Strategic Planning And Organization Performance In Uae Government

Published Date: 02 Nov 2017

Research title

This research is designed to investigate "The effect of the organizational structure and environment on the relationship between strategic planning and organization performance in UAE government companies"

Importance of the Study

The present study is designed to contribute to filling a gap in the literature by reporting the results of a survey on the impact of strategic planning on firm financial performance in the organization in the United Arab Emirates (UAE) and the effect of the moderating variable of structure and environment. Equivocal findings in the prior literature might largely stem from the lack of attention to these variables and their potential impact on formal planning practices and performance.

It therefore attempts to rectify an imbalance by examining the relationship between strategic planning and organisational performance in a different contextual variables that of a developing economy of the UAE and provides not only a contribution to the literature but also a managerial application to the businesses in the UAE. As the relatively new trend towards strategic planning in firms in the UAE is perceived as a move designed not only to hale them to manage their environment more effectively but also to improve their organizational performance. The finding of this research has also an importance dimension to the applicability of the Western strategic management thinking to the business environment of the emerging countries.

Research Objectives

The main objective of this thesis is to demonstrate that the link between strategic planning and firm performance in the UAE is moderated by a set of contingency factors such as environmental turbulence, organizational structure. An examination of these important factors is likely to lead to a better understanding of the planning-performance relationships in firms operating in an emerging economy.

The following subsections detail the rationale for the strategic planning-performance linkage and moderating impact of these contingency factors on this linkage, and set out the study’s hypotheses.

Therefore I would summaries the aim of this research as below:

1. To investigate views and attitudes on the importance of strategic planning.

2. To assess the extent to which the tools of strategic planning are employed in the

sampled organizations

3. To understand the link between strategic planning and the governmental

performance

Introduction

The objective of this research is to provide an insight on the correlation between the strategic planning and organizational performance in the UAE within certain contextual variables that assist in providing a better explanation in this relationship.

This is an important topic because the research results can in addition to the academic contribution be useful for managers of the organizations in the UAE, and several stakeholders who are interested in developing strategic planning within the UAE, because if the link between strategic planning and performance exists and its effect is significant, then manipulating strategic planning may lead to considerable improvements in the organizational performance.

The connectivity between strategic planning and organisational performance has been a topic which fascinated researcher due to its strategic importance and direct effect on the sustainable success of firms., however critical reviews of the researches in this domain provide inconsistency in the results. Therefore we dedicated the first part of the literature review to thoroughly and critically examine the empirical evidence on the link between strategic planning and organisational performance.

Defining Strategic planning

To some extent, all organizations are engage in some form of planning, even if only intuitively. The focus however in this research will on strategic planning which is intended to be explicit, rigorous and systematic; it consists of process and methods (Boyne, 2001). The concept of strategic planning is subject to different definitions depending on the preferences of the author and despite numerous studies there is no commonly acted and universal definition. The literature of strategic planning offers a wide range of definitions Peter Durcker, 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 today’s decision for tomorrow’s result. 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 result Peter Durcker, 1974 el. (Chaffee, 1985)

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 purpose, objectives, polices and strategies and to develop detailed plan to implement policies and strategic to achieve objective and basic company purpose. (Chaffee, 1985)

Planning can be defined as the process of determining the mission, major objective, strategies and the policies that govern the acquisition and allocation of recourses to achieve organization aim, strategic planning has become "inextricably interwoven into the fiber of management, it is not something separate and distinct from the process of management" (JA Pearce, EB Freeman, RB Robinson .1987).

Bryson defines strategic planning 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. (Bryson, 1998). Strategic planning is associated with collection and interpretation of data that are important for aligning the firm with its competitive environment, and it follows that better alignment leads to better firm performance. (Eriksen1, 2008). Chaffee (1986) summarizes the voluminous body of strategic management literature by stating that "everyone writing on strategy agrees that no consensus on its definition exists" (Chaffee, 1985).

Although strategic planning has been defined differently, the various definitions nevertheless share a fundamental concept that the future orientation underlies strategic planning. Hence, the issue is not anticipating the future but making major or essential decisions about the future in the present, but rather it is a strategic focus on the direction of the organization and processes necessary to improve its performance

