The Effect of Formal Strategic Planning on Firm Performance and Job Satisfaction Essay Example

the researchers to investigate the relationship between formal strategic planning and job satisfaction in the context of TMIB in Bangladesh. Formal strategic planning has also been found to directly influence company performance. Numerous studies (Covin, Slevin, and Schulz, 1994; Dess, 1987; Dess and Robinson, 1984, Golden, 1992; Hart and Banbury, 1994; Powell, 1992; Venkatraman, 1990; Venkatraman and Ramanujam, 1986; Verhage and Waarts, 1988) have provided evidence of the positive impact of formal strategic planning on company performance.

The aim of the present study is to examine the impact of formal strategic planning on company performance in TMIB, Bangladesh. This study aims to propose and test a model that explores the relationship between formal strategic planning and its effects on businesses. The significance of focusing on formal strategic planning lies in its consequences for both company performance and job satisfaction. A review by Greenley (1994) found that most data came from the USA, indicating potential limitations in applying developed frameworks and models to developing or emerging countries (Koufopoulos, Lagoudis, and Pastra, 2005; Haines, 1988). Moreover, Greenley (1994) recognizes that while the principles of strategic planning should be universally applicable, there may be national differences influenced by business culture and trading conditions.

The purpose of this study is to examine the relationship between strategic planning, company performance, and job satisfaction in Bangladesh. Previous research has focused on the connection between performance and strategic planning. Glaister et al. (2007) studied Turkish companies and found a positive effect of strategic planning on performance. Robbins (2003) studied a US company which showed a positive effect of strategic planning on employees' job satisfaction. However, there has been limited focus on these relationships within

Bangladeshi companies. This study aims to investigate the impact of formal strategic planning on company performance and job satisfaction at TelekomMalaysia International (Bangladesh) Ltd., considering organization structure and environmental turbulence as mediators. The literature also refers to strategic planning as "long range planning," "corporate planning," and "strategic management" (Steiner, 1979; Steiner and Cannon, 1996; Ackoff, 1970; Ansoff, Declerck, and Hayes, 1976).

Mintzberg and Lampel (1999) categorized strategic formulation into ten schools: design, planning, positioning, cognitive, learning, power, cultural, environmental, entrepreneurial, and configuration. In this study, the researcher will utilize formal strategic planning to depict a managerial process within an organization. This process is defined as determining the mission, major objectives, strategies, and policies that guide resource acquisition and allocation for achieving organizational goals (Pearce, Freeman, and Robinson, 1987). Other authors such as Mintzberg et al. have expanded on this concept.

, 1999) state that formal strategic planning refers to the “systematic procedures used to gain the involvement and commitment of those principal stakeholders affected by the plan” (Glaister et al. 2007). Previous researchers have agreed that the strategic planning process consists of three major components (Hopkins and Hopkins, 1997): (1) Formulation (which includes developing a mission, setting objectives, determining the external and internal environments, and evaluating and selecting strategy alternatives).

Implementation Control

The nature of strategy for an organization has sparked the "design versus process" debate, which highlights the distinction between deliberate and emergent strategies (Mintzberg and McHugh, 1985; Mintzberg and Waters, 1985). Deliberate strategies are those formulated in advance, while emergent strategies represent an evolving strategic pattern with or without advance planning.

Grant (2003) challenged the notion that strategic planning operates in a simplistic manner. After studying the strategic

planning practices of major oil companies, Grant (2003) concluded that strategic planning can be seen as a process of "planned emergence". This means that planning primarily occurs from the bottom up, with business units having autonomy and flexibility in shaping strategy. However, corporate management can provide guidance through vision and mission statements, corporate initiatives, and performance expectations. With this in mind, this research aims to explore the impact of deliberate or formal strategic planning.

According to Miller (1987), organizational structure determines how roles, power, and responsibilities are distributed and controlled within a company. It also influences how information is shared between management levels. The structure of an organization plays a crucial role in its ability to process information and shapes the nature of human interactions (Glaister et al.).

