REVIEW
Performance Improvement in Public Organizations
The question of how to improve public organizations performance has been a
challenge for decades. The attempts, however, to improve public organizations'
performance from the beginning of this century up to the 1980s can be considered a
self-examination process in which public administration and management theorists
and practitioners have tried to advance the field. They have incorporated
management tools such as planning programming and budgeting systems (PPBS),
management by objectives (MBO), zero-based budgeting (ZBB) and other tools in the
hopes of improving the efficiency and effectiveness of public organizations
performance. The late 1980s and early 1990s have witnessed new trends in the effort
to improve public management although the questions of what government should do
and how it should do its job are never-ending, the beginning of the 1980s is
considered a turning point in the attempts to improve government performance. The
emphasis has shifted swiftly from how public organizations can improve their
performance to what they should do. The main assumption is that government is
not efficient, and therefore it should do as little as possible. Thus, the Grace
Commission in the early 1980s advocated the principle of minimal government and
more privatization as a means of improving government performance ( Moe, 1992).
Many observers of public management at the beginning of the 1990s have
gone beyond the how and what debate to question the value and ability of the
bureaucratic model to deliver services citizens need. Osborne and Gaebler (1993) and
6


Denhardt (1993) have argued that the assumptions behind the bureaucratic model as
envisioned by Max Weber, for example, stable environment, simple goals, impersonal
treatments, etc., are not applicable to todays environment which is knowledge-based
and dynamic. Thus, there is a need to reinvent government.
This critique of the bureaucratic model has introduced many challenging
ideas, the most powerful of which is the notion that public organizations should be
customer-driven and service-oriented (Barzelay, 1992; Osborne and Gaebler, 1993).
The advocates of this approach indicate that thinking in terms of customers and
service helps public managers and overseers articulate their concerns about the
performance of the public organizations for which they are accountable. Therefore,
there is a need to transform public organizations to be customer-driven; that is the
focus is on customer needs and perspectives. A customer-driven organization defines
itself not by the tasks it performs, but rather by the results it achieves for its
customers. It does not stick to routine, but modifies its operations in response to
changing demands for its services. It engages in two-way communication with its
customers in order to assess and revise its operating strategies (Barezly, 1992). These
new emerging ideas become to be known as post-bureaucratic paradigm.
The post-bureaucratic paradigm emphasizes delegation, decentralization,
streamlining, incentives-based regulation and voluntary compliance. Thus the new
emphasis in public organizations should be on winning adherence to these norms.
Employees will be more likely take personal responsibility at work when they receive
clear direction about purposes and desired outcomes, education, coaching, feedback
and recognition. There is a need in public organizations to build accountability rather
than enforce responsibility. When administrators use their authority to enforce
responsibility on their subordinates, they neglect the roles that emotions,
commitments, and peer group norms play in shaping intrinsic motivation and
behavior. An effective way to hold employees accountable is to make them feel
7


accountable, because this is the only way for them, as for us all, to be important
(Barzelay, 1993, p.126). The post-bureaucratic advocates indicate that it is necessary
in a post-bureaucratic paradigm for a public organization to identify its mission,
services, customers and outcomes rather than specific functions, authority, and
structures. The focus on formal structure only, to the exclusion of the mission,
services and customers, puts the cart of organizational means before the horse of
organizational purpose and strategies (Chandler, 1962; Barzelay, 1993).
Recent works of major public management scholars (Barzelay, 1992;
Denhardt,1993) and the National Academy of Public Administration (NAPA, 1996),
as shown in Table 2.1, indicate the impact of the post-bureaucratic paradigms values
on management thinking and practice. As the comparison in the table shows, the
common characteristics of high performing organizations are: the development of a
clear mission, close contact with customers (citizens), employee empowerment, and
clear definition of performance outcomes and a focus on results (Hale, 1996, 139).
The post-bureaucratic paradigms influence has been reflected at the federal
level of government where the National Performance Review (NPR) has adopted the
principles of the reinventing government movement. The aim is to create government
that works better and costs less. Another major impact of the post-bureaucratic
paradigm is the enactment of the Government Performance and Results Act of 1993
(GPRA) (Public Law 103-66). The GPRA requires major departments and agencies
1) to develop strategic plans outlining missions, goals and objectives; 2) to formulate
performance (outcome) measures; 3) to develop five-year performance plans; and 4)
to prepare annual performance reports assessing the success of these plans.
At the state level, many states have adopted strategic planning, which calls for
developing clear mission statements and strategies to achieve them. They have also
adopted performance measures and performance budgeting as management tools to
8


Table 2.1 COMPARISON OF HIGH-PERFORMANCE CHARACTERISTICS
ACROSS TEN YEARS
How Three Groups Define the Characteristics
Principle Barzelay, 1985 (STEP) Denhardt, 1993 Alliance, 1994
Mission and customer orientation Closer contact with the customer for abetter understanding of the customers needs Dedication to public service Mission clarity and understanding
Employee empowerment, including the provision of tools and use of performance measurement Tapping the knowledge, skills, and commitment of all state workers Empowerment and shared leadership Restructured work processes to meet customer needs
Increasing discretionary authority to give managers and employees control over and accountability for a bottom line Pragmatic incrementalism (a free-flowing process of seizing opportunities) Flexible adaptability, ability to adjust when conditions change
State-of-the-art productivity improvement techniques Open and productive communications among stakeholders
Partnerships to allow the sharing of knowledge, expertise, and other resources Employee empowerment
Improved work measurement to provide a base for planning and implementing service improvements and giving workers information about their performance New processes to motivate and inspire people to succeed
Define outcomes and focus on results
Competitive in terms of performance
9


implement their strategic plans. The aim is to increase the efficiency and the
effectiveness of public organizations performance to deliver services customers
would value. The increased use of strategic planning in public organizations raises
many questions, some of which are: What is strategic planning? What are the
different approaches and models of strategic planning? What are the common steps
to strategic planning? What are the pitfalls of starting and implementing strategic
planning? What is the strategic planning record in improving organizations
performance? What are the criticisms of strategic planning? What are the major
problems with strategic planning implementation? What is the role of performance
measures and budgeting in implementing strategic planning? What would be the
barriers to improving performance in public organizations that may limit the
usefulness of strategic planning in public organizations? These questions guide my
next critical review of strategic planning literature.
SUategigPlanning in Private and Public Sectors
The literature of normative theory on strategic planning indicates that most of
the theory and practice of strategic planning in this century has been focused on the
private sector (Ansoff, 1987, 1990, 1991; Andrews, 1971, 1987; Steiner, 1979).
Strategy as used in the private sector has been defined in many ways. Alfred
Chandler (1962, p.13) perceives strategy as "the determination of the basic long-term
goals and objectives of an enterprise, and the adoption of a course of action and
allocation of resources necessary to carry out these goals. Another leading authority
in business Strategy defines corporate strategy as "the pattern of major objectives,
purposes, or goals and essential policies and plans for achieving those goals, stated in
such a way as to define what business the company is in or is to be in and the kind of
company it is or is to be" (Andrews, 1971, p.28). Thus Andrews has included in his
10


definition of strategy the choice of purpose as well as the essential policy-level means
for achieving it. These definitions of strategy, however, should include other
elements beyond resource allocation and day-to-day activitiesfor instance,
performance improvement.
Strategic Planning Definitions
The literature of strategic planning offers a wide range of definitions of
strategic planning process. Peter Drucker, the father of Management by Objectives,
defined strategic planning as:
... thinking through the mission of the business... asking the question
what is our business and what should it be? This leads to the setting
of objectives, the development of strategies and plans, and the making
of todays decisions for tomorrows results. This can be done only by
an organ of the business that can see the entire business; that can
balance objectives and the needs of today against the needs of
tomorrow; and can allocate resources of men and money to key results
(1974, p.661).
George Steiner, a leading figure in strategic planning literature, states:
Strategic planning is a systematic and more or less formalized effort of
a company to establish basic company purposes, objectives, policies,
and strategies and to develop detailed plans to implement policies and
strategies to achieve objectives and basic company purposes (1979,
P-15).
With respect to the public sector, Nutt and Backoff define strategic planning as:
. . decisions an organization makes that determine or reveal its
objectives, purposes, or goals; create the principal policies and plans
for achieving its aims; define the range of businesses or services the
organization is to pursue; identify the kind of economic and human
organization it is or intends to be; and specify the nature of the
economic and non-economic contribution to be made to the
organizations shareholders or trustees, customers, and communities
(1992, p. 57).
11


Bryson, who has been advocating strategic planning for public sector, defines it as:
... a disciplined effort to produce fundamental decisions and actions
that shape and guide what an organization is, what it does, and why it
does it. To deliver the best results, strategic planning requires broad
yet effective information gathering, development of explanation of
strategic alternatives, and an emphasis on future implication of present
decision (1995, p. 4).
These definitions share a common theme that the purpose of strategic planning
is to enable an organization to: state its mission clearly, cope and adapt effectively
with its ever-changing external and internal environments, obtain needed resources,
and focus its efforts and resources to achieve mandated or discretionary objectives
efficiently and effectively. Strategic planning efforts succeed mostly where
organizational leadership pay close attention to both strategic planning development
and implementation process. Neither strategic planning development nor
implementation can succeed without continuous attention to both by the
organizations leadership. But how is strategic planning developed and implemented
both in the private and the public sectors?
Strategic Planning Development
Strategic planning has been evolved in both the private and public sectors.
Over the years, many approaches have been developed that have influenced strategic
plan development (Bryson and Roering, 1996). Therefore, it is worth examining
briefly some of the well established approaches to strategic planning development.
Strategic Planning Approaches. The approaches that will be discussed below
are: the Harvard Policy Model, strategic planning systems, stakeholder management
approaches, strategic issue management, and process approaches.
The Harvard Business School developed its Harvard Policy Model in
1920. The purpose of the model is to assist an organization in finding the best fit
12


between itself and its environment by developing strategies that direct its actions
(Andrew, 1971). The major contribution of this model is the development of
techniques that enable an organization to analyze its strengths, weaknesses, and the
opportunities and threats (SWOT) in its environment, so an organization can develop
its strategy.
The main weakness of this model, however, is its inability to draw attention to
strategic issues or offer strategic specific advice on how to develop strategies except
to note that effective strategies will build on strengths, take advantage of
opportunities and overcome or minimize weaknesses and threats (Bryson and
Roering, 1996, p. 487). Strategic issues may include a forthcoming development,
either inside or outside of the organization, which is likely to have an important
impact on the ability of an enterprise to meet its objectives (Ansoff. 1991, p. 369).
The strategic planning systems deal with how managers can plan, make,
implement and control important decisions across organizational functions and levels.
Lorange (1980, 1993 ), a leading advocate of this approach, argues that an effective
strategic planning system must address four fundamental questions: 1) where are we
going? (mission), 2) how do we get there? (strategy), 3) what is our blueprint for
action? (action), 4) how do we know if we are on track? (control).
The strength of these systems is reflected in its attempt to coordinate all
strategies across functions in an organization to build an overall strategy for the
organization. Ironically, their weaknesses stem from their strengths in their excessive
comprehensiveness of analysis and of the areas targeted for change (Bryson and
Roering, 1996; Mintzberg, 1994).
The stakeholder management approaches view strategy as a bridge that
links an organization to its stakeholders (Freeman, 1984). Stakeholders are
individuals or organizations who affect and are affected by an organizations actions,
such as its employees, customers, suppliers, and critics. Thus, the key task of
13


strategic leadership is to manage relationships with influential stakeholders, maximize
their support, and minimize their opposition to the organizations activities. The
strengths of these approaches are the recognition of the stakeholders complementary
and competing views, and claims placed on organizations. The weaknesses, however,
are the absence of criteria for judging competing claims and the need for clear
guidelines which will help to develop strategies for dealing with these competing
claims (Bryson, 1995; Bryson and Roering, 1996).
The strategic issue management approaches primarily focus on the
recognition and resolution of strategic issues, whether inside or outside of the
organization, that might affect an organizations ability to meet its objectives (Ansoff,
1980, 1991). The concept of strategic issues was developed to bridge the missing
step between the SWOT analysis of an organization and its development of strategies.
To develop an effective strategy, an organization needs to explore and resolve the
emerging strategic issues, so that the organization can achieve its goals effectively.
Based on these theoretical approaches and other ideas, strategic planning theorists
and practitioners have developed applied strategic planning models.
The process approaches of strategic planning deal primarily with
implementing strategies. Two process models of interest are the logical
incrementalism and framework for innovations models. The incremental approach
views strategies as consisting of a loosely linked group of decisions that are handled
incrementally. Mintzberg and Quinn (1991) build upon Lindbloms (1959)
incrementalism, using their logical incrementalism for strategy implementation.
Although the incremental approach has the strength of handling complexity and
change, it does not, however, guarantee that various loosely linked decisions will
emerge together to fulfill organizational goals. It does not call for radical change in
the decision making process from the current status quo. Incremental change is
effective when what you want is more of what you have already got ( Pascale, 1992,
14


p.12 ). It encourages management to devote itself to techniques that squeeze more out
of the existing paradigm instead of creating a new one (Pascale, 1992). However,
Dilulio, Garvey and Kettl (1993) advocate incremental approach to policy
implementation in government.
The framework for innovation approach attempts to benefit from different
strategic planning approaches and avoid many of their weaknesses. Many strategic
planning approaches have become an end in themselves (Mintzberg 1994a). This
approach views innovation itself as a strategy. It advocates specific management
practices such as project teams, task force, and different organizational development
techniques to support innovation in organizations. It also encourages the
development of a vision of success to provide the decentralized and entrepreneurial
parts of the organization with a common set of subordinate goals (Baizelay 1992 and
Bryson, 1996). The strength of the approach stems from its attempt to encourage
innovation with central control. However, some innovation in the public sector may
lead at times to big mistakes that inhibit public managers from being risk takers
(Rainey 1996)
Developers of strategic planning in both private and public sectors have
benefited from all these approaches. However, the most dominant approach in the
public sector is the Harvard Policy Model (Berry, 1994). Although these
approaches to strategic planning represent a typology that is useful in understanding
the theoretical aspects of strategic planning, it is important from a practical
perspective to present a sample of applied strategic planning models.
Strategic Planning Models. There are as many strategic planning models as
there are strategic planning theorists and practitioners. However, I present a sample
of these models that are widely addressed in strategic planning literature for the both
private and public sectors. The brief discussion of these models will enhance our
understanding of how some of the strategic planning theorists benefited from the
15