The purpose of strategic planning commonly shared in these definition could be simplified as mechanism in which enables an organization to: state its mission clearly, cope and adapt effectively with its ever-changing external and internal environment, obtain needed resources, and focus its effort to achieve mandated or discretionary objectives effectively and efficiently, by which firms derive a strategy to enable them to anticipate and respond to the changing dynamic environment in which they operate.(Regan & Ghobadian, 2002). Strategic planning can be viewed as a process whereby the firm obtains and evaluates information about its competitive environment, its resources and capabilities, and other factors that are relevant to its strategic decision making. The consequence of strategic planning is to improve knowledge about these factors, and thereby reduce decision making uncertainty in the firm. The benefits that can be obtained from strategic planning relate to the process for determining long term goals, generating and evaluating alternative strategies, and monitoring the level of goal achievement (Armstrong 1982). Strategic planning will therefore enable organization to align its resources and capabilities with the environmental challenges it faces (Ansoff 1991) which is believed to lead to better organizational performance. (Eriksen, 2008)

It is important for this research to make a distinction between the content and the process elements of the strategic planning, as the content relates to the distinct elements of the strategic plan which differ from an organization to other, while the process relates to the mechanism for the development of strategic plan and its subsequent deployment.(Regan & Ghobadian, 2002). Even though the content and the process are separate elements of the strategic formulation; they are highly interdependent (O’Regan & Ghobadian, 2002).

This research will mainly focus on the process aspect of the strategic planning due to the fact that our interest in examining the effect of the organisational structure and the environmental variables on the implementation of the strategic plan and its relationship to the firm performance is an essential and permanent part of the process research

Defining Performance

The need to align organizations’ strategies with organizational performance measurement systems is well established in the strategy literature. It is quite challenging for the firms to objectively and consistently evaluate the quality of the strategic management. Organizational performance and effectiveness are but two of the labels under which aspects of strategic performance have been researched.(Chakravarthy, 1986).

The concept of organisational performance varies considerably among different authors. Child points out that the definitional variations cover several issues concerning the performance measurement; one of these issues is whether there should be a single dimension or a range of dimensions for measuring such performance. (Child, 1984),

Lusthaus et al (2000, Page 46) stated that "outputs and their effects are the most obvious aspects that show an organization’s performance."

Strategic planning research has traditionally assessed planning effectiveness by focusing on financial performance (Falshaw, 2006) and it has less investigated the non-financial outcomes (McLarney, 2001) such as efficiency in operations, public image, quality of products and employee satisfaction (Elbanna and Child, 2007). Ittner and Larcker (2003) found that most of their investigated companies have made little attempt to measure non-financial performance. (Said Elbanna, 2009)

Other researchers such as (Pearce and Robinson, 2000) have pointed out, ‘an accurate assessment of the impact of strategy formulation on organisational performance requires not only financial evaluation criteria but also non-financial evaluation criteria - measures of behavior-based or qualitative effects’ such as building strong team, common understanding among employees and management, improvement in decision making of management, individual role definition, etc. Therefore, incorporation of other performance measures in addition to the financial indicators would enrich our comprehension of the relationship between strategic planning and performance.

This study will exclusively be focused on the financial analyses and economic performance of firms. In other words, it will study the effect of strategic planning on the financial key performance indicators such as net profit margin, (NPM) return on investment, (ROI) earnings per share, (EPS) return on equity (ROE), shareholder value, as well as other economic indicators.

Strategic planning implementation

The literature in strategic management indicates that effective implementation is vital for the success of any strategic plan and that as many as eight out of every ten companies fail to implement their strategy effectively. Noble (1999) contends that the ineffective implementation of the strategic planning in many organisations is one of the main factors for the failure to achieve expected performance (O’Regan & Ghobadian, 2002).

Beer and Eisenstat (2000) contend that implementation can only be effective by being open about any barriers or constraint and their underlying causes, and they also acknowledge that the limited research in this filed has resulted in "contradictory results" which largely arise from the failures to examine important variables.

This presents a very important topic to be studies thoroughly due to its importance and implication of the success of organisations, which this research attempts to study the organisational structure as an important variable to be studies in the context of strategic planning.

Interplay between strategic planning and performance

Interest in strategy as an area of management study followed the diffusion of strategic planning (‘long-range planning’) among large companies during the 1950s and 1960s. Articles on long range planning began appearing in the Harvard Business Review during 1956–61 (Ewing, 1956; Wrap, 1957; Payne, 1957; Platt and Maine s, 1959; Quinn, 1961) and by 1965 the first systematic, analytically based frameworks for strategy formulation appeared (Ansoff, 1965; Learned et al, 1965) (Grant, 2003)

As strategic management developed as an area of academic study, interest in companies’ strategic planning practices waned. By the 1980s empirical research in strategic planning systems focused a major area which is the impact of strategic planning on firm performance. This particular field of research spawned many studies but no robust findings and the results of this body of research seems fragmented and contradictory, and as Boyd’s (1991) survey concluded: ‘The overall effect of planning on performance is very weak.’(Grant, 2003).

