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We can argue that strategy formation by means of strategic management lends itself well to formalisation.  By its very nature, strategic management is a very structured and sequential activity, and therefore can be readily organised by employing formal procedures.  Extensive formalisation can culminate in the establishment of a strategic management system.  In such a system, strategy formation steps can be scheduled, tasks specified, responsibilities assigned, decision-making authority clarified, budgets allocated and control mechanisms installed.

 

Obviously, not everyone agrees that formal strategic management systems are worth instituting.  Some regard them as a mixed blessing, while others are outright hostile. Some authors, who value explicit strategies, are not enthusiastic about formal strategic management.  The debate between supporters and detractors of formal strategic management systems resolves around two major tensions. 

 

Formal Vs. Informal Process

 

The advantage of formalisation, according to advocates of the strategic management perspective, is that it structures and disciplines the strategy formation process.  Formalisation facilitates tighter company, unambiguous responsibilities, clearer accountability and stricter review of performance.

 

A formal strategic management system forces managers to comply with a planning approach to strategy formation. It also gives top management more control over the company, as all major activities must be in approved strategies and the implementation of strategies is checked. 

 

However, the value of such extensive procedures can be challenged. Formal strategic management systems could use bureaucratic means to make strategy. Formalisation strongly overemphasises those aspects which can be neatly organised such as meetings, writing reports, giving presentations, making decisions, allocating resources and reviewing progress, while marginalizing essential strategy-making activities that are difficult to capture in procedures.  Important aspects such as creating new insights, learning, innovation, building political support and entrepreneurship are sidelined or crushed by the bureaucratic mechanisms used to produce strategy. Moreover, strategic management bureaucracies, once established, come to live a life of their own, creating rules, regulations, procedures, checks, paperwork, schedules, deadlines, and double-checks, making the system inflexible, unresponsive, ineffective and demotivating.

 

Differentiated Vs. Integrated Tasks

 

Many advocates of the strategic management perspective also believe that a division of labour within strategy formation processes is an important advantage of formal strategic management systems.  The most important split facilitated by strategic management systems is between those who formulate the strategies and those who implement them. Formulation can also be divided into the task of developing strategies and the task of deciding which strategies should be implemented.  Of course, other specialised functions can also be created such as strategic planner, competitive intelligence analyst, new business developer and controller.  A major benefit of task differentiation is that the best managers are liberated from time-consuming operational matters, so that they can focus on strategic issues.  Furthermore, a certain measure of isolation from day-to-day operations gives the manager formulating strategy the necessary distance to judge a business more objectively. However, it can be pointed out that such isolation of the cerebral strategy formulator from the reality of the business is the main reason why so few strategies are successfully implemented. Separating formulation and implementation tasks can seriously inhibit the formation of novel strategies.  If strategists need to be explorers, inventors and organisational developers, they cannot afford to view formulation and implementation as distinct activities, but must approach them as tasks that should be integrated.

 

Formal strategic management can be used when some conditions are present and is difficult to use when the opposite is true. In his book ‘Strategic Planning: What Every Manager Must Know', George A. Steiner (New York: Free Press, 1979), develops a table differentiating between the positions where formal strategic planning would be more successful and where it would not be. This table is reproduced below in Table 1.1.

 

Toward more formality and more details	Nature of the Force	Toward less formality and fewer details
	Company Small one-plant companies Large companies
	Management styles Policy maker Democratic-permissive Authoritarian Day-to-day operational thinker Intuitive thinker Experienced in planning Inexperienced in planning
	Complexity of environment Stable environment Turbulent environment Little competition Many markets and customers Single market and customers Competition severe
	Complexity of production processes Long production lead times Short production lead times Capital intensive Labour intensive Integrated manufacturing processes Simple manufacturing processes High technology Low technology Market reaction time for new production is short Market reaction time is long
	Nature of problems Facing new, complex, tough problems having long-range aspects Facing tough short-range problems
	Purpose of planning system Co-ordinate division activities Train managers

Source: Adapted from ‘Strategic Planning: What Every Manager Must Know by George A. Steiner (New York: Free Press, 1979), p.54.

 

Table 1.1 Forces Influencing Design of Strategic-Planning Systems

 

Therefore, not all proponents of explicit strategies are convinced of the need for formal planning systems.  In general, they argue that such extensive formalisation creates bureaucracy and reduces top management's freedom to manoeuvre.  Their preference is to retain a certain level of organisational flexibility, despite the existence of strategies, by keeping enough power in the hands of top management to push through a change of course on command. 

 

With this background let us turn our attention towards the structured process of strategic management, one that will retain enough flexibility and room for creativity, for that is what this book is all about.