strategic planning approaches to develop their models to help managers improve their
organizations performance.
The Brvson Model. Bryson (1995) writes for public and nonprofit
organizations. He advocates adapting private strategic planning concepts into public
organizations. He introduced what he calls the Strategy Change Cycle as strategic
planning activities for public and nonprofit organizations (Bryson, 1995, p 21) The
Strategic Change Cycle consists of the following activities: setting the organizations
direction, formulating broad policies, making internal and external assessment,
paying attention to the needs of key stakeholders, identifying key issues, developing
strategies to deal with each issue, planning review and adoption procedures,
implementing planning, making fundamental decisions, taking actions, and
continually monitoring and assessing the results. Based on these activities, Bryson
develops a ten-step strategic planning process that consists of: 1) initiating and
agreeing on a strategic planning process, 2) identifying organizational mandates, 3)
clarifying organizational missions and values, 4) assessing the organizations external
and internal environment to identify strengths, weaknesses, opportunities, and threats,
5 ) identifying the strategic issues facing the organization, 6) formulating strategies to
manage these issues, 7) reviewing and adapt the strategic plans, 8) establishing an
effective implementation process, 9) developing an effective implementation process,
and 10) reassessing strategies and the strategic planning strategies and process.
Bryson (1995, p.27) indicates the importance of incorporating the
stakeholders concerns in the plan, indicating that the key success for public and
nonprofit organizations is the satisfaction of key stakeholders.
Nutt and Backoff Model. Nutt and Backoff (1992, p. 158) are leading
advocates of strategic planning for public and nonprofit organizations. They indicate
that organizations function in a tension field between opposing trends such as
differentiation and integration, change and stability. To manage an organization
16


effectively, they have proposed their Tension Field Lens model and a six-stage
strategic planning process. Using the Tension Field Model, management could
examine the organizations current situation by identifying its clientele, programs,
services and competence, and picture its future by identifying changes in who will be
served, what programs will likely be adopted and what capacity the organization
needs to achieve its goals. They also advocate a six-step strategic planning process
which consists of : 1) depicting the organizations historical context in terms of
trends in its environment, its overall direction, and its normative ideas, 2) assessing
the immediate situation in terms of current strengths and weaknesses and future
opportunities and threats, 3) developing an agenda of current strategic issues, 4)
designing strategic options to manage priorities issues, 5) assessing the strategic
options in terms of stakeholders affected and resources required, and 6) implementing
priority strategies by mobilizing resources and managing stakeholders. With each of
these stages, management would engage in the three steps of search, synthesis and
selection. Management searches for information and ideas, synthesizes information
and ideas to find generalization, patterns, and themes, and selects criteria to set
priorities for action as the process moves from one stage to the next.
The Goodstein. Nolan and Pfeiffer Model. These strategists developed an
applied strategic planning model which they claim is as useful for government
agencies and nonprofit organizations as it is for business organizations (1993, p. 7).
The model gives attention to application and implementation concerns at every stage.
It involves nine sequential phases: planning to plan, value scan, mission formulation,
strategic business modeling, performance audit, gap analysis, integration action plans,
contingency planning, and implementation. They have emphasized the importance of
a planning to plan phase that involves addressing how much commitment to the
strategic planning process is present at the organization and how employees and
17


stakeholders will be involved in the process. They assert that without organizational
commitment, strategic planning efforts will fail.
The Eadie Model. Eadie advocates a strategic issue management approach
for public organizations, which he indicates moves beyond traditional strategic
planning. He argues that strategic issue management differs from strategic planning
in its conscious focus on change; action bias and attention to implementation:
selectivity in addressing particular issues, rather than comprehensively describing
what is already being done; avoidance of mechanical projection into the unforeseeable
future; and attention to the intensive collective involvement of people, both board and
staff, in making strategic decisions (1993, p. 20). His strategic issue management
process consists of five key steps: 1) designing the process to fit an organizations
circumstances, capabilities, needs and resources, 2) clarification of the strategic
framework through clarifying values, vision, and mission, 3) identification of
selection of strategic issues, 4) development of strategic projects to address selected
strategic issues, and 5) implementation of strategic change projects.
The Steiner Model. Steiner is considered one of the leading strategic planning
theorists. However, he writes mainly for the private sector. In his seminal work
(1979), he presents his conceptual model which emphasizes three major phases:
planning premises, formulation of plans, and implementation and review. The
planning premises are divided into two types: the plan to plan and substantive
information needed in the development and implementation of plans. This includes
examining the expectations of both the major outside constituents and managers and
employees of strategic planning. It also includes information about the past
performance, the current situation, and the future and WOTS UP analysis -- an
acronym of weaknesses, opportunities, threats, and strengths underlying strategic
planning. The formulation step, based on the planning premises, proceeds to the
development of an overall and program strategies. The overall strategies are defined
18


as basic mission statements, purposes, objectives, and policies, while program
strategies are concerned with the use of resources for strategic projects. The
implementation process covers the entire range of managerial activities, including
such matters as motivation, compensation, managerial appraisal and control
processes. Steiner represented his model within the business company-wide
planning. He emphasized the role of the executive director in ensuring commitment
across the organization to strategic planning.
Common Strategic Planning Process Steps. Based on strategic planning
literature and the above models, we can draw several basic steps leading to the
development of strategic planning in an organization: commitment to strategic
planning, development of mission statement, assessment of external and internal
environments, identification of strategic issues, formulation of strategies to achieve
goals and objectives, composition of strategic plan, development of action plan,
implementation of action plans, and assessment of strategy implementation and
feedback.
Commitment to Strategic Planning. The purpose of this step is to make
certain that there is an organizational commitment to strategic planning efforts. The
support and commitment of the organizations key decision makers is vital if strategic
planning is to succeed (Eadie, 1996; Nutt and Backoff, 1992; Goodestein, Norlan, and
Pfeiffer, 1993; Bryson, 1995; Steiner, 1979). Also, the involvement of key
stakeholders outside the organization is crucial to the success of public organizations,
if implementation requires involvement of multiple parties and organizations (Bryson,
1995; Gogin, Browman, Lester, and Toole, 1990).
It is important that top policy decision makers, middle management personnel,
and technical core or front line personnel be involved to different degrees in this stage
and in the other stages of strategic planning development and implementation.
19


Although strategic planning is a function of all managers at all levels of an
organization, the commitment of an organizations top managers are vital to achieve
an overall organizational commitment to strategic planning (Steiner, 1979; Nutt and
Backoff, 1992; Bryson, 1995). Top management personnel are charged with linking
the organization to its environment. Middle managers translate policies and decisions
into operation. Technical people (front line) are the most knowledgeable about the
ways in which the organizations basic technologies work and are the closest to the
organizations customers. The input of these groups into strategic plans is vital to
improvement of its quality and minimization of any potential resistance to strategic
plans implementation.
Mission Statement. Drucker (1973, p. 66) suggests facetiously that if you do
not know where youre going, any plan will do. Most strategic planning theorists for
both the public and private sectors share a belief in the importance of having a clear
mission statement to provide both a sense of an organizations purpose and a
justification for its existence. Some others distinguish between vision and mission.
Bryson indicates that a successful vision should include: 1) mission, 2) basic
philosophy, 3) goals, 4) basic strategies, 5) performance criterion, 6) important
decision rule* and 7) ethical standards expected of all employees (Bryson, 1986, pp
184-189). So, mission statement should clarify an organizations purpose, and
explain why it should be doing what it does; and vision clarifies what the organization
should look like and how it should behave as it fulfills its mission. Mission is a
powerful instrument of accountability (Kearns, 1996 ). In fact, Peter Drucker (1989 )
suggests that the mission statement is the instrument of accountability for public and
nonprofit organizations because they do not have a bottom line. He writes, a well
defined mission serves as a constant reminder of the need to look outside the
organization not only for customers but also for measures of success (Drucker, 1989,
p. 89). Behn (1991) argues that mission statement is the bottom line of public
i
20


organization. Furthermore, Cohen and Eimicke emphasize the importance of the
mission statement for organizational innovation by indicating that all organization
innovation must begin with strategy. Without organizational consensus on its
mission and a road map for achieving its objectives, better management has no
meaning...so, for us, all management innovation initiatives must begin with strategic
planning (1996, p.27). It is important, however, to realize that many public
organizations are established by law, and therefore their basic mission elements are
pre-established. Clearly, defining their missions is nevertheless important because
mission justifies the existence of public organizations and their right to use public
resources (Halachmi, 1992). Without a concrete understanding of the statement of
purpose, it is virtually impossible for any organization to develop clear objectives
(Behn, 1991).
In the development of mission statement in public organizations, there is a
need to analyze and understand the mandates that an organization confronts. Poor
understanding of mandates may lead an organization to make one or all of the
following fundamental mistakes: First, not knowing what an organization must do, it
is unlikely to do it. Second, it may believe that it is more tightly constrained in its
action than it actually is. Third, it may assume that if it is not explicitly told to do
something, it is not allowed to do it (Bryson, 1995).
Assessment of External and Internal Environment. Organizations are not
assumed to exist in a vacuum, but rather both their objectives and the steps necessary
to achieve those objectives are seen in the context of available resources and
constraints presented by the organizations environments (Denhardt, 1985). Selznick
(1957) indicates that leaders are responsible for assessing the environment in which
their organizations exist to reduce the uncertainty confronting organizations in their
environment. Thus, public organizations must understand their external and internal
21


environments so they can develop productive strategies to align the two and respond
effectively to any changes in either environment.
The purpose of analyzing the external environment is to identify the
opportunities and threats a public organization faces, while the internal analysis will
provide information about the organizations strengths and weaknesses. This
information will be of great help in designing an effective strategy which aims to take
advantage of strengths and opportunities and at the same time minimizes or
overcomes weaknesses and threats. Strengths are aspects of organizational
infrastructure, resources and services that contribute to the effective and efficient
pursuit of its mission and thereby enhance its accountability to its stakeholders.
Weaknesses are aspects of organizational infrastructure, resources and services that
detract from the effective and efficient pursuit of mission and thereby tend to
diminish accountability. Opportunities are trends or events in the external or internal
environment that have the potential, if acted upon, to assist the organization in pursuit
of its mission, thereby enhancing its ability to serve its clients (customers). Threats
are events or trends in the external or internal environment that have the potential to
hinder the organization in pursuit of its mission and threaten its accountability to its
stakeholders (Keams, 1996; Nutt and Backoff, 1992). In a private firm environment,
strengths and weaknesses tend to arise internally while threats and opportunities tend
to arise externally. In a public organizations environment, strengths and weaknesses
tend to arise in both its internal and external environment. Also, private firms tend to
be pulled toward opportunities while public organizations tend to be driven by threats
such as the fear of budget cuts in its appropriation (Nutt and Backoff, 1992). Thus,
strategic planning is concerned with finding the best or most advantageous fit
between an organization and its environment in accordance with an intimate
understanding of both the organization and its external and internal environments.
22


In assessing the organizations environment, the strategic planning authors
advocate the use of the SWOT technique which addresses four questions: 1) what are
our major internal or present strengths? 2) what are our major internal or present
weaknesses? 3) what major external and/or future opportunities do we have? and 4)
what major external or future threat might we face? It is essential to formulate
strategic issues prior to the development of strategies. After all, an answer without
an issue is not an answer (Bryson, 1988, p.160). However, identifying the
organizations general strengths and weaknesses is rather difficult and tends to
overestimate the strengths (Mintzberg, 1994). Thus, the analysis of the strengths and
weaknesses, to be useful, should be issue- and problem-strategic specific.
The most frequent limitation of SWOT analysis is the failure to link the
assessments of the external and internal environments. There is a temptation to deal
with the internal and external environments separately, using only one or the other as
a foundation for strategies (Kearns, 1996). However, SWOT analysis is an important
component of strategic management because it allows management to achieve a good
fit between the organization and its external environment. Strategically, a first fit is
achieved when an organization develops certain internal strengths that enable it to
capitalize on its existing or emerging opportunities in its external and internal
environment. This would provide the organization with a comparative, and
competitive advantages that would represent its distinctive competence (Kearns,
996, p. 57). A second fit is achieved when decision makers understand the
relationship between strengths and threats in the organizations environment which
will enable them to mobilize the organizations strengths to deal effectively with the
negative impact of the threats. A third fit can be realized when decisions makers
understand exactly which of the organizations weaknesses are preventing it from
capitalizing on the external opportunities. Seeking a fit between an organization and
its environment raises strategic issues for decision makers.
23


Identification of Strategic Issues. The process of identifying strategic issues is
the heart of straategic planning (AnsofF, 1980, Bryson, 1995, Nutt and Backoff,
1992). The examination of an agencys mission (mandates) and the internal and
external environment would indicate the strategic issues that the agency is facing. A
strategic issue would be a fundamental policy question or challenge affecting an
organizations achievement of its mandates, mission, and desired quality of service
delivery (Bryson, 1995). An issue can be a welcome one, an opportunity to be
grasped in the environment, or an internal strength which can be exploited to
advantage. Or it can be an unwelcome external threat or an internal weakness, which
imperils continuing success or even the survival of the organization (AnsofF, 1980).
Identification of strategic issues is important because it focuses the
organizations attention on what is truly important. It will establish a distinction
between issues the organization needs to handle immediately and those that may
need no immediate action. Furthermore, it directs efforts toward the definition of
issues and problems rather than toward finding solutions for undefined problems.
While addressing strategic issues, decision makers need to ask: how can we build
upon the organizations distinctive competencies to deliver quality service and
preserve customers trust? How can we mobilize resources to minimize the impact of
existing or looming threats on the horizon? How can we address the organizations
weaknesses to take advantage of opportunities? (Kearns, 1996)
Formulation and Choice of Strategies. Strategies are developed to deal with
strategic issues through the outlining of an organizations response to the fundamental
strategic issues it faces. Strategy is a plan to achieve the mission goals and meet the
mandates (Bryson, 1995, p. 131). If the agencies goals are not predefined, the
analysis of the previous steps would identify its goals and objectives.
24