For many years, contingency and configuration theorists have asserted a connection between organization alignments and performance. For instance, Lawrance and lorsch reported that successful firm in uncertain environments adopted more differentiated structures than unsuccessful firms and employed sophisticated integration devices (such as task forces and liaison devices) appropriate to this greater degree of differentiation. Successful firms in less uncertain environments adapted lesser differentiation and used less sophisticated integration devices (Powell, 1992).

Contingency and configuration theories have received considerable attention, both in organization theory and in strategic management research. In general contingency theorist assert that successful organisational performance is the result of a proper alignment of endogenous design variable such as organizations structure with exogenous contextual variable such is environmental uncertainty.(Powell,1992). Contingency theorists claim that attempts to link strategic planning with performance will increase the understanding of the effect strategic planning has on organisational performance under different situations and will foster a consistent conceptualization of strategic planning characteristics and their relationship to different firm and environmental characteristics (Kukalis Sal, 1991).

Arguments with and against

The performance implications of strategic planning have been a central area of interest for researchers in the strategic management filed. Even though a substantial amount of empirical researches have been conducted, and plenty of findings on the relationship between strategic planning and performance over the past three decades have been emerged to attempt to clarify the links between strategic planning and firm performance, many of them are indecisive and failed to prove the positive relationship that most managers and research believe that strategic planning has on the organizational performance which produced no agreement as to whether strategic planning has an impact on organizational performance. Rather, the results of this line of inquiry are still fragmented and inconsistent. (Al-Shammari, 2007).

Numerous researchers advocate strategic planning and argued that planning generally produce better alignment and financial results than does trial and error learning, while other researchers have countered that explicit strategic planning is dysfunctional or at best irrelevant.(Miller & Cardinal, 1994). Thus, it appears that there is no clear systematic relationship between strategic planning and organizational performance. Much of the reported research assumes that strategic planning and organizational performance are logically related and tightly coupled, however, The assertion that strategic planning is positively associated with performance has been hotly disputed.

Proponents of strategic planning have consistently argued that formal planning leads to better decisions (Ansoff 1991) and that in turbulent environments this will be especially important because the benefits of uncertainty reduction are greater in such environments (Miller and Friesen 1983; Glick, Doty and Huber 1993, Miller 1987). The prescriptive strategic management literature implies that there is a positive association between strategic planning and company performance, which directional causality from strategic planning to performance. A number of studies examining this relationship indicate that strategic planning pays off, and that organizations using formal strategic planning significantly outperform those that do not. Some of the studies indicate positive impact of strategic planning (Karger & Malik, 1975; Burt, 1978) and explicitly stated that the practice of strategic planning is beneficial for organizations (Sarason and Tegarden, 2003), other classic studies on planning vs performance established a positive relationship between the extent of planning and organizational performance (Peggy A. Golden,1989).

Greenly have examined the importance of the strategic planning he provides two kinds of answer to the question: why do companies needs strategic planning?

He argues that strategic planning should improve the performance of companies and states that the standard theory of strategic management focuses around planning of a mission and objectives, of which company performance is part, the implementation of strategies to achieve these objective and control to ensure that the objectives are achieved. Secondly, Greenly stated that the purpose of strategic planning is to improve the effectiveness of management throughout an organization, this is turn could lead to indirect improvement in performance although its efficacy may, of course, be lost in the complicity of variable with the potential to influence performance (Falshaw, Glaister, & Tatoglu, 2006)

In their synthesis of more than two decade of research on strategic planning and its link to firm performance, Miller and Cardinal (1994) demonstrated through examining 25 studies that that the overall relationship between formal planning and performance is significantly positive. They concluded that "methodological difference 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 & Cardinal, 1994). Capon 1994, advocated the positive relationship between strategic planning and performance and argue the greater the degree of sophistication of the planning process, the better the performance.(Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008).

Despite all the above researches and findings that hypothesize that planning relate positively to performance, Boyd (1991) notes that after decades of research on the interplay between strategic planning and performance the effect is still not clear.(Boyd, 1991).

In contrast, other opponent researchers cast doubt about the importance of strategic planning and its usefulness (Fulmer & Rue, 1974; Grinyer & Norbum, 1975) and have countered that explicit strategic planning is dysfunctional or at best irrelevant (Miller, Cardinal, 1994) while the others (Guynes, 1969; Leontiades & Tezel,1980) failed to establish a significant link between perceived importance of planning and organizational performance.(Al-Shammari, 2007). They have also argued that planning is a bureaucratic feature that leads to rigidity and low capability for adaptation to changed environmental and competitive conditions (Mintzberg 1987, 1990). Eventually such rigidities lead to poor performance as failure to adapt to changed circumstances results in inefficiencies (Eriksen, 2008).

Despite its high importance as a theoretical construct within strategic management, the empirical evidence for a substantive relationship between strategic planning and performance has been less convincing and there have a fair share of inconsistent empirical findings regarding the effect of strategic planning. This inconsistency in the findings presented an interesting and important filed in management for researchers to examine this relationship in different contexts.

This research argues that the relationship between strategic planning and performance is moderated by several factors and is not an isolated relationship and agree with other researchers that argued that strategic planning's impact on organizational performance could possibly be decoupled or mitigated by environment or externalities (Ford & Schellenberg, 1982; Lindsay & Rue, 1980), by stage of organization life cycle (Aplin & Cosier, 1980; Van de Ven, 1980), by managerial skill and ability to assess the environment and make decisions (Bobbitt & Ford, 1980; Fulmer & Rue, 1974; Khandwalla, 1977), by time horizon and time spent on planning (Lenz, 1981; Leontiades & Tezel, 1980), by quality of planning and quality of strategy (Burt, 1978), by quality of implementation effort (Rogers, 1983), by the organization's ability to monitor activities and foster commitment for the strategy (Van de Ven, 1980), by organization Structure (Ford and Schellenberg, 1982), and by type of organization technology (Mahoney & Frost, 1974; Woodward, 1965) who found that formal planning contributed greatly to the performance of firms with long-linked technologies but less so to the performance of intensive technology firms. Likewise, Lenz (1981) argued that the impact of formal planning on performance only occurs over long periods of time and that short-run examinations of the relationship may be misleading.

Description of earlier research on Strategic Planning and performance

Performance improvement is at the heat of strategic planning. Several studies have examined the effect of strategic planning on organization’s productivity. The result on these studies on the correlation between strategic planning and performance appear mixed, largely due to several reasons of which many has been cited in the earlier paragraph. Pearce, et al (1987) has examined 18 empirical strategic planning studies in the private sector. The first group consists of 14 studies that have accessed the value of formal strategic planning on organizational performance. These studies tried to determine whether there is any difference between informal formal planning when it comes to organizational performance. Nine studies reported a significant relationship between formal planning and organisational performance, while five studies indicated no significant difference in organizational performance between formal and informal planning.

The second group consists of four studies that have concentrated on the relationship between top mangers’ perceptions of the importance of formal planning and subjective and objective measures used to judge the firm’s performance. Three studies indicated that there is no significant relationship between the perceived importance of planning to manager 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 implementation process that links strategic planning and organisational performance, a lack of attention to the time frame within which the effect of strategic planning should be anticipated and measured, and finally, lack of concern about the influence that a firm’s size may have on the planning-performance relationship.(Pearce, Freeman, & Robinson, 1987)

Another important research in this field of research has been conducted by Greenley, who identified a total of 29 relevant and published empirical studies where the overall aim of each study was to investigate whether or not an association can be identified between strategic planning and performance. Greenley classified these studies into three groups.

In the first group there were nine studies where the researchers concluded that there is no association between strategic planning and company performance. In the second group there were 12 studies which support an association between strategic planning and company performance. In the third group of nine studies it was concluded that companies with strategic planning outperform companies without strategic planning (Falshaw, Glaister, & Tatoglu, 2006).

Researcher

Year

Main findings

Limitation

Greenley Studies the three categories below

1994

Rehenman 1973, Rue and Fulmer, 1973,1974, Grinyer and Norburn 1975, Kallman and Shapiro 1978; Kudla 1980, Leontiades and Tezel 1980; Robinson and Pearce 1983; Fredrickson and Mitchell, 1984; and Whitehead and Gup, 1985

From 1973-1985

In the first group there are nine studies where the researchers concluded that there is no association between strategic planning and company performance

Ansoff et al, 1970; Eastlack and MaCdonald, 1970, Guth, 1972; Burt 1978; Klein, 1981; Sapp and Seiler,1981; Fredrickson 1984;Robisnson el al 1984; Welsh, 1984; Bracker and Pearson 1986; Pearce el al, 1987 and Robinson and Pearce 1988)

12 Studies

Support an association between strategic planning and company performance

Gershefski 1970;Thune and House 1970;Herold 1972;Karger and Mailk,1975;Wood and LaForge, 1979;Robinson 1982;Ackelsberg and Arlow, 1985;and Rhnye,1986,1987)

9 Studies

concluded that companies with strategic planning outperform companies without strategic planning

Armstrong

1982. considered 12 studies

His studies reported inconsistency in the results varies between positive, Null and negative benefits to formal planning

Serious research problem were found in these studies so few conclusion could be drawn about how to plan and when to plan

Pearce

1987. on 18 studies

Empirical support for the effect of formal planning "has been inconsistent and contradictory"p671 and only "tenuous link" between formal strategic planning and financial performance has been identified

Shrader

1984. examined 18 studies

"there is no clear relationship between formal-long range planning and organization performance"

Boyed

1991. Meta- analysis on 29 empirical studies.

He aggregated statistically the previous research in a meta-analysis in order to estimate a weighted "average" correlation and found the overall effect of the planning on performance is very weak

Reasons of the discrepancies of the relationship between strategic planning and performance.