The key element of effective strategy is flexibility. Also, strategy should have
performance measure components to indicate later how successfully an organization
has implemented strategy and the extent to which the strategy contributed to the
achievement of performance goals. Strategy development should address the barriers,
if any, to the realization of these goals, and the major proposals for overcoming such
barriers. It should be noted, however, that strategies have no value in and of
themselves. To paraphrase Philip Selznick (1957 ), they take on value only as
committed people infuse them with energy.
Composition of a Strategic Action Plan. Writing a strategic plan that would
include such elements as a mission statement, resource plans, and implementation
plans is an essential part of the strategic planning process. A danger, however, lies in
writing a static strategic plan that would discourage innovations. The composition of
a strategic plan should be a dynamic and continuous process. The strategic plan
should convey what success should look like, and how it might be achieved (Andrew,
1987, Kotter, 1995). The vision of a success plan would include elements such as: 1)
mission, 2) basic philosophy, core values and cultural features, 3) goals, if they are
established, 4) basic strategies, 5) performance criteria, including critical success
factors, 6) important decision-making rules, and 7) ethical standards expected of all
employees.
This plan would provide an organizations members with specific, reasonable,
supportive guidance in regard to what is expected of them and why. There are two
elements that best determine whether or not goals are achieved: the extent to which
the goals are specific and reasonable, and the extent to which people are supported in
their pursuit of those goals (Locke and Latham, 1990). If goals are to motivate, they
must be set high enough to provide a challenge, but not so high as to induce paralysis
and hopelessness. Thus, a well-tuned vision of success can articulate reasonable
25


standards of excellence and motivate the organizations members to pursue them
(Bryson, 1995).
Development o f Action Plan. A strategic plan is, in part, a communication
device, since it serves to ensure that managers at all management levels in an
organization understand their environment within the big picture of the organization.
However, a strategic plan is meaningless unless it has been transformed to a concrete
action plan that translates good intentions into good work. The distinction that makes
a plan capable of producing results is the commitment of key people to working at
specific levels (Drucker, 1980). It is at the functional level where strategic plans are
translated from its generalities into everyday management decisions. It indicates
detailed action steps telling what would be done and by whom.
Implementation of Strategic Plans. The implementation of a strategic plan is
the transition from strategic planning to strategic management. Development of
budgets and implementation of processes will bring life to the strategies and create
real value for the organization and its stakeholders. The process of implementing
strategies would involve:
Designing the organizations structure and climate to match the strategy
Ensuring that divisional and functional managers have the right background, skills
and attributes to make the strategy work
Employing the right functional policies to make the strategy work
Allocating resources to the operating units in support of the strategies approved
for those units (Sigman, 1986, p. 300)
The implementation process should allow for adaptive learning as new
information becomes available and circumstances change. Such learning will lead to
more effective implementation, because realized strategies are a blend of what is
intended with what emerges in practice (Argyris and Schon, 1996; Mintzberg and
Westley, 1992; Mintzberg, 1994a). So the implementation process should emphasize
learning. Adaptive learning is necessary to tailor strategies to emergent situations so
26


that appropriate modifications are made and desirable outcomes are produced
(Bryson, 1995; Mintzberg, 1994b).
Implementation of strategy has always been a challenging process in strategic
planning. Lorange proposes nine questions which should be addressed to achieve an
effective corporate planning implementation, paraphrased as follows:
1) Are the benefits from adopting strategic planning clear to the users?
2) Is the overall logic of the planning process understandable to relevant managers?
3) Has the plan been broken down into smaller, manageable elements?
4) To what degree do proposed innovations break with past experience and tradition?
5) Does the implementation plan have a readily identifiable, top-level sponsor as its
champion?
6) Do clients clearly feel a need for the outcome of the strategic planning process?
7) Can minimum results be demonstrated relatively quickly?
8) Can early endorsement and commitment of the plan users be obtained?
9) Have resource needs been realistically assessed and allocated? (1982, pp.8-10).
In short, successful strategy implementation depends on successful strategy
formulation and continuous adaptation to emerging issues throughout the
implementation process. Implementation must be a learning process rather than a
rigid process if it is to be successful.
Assessment and Revision of Strategic Plans. Strategies can cease to work for
several reasons. First, although a strategy may be well-developed, it may have
insufficient resources devoted to its implementation, and therefore, insufficient
progress is made toward resolving the intended issue. Second, problems change, and
third, the political environment may shift (Bryson, 1995).
In reviewing strategies, there is a need to stay focused not only on what is
important, but also on indicators of success and failure as well. Thus, there is a need
to review the issues affecting strategy formulation in the first place. This process
involves measuring, evaluating, and providing corrective action, and then using the
results of these measures to reevaluate strategies. It should be noted that strategic
planning activities presented here are more than a static collection of mission, goals.
27


objectives, techniques, strategies and strategic plan documents. It is an organization-
wide commitment to a set of values, operating philosophies, and priorities and a
strategic way of thinking in which all major decisions are evaluated in light of their
strategic implications (Keams, 1996, p. 58). In other words, the real purpose of
strategic planning is not to make plans but to change the mental models decision
makers carry in their heads (Bryson, 1995, p. 232). It should be noted however that
these strategic planning development steps are in practice iterative and not linear
processes.
Having discussed the strategic plan development issues, we now turn to the
actual implementation of strategies, thus moving from the imaginary to the real.
Strategic Planning Implementation
Strategic planning is helpful only if it becomes a guide for day-to-day
operation (Denhardt, 1985). Thus strategic planing without implementation is of
limited value. As Pressman and Wildavsky (1973) remind, a policy (read strategy)
is not automatically translated into action, and the dynamics of the implementation
process must be understood as a major determinant of policy outcomes. For decades
strategic planning advocates failed to address the implementation aspect of strategic
plans. Recently, however, they have started addressing strategy implementation,
which has become a major component of what is known as strategic management.
Thus many strategic planning advocates (Kotten, 1989; Ansoff, 1990; Nutt and
Backoff, 1992; Fogg, 1994; Eadie, 1996) called to go beyond strategic planning that
only addresses strategic plan development to strategic management which includes
resource allocation and control and an evaluation process as well. In short, strategic
planning is no longer thought to deal only with strategy development but must
28


incorporate strategy implementation as well. Strategic planning, addressed in this
research, (read strategic management) in public management literature has gone
beyond strategic plan development to its implementation (Bryson, 1995). So strategic
planning at public organization emphasizes both strategy development and
implementation. Thus, it provides guidance, direction, and boundaries for operational
management.
Reasons for Strategy Failure. A dominant criticism of strategic planning in
the 1970s and 1980s was that few strategies actually achieved their intended
objectives, provoking doubt about the value of strategic planning. An analysis of 31
articles that appeared in business and management journals from 1979 to 1988 shows
that the prevailing criticism (45 percent) was that there had been a failure to
implement the strategy once formulated (Judson, 1990, p. 9). As a result of this
implementation failure, many private organizations shifted the responsibility of
developing strategic planning from planning staff to line managers. The planning
staff role became supportive and facilitative in developing and implementing strategic
planning process. However, there are still several reasons that contribute to the
failure of strategiessuch as poor preparation of line managers, faulty definition of
the business, excessive focus on finances and other numbers relevant to business
performance, unrealistic self-assessment of organization strengths and weaknesses,
insufficient effective participation across functions in developing strategies, and lack
of integration of strategic planning with other control systems such as budgets and
informational rewards (Judson, 1990; Lorange, 1993).
This disappointment with strategic planning has led many strategic planning
advocates to examine the pitfalls during the initiation phase of starting strategic
planning efforts (Steiner, 1979; Stringer, 1986). Steiner studied the pitfalls in getting
29


strategic planning started, in understanding the nature of strategic planning, in the
actual process of strategic planning, and in using the plans once they are prepared.
Although he identified fifty pitfalls, there are ten major ones that are worthy of note:
Top managements delegating the planning function to planners
Top management becoming so engrossed in current problems that it spends
insufficient time on long-range planning and the process becomes discredited
among other managers and staff
Failure to develop company goals suitable as a basis for formulating long-range
plans
Failure to involve key line personnel in the planning process
Failing to use plans as a standard of measuring managerial performance
Failure to create a climate in the company that is congenial and not resistant to
planning
Assuming that corporate comprehensive planning is something separate from the
entire management process
Injecting so much formality into the system that it lacks flexibility, looseness, and
simplicity, and restrains creativity
Failure of top management to review with departmental and divisional heads the
long-range plans they have developed
Top managers consistently rejecting the formal planning mechanism by making
intuitive decisions that conflict with the formal plans (1979, p. 294 ).
Although Steiners writing represents the strategic planning of the 1970s,
when strategic planning was formal and rigid and dealt with the external more than
the internal environment of an organization, some of these pitfalls may still occur in
both public and private organizations. The underline message of these pitfalls is lack
of top management commitment and involvement in strategic planning processes.
Thus strategic planning efforts have become discredited among organizations
managers and employees. It should be noted that strategic planning emphasis in the
1970s was on long rage planning. Predicting the future and setting long range goals
are difficult for both private and public organizations. This type of strategic planning
contributed to the existence of such pitfalls. However, strategic planning in the 1990s
30


is about position (Denhardt, 1993). It is about developing mission statements that
v/ould be clear to all organizations employees and develop strategies to achieve
them. Also, strategic planning in the 1990s aims to be more flexible and to encourage
strategic thinking in organizations, whereby employees should always be able to see
their actions within the big picture of their organization; employees, that is, need to
understand how they are contributing to the achievement of their organizations
mission. Mintzberg (1973) has found that managers do not base their decisions solely
on hard data such as the ones resulted from strategic planning analysis, but rather they
use both analysis and intuition in their decision making process. As Peter Drucker
reminds us, Strategic planning does not substitute facts for judgment, does not
substitute science for the manager. It does not even lessen the important role of
managerial ability, courage, experience, intuition, or even hunchjust as a scientific
biology and systematic medicine have not lessened the importance of these qualities
in the individual. On the contrary, the systematic organization of the planning job
and the supply of knowledge to it strengthen the managers judgment, leadership and
vision(1973, p. 129). Strategic planning is not an effort to replace managerial
intuition and judgment Rather it supports it. Thus, I do not share Steiners concern
that using intuition is a mistake or even a threat to strategic planning. Rather,
strategic planning is one of many management tools managers use in their daily
management of their organization to improve their performance.
However, most of the ten pitfalls listed above would inhibit the successful
formulation and implementation of strategic plans. How can we expect strategic
planning to succeed if it lacks the support of top management, lacks line managers
involvement in developing their departments missions, goals, and plans, and lacks
the climate of teamwork and successful communication within an organization? The
result of strategic planning in such situations would be a waste of time and effort.
31


The formulation and implementation of strategic planning is strongly affected
by the culture of an organization. Organizational culture is a system of shared
attitudes, values, and beliefs (Schein, 1992). The nature of the organization's culture
system will define appropriate behavior and shape the decision making process of its
senior managers. So for strategic planning to succeed, the organizations culture
should put great emphasis on continuous improvement efforts, linking performance
and reward, and providing training and development programs. One major aspect that
contributes to strategic planning failure is the organizations neglect of the
organizational and cultural requirement of strategy. An organization may overlook
internal differencesculture, competence and othersamong its units. Yet taking
these differences into consideration is critical for successful strategy implementation
(Wilson, 1994).
The most influential forces shaping an organizations culture is its top
managementCEOs and their deputies. They shape their organizations culture
through the establishment of an effective communication process throughout the
organization, providing programs and educational training, placing emphasis on
leadership by example, and setting and articulating vision, goals, and values.
Strategic planning fails not because its tools are faulty but because it is not seen by
managers as an essential part of the strategic change process (Grundy and King,
1992, p.101). In reality, as Curtis notes, strategic planning is not a technique but a
belief with a clear purpose, philosophy, mission and goals that enhances results in
organization (1994, p. 75). It is an attitude, a way of life (Steiner, 1979, p. 14).
Therefore, the introduction of strategic planning to an organization requires
transformation of the organizations culture in such a way that strategic planning
comes to be viewed as a management tool that helps in improving the organizations
performance. Thus, an organization that would view strategic planning as an
32


opportunity, and not as an additional burden, will benefit in improvement of its
management practices and performance.
But many transformation efforts fail. The transformation efforts go through a
series of phases that require a considerable total length of time. A critical mistake in
any of these phases can have a devastating effect. The errors that management may
commit in these phases and which therefore may affect the success of any
transformation effort, as in the case of strategic planning, include the following:
Failure to establish a sufficient sense of urgency.
Failure to create a powerful guiding coalition.
Lack of a vision that clarifies the direction in which an organization needs to
move.
Failure to communicate the vision to employees.
Failure to remove obstacles to the new vision.
Lack of systematic planning, and emphasis on short-term wins.
Premature declaration of victory. Until changes sink deeply into an organizations
culture, a process that can take five to ten years, new approaches are fragile and
subject to regression.
Failure to anchor changes in the organizations culture. Change sticks when it
seeps into the bloodstream of the corporate body (Kotter, 1995, p. 67).
These pitfalls and errors in transformational efforts clearly show the
importance of the participation of all management-level personnel in the development
and implementation of strategic plans. It is no longer to be expected that a strategic
plan developed by planners and endorsed by top management will necessarily enjoy
successful implementation. What is important is not so much the strategic plan
document but the strategic planning process. The strategic planning process begins
with setting of organizations aims, defines strategies and policies to achieve them,
and develop detailed plans to make sure that the strategies are implemented so as to
achieve the ends sought (Steiner, 1979). A good strategic planning process must
involve, as much as possible, managers from different levels of the organization. As
Tom Peters puts it: The new strategic plan, and planning process, must necessarily
33