Reviewing the results of early empirical researches on the strategic planning–performance relationship listed in the table above the researchers could not find evidence that support a consistent correlation between them and rather it a pattern of discrepancies we found.

Criticisms regarding empirical studies investigating the relationship between strategic planning and performance have indicated several factors that affect the results of the researches. The main shortcomings in the prior empirical literatures have been identified by number of factors one of which is related to the selection of performance measures as most of the researches are only considering financial measures (Rudd, Greenley, Beatson, & Lings, 2008), The issue of measurement of organization performance is a controversial area a major problem is the choice of the appropriate yardsticks to be used when assessing organization performance. Essentially, this debate concerns the appropriateness of traditional financial measures (for example ROI, growth) as providing a unique of performance versus the relevance of other indicators (such as maximizing shareholders’ wealth; qualitative returns to non-financial stakeholders such as customer satisfaction).(Falshaw, Glaister, & Tatoglu, 2006). Shrader notes that dependent performance variable have been measured in numerous way in the literature ( Sales, Profit, productivity, revenue, dividends, growth, ROI, as well as other financial ratios) and pointed out that some performance variables may be more susceptible than others to strategic planning intervention (Falshaw, Glaister, & Tatoglu, 2006).

Other researchers such as Greenley (1994) has identified the methodology as the main reason for the inconsistency in the results of researchers examined the interplay between strategic planning and performance, to the extent that their results cannot be legitimately combined (Elbanna, 2009) Similarly, Miller and Cardinal (1994) in a meta-analysis concluded that the study methodology is primarily reason responsible for the different results reported in previous research (Miller & Cardinal, 1994).

In addition, there is little evidence of researchers addressing mediating variables, as most of the research generally studied the performance differences between firm with formal planning systems and those without and did not in fact make a distinction between performance-related characteristics of the planning process and the planning situation associated with the performance from firm to firm (Kukalis Sal, 1991). The researcher agrees that the lack of controls for important contextual factors and the failure to control for relevant contextual factors are key reason why early empirical studies have failed to show a consistent and positive relationship between organizational performance and strategic planning and key insights are to come from investigating the impact of moderation variables in the planning performance relationship. This particular research will investigate the role of organizational structure and environmental factors in understanding the link between strategic planning and performance (Sarason & Tegarden, 2003)

Strategic Planning in the UAE

Although the principles of strategic planning should, of course, have universal application, there may be national differences in strategic planning, country dependent influences from business culture, and influences from difference national trading condition (Falshaw, Glaister, & Tatoglu, 2006). A review of literature indicates that the majority of researches link between strategic planning and firm performance have shown strong and consistent bias toward western context organizations, mainly in the U.S. and Western Europe. Little research is available that investigates the relationship between strategic planning and firm performance in other contexts in developing and emergent markets let alone the UAE (Al-shammari, 2007) ,unfortunately, a detached observer can easily see that strategic planning beyond the scope of the Western/Developed World is not taken seriously and the majority of the research on the planning-performance relationship has been conducted in the context of a relatively few developed countries (USA, UK and Japan), with the emerging countries largely ignored (Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008). In the Middle East and Gulf countries, research on this area is rather rare. The only exception was Khan and Al-Buraki’s investigation (1992) on Bahraini firms, which only emphasized planners’ familiarity and awareness of selected strategic planning tools (Al-Shaikh, 2001) therefore In addition to both its cultural and institutional idiosyncrasies the characteristics of the UAE economy also make it an interesting case to examine the nature and role of the strategic planning on organizational performance.

In addition we found a pattern of studying the strategic planning as a set of activates and processes with a little emphasis on the organizational or contextual variables. This thesis emphasizes on the fact that in order to provide an insight to the strategic planning and its impact on organizational performance this relationship should be examined in relation to organizational variables (Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008). The researcher is aware that although there may be several organizational variables determinates of the strategic planning- performance relationship, there are limitations to examine all the contextual variables; hence, this research examines the organizational structure and the environmental turbulence and their effect as main determinates.