be bottom-up. Assessing the ability (and necessary skills) to executeto be
responsive, flexible, attentive to customers starts on the front line (1987, p. 616 ).
It should be noted that among the problems that impede effective execution of a plan
are limited integration of it into other agency decision processes, lack of staff
commitment and an effective monitoring system, and a tendency to view the plan as
an immutable strategy (Grewe, Marshall and OToole, 1989, p. 116). Ways to
overcome these problems include 1) disseminating the final strategic plans to all
potential users of the plans, thus fostering participant advocacy for the plan and its
execution, 2) creating an action plan detailing how strategic plan implementation will
occur, 3) presenting the strategic plan to the agencys governing body, which will
increase its commitment to its implementation, 4) integrating the strategic plan into
the organizations annual budget preparation process, 5) designing a monitoring
system to track the progress of achieving the objectives of the plan and 6) reviewing
and updating strategic plans. Top management belief in the importance of strategic
planning is a necessity, but it is not enough. Their commitment and involvement
must be reflected in their careful attention to the preparation, design, and facilitation
of the process (Grewe, Marshall and OToole, 1989).
Two management behavioral factors emerging from the above discussion are
essential for achieving successful strategic planning: first, top managers (particularly
line managers) commitment to the strategic planning process and, second, their
involvement in the strategic planning process. Strategic planning should be
understood as a set of concepts, procedures and tools designed to help leaders and
managers think strategically on behalf of their organizations stakeholders. Thus
there is no substitute for effective leadership when it comes to adapting strategic
planning to organizations (Steiner, 1979; Bryson, 1995). The commitment and
involvement of executive leadership enhances overall organizational commitment,
which is a primary factor in achieving success with strategic planning (Goodstein et.
34


al. 1993). It should be noted, however, that it is not enough to have top
managements support to have successful strategic planning. There are many factors
in the organizations structure, climate, culture and work procedures that promote
strategic planning efforts. Also, there is a need to incorporate performance measures
and budgets with strategic plans to enhance the success of their implementation
(Ansoff, 1991; Lorange, 1993). In short, strategic planning need to be integrated in
the other organization management practices as performance plans for teams and
divisions within an organization.
Strategic Planning and Budgeting
The relationship between budgeting and strategic planning is inevitable in that
strategic planning tends to set an organizations goals while budgeting allocates
resources to achieve them. Performance measures are an important tool in facilitating
the linkage between strategic planning and budgeting. Understanding the relationship
between the two requires us to address questions such as: What are performance
measures? Why do we need them? What are their unintended consequences? What
are the orientations of the budget? How does budget relate to strategic planning?
Performance Measures. Performance measures are a major component of
public productivity. Epstein indicates that productivity is the responsiveness to the
needs, desires, and resources of community (1992, P.162). Performance measures
are the ingredients of a performance monitoring system. Thus a good set of
performance measures should answer four key questions: How many? How
efficiently? Of what quality? To what effect?(Ammons, 1995 ; Epstein, 1992).
35


Thus performance measurement is a critical part of performance improvement
for an organization of any size and type. Just measuring, however, gets an
organization nowhere. Measuring the right things for the right reasons in the right
manner may make the difference between a completely successful improvement
initiative that is easy to institutionalize and a random collection of good intentions
and accidental insights that goes nowhere (Thor, 1995). The biggest difficulty in
thinking through the problem of management in government is that managers
consider it simply a problem of measurement. Committing public organizations to
performance-based management requires that public officials identify and measure
results. However, the main question, as Kettl and Dilulio (1995) put it. is what do we
do with these measures? Too often, managers pursue measurement for its own sake,
which is doomed to create a failing performance measurement system. Thus,
government has been criticized for measuring only for the sake of measurement. As
Osborne and Gaebler (1993) indicate, people in government are always counting
something or churning out some statistical report. But most of this counting is
focused on inputs how much is spent, how many people are served, what service
each person receives. Very seldom does it focus on outcomes, on results, because
measuring results is so difficult. The focus on outcomes is extremely important
because focusing on efficiency measures in the absence of effectiveness
considerations may lead to perverse behavior by focusing on workload outputs at the
expense of quality (Hatry and Fisk, 1992). As many writers (Epstein, 1992;
Ammons, 1995) have indicated, performance measures are important for
organizations for several reasons, among which are:
Accountability. Managers in high performing organizations require
performance accountability from the employees. Thus, each unit in the performing
organization would have its own performance targets and performance measures to
36


track the units performance. In turn, the top management and the whole organization
is expected to be accountable for performance to its clients. Performance measures
serve both managers, who need to track their teams, and the whole organization,
which needs to know how well it is meeting its performance targets. Therefore,
measurement of service performance will hold officials accountable for their job
performance, beyond mere compliance with laws and adherence to budgets.
Planning and Budgeting Linkage. Planning aims to identify the goals and
services an organization needs to provide. Budgeting expresses the resources that the
organization needs to achieve its mission. Neither planning nor budgeting can
succeed without performance measures. Thus performance measurement is the key
that links planning to budgeting. An organization needs to measure how well it uses
its resources to achieve the goals that stem from its planning process. Therefore,
performance measures have become important in allocating resources. Whether we
allocate resources or reallocate them, the questions remain: Why do we allocate
resources in this manner? What are we trying to achieve from the resources
allocation? What kind of criteria are used in allocating resources? Performance
indicators are the management tools that would provide answers for these questions.
Performance measures are increasingly used to develop and justify budgets (Epstein,
1992). The spread of performance-based budgeting reflects the new focus in
government on program results rather than just measuring inputs and activities.
Operational Improvement. An organization that tracks and measures its
operation is likely to detect operational deficiencies at early stages and to correct
them. Performance measures improves the efforts of a high performing organization
and confirm its effectiveness. Therefore, a manager equipped with a good set of
performance measures is better able to detect the organizations operational strengths
and weaknesses and to provide feedback to employees and work units.
37


Program Evaluation. Performance measures are essential elements of
program evaluation. In evaluating a process or a program, there is a need to identify
as clearly as possible the intended goals and performance indicators necessary to
evaluate the effectiveness of the program management in achieving the program's
objectives.
Public Employee Motivation. Robert Behn asks, Performance measures to
punish, or to motivate? (1993, p. 84). Public managers resist measuring their
agencies performance because their experience with legislators tends to indicate that
performance measures are used to punish and not to motivate (Behn, 1993). There
are many factors beyond public managers control that would affect their
organizations performance. Instead of accepting the excuse that we dont control
everything (Behn, 1995, p. 320), performance measures need to motivate
management to overcome the obstacles they face while striving for excellence. After
all, performance measurements are only indicators and not absolute measures of
agencies performances. Many agencies use performance measures in their pay-for-
performance, which encourages employees to be more productive. Performance
measures are increasingly used to motivate management to be effective in their
service delivery. Budgeting for results, where management can keep a portion of any
unspent money in their budget to improve the capacity of their agencies, is a clear
example of the right use of performance measures to motivate and not to punish
(Schick, 1990).
Customer Focus. The main emphasis of result-oriented government initiatives
-- such as reinventing government, the National Performance Review, budgeting for
results and others is to focus on customer needs. Meeting customer needs requires
agencies to focus on service quality. Performance measures are important
38


management tools that would enable management to know to what extent they have
succeeded in meeting the performance targets related to their customers needs.
Developing and using effective performance measures to improve
organizations performance are affected by several critical actions (GAO. 1995).
including :
Focus and Desired Results. Although many public agencies, created by law
have predefined denoted missions, many agencies fail to clarify their missions and
make them clear to their employees and customers. A clear understanding of
agencies mission, strategies, customers, and desired results is a prerequisite for
developing successful performance measures (Kravchuk and Schaak, 1996). Behn
(1994) argues that many public agencies have failed to achieve their missions because
they have never developed their bottom line. By clarifying their missions, public
agencies would be able to develop performance targets which would be considered
their bottom line target. It is true that developing missions and goals for public
agencies is not as clear and simple as in the private sector, but such difficulties
should not be used as an excuse for not developing successful performance measures
that will assist in improving agencies performance (Ammons, 1995). Therefore,
agencies that have used strategic planning to clarify their mission and develop their
goals have succeeded in redirecting their efforts and achieving dramatic improvement
in effectiveness (GAO, 1995, p. 3).
Stakeholder Involvement. Although defining customers of public
organizations is difficult (Bryson, 1996; Hyde, 1992; Fredrickson, 1993), the success
of performance measurement depends on the identification and involvement of
agencys stakeholders. The consideration of customers needs, desires, and
satisfaction should be considered at each stage of the organizational learning process,
39


including 1) the formulation of goals and objectives, 2) the development of measures,
and 3) the evaluation of these measures for organizational learning and quality
improvement (NPR, 1993). The involvement of multiple stakeholders helps
organizations to develop proper performance measures that would measure program
outcomes and improve their usefulness for multiple users. Credibility of performance
measures also depends on obtaining the views of agency managers and staff. A major
benefit involving these individuals in the development of performance measures is
that they are closest to the programs and customers. Therefore, they will be among
the people who would know best what should be measured to determine progress
toward meeting strategic goals. Also, they will be inclined to use performance
information to improve their programs services and delivery (Hatry and Fisk, 1992)
It should be noted that one of the criticisms of performance measures is that it
produces a lot of information that may not prove a great benefit for management
(Kettl, 1995). This could be true when an organization develops too many measures,
some of which have little value to either management or stakeholders. Their impact
will result in confusion and not improvements. Performance measures advocates
(Hatry; 1996; Epstein; 1992; Ammons; 1995) suggest the importance of developing
few vital performance measures. Using a few significant performance measures
provides a clear basis for assessing accomplishments, facilitating decision-making,
and focusing on accountability. Organizations using performance measures need to
be aware of unintended behavioral consequences. Smith (1995) notes some of these
unintended consequences, such as l) management or oversight bodies emphasis on
measuring phenomena that are quantified at the expense of unquantified aspects of
performance, 2) management pursuit of single or local objectives by managers at the
expense of the objectives of the organization as a whole, 3) management pursuit of
short-term targets at the expense of legitimate long-term objectives, 4) management
emphasis on measures of success rather than on the underlying goals. [It is difficult
40


to devise comprehensive performance measures that capture all the dimensions of
clear goals. Performance measures are only proxies for outputs. Thus a good
performing organization needs to survey its clients to track its performance], 5)
misrepresentation of performance measures results. [If the goal of the oversight
body is only to control the public organizations managements actions and not to
work with them to assist them to meet their performance targets, then the
misrepresentation phenomenon may exist in the organization], 6 ) misinterpretation of
data. [Interpreting performance measures can be extremely difficult. Our bounded
rationality might cause misinterpretation of the data. Thus, it is important to realize
that performance indicators are only giving management signals about performance
that should be understood within a bigger picture of the organizations environment],
and 7) ossification of measures. [If performance measures are misused and
misunderstood, then they can inhibit innovation and lead to ossification.
Organizational paralysis is brought about by an excessively rigid system of
performance evaluation] (Smith, 1995, p. 299).
Having discussed strategic planning and performance measures which are
major elements of the performance outcome budgeting system, in the next section a
discussion on budgeting processes as related to strategic planning goals and
performance measures is presented.
Performance Based Budgeting. Although there are different classifications of
budgets such as program budgeting, and zero-based budgeting, this discussion will
concentrate on the new performance budgeting, because it incorporates strategic
planning goals into its process. However, there is a need to examine the budget
orientations so we can understand the relationship between strategic planning and
budget. Budgeting has been conceived as a process for relating the expenditure of
funds to the accomplishment of planned objectives. Every budget system is expected
41


to serve three indivisible important functions: 1) expenditure control, 2) management
and efficiency, and 3) planning for service requirements (Schick, 1966, 1987).
The control orientation of budgets deals with a range of questions: How can
agencies be held to the expenditure ceiling established by the legislature and chief
executive? What reporting procedures should be used to enforce propriety in
expenditure? What limits should be placed on agency spending for personnel and
equipment? (Schick, 1980). The control orientation poses a great challenge for
creating a more responsive government. As Paul Light observes, The definition of
accountability in government has remained relatively constant over the past fifty
years: Limit bureaucratic discretion through compliance with tightly drawn rules and
regulations(1993, p. 12). If government is to be flexible, responsive, and innovative,
then narrow control and accountability to the legislature and within the operating
agencies must change from internal operation to external results. Such a new
orientation is quite difficult to accomplish in government (Mikesell, 1994, p. 38).
The management and efficiency orientation focuses on the performance of
public organizations and involves the use of budgeting authority to ensure the
effective use of agencies resources. The emphasis is on agency output. Thus the
management orientation deals with questions such as: What is the best way to
organize for the accomplishment of prescribed tasks? What are the outputs? At what
cost have they been achieved? How are they related to the budgeted goals? (Schick,
1973, 1980). Therefore, the important concern of this orientation is the relationship
between the resources used and the public services performed by an agency.
The planning orientation of the budget addresses the questions: What are the
missions and objectives of public agencies? How are these objectives expressed in
the budget? What criteria should be used for evaluating programs and for computing
other costs and benefits? What is the effectiveness of program A compared to
42


program B? (Schick, 1973, p. 5). Thus budget planning can be used as a decision-
making tool for ensuring continuity of activities, developing new programs, and
allocating resources among public organization activities (Mikesell, 1994).
Even though one orientation may take priority in a given budget, the other two
are still served, at least to a lesser degree, by the budget process. So a comrol-
oriented budget process subordinates management and planning but does not
eliminate them altogether (Schick, 1973, p. 5). The domination of a function differs
from one budget classification to another, so a line-item budget, which focuses on
objects of expenditures such as personnel and equipment and does not provide details
about programs, emphasizes the control orientation.
Traditional performance budgeting focuses its budgetary orientations on the
direct output of government agencies activities. Osborne and Goebler (1992) and
Barzelay (1993) argue that outputs are not the real reason for a public agencys
existence. It is the outcomes that are important. The argument goes that there is no
benefit in the delivery of services that citizens dont value. The advocates of the new
performance outcome budgeting propose a result-oriented budget system which holds
public organizations accountable for results. It would not appropriate for inputs and
would reward agencies for being efficient and effective in serving their clients
(National Performance Review, 1993).
By focusing on results, public organizations would become responsive to the
interests of their customers and by allowing greater flexibility, government would
become more entrepreneurial and efficient in service delivery. The new performance
outcome budgeting entails the following points:
Objective/strategic plan. Establishing a strategic plan and objectives, the agency
would consider its reasons for existence and its putative goals.
43


Performance measures. From its strategic plan, the agency would develop
measures that would gauge the progress toward meeting its objectives. These
measures need not focus on an agencys activities, but on its broader societal
impact. The new performance budget will measure outcome the results or the
context in which agency activities have their intended effect.
Flexible execution. Agencies, after receiving their appropriations, would be
responsible for service delivery. They would not be constrained by narrow
control of resources applied during budget execution. Accountability would be
focused on outcome, not expenditures.
Reporting. Agencies in their annual financial reports would emphasize service
outcome. Also, audit and evaluation would emphasize achieving performance
targets and outcomes, and de-emphasize a detailing of how money was spent
(Mikesell, 1994 ; Public Law 103-62).
The challenge for new performance budgeting is not only to establish
meaningful sets of measures but also to establish measures that would help in
understanding the cause and effect link between agency effort and performance
outcome. Without commitment and decision-maker intention to use this information,
the new performance budgeting will generate reports without results (Mikesell, 1994,
p. 189).
The new approach to performance budgeting seeks to enhance the
achievement of strategic planning goals and holds public organizations accountable
for delivering services that citizens value. The experience of linking planning
outcomes with budgets in the 1960s and 1970s, in the form of planning,
programming, and budgeting systems (PPBS), proved to be difficult and was not
successful (Schick, 1973). However, strategic planning as practiced in the 1990s,
differs from the planning in PPBS, in the sense that strategic planning aims to
encourage strategic thinking in an organization. It asks the question: How can an
44


organization take advantage of its strengths, whether in its budget system,
management skills, etc., and the opportunities in its environment to achieve its
mission? However, the question of how successful the new performance budgeting
can be in linking strategic plans strategies into budget allocation and achieving
accountability is yet to be answered and is beyond this studys objective
Strategic Planning and Organization Performance
Performance improvement is at the heart of strategic planning. Several studies
have examined the effect of strategic planning on organizations productivity. Pearce,
et al. (1987) have examined 18 empirical strategic planning studies in the private
sector. The first group consists of 14 studies that have assessed the value of formal
strategic planning for organizational performance. These studies tried to determine
whether there is any difference between informal and formal planning when it comes
to organizational performance. Nine studies reported a significant relationship
between formal planning and organizational performance, while five studies indicated
no significant differences in organizational performance between formal and informal
planning.
The second group consists of four studies that have concentrated on the
relationship between top managers perceptions of the importance of formal planning,
and subjective and objective measures used to judge the firms performance. Three
studies indicated that there is no significant relationship between the perceived
importance of planning to managers and perceived organizational performance among
manufacturing firms. However, the authors did indicate that the studies raise several
methodological concerns. For instance, there is a lack of attention to contextual
influence, a lack of uniformity in operationalization of planning, a lack of distinction
between effective and ineffective planning and the impact of the implementation
process that links strategic planning and organizational performance, a lack of
attention to the time frame within which the effects of strategic planning should be
45


anticipated and measured, and finally, a lack of concern about the influence that a
firms size may have on the planning-performance relationship.
In their synthesis of more than two decades of research on strategic planning
and firm performance. Miller and Cardinal (1994) examined 25 studies and concluded
that strategic planning positively affects firm performance equally in both large and
small and capital-intensive and labor-intensive firms. They concluded that
methodological differences across studies have been largely responsible for the
inconsistent findings reported in the literature and largely responsible for the debate
concerning the value of strategic planning (Miller and Cardinal, 1994, p.1662). In
the Spring of 1993, Wilson (1994) surveyed 50 organizations in a variety of countries
and industries and found that strategic planning benefits organizations. He found the
most highly rated benefits are 1) a clear sense of strategic vision for the organization.
2) a sharper focus, in planning and implementing, on what is strategically important
and 3) improved understanding of a rapidly changing business environment. Most of
the studies assessing the impact of strategic planning on organizations performance
were conducted in the private sector for two reasons: strategic planning was being
used mainly in the private sector, and measuring performance is much easier in the
private sector than in the public sector. Strategic planning is a newcomer in the
public sector.
However, strategic planning advocates for the public sector (Bryson, 1995;
Nutt and Backoff, 1993; Koteen, 1989; Mercer, 1992) present several benefits of
strategic planning for public organizations.
First, strategic planning promotes strategic thought and action. This leads to
systematic information-gathering about the organizations external and internal
environments and its stakeholders. It also heightens the attention paid to the
organizations future direction and the establishment of organizational priorities for
action.
46


Second, it improves decision making. It focuses management attention on
crucial issues and challenges facing an organization. It helps management to
formulate and communicate their strategies and actions. It can help them develop a
coherent and defensible basis for decision-making and in directing and controlling
organization activities.
Third, it improves organizational responsiveness and performance. When
engaged in strategic planning, organizations are encouraged to clarify and address
major organizational issues that would help them to respond to internal and external
demands and pressures. Achieving better performance, however, depends on the
extent to which improved strategies are developed and implemented (Lorange. 1991).
Finally, it benefits the employees of an organization. By achieving the
organizations goals, the employees at different levels of the organization would meet
their responsibilities, and teamwork and expertise are likely to be strengthened
(Bryson, 1995).
Agencies that have adopted strategic planning have improved their
commitments to organizational values such as teamwork, achievement, innovation,
customer service, accountability and strategic thinking (Denhardt.1993). Hennepin
County, Minnesota, found that organizational development, team building, and
heightened morale throughout the organization were among the greatest benefits
derived from its strategic planning process (Bryson, 1996, p. 238). Recent studies
of strategic planning in public organizations have found several broad strategic
planning outcomes that have been realized in public organizations. These are: 1)
clarification of agency direction and goals, 2) assistance in policy and budget
decision-making, 3) enhancement of client and external relations, 4) improvement in
internal management, 5) improvement in agency reorganization, and 6) improved
service delivery and commitment to customer satisfaction (Berry and Wechsler,
1995).
47


In their recent national strategic planning survey, Berry and Wechsler have
found that 90 percent of surveyed states agencies identified both clarified agency's
direction and clarified agencys goals as the most important outcomes (1995. p.
165). The second most important outcome was assistance in policy and budget
decision-making. Strategic planning helped to guide policy decisions and budget
decisions, and also gave support for budget priorities. The earlier results indicate
clearly that strategic planning will aid public managers in managing their
organizations. Public managers, however, face different barriers to performance
improvement in their organizations environment which they have to deal with to
achieve the full potential benefits of strategic planning.
Barriers to Performance Improvement in Public Organizations
Most of the barriers to performance improvement stem from the unique
characteristics of public organizations that distinguish them from their counterparts in
the private sector. Some of these characteristics are as follows: There are more
political intrusions into management in public organizations and greater infusions of
political criteria. The imprint of political authority on public management is deep,
particularly at the level of setting directions and strategies for public organizations
(Bozeman and Straussman, 1990). A more elaborate overlay of formal, institutional
constraints governs the management process, involving more formal law, rules, and
mandated procedures and policies. Goals and performance criteria are generally more
vague, multiple, and conflicting for public organizations. Although Behn (1990)
argues that a public organizationr mission can be considered as its bottom line, there
is no bottom line as clear as profit in private organizations (Perry and Ring, 1988).
Economic market indicators are usually absent, and the organizations pursue
idealized, value-laden social objectives. The public sector must handle particularly
48


difficult social tasks, often under relatively vague mandates from legislative bodies.
Public organizations must jointly pursue accountability, responsiveness,
representativeness, openness and efficiency (Rainey, 1991, p. 95; Ammons, 1992).
In addition to these characteristics that contribute to the difficulty of achieving
high performance in public organizations, there are several management barriers to
productivity. There is usually a constant change in leadership in public organizations
which makes continuous improvement difficult. Essential recognition and
enforcement of employee innovations are blocked, in many cases, by civil service
rules and regulations (Barezlay, 1992). The extensive control system in public
organizations blocks innovations. But it is through innovation that we can learn
better ways to manage public organizations.
A final barrier is the standard funding processes in government that
discourage innovation and effectiveness and foster inefficiency in management
practices. If an organization were able to save money due to innovations in delivery
of its services, the reward it might get would be a reduction in its future budget,
because the funding body would tend to think that the original appropriation was too
large. Yet, financial incentives are extremely important in driving organizations
management to adapt and implement new management practices that could improve
the organizational performance (Nutt and Backoff, 1992).
These barriers pose constraints on public organizations management. The
developing and implementation of successful strategic plans have to take these
constraints into an account. Also, achieving strategic planning benefits would require
clear commitment and involvement of all employees across an organization.
Critique of Strategic Planning
Strategic planning is not without its critics, and there are impediments to the
achievement of successful strategic planning. James Ziegenfuss (1989, p. 13) cites
49


several impediments to strategic planning as they have been enunciated by executives,
board members and staff of organizations using strategic planning. These are: 1) time
pressure, 2) lack of knowledge about the true characteristics of the organization. 3)
lack of knowledge about the environment in which the organization operates, 4) the
cost of the process, 5) a reluctance to give up the alternative not chosen, 6) fear of
failure, 7) lack of continuing commitment required to the plans, and 8) uncertainty
about the strategic planning outcomes. An examination of these obstacles indicates
they equally relate to strategic planning as to any other management approach, such
as total quality management (TQM) and reengineering, in their applicability to the
work environment. Therefore, implementers of any management technique need to
be aware of these barriers.
However, with respect to strategic planning, no one has criticized strategic
planning practices as much as Henry Mintzberg, a leading contributor to strategic
management literature. He argues that strategic planning inhibits organizational
learning, promotes inflexibility, and separates formulation from implementation, or
what he calls thinkers from doers (Mitzberg, 1990, 1994a, 1994b, 1994c).
First, Mintzberg questions the value of using the SWOT technique to assess
the strengths and weaknesses of an organization as related to its external environment.
He argues that we cant assess the strengths and weaknesses of an organization in
general by conscious thought (Mintzberg, 1990, p. 114). The strengths and
weaknesses of an organization are distinctive in time and to specific applications.
Therefore strengths and weaknesses have to be defined in the context of a problem.
He asserts that no organization can ever be sure in advance whether an established
competence will prove to be a strength or a weakness; thus, an organization has to
benefit from the results of testing and experience to identify its competence
(Mintzberg, 1991, p. 50). So an organization will not know its strengths or
50


weaknesses except through the experience of solving a problem or achieving certain
goals. It is a learning process.
Although it is true that understanding strengths and weaknesses should be
within the context of a specific place and problem, there remains a need, to assess an
organizations competence in order to find the best fit between the organization and
its environment. We cannot expect public organizations to be purely learning
organizations, as Mintzberg portrays them, because of the political environment in
which those organizations function (Bozeman and Strasussman,1990; Kearns, 1996).
Second, Mintzberg argues that making strategy explicit promotes inflexibility.
Strategy is usually developed based on the results of SWOT analysis. He argues that
although making strategy explicit may provide coherence to organizational action and
generate support to achieve certain goals, it promotes inflexibility and inhibits
motivation. What can be excellent strategy now may not be excellent in the future.
Also, a formulated strategy would breed resistance to later change (Mintzberg, 1990).
For a strategy to be flexible, it needs to be a marriage between what he called
deliberate and emergent strategies (Mintzberg, 1994a).
Third, Mintzberg argues that strategic planning promotes separation of
formulation from implementation. The dichotomy of formulation and
implementation results from separating the thinkers from the doers. As a strategy is
developed by the thinkers, by the planners or by others, it is handed to the rest of the
organization to implement it (Mintzberg ,1994a). This argument addresses two
issues. In the 1960s and 1970s, strategic planning efforts were focused on strategy
formulation only. Strategic planning rarely considered the implementation aspect of
strategic plans. The other issue was that strategic planning efforts were formulated
only by staff planners. In the 1990s, however, implementation has become a major
issue in strategic planning literature. Also, the role of staff planners has been
redefined as providers of data and analysis to line managers, who should be in charge
51


of developing and implementing strategic plans. Thus, the planning staff become
facilitators to the strategic planning process rather than makers of strategies and plans
(Judson, 1990).
Mintzberg's disenchantment with strategic planning can be traced to one
source. Strategic planning is not strategic thinking. Indeed, strategic planning often
spoils strategic thinking, causing managers to confuse real vision with the
manipulation of numbers... Most successful strategies are vision; not plans
(Mintzberg, 1994c, p. 107). Mintzbergs criticism of strategic planning is valid for
the kind of strategic planning practiced in the 1960s and 1970s more than for its
current practices. Strategic planning has advanced, at least in the private sector,
beyond many of Mintzbergs criticisms. As Ansoff indicates, Mintzbergs criticism
of strategic planning reflects a probability that his understanding of planning was
frozen in 1964 (1994, p.31). It goes almost without saying that professional
planners can only inform the process of strategy development by collecting relevant
data and perhaps posing challenging questions to the executive managers, who are
responsible for strategy development and implementation(Keams,1996, p.196).
Strategic planning is evolving. In its cover story for August 26,1996.
Business Week demonstrates that strategic planning is a prevailing technique in the
private sector in recent years. However, the emphasis of new strategic planning is not
on long-range planning. Strategic planning becomes an essential part of all line
managements daily responsibilities in looking for new approaches to improving their
service delivery and ensuring their accountability for performance to their customers.
If strategic planning in the 1970s and 1980s was oriented outward, emphasizing the
future of an organization, its emphasis today is both outward and inward, as it
becomes less technique- and calculations-driven. Securing competitive advantages in
the private market or achieving mandates in the public sector requires an organization
not only to explore outside opportunities and threats but also to create and sustain
52


distinguished internal competence that would provide an edge over its competing
organizations and succeeding in securing resources to achieve its goals.
Strategic planning is widely used in private sector, and has recently been
widely adopted in public organizations in state governments. The practice of
strategic planning in public organizations has benefited from the lengthy experience
of private sector (Bryson, 1995). In order to assess the benefits of strategic planning
in public organization settings, the next section presents a case study of strategic
planning in the government of the state of Texas.
53