This research therefore attempts to rectify this imbalance by examining the relationship between strategic planning and organisational performance in a different environmental context that of a developing economy of the UAE and provides not only a contribution to the literature but also a managerial application to the businesses in the UAE. As the relatively new trend toward strategic planning in firms in the UAE is perceived as a move designed not only to hale them to manage their environment more effectively but also to improve their organizational performance. The finding of this research has also an importance dimension to the applicability of the Western strategic management thinking to the business environment of the emerging countries.

Importance of this paper Managerial Implication

Therefore, the important contribution of this paper is providing empirical evidence from a non western, emergent market context on the value of strategic planning and its link to performance in the scope of governmental organization in the UAE which will to contribute to filling this gap in the literature by reporting the results of a survey on strategic planning and the interplay with performance.

Contextual variables

Environmental Turbulence

A major pillar of thinking about strategy concerns the inseparability of organization and environment. The organization uses strategy to deal with changing environments due to the fact that changes brings novel combinations of circumstance to the organization the substance of strategy remain unstructured, unprogrammed, nonroutine and nonrepetitive.(Chaffee, 1985). "Environment" is normally taken to mean those forces acting on the firm beyond the control of management (Shrader et al., 1984). Greenley and Foxall (1997) note that although studies have found that certain aspects of strategic planning are associated with performance, theory also predicts that these associations will be influenced by external environmental influences (Boyd et al., 1993; Drazin and Ven de Ven, 1985; Ginsberg and Venkatraman, 1985; Hansen and Wernerfelt, 1989). Shrader et al. (1984) note that if one of the purposes of strategic planning is to guide the organization in its relationships with the environment (Hambrick, 1980), then organizations that accurately project and anticipate environmental changes should exhibit an uncommon or distinctive level of performance. (Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008). In this sense strategic planning may be more useful in a turbulent environment than a placid one (Armstrong, 1982; Miller and Friesen, 1983, Eisenhardt, 1989; Miller and Cardinal, 1994).

The external environment of a firm is a major factor that may influence the planning-performance relationship.(Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008) and the effect strategic planning on performance is contingent upon the level of several environmental factors of the organization including complexity, dynamism, uncertainty, turbulence and munificence. (Boyne, 2001). Strategic planning has been used in order to improve the organisational performance by finding the best fit between an organization and its environment. It aid organizations in examining the opportunities and threats in the external environment, as well the strength and weaknesses of their internal environment. The process of strategic planning allows external events and internal changes to be anticipated and brought into alignment to minimize to impact of the unforeseen circumstances.

The moderating effect of such environmental circumstances on the relationship between strategic planning and performance is not clear and has not been investigated thoroughly in the emerging economies let alone in the UAE. The correlation between planning and performance may be stronger in a turbulent environment, and weaker in a placid environment (Boyd, 1991), the most common line of reasoning is firms facing high turbulence must rely on large amount of strategic planning to cope with changing, unpredictable conditions, while firms facing low turbulence need less strategic planning (Miller & Cardinal, 1994). However, there are counter arguments to this view: strategic planning is more likely to have a positive impact on firm performance in less turbulent environments where future conditions are easier to anticipate (Mintzberg, 1973; Fredrickson and Mitchell, 1984; Daft, 1992) and that firms facing turbulent environments should not arrange for high level of planning because future states of turbulent environments are impossible to predict (Miller & Cardinal, 1994) , and that some studies suggest that planning works best under condition of stability and whereas others imply that planning is more effective in an unstable environment, these conflicting arguments with their respective empirical evidence are well documented by Priem et al. (1995).

Adopting the former argument, and given the relatively turbulent environment in the UAE, firms will expect a large positive impact on performance by adopting strategic planning processes (Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008).

This leads to the below hypothesis:

In the UAE the positive effect of formal strategic planning on firm performance is greater when environmental turbulence is high than when environmental turbulence is low.

Strategic planning affect performance more strongly in firms facing turbulent environments than in other firms

Firms facing turbulent environments exhibits stronger planning-performance correlations than other firms

Structure

Strategic planning is an instrumental process of relating a firm to its competitive environment as it is associated with collection and interpretation of data that are important of determining long term goals, generating and evaluating several and alterative strategies and monitoring the level of goals achieved. Strategic planning therefore enables firms to align its resources and capabilities with the environmental challenges it faces (Ansoff 1991) which is believed to lead to better organizational performance (Eriksen, 2008). In this context it is important to realise that strategic planning processes take place within an organizational context that may influence the impact of strategic planning on organizational performance, as the organizational structure may strengthen or weaken the ability to implement these processes (Eriksen, 2008).

To understand structure, it is imperative to delineate the basic parts of organizations and the basic mechanisms organizations use to coordinate their work. Organization structuring, of course, focuses on the division of labor of an organization mission into a number of distinct tasks, and the coordination of all of these tasks to accomplish that mission in a unified way (Mintzberg, 1980). The structure of any organization importantly influences the flow of information and the context and nature of human interactions (Miller, 1987) it channels collaboration, specifies mode of coordination, allocates power and responsibility that allow organizations to conduct, coordinate and control their work activities. Structure could be defined as a vehicle in which strategy is implanted and an integral part in assuring that strategy content gets executed as planned.

Although many investigations have studied the components of structure and the process of strategy in large organizations, they have made little attempt to relate the two, yet there may well be intrinsic association between strategy and structure. There is general consensus that in unstable settings, strategic response capabilities, adaptive decision-making, dynamic capabilities are considered important drivers of performance, this resonate with the literature advocating decentralization organization structure under persistent uncertainty, however, it is also recognized that effective organizations integrate activities within more rigid structures and engaged in central integrative process

Previous research has investigated the relationships between structure and strategy and between structure and environmental uncertainty (Khandwalla, 1977; Covin and Slevin, 1989; Gibbons and O’Connor, 2005) and indentified environmental variability as a critical contextual factor in organisational design. The central proposition in these studies is that different level of environmental variation require different level of structural formalization where formal, mechanistic structure are appropriate in stable environments, informal, organic structures are appropriate in unstable environment.

There have been much empirical studies which made attempts to characterize the structure of an organization, Burns and Stalker (1961) in their research stated that organization structures may be viewed as being either mechanistic or organic organizations relying on organic structures are characterized by a high level mutual adjustment and tend to encourage flexibility and decentralized decision making. In contrast, a mechanistic organization is characterized by a higher level of standardization and formal rules to facilitate control and coordination, which in turn favourably influences the organization’s choice of formal strategic planning practices (Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008). In a later study, Gibbons and O’Connor (2005) similarly found that firms with organic structures tended to adopt a strategy formation process that is incremental and emergent, while firms with mechanistic structures were more likely to adopt a strategy formation process that is formal and comprehensive.(Glaister, Dincer, Tatoglu, Demirbag, & Zaim, 2008). Miller (1987) investigated the relationship between strategy making and structure and he categorized structure into four dimensions: formalization, centralization, complexity and integration and noted that formalization had a significant and positive impact on the rationality of strategy-making approaches. (Miller, 1987).

Since the structure is a key component in hosing the organization’s capabilities (strengths and weaknesses) then structure must play a major role in determining strategy by constraining and conditioning it as well as guiding it.(Mintzberg, 1990).In fact, strategy and structure both support the organization. None takes precedence; each always precedes the other, and follows it and this lead the researcher to formulate the below hypotheses that

"The better the alignment between organizational structure and strategic planning the great is the effect on the performance and misalignment may cause poor performance.

Strategic planning deployment often fails due to inability of the organization to identify and overcome implementation barriers. Few studies such as (Regan & Ghobadian, 2002) identifies external and internal barriers to implementation however this research will focus on an important aspect of the organization which so far has not been given its importance which is the effect of the organization structure on the strategic planning implementation effectiveness. This research attempts to explore that the organization structure and strategy are highly interdependent and must be complementary in many ways to ensure good performance and will attempt to provide an empirical analysis of the planning-performance relationship that takes into account the effect of organisational structure, and thus address a weakness in the prior researches that address this relationship without the effect of the contextual variables specifically, since as organisation’s strategic planning process is nested in an organisational context. This research will therefore study that potential moderating effect of organisational structure on the relationship between strategic planning and performance as the researcher believe it is essential to understand the relationship between strategic planning and performance to look at this relationship from a contextual perception in a given context rather than an isolated linkage.

Scale which has been used to measure strategic planning

Previously tested and validated measures were used to capture the constructs of strategic planning (Boyd and Reuning- Elliot, 1998), and financial and non-financial performance (Greenley, 1983; Chakravarthy, 1986; Thomas, 1988; Cadogan et al., 2002). Perceptual responses were gauged using Likert- style responses on five and seven-point scales. Subjective assessments of financial and non-financial performance were used, consistent with established practice in strategy research (Brews and Hunt, 1999; Andersen, 2000; Morgan and Strong, 2003).