CHAPTER 3
THE RESEARCH CASE STUDY: STRATEGIC PLANNING IN TEXAS
GOVERNMENT
Overview of Strategic Planning in Selected States
To put Texas strategic planning efforts in perspective, it is necessary to
explore briefly strategic planning efforts of other state governments. Spurred by
budgetary pressures of recent years and by growing citizen demand for accountability,
a number of states have undertaken strategic planning and performance measurement
activities. The strategic planning efforts of three states are briefly described below.
Utah launched statewide strategic planning and performance measurements
efforts in 1990. The state plan identifies goals, objectives, and performance
measures. Utah decided that specific strategies should be left to the agencies for
development and implementation (The Governors Office, 1995).
Virginia developed a strategic planning process that consists of steps of initial
agreement on the purposes of planning efforts, customer/stakeholder analysis,
identification of mandates, clarification of mission, internal and external
environmental scanning, identification of strategic issues, goals and strategies, review
and approval, implementation action, and assessment and evaluation. Also, each
agency develops six to eight key performance measures that keep track of the
strategic planning efforts of an agency. Virginia plans to integrate strategic planning,
budgeting and performance measures starting with the 1996-98 executive budget
(Lauterberg,1995).
54


Missouri developed an eight-step model of strategic planning which consists
of: 1) planning to plan, 2) mandates, 3) vision, mission, values, 4) external
environmental assessment 5) internal environmental assessment, 6) strategic issues. 7)
goals, outcomes, objectives, and strategies, and 8) performance measures. In
developing its integrated strategic planning, Missouri aims to ensure that statewide
vision, values, and goals of government have been incorporated into government
operations (Office of The Governor, 1995).
Although these states and others have developed strategic planning to ensure
the accountability of public organizations to their citizens, these states have not yet
tied strategic planning goals and performance measures to their budgeting process.
Texas, on the other hand, has integrated its strategic planning outcomes by linking
strategies and performance measures into its budgeting process. This integration
makes the Texas strategic planning effort unique. The question, however, is: To
what extent has strategic planning benefited public organizations in improving their
performance? The next section examines theoretically the Texas strategic planning
model and introduces the study model and hypotheses.
Strategic Planning and Texas Government
Before presenting Texas strategic planning elements, it is worthwhile to
briefly examine Texas government. Probably the most useful approach to
understanding Texas government is to examine it using the political culture
framework advanced by Professor Daniel Elazar (1984). Elazar identified three
strains of political culture found in the United States: moralistic. individualistic and
traditionalistic. The moralistic political culture view expects government to
intervene in the social and economic affairs of the state, promoting the public welfare
and advancing the public good. So good government, then, is measured by the degree
55


to which it promotes the public good and in terms of the honesty, selflessness and
commitment by those who govern. So government services are public services (Hill.
et.al.,1997).
The individualistic political culture is an approach to government and politics
that emphasizes private initiative with a minimum of government interference. The
role of government, in this view, is limited to protecting individual rights and
ensuring that social and political relationships are based on merit rather than tradition,
family ties or personal connection (Tannahill, 1997). In this culture citizens desire
only a government with limited functions and goals. This culture is the Iaissez faire
concept of government. Government should perform only limited and essential
functions so the individual can pursue his or her private, mostly economic, interests
unfettered by government constraints (Hill, et. al., 1996).
The traditionalistic political culture sees the role of government and politics
as the preservation of tradition and the existing social order. Government leadership
is in the hands of an established social elite, and the level of participation by ordinary
citizens in the policy-making process is relatively low.
Elazar says that Texas states overall culture is a hybrid, including both
traditionalistic and individualistic elements. He cites the states strong support for
private business, opposition to big government, and faith in individual initiative as
reflections of Texas individualistic political culture (Tannahill, 1997, p. 24). What is
the implication of this political culture framework in Texas government?
The political culture in Texas opposes both big and strong government and
seeks private sector solutions for government problems (Hill, et.al.,1996). Texas
government structure is fragmented. Texas has many agencies, yet the executive
branch size in comparison with other states is quite small. The ratio of the number of
state employees to the total state population which they serve is ranked forty-fourth
among the fifty states. The fragmentation of the executive branch can be seen in the
56


case of the fragmented system of health and human services, which consists of
fourteen agencies (Hill, et. al., 1997, p. 160).
The fragmentation of the executive structure branch inhibits coordination of
agencies efforts and hence leads to inefficiency and multiplicity of sometimes
conflicting goals (Texas Performance Review, 1994). What makes it difficult to
reform, strengthen and coordinate the fragmented agencies is the weak power of the
governor. The governors power in Texas in all separate areas of traditional executive
responsibility- management of the executive branch, control of policy implementation
and recommendation of new policies, to name a few, is limited. The Texas governor
is one of the weakest governors in the nation (Hill, et. al.. 1997). The executive
system relies heavily on agencies run by multimember boards or commissions that
enjoy power and are independent from the governors control.
The legislative branch in Texas is powerful, and one of its functions is the
oversight of the executive branch, but its oversight is limited by the power of the
executive branch agencies. They are often quite powerful politically because they are
essential to the implementation and enforcement of laws. Also, they stem their power
from the independent boards and commissions who can chart their own course and
from their clientele groups (Hill, et. al., 1997, p. 154). So the result of the political
culture values in Texas is to have many fragmented agencies, small government with
limited functions. This view is clearly expressed in the governors vision of Texas
government for the need of government if its necessary. Also, there is the belief
that government programs should be closely related to economic development in the
states such as transportation, water and education and should not be geared to welfare
programs. Furthermore, Texas government limits its spending to the expected
revenue. In sense, the budget has to be balanced. Thus, the state of Texas has gone
through many budget reforms to enhance efficiency and accountability for
performance.
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Giving the limited resources and fragmented executive branch, how could
executive and legislative leadership direct the fragmented executive branches? In an
attempt to end laments that the legislature and governor were powerless to assert
policy-making control over the fragmented executive agencies, the Texas legislature
passed legislation in 1991 requiring linkage of the strategic planning process to the
budgeting process. The aim was to direct agencies initiatives and spending to state
policy priorities as set by the executive and the legislature. So Governor Richards, in
early 1990s, took advantage of limited resources and fragmented government to
advocate adopting strategic planning into Texas government.
As a result, the state enacted a law in 1991 requiring the development of a
strategic plan. The goal was to stimulate state government to move beyond
incremental thinking to a more holistic perspective; to rise above the organizational
view to a global, public vision, and to transcend traditional functional and
programmatic considerations to reach a more integrated system of governance and
service delivery (Texas Governors Office of Budget and Planning, 1995, p. 414).
The law required the Governor and the Legislative Budget Board (LBB) to set
goals for each functional area of state government. Drawing from those goals, each
state agency was required to submit a five-year strategic plan to the Governors Office
and the LBB. The Governor and the LBB, then, were to prepare a statewide strategic
plan. The result of this effort was that the state was able to develop a mission
statement that classified the basic functions of state government in five broad areas.
Each state agency was required to identify a place for its services within the basic
functions, and each was further defined by a series of goal statements. The states
developed mission is:
to provide educational opportunities for all its people;
to protect and enhance the health, well-being and productivity of all
Texans;
58


to preserve the states environment, and ensure wise, productive use of
the states natural resources;
to build a solid foundation for social and economic prosperity
to ensure the safety of its communities
(The Governors Office of Budget and Planning, 1995, p. 439)
Definition of Texas Strategic Planning Elements
The state developed its Texas Strategic Planning Template (see Table 3.1)
and required each state agency to use it as a guide for developing its own strategic
plan (Governors Office of Budget and Planning and Legislative Budget Board.
1995). The template includes the statewide vision, mission and functional goals. The
statewide vision is an inspiring view of the preferred future for the state. The mission
was developed to be a concise statement of the basic purpose and role of Texas state
government. The Texas state philosophy is a statement of the core values and
principles underlying Texas state government service. These are general statewide
functional goals toward which the state directs its efforts. Also, statewide
benchmarks are specific performance indicators and targets intended to facilitate
assessment of progress at the statewide level in achieving functional goals (Carter,
1992). From these statewide functional goals, state agencies develop their strategic
plans. The purpose of each state agencys strategic planning elements is as follows:
Mission statement Reviewing the statewide strategic plan, each agency should
develop a concise statement of purpose that answers the following questions:
Who are we and who do we serve? What are the basic purposes for our existence
as an agency and what basic problems are we established to address? What makes
us and our purpose unique? Is the mission in harmony with the agencys basic
enabling statutes? (Texas Governors Office of Budget and Planning, 1995) The
mission statement should be considered as the bottom line for the agency that
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Table 3.1
Statement
of
Purpose
Statement
of
Direction
Statements
of
Impact
Strategic Planning Elements
Statewide
Vision / Mission
Philosophy /
Functional
Goals / Benchmarks
Agency
Mission
Philosophy
Agency External
Goals/ Objectives*-* Internal
Strategies Assessment
Action Plans
Agency
Outcome Measures
Output Measures
Efficiency Measures
Explanatory Measures
60


directs the agency efforts.
Philosophy. An agencys philosophy statement is an expression of the core
values and operating principles of its employees. The statement should define the
relationship between the agency and its customers or clients and define basic
approaches to management, organizational value, and rules of behavior.
External internal assessment The purpose is to identify both opportunities for
and obstacles to achieving the agencies missions and to identify their strengths
and weaknesses. It is an attempt to evaluate the key factors influencing the
success of an agency in achieving its mission and goals. Also, the agency
identifies its main customers and the extent to which it is delivering services they
value.
Goals. An agencys goals represent the general ends toward which it directs its
efforts. Although goals are still broad, they are more specific than agency mission
and philosophy. Because of the non-specific nature of goals in the public sector,
an agencys goals are few in number.
Objectives and outcome measures. Objectives are clear targets for specific
achievement and the quantified results or impacts of the action. They are subsets
of goals which are tracked using outcome measures. Outcome measures are
indicators to assess the effectiveness of an agencys performances.
Strategies, output, efficiency, and explanatory measures. Strategies are
operational statements that specifically define a way to accomplish an objective.
Efficiency and other output measures are used to track strategies. Formulated
from goals and objectives, a strategy is a means for transforming inputs into
outputs, and ultimately outcomes, with optimal use of resources. These measures
offer descriptive indicators of the agencies efforts.
Action Plan. The action plans detail the methods that will be used to implement
the stated strategies. Each agencys strategic plan incorporates outcomes and
61


outputs, performance measures which aim to quantify agency progress toward
their goals. The process of incorporating performance measures in an agency's
strategic plan is based upon the premise that goals are quantified by objectives
and measured by outcomes. Outcomes measures state the public benefits
associated with each objective, allow for evaluation of an agencys progress in
achieving them, and provide the basis for assessing whether an agency is
functioning well. Strategies are measured by outputs. Output measures track an
agencys workload. Combined with records of date of expenditures, output
measures help assess an agencys efficiency.
Furthermore, Texas government began in 1992 to link strategic planning
and budgeting. The strategic budgeting of Texas is "a system of mission/goal
driven, results-oriented management in which funding and other decisions are based
upon what an organization is accomplishing, rather than what that organization is
doing (State Auditors Office, 1995, pp. 1-2). Thus the integration between strategic
planning and budgeting aims to foster accountability for performance, improve
resource allocation and help agencies to focus on public benefits (customers)that is,
to achieve successful strategic planning. The performance measures integrated into
agency strategic plans become the link between the strategic plans and a performance
outcome budgeting system.
As Table 3.2 illustrates, an agencys strategic plans become the basis for its
request for appropriations. Strategies serve as the line-items in the appropriations
bill. Output measures identify the workloads associated with a particular strategy and
the line-item is the estimated cost of meeting this workloads targets.
An examination of the Texas strategic planning model in view of the common
elements of strategic planning introduced in the literature review shows that, although
there are many similarities, there are also several differences between the two:
62