The literature suggests a high degree of correlation between perceptual and objective measures of organizational performance (Venkatraman and Ramanujam, 1986; Dess and Robinson, 1984; Murray et al., 2005), and hence confidence in their use was high. Following protocols and a pre-test (Diamantopoulos et al., 1994), adaptations to these scales were made in line with established procedures (Spector, 1992; DeVellis, 2003). No face validity issues were identified. The scales are listed below.

Based on data from the pre-test, and prior to administering the main survey, the chosen scales for strategic planning, financial and non-financial performance were examined regarding issues of dimensionality, reliability and validity (Churchill, 2002; DeVellis, 2003). No problematic statistics were identified, and hence confidence in their use in the main survey was high. (Rudd, Greenley, Beatson, & Lings, 2008)

Strategic planning (adapted from Boyd and Reuning-Elliot,1998)

Scale item Item Scale Cronbach

α α

Mission statement 0.84

Analysis of competitor trends 0.80

Analysis of supplier trends 0.76

Analysis of market trends 0.72

Internal analysis 0.62 0.81

Long term, corporate level strategies 0.67

Medium term, business level strategies 0.70

Short term, functional level strategies 0.50

barriers to strategy implementation 0.61

Analysis of contingencies 0.69

On-going evaluation and control 0.73

(Rudd, Greenley, Beatson, & Lings, 2008)

Financial and non-financial performance (adapted from Thomas, 1988; Cadogan et al., 2002)

Financial performance Item Scale Cronbach

Scale item α α

Profit growth 0.81

Sales growth 0.94

Market share 0.89 0.85

Non-financial performance

Scale item

Employee satisfaction 0.89

Employee retention 0.91 0.78

There is virtually no research that can be done which would not benefit from the existing literature. Hence, in order to establish a theoretical base, in which the finding of this research could be compared to, a comprehensive literature review in focus to strategic planning from various studies and researches will be done identifying key issues and concepts. (Ticehurst, Veal. 1999)

When deciding on what is the appropriate approach to use in this research, the fundamental determination factor is whether the main purpose will be to rely on numerical evidence to draw a conclusion and test a theory and hypotheses or it will be to have a complete and details description of the situation under this research.

The former implies that a quantitative approach should be used with a more statistical methodology. The latter implies on the other hand a qualitative approach.

Since the ultimate purpose of this research is to systematically investigate the relationships between successful strategic planning and performance the analysis of the research will be largely quantitative, however qualitative analysis might be used to highlight patterns and make the analysis more robust. The findings will be compared to theory in context in order to describe the patterns which exist. Indeed, the obvious choice on the approach which will be used in this research created a question of choice between a case study methodology (in which on studies a limited part of the phenomena in order to enhance knowledge on the whole part of the researched area) and questionnaire-based survey methodology (which is based on data collection based on questionnaire approach on a wide front in order to enable a statistical comparison). However, after a thorough consideration of the most appropriate approach to this research questionnaire methodology will be adopted.

To accomplish the objectives of this research, question based survey will be developed from the literature review and quantitative analysis of the questionnaires will be used to map the characteristics of the organizations and discover patterns in the responses within organizations. Consideration of the data and patterns whish will be found and collected from the public organizations will be used in conjunction with academic theory to try to explain the findings and answer the research.

CEOs, Managing Directors and General Managers will be targeted as key respondents because of their perspective on strategy, their extensive knowledge of their respective organizations and their access to relevant information (Tan and Tan, 2005; Tuominen et al., 2004). In an attempt to increase the response rate the covering letter asked recipients to pass on the questionnaire to the most senior strategist in their organizations (Leontiades and Tezel, 1980). (Rudd, Greenley, Beatson, & Lings, 2008)

Given the nature of the required data, questionnaires will be collected from senior manager level in the governmental organization in the UAE. For generalization purpose organizations will be selected from several Government sectors such as Telecommunication sector to Healthcare, IT. As most of the questionnaire- based survey requires specification about the data requirements a cover letter of each questionnaire will include a written definition of strategic planning and the financial performance indicators, in order to unify the way in which our respondents would understand this concept.

"Strategic planning is defined as ‘the development of a long-range written plan which covers more than one year for the effective management of environmental opportunities and threats, in the light of the organization’s strengths and weaknesses. It should include formulating an organization’s mission and/or vision, specifying long-term objectives and developing strategies which the organization plans to use to achieve these objectives’ (Elbanna-2009). The definition will be adopted because it is considered more comprehensive than other definitions. It incorporates the most widely used dimension of strategic planning, such as the extent to which planning documents exist and some other dimensions such as the availability of quantified objectives and performance financial statements.

The present study is designed to contribute to filling this gap in the literature by reporting the results of a survey on the impact of strategic planning on firm financial performance in the governmental organization in the United Arab Emirates (UAE).