The Texas strategic planning model does not include the initial step of planning to
plan. The concept of an agreement on the importance of strategic planning value,
understanding of strategic planning process, and support for strategic planning are
widely believed to be essential prerequisites to achieve success with strategic
planning, even though it is mandated in Texas. The fact that some agencies may
not buy into the process may lead to compliance without commitment to strategic
planning. Compliance only with the mandate will show strategic planning as a
burden and not an opportunity to improve an organizations performance.
The Texas strategic planning model has emphasized the development and
clarification of goals and objectives. It fails, however, to identify the strategic
issues. Identifying strategic issues in the agencys environments is the heart of
strategic planning (Bryson, 1995; Nutt and Backoff, 1992). It could be
unsuccessful to develop strategies for achieving goals without a clear
understanding of the related strategic issues that might present obstacles towards
achieving those goals.
The Texas strategic planning model lacks a focus on elements of strategic issues,
strategic development, and the future orientation of an agency. Instead, the
emphasis has been placed on performance measures that link strategies with
budget appropriation. Therefore, the current focus of strategic planning in Texas
could lead to the emphasis of controlling spending rather than on the continuous
improvement across functions in public agencies.
In spite of the limitation of the Texas strategic planning model, it is clear that
Texas government has adopted strategic planning and linked it to the budgetary
process to achieve such benefits as: l) enhancing an agencys performance
accountability, 2) creating customer-focused agencies, 3) assessing an agencys
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Table 3.2 Linking Strategic Planning and Performance Budgeting
Strategic Planning
Appropriations
Performance Measures j Budget
Mission
Philosophy
Internal /
External
Assessment
Agency Goals
Objectives
I
I
j Outcome Measures -------------*! Performance
! Quantifiable results Targets
i measuring how the public
! is benefited by the agency
j meeting the objective !
Strategies
| Output Measures ---------
| Quantification of agency
I workload and work
i product as it pursues
its strategies
Line-items of
Appropriation /
Performance
Targets
Efficiency Measures
Agency workload unit
costs or time for completion
Performance
Targets
Explanatory Measures
External factors relating
to agency operations
Performance
Targets
* Source: Texas Governors Office of Budget and Planning, 1995, p. 421
64


strengths, weaknesses, and opportunities for and obstacles to achieving their mission,
4) improving resources allocation, 5) improving service delivery, 6) clarifying
agencies direction, and 7) developing clear mission and philosophy that would clarify
the agencies direction. The integration of strategic planning goals, performance
measures, and budget should enhance the strategic planning implementation process.
The benefits of strategic planning, however, will not be achieved through only
deterministic rational thinking linking strategic planning to budget. Systems do not
think (Mintzbeg, 1994a). The leadership role of the agencies is extremely important
because organization, in reality, is a reflection of its leadership thinking and action.
Thus, strategic planning benefits will be achieved through improving strategic
thinking in the agencies that will encourage all employees at all levels of an agency to
view their contributions and achievement within the big picture of the agency. That is
its mission. Thus, agencies which would view strategic planning as an opportunity to
improve their overall performance will exert extra efforts (more commitment) rather
than merely complying with the basic element of the Texas strategic planning model.
However, one may still ask, how beneficial has strategic planning been for
public organizations in Texas? Has strategic planning been viewed only as a
requirement that an agency has to comply with or has it been seen as a management
tool that can improve organizational performance?
Synthesis and Research Model
Strategic planning was used in the 1960s primarily to predict the future of an
organization. It emphasized calculations over intuition and learning. The
responsibility of the planning staff was to prepare the strategic plans. There was little
involvement of line managers in the strategic planning process except in the
65


endorsement by the CEO of such plans. This approach to the conduct of strategic
planning was doomed to fail. It is not easy to predict the future, and neither
calculations nor any strategic planning techniques could substitute for leadership in an
organization (Bryson. 1995).
So, strategic planning has evolved from being concerned only with strategy
formulation to a greater focus on implementation and toward an emphasis on the
identification of strategic issues that may prevent agencies from achieving continuous
improvement. It is a hard lesson for strategic planing theorists to learn: that a failure
of implementation is primarily a reflection of poor strategy formulation. Not only do
formulation and implementation have to be intertwined, but they should be performed
by line managers. Planning staffs role becomes facilitation of the process rather than
formulation of the strategy. If line managers across an organizations functions
commit their effort to formulating and implementing strategies, then strategic
planning will improve organizations performance. Therefore, it is no longer
acceptable to have a separation between thinkers and doers; rather, they should
collaborate in thinking strategically to improve their agencys performance. So. the
value of strategic planning depends on how line managers are committed and
involved in the strategic planning process. Therefore, if public managers in Texas
government who view strategic planning as useful would commit their agencies to the
process, they will realize some of the strategic planning benefits cited in the literature.
There are several variables that contribute to the success of strategic planning
in public organizations. These include linking strategies to achieve goals to the
budgetary process and establishing effective control systems as well as many other
factors. However, the main variables that have emerged from the previous discussion
are executive and top managers commitment, organizational commitment, quality of
strategic planning development, and improved strategic planning implementation.
There is no replacement for leadership to achieve effective strategic planning
66


(Bryson. 1995). The Upper Echelons Theory (Hambrick and Mason, 1984) indicates
that an organization is a reflection of its top management. Thus, top managers'
commitment is essential to achieve organizational commitment to strategic planning
(Goodstein, et. al. 1990).
Organizational commitment is perceived as important because it has been
associated with improved performance (Larson and Fukami,1984; Van Mauner,1975).
Studies have attributed the failure of TQM in certain organizations to the lack of
management commitment (Brown, Hitchcock and Willard, 1994). Strategic planning
theorists (AnsofT, 1991; Steiner, 1979; Lorange, 1993; Brayson, 1995) have indicated
the importance of top management commitment to the strategic planning process.
The commitment of managers to strategic planning will likely improve their
involvement in the strategic planning process. Some studies (Floyod and
Woolbridge, 1992; Hambrick and Mason, 1984) have indicated that management
involvement in strategy formulation improves strategy credibility and implementation
which, as a result, contributes to organizational performance. It can be argued
therefore, that top management commitment and involvement, as well as the
commitment and involvement of employees across an agency, will improve the
quality and the implementation of the strategic plans. As a result, strategic planning
will yield benefits that will improve organizational performance. Based on the
previous discussion, I present a research model with different variables. The
variables are: 1) managers' commitment, which is defined here as the executive
managers, planning and budget managers; 2) organizational commitment, which is
defined as the commitment of all employees of an organization to strategic planning;
3) strategic planning quality, which is defined as the activities an organization has
completed to develop its strategic plan; 4) strategic plan implementation, which is
defined as the level of success of an organization in implementing its strategic plan;
5) strategic planning benefits, which are defined as the realized benefits from
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adopting strategic planning and 6) the organization performance, which is defined
as the overall improvement in service delivery and organizational effectiveness as
resulting from using strategic planning. I have discussed the operation of these
variables in the methodology section of this study.
Research Model
L
As stated throughout the previous discussion, strategic planning process is not
linear. Rather, it is an iterative process. Examining the research model, several
clarifications are in order: first, the shape of the lines has no special meaning in itself.
The different lines only indicate the direction and the several phases of the proposed
associations and analysis between the research model variables. Second, the research
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model presents different hypothesized positive associations between the different
research model variables which are:
Top managers commitment affects positively the organizational commitment.
Both top managers commitment and organizational commitment affect positively
the improvement of strategic plan quality.
Top managers commitment, organizational commitment and improved strategic
plan quality affect positively improvement in strategic planning implementation.
Top managers commitment, organizational commitment, improved strategic
planning quality, and improved strategic planning implementation affect
positively improvement in strategic planning benefits.
Finally, improved strategic planning benefits contribute positively to the
improvement in the perceived organizational performance.
Based on the research model several research hypotheses are in order:
Research Hypotheses
There is a positive relationship between top management commitment and overall
organizational commitment.
There is a positive relationship between overall organizational commitment and
the quality of strategic plan.
There is a positive relationship between management commitment and strategic
plan quality.
There is a positive relationship between management commitment and improved
implementation of strategic plans.
There is a positive relationship between overall organizational commitment and
improved strategic plans implementation
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There is a positive relationship between strategic plan quality and improvement in
strategic plan implementation.

There is a positive relationship between strategic plan implementation and the
perceived strategic planning benefits.
Overall strategic planning benefits contribute to the improvement of
organizational performance.
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CHAPTER 4
RESEARCH METHODOLOGY
Research Design
Research designs are plans that guide the decision as to when and how often
to collect data, what data to gather, from whom and how to collect data, and how to
analyze the data (OSullivan and Rassel, 1995, p.21). Research methodology is
mainly either quantitative or qualitative or a combination of the two triangulation.
Triangulation is a combination of methodologies in the study of the same
phenomenon, or the use of multiple techniques within a given method to collect and
interpret data (Jick, 1979). Qualitative research techniques are better for theory
building whereas quantitative research techniques are effectively and efficiently used
for theory testing (Babbie, 1997). There are different strategies used to conduct
research such as experiments, surveys, archival analysis, case studies, and many other
research methods. The question, then, remains: how can a researcher choose the
most appropriate research strategy? The research questions should determine the
research methodology and not vice versa.
Yin (1994, p. 4) indicates that there are three conditions that a researcher
should consider during the process of choosing research methods. These conditions
are: a) the type of research questions, b) the extent of control the investigator has
over actual behavioral events, and c) the degree of focus on contemporary as opposed
to historical events Case study is best where a how or why question is being
asked about a contemporary set of events over which the investigator has little or no
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control (Yin, 1994, p. 9). Case study methods are appropriate for the study of
strategic planning practices in Texas. Strategic planning is a newcomer to the public
sector and few studies have been conducted to investigate its impacts on improving
organizations performance (Berry and Wechsler, 1995). A researcher using case
study methodology can use quantitative and qualitative methods to collect data (Yin.
1994). Quantitative methodology, using surveys as a method of collecting data.
ofFers some advantages over the qualitative methods for hypotheses testing and
generalization. Survey, for example, attempts to maximize objectivity and neutrality
(Babbie, 1997; OSullivan and Rassel 1995). However, many criticize the use of
surveys in public management research. Behn (1993) argues that survey research
does not examine the principles behind management techniques such as management
by objectives (MBO), performance based budgeting, or the circumstances in which
these principles may work. Also, Mintzberg criticizes questionnaire research; he
says, A doctoral student I know was not allowed to observe managers because of the
problem of sample size. He was required to measure what managers did through
questionnaires, despite ample evidence in the literature that managers are poor
estimators of their own time allocation. Was it better to have less valid data that were
statistically significant? (1979, p. 583). On the other hand, the case study method
has been criticized for its lack of rigor, lack of scientific generalization, and often for
its lengthy reports.
Thus, each of the qualitative and quantitative approaches has its own
weaknesses and strengths. Instead of choosing one method over the other, both
quantitative and qualitative methods are employed in this study. Both survey and in-
depth interviews are used to investigate the impact of strategic planning on
organizations performance. The effectiveness of triangulation rests on the premise
that the weaknesses in each single method will be compensated by the counter-
balancing strength of another (Jick, 1979; Creswell, 1994). The in-depth interviews
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of managers in the two organizations who successfully benefited from strategic
planning offer us deep understanding of why and how strategic planning was
successful in their organizations. The questionnaires, on the other hand, which were
sent to executive managers and planning and budget directors in 77 agencies, provide
an understanding of the extent to which strategic planning was successful across the
state agencies. Thus the triangulation of research methods strengthens the study
findings.
Variables and Measurement
The primary purpose of this study is to investigate the role of strategic
planning in improving organizations performance. Strategic planning has been
mandated in Texas government. However, the literature review presented in Chapter
2 indicates the necessity of having an organizations top management committed to
and involved in the strategic planning process (Finkeslein and Hambrick, 1996).
Management involvement improves the organizational commitment which in turn
improves the quality of the strategic planning process. Organizations that view
strategic planning as a management tool tend to commit themselves to implementing
strategic plans and benefit from the process by improving their performance. Thus
strategic planning outcomes or benefits are treated in this study as a dependent
variable. The other variables the degree to which an organization has completed
strategic planning common activities, management commitment, management
involvement, overall organization commitment, strategic plan implementation are
treated as independent variables.
The questions of the in-depth interviews are centered around these variables
(see appendix). In measuring the research variables quantitatively, a survey, based on
the literature, was developed consisting of several sections (see appendix). The
measurement of the research variables is as follows:
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Management Commitment
The participants in the survey were executive directors, planning and budget
directors and a sample of division directors. In measuring their commitment, each
participant was asked to indicate on a five-point scale their commitment to strategic
planning efforts, where 1= low commitment and 5= high commitment (see survey.
Section II)
Organizational Commitment
The overall organizational commitment was measured by asking each
participant to indicate the overall perceived commitment of all employees and
management in the organization to strategic planning efforts. The measure consists of
a five-point scale where 1= low commitment and 5= high commitment.
Strategic Plan Quality
Based on the literature review and on the strategic planning model of Texas
government, sixteen items were developed to measure the different activities of
developing a high quality strategic plan. Participants were asked to indicate on a
five-point scale, where 1= minimally completed and 5= mostly completed, the degree
to which their organization had completed each activity. For analysis, an index of the
sixteen items was developed, by taking the average of each participants responses in
this section (see Section I). Also, participants were asked to indicate on a five-point
scale, where 1= minimum benefit and 5 = significant benefit, the degree of benefit of
conducting each activity to the improvement of their organizations performance.
Strategic Plan Implementation
As indicated in the literature review, strategic plan implementation is difficult,
yet it is very important to achieve any success with strategic planning efforts. On a
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five-point scale where 1~ very unsuccessful and 5= very successful, managers were
asked to indicate their organizations level of strategic plan implementation (see
Section ID. item 9).
Strategic Planning Benefits
Reviewing the strategic planning literature and the goals of strategic planning
mandate in Texas government, twenty items of the potential benefits for public
organizations were developed. Participants are asked to indicate on a five-point scale,
where 1= minimal improvement and 5 = significant improvement, the degree of
improvement their organizations have realized compared with the expected level of
improvement as the result of using strategic planning. For the inferential statistics,
nineteen items out of the twenty measuring the realized benefits were used to create
one index, by taking the average of each participant on them ( see section IV).
Organizational Performance
Improving organizational performance is the heart of strategic planning. It has
been asserted throughout this research that strategic planning contributes to the
improvement of public organizational performance. Performance improvement is
reflected in improvement in delivering services and on the overall improvement in the
effectiveness of the whole organization processes. Therefore, item twenty in Section
IV that deals with overall service delivery improvement and the overall effectiveness
improvement in an organization item were used as an indicator of overall
improvement in an agency resulting from using strategic planning. Combining these
two items and taking the average of each participant on them has resulted in one
index of organization performance.
The survey includes other sections that are used for the descriptive analysis.
So Unit A, Section II, measures the question: who are the primary developers of
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strategic plans? It attempts to measure the executive management involvement in
developing strategic plans. Unit B addresses the question of who are the primary
implemented of strategic plans. It attempts to measure the top management role -
executive managers and their assistants in implementing and monitoring strategic
plans.
Section HI deals with the state role in encouraging organizations to implement
strategic planning. There are many barriers to performance improvement in public
organizations. Implementing strategic planning in state government requires not only
mandating strategic planning but adopting policies incentives that would help
agencies to implement strategic planning successfully. This section consists of eight
items which measure the extent to which the state has provided support and incentives
and the level of the effectiveness such policies have in improving strategic planning
implementation in state agencies. The measure consists of two parts. The first part
measures the existence or absence of state strategic planning policies. The second
part consists of a five-level scale where 1 = minimal effectiveness and 5 = significant
effectiveness of the policy in assisting state agencies implementation of strategic
planning.
The commitment and involvement of top management affects the success of
strategic planning efforts. But what factors influence the top managements
commitment and involvement in strategic planning efforts? One major factor is the
managers perception of and belief in the value of strategic planning. Mintzberg
(1994a and 1994c) argues that strategic planning does not encourage top management
to commit their efforts to it because it does not help them to improve their
organizations performance. It is rather a tool which attempts to control managers.
His argument raises concern about strategic planning in public organization. To what
extent do the managers attitudes toward the value of strategic planning impact their
commitment to and involvement in its activities? To what extent is Mintzbergs
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criticism of strategic planning correct? How did public managers view the value of
strategic planning for their organizations? Section IV, part 2, measures the managers
attitude toward the value of strategic planning for their organizations. The
background section covers the type size and source of revenue of each agency.
Validation of Survey Instrument
It is advantageous to use a well-developed survey that has been tested for
validity and reliability (Babbie, 1995). However, due to the nonexistence of a survey
that can be used to gather data for this study, most of the survey items were developed
by the researcher. Validity refers to the extent to which the survey measures what is
intended to be measured, and reliability refers to the extent to which the same results
are obtained when the same technique is repeated at different times (Babbie, 1995).
Followed Dillmans (1978) suggestions to solicit feedback on the survey from the
potential participants in the study, the potential users of the study results and from
experts in the field study. Thus, the researcher solicited feedback from the suggested
three groups by distributing the survey as a pilot study to managers in two agencies in
Texas, and solicited feedback on the survey from strategic planning experts in the
Governors Office, the Legislative Budget Board, and the training experts at the
Governors Center for Management Development at the LBJ School for Public
Affairs in Austin. These groups are the potential users of the study findings. Their
comments, as well as the valuable comments of the dissertation committee members,
were taken into consideration in the preparation of the final version of the survey
instrument. This process improved the face validity of the survey instrument.
Measuring the reliability of the section items, the researcher conducted reliability tests
for the strategic plan development activities, and the benefits of strategic planning.
The Cronbachs alphas for these sections are .923 and .952, respectively. On a
possible scale ranging from 0 to 1, these reliability coefficients ( Cronbachs Alpha)
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are strong, indicating a very high estimate of reliability based on observed correlation
or covariances (i.e., internal consistency) of the scale items with each other.
The Sample
The sample of this study consists of two groups. First, the researcher
examined the experience of two agencies that are considered exemplary models in
conducting strategic planning. Knowing how these agencies have succeeded with
strategic planning, and in what way they benefited from strategic planning, will
enhance our understanding of how successful strategic planning will assist similar
agencies in different states to benefit from these exemplary agencies experiences.
The exemplary agencies are defined as those that exhibit success more than others
with respect to the adoption of strategic planning practices. Thus, the selection of the
two agencies was based on two factors. First, the researcher examined the Summary
Assessment of Agency Performance (Legislative Budget Board, 1996) to identify
agencies with improved performance. The Legislative Budget Board assesses
agencies performance in achieving strategic planning goals and their usage of
performance measures as part of the performance budget process. Second, the
researcher asked the experts of strategic planning in the Governors Office and the
Legislative Budget Board (LBB) who oversee the agencies strategic planning efforts
to provide him with the names of the agencies they believe, based on their experience,
take the lead in implementing strategic planning efforts in the state. The experts
provided a list of agencies that were ranked based on their success so far with
strategic planning efforts. Contacts were made with the first two agencies, who had
no objection to participating in the study.
The second group of the sample consists of the executive managers and the
directors of planning and budget in 77 central executive branch agencies located in
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Austin. The 77 agencies covered all the executive agencies reported in the Guide to
Texas State Agencies (Lyndon B. Johnson of Public Affairs 1996). The reason the
researcher decided to survey all the executive agencies was to maximize the response
rate for the survey and to obtain as comprehensive information as possible about
strategic planning experience in Texas government states. The researcher surveyed
the executives, division managers and the planning and budgeting directors because
strategic planning efforts in Texas are linked to the budgeting process. The planners
and the budgeters are involved in the process as part of their job responsibilities. The
success of strategic planning efforts is influenced by the commitment and
involvement of the executive and division managers. They are the ones who are
supposed to be setting agencies directions and improve their agencies performance.
Thus, surveying the executives provided us with valuable information about the
strategic planning efforts and their success in state agencies.
Data Collection
Wolcott (1992) suggests that there are but three data gathering techniques in
qualitative study: watching, asking and reviewing. In more formed terms, we can
gather data by observing, interviewing and archival research. Interviews were used as
a method of collecting qualitative data for this study. The researcher conducted in-
depth interviews, between December 5-23, 1996, with officials in the two studied
agencies. The researcher used semi-structured interviews, asking participants to
respond to a set of questions. The interview questions (see interview questions in
appendix) concentrated on several aspects of strategic planning, including :
1. How the agency develops its strategic plans, the extent to which they use the
common strategic planning steps presented in this study, and the extent to which
they thoroughly completed each step.
2. Who participated in formulation and implementation of strategic plans? What
were the respective roles of planning staff and line managers?
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3. How were line managers at different levels committed and involved in strategic
planning? What impact does managers commitment and involvement in the
strategic planning process affect the perceived benefits of strategic planning?
4. What was the role of the state in assisting agencies to implement strategic
planning mandates? How effective were the state policies in encouraging state
agencies to implement strategic planning?
5. What have been the benefits of strategic planning? (see Appendix A).
Each interview lasted for an hour to an hour and a half. Participants answers
were used to generate further questions to improve our understanding of how these
two agencies succeeded in implementing strategic planning and how they benefited
from their strategic planning efforts. The researcher interviewed 17 officials at
agency A and 16 in Agency B. The total transcription of the interviews is 490 pages.
In addition to conducting interviews, strategic planning documents and other related
documents from the two agencies were collected.
In addition to the qualitative data, 77 agencies were surveyed using the survey
developed for this purpose (see appendix ).
Response Rate
On January 17, the researcher sent three surveys to each of the 77 agencies.
Each survey was accompanied by a cover letter, and a self-addressed return envelope,
and was addressed to either executive manager, planning director, budget director .or
division manager. Because of very low response rate, another wave of surveys was
sent on February 17, 1996. The researcher contacted each agency to encourage each
participant to fill out the survey and to clarify any questions about the survey.
However, the response rate of the survey from the 77 agencies for each category was
as follows: executive managers 51 percent, budgeters 26 percent, planners 26 percent
and division managers 49 percent. The difficulty of getting a higher response rate
derives from two reasons. First, all agencies were involved in the legislative sessions
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which started in early January. The most involved officials in each agency in the
legislative sessions ironically were the targeted group of the survey executive
managers, budgeters and planners -- because of their direct participation in the budget
process of their agencies. Second, many agencies do not have a planning director and
instead, the planning responsibilities are either the responsibility of the executive
managers office or the budget office. Thus, it would be misleading to expect to have
responses from 77 planning directors.. Some agencies responded to all surveys that
is, the executive manager, the budget director and the planning director. Others sent
only one response with the justification that it is reflective of the strategic planning
efforts in their agencies. So, looking at the response rate from the perspective of how
many agencies responded to the questionnaire, we find that the response rate was 66
percent. This is a very encouraging response rate. Babbie (1995) indicates that a
response rate of at least 60 percent is good for analysis; thus, with the 66 percent
response rate, the research study will increase our understanding of the experience of
strategic planning in Texas agencies.
Data Analysis
This study has two major sets of data: qualitative data from the interviews
and documentation and quantitative data from the survey. In analyzing the qualitative
data, Miles and Huberman (1994) suggest generating theoretical or conceptual
categories to constantly enhance the coding and analysis of the qualitative data. Thus,
the researcher has relied on the studys theoretical framework and the study variable
to code and analyze the qualitative part of the study data. Extended quotations
analysis was used with the aim of finding common patterns among interviews about
how strategic planning developed, was implemented and the realized benefits. Each
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agencys experience was analyzed separately, then investigated any differences and
similarities between the two agencies experience with strategic planning.
Analyzing the survey results, both descriptive and inferential analysis
techniques were used. The survey data is analyzed for the measure of frequency of
the strategic planning steps, perceived outcomes, and the role of planning staff and
line managers in the formulation and implementation of strategies. This will reveal
any clustering that could occur around a specific step or series of steps in the strategic
planning process and around perceived benefits or lack of benefits. The descriptive
analysis gives a better understanding of the survey data. ANOVA analysis was used
to examine any differences between the participants perception (executives,
budgeters, planners and division managers) about strategic planning benefits, strategic
planning activities completion, and overall organizational effectiveness as a result of
using strategic planning and other measures. The result is not significant. Thus all
groups were combined for all the inferential statistics analyses. The inferential
analysis centered around testing the research hypotheses. Also, path analysis was
used to investigate the theoretical research model and examine the effect of different
factors in achieving success with strategic planning. Common results between the
qualitative and quantitative were discussed. The similarities and differences were
analyzed in view of the main questions and hypotheses of this study.
Limitation
Each research design has limitations. One limitation of this research is the
study sample. However, the qualitative and the quantitative data provided us with
greater understanding of the strategic planning experience in state government.
Although the study used different methods of collecting data and several qualitative
and quantitative statistical analyses which have strengthened the results of the study,
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we should be cautious not to generalize the study findings to other settings. Each
setting has its unique environment. However, we should view this studys findings as
clear indicators of the benefits of strategic planning for public organizations.
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CHAPTER 5
RESEARCH FINDINGS
To what extent has strategic planning benefited public organizations in the
Texas government? In an attempt to answer this question, qualitative and quantitative
approaches were used to investigate the experience of strategic planning and to test
the research model presented in Chapter 3. The research findings consist of three
parts: 1 ) qualitative analysis of the experience of the two agencies with strategic
planning, 2 ) quantitative analysis of the survey results and 3) hypotheses testing
where both qualitative and quantitative findings will be addressed.
Part One: Qualitative Analysis
The qualitative research has examined the experience of two public agencies.
In keeping with the confidentiality agreement between the two agencies and me, the
two agencies will be referred to hereafter as Agency A and Agency B- By assisting
agencies to develop their strategic planning, the state provided each agency with a
guideline explaining what should be included as a minimum requirement in each
agencys strategic plan. That is, the strategic plan should include the agencys
mission, philosophy, intemal/extemal assessment, goals, objectives and performance
measures. However, how an agency approaches fulfilling such a requirement has
been left to the management of each agency. It is, however, how an agency has
developed its strategic planning that contribute to the success of its efforts.
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By examining each agencys experience with strategic planning, the discussion will
center around the following issues:
What are the major characteristics of each agency?
How does each agency develop its strategic plan?
How does each agency view the role of the state in implementing strategic
planning mandates?
How does each agency implement its strategic planning efforts?
What are the major outcomes of strategic planning?
Agency A
Agency A is made up of approximately 2400 full-time and 393 temporary
employees, with up to 75% of its employees working in more than 225 locations
spread throughout the state of Texas. Agency A, therefore, is mainly a field agency.
It consists of several divisions which, although they share a common mission, have
conflicting goals. As a result, the clients of divisions have competing and conflicting
values, not because of lack of integration between these units but rather because of the
nature of the divisions functions and goals. Further, it raises its revenue from fees
for its services. The agency has a nine-member board who oversees the appointed
executive directors and the agencys performance. Agency A has enjoyed stability in
its executive leadership because the current executive director has been directing the
agency since 1989.
Strategic Planning Development. The executive director stated, We take
strategic planning very seriously at [Agency A]...Its not considered a government
exercise. We believe that strategic planning is a powerful and meaningful learning
process. How is this statement reflected in the strategic planning development
process at this agency?
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Although Agency A had some sort of formal planning before the state
mandated strategic planning in 1992, it started developing its strategic plan in 1992
using the state strategic planning guidelines. The agency formed cross-division teams
that consisted mostly of upper management, with some mid-management
involvement, to develop the mission statement and goals. The agency brought in field
employees and front-line employees to go through the internal and external
assessment and, to some extent, to work on strategic planning strategies. It also
involved the constituents of the agency in the process so that the agencys customers,
as the planning coordinator indicated, had a real large role in determining what were
the most important factors to deal with to meet the goals. Because of the
requirement of linking strategies to budget, the strategy statements were mostly
developed by internal budget staff and other division directors who were budget-
oriented. So there was great involvement from both the employees of Agency A and
the customers in the strategic planning process. As one manager observed, Both our
employees and our constituents have been mostly involved in the internal and
external assessment. That is where we get our best feedback which drives the
strategies in fine-tuning our goals.
Initially, the agency used a strategic planning process to clarify and fine-tune
its goals, which found that they didnt change greatly from one strategic planning
cycle to another. In the last strategic planning cycle, started in 1996, the agency used
the strategic planning process to identify the five most important issues that the
agency needs to address over the next five years, in addition to its
strengths/weaknesses and seeking both employees and customers feedback about
broad goals and strategies. The whole strategic planning process, such as internal and
external assessment, has focused primarily on these five issues. The strategic
planning process at this agency, however, has been an evolutionary process. As one
manager expressed, At the beginning, it was a plan that was put together by upper
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management in a very short time frame. Its evolved into a process where we have a
great amount of input from constituents and employees so that they have a stake in
whats represented in the strategic plan. Across all the strategic planning cycles, the
executive management and the budget staff have had the biggest impact on setting the
objectives and strategies, whereas program managers have had the greatest impact
with respect to performance measures development.
The State Role. The discussion of how Agency A perceives the role of state
policies in assessing it in implementing the strategic planning mandate centers around
the extent to which the state has provided incentives and rewards to enhance strategic
planning implementation as well as the effectiveness of state strategic planning
policies as performance measures and linking strategic planning to budgeting.
Incentives:
Training. At the beginning the state provided some training to
introduce strategic planning into agencies and to direct them as to how they would
use the states strategic planning instructions to develop their strategic plans.
However, the training was limited in scope and had limited impact on how successful
an agency could be with its strategic planning effort. One manager notes that, State
training has nothing to do with the success of our process. Their involvement had
only to do with the requirements of the process, the requirements of the documents.
Although the training was limited, it provided clear guidelines for developing a
strategic plan, which provided consistency statewide regarding strategic plan content
and focus; otherwise, as one manager noted, some peoples plans would be 300-page
documents, others would be two pages.
Rewards for Good Performance. The state asserts in its strategic
planning guidelines that there will be rewards for agencies which successfully
implemented the strategic planning mandates and penalties for those that failed to do
87