Previous researches have investigated the relationships between structure and strategy. Burns and Stalker (1991) suggested that organization structures can be either mechanistic or organic. An organic structure encourages flexibility and participative decision-making through a high level of mutual adjustment. On the other hand, a mechanistic structure is characterized by higher standardization and formal rules to control and coordinate, which influences the organization's choice of formal strategic planning process (Khandwalla, 1977; Covin and Slevin, 1989; Gibbons and O'Connor, 2005).

The organization structure of a company is influenced by the nature of the external environment. Scholars argue that in turbulent environments, companies tend to adopt organic structures, while in stable and certain environments, mechanistic structures are preferred (Lawrence and Lorsch, 1967; Pugh, Hickson, Hinings, and Turner, 1969; Child, 1972). They also suggest that increased uncertainty leads to more complex and non-routine tasks. Limited evidence exists on the internal organization of companies and

its impact on the planning process in relation to performance and job satisfaction (Roberts, 2004). Therefore, this research aims to investigate whether the effect of formal strategic planning on performance and job satisfaction is greater when a company's organization structure is more organic than mechanistic. Environmental turbulence refers to the amount of change and complexity in a company's environment beyond management's control, such as technology and governmental regulations (Shrader et al., 1984).

According to Pearce et al. (1987), Shrader et al. (1984), Priem, Rasheed, and Kotulic (1995), Slevin and Cobin (1997), and Duserick, Huang, and Dai (2007), the external environment of a company is believed to have an impact on the relationships between planning-performance and planning-job satisfaction. Studies have also found that specific elements of strategic planning are associated with performance and job satisfaction, as revealed by Greenley and Foxall (1997) and Duserick et al.

According to theory, the associations between strategic planning and organizational performance are influenced by external environmental factors (Boyd, Dess, and Rasheed, 1993; Drazin and Ven de Ven, 1985; Ginsberg and Venkatraman, 1985; Hansen and Wernerfel, 1989). Shrader et al. (1984) suggest that organizations accurately projecting and anticipating environmental changes through strategic planning should experience higher performance levels (Hambrick, 1980). Strategic planning may be more effective in turbulent environments rather than placid ones (Armstrong, 1982; Miller and Friesen, 1983; Eisenhardt, 1989; Miller and Cardinal, 1994), as stated by Boyd (1991). However, there are counter arguments suggesting that strategic planning is more beneficial in less turbulent environments where future conditions are easier to predict (Mintzberg, 1973; Fredrickson and Mitchell, 1984; Daft, 1992). These conflicting arguments and their empirical evidence have been well documented by

Priem et al.

(1995) In light of the turbulent environment in Bangladesh, our research will adopt previous arguments. The aim of TMIB is to positively impact performance and job satisfaction through implementing a formal strategic planning process.

Job Satisfaction: Job satisfaction refers to the mental, physical, and environmental contentment experienced by employees. Evaluating employee satisfaction levels helps determine the extent of job satisfaction. There are three academic definitions of job satisfaction (Chang and Lee, 2007), which are as follows:

1. Integral definition: This definition focuses on workers' attitudes towards their environment, particularly the mental changes that contribute to individual job satisfaction (Locke, 1976; Fogarty, 1994; Robbins, 1996).

2. Differential definition: This definition emphasizes the difference between actual and expected rewards received by an employee. A larger difference indicates lower satisfaction (Smith, Kendall, and Hulin, 1969; Hodson, 1991).

3. Reference structure theory: This theory highlights how objective organizational or job characteristics influence employees' attitudes and behaviors. It also recognizes subjective perceptions and explanations influenced by an individual employee's self-reference structures (Morse, 1953; [other source]).Homans (1961) states that within the hierarchy of human needs, which consist of psychological needs, safety needs, social needs, esteem needs, and self-actualization needs (Maslow, 1943), it is crucial for organizations to determine the level at which an employee currently exists. The author argues that although needs are never fully satisfied, once a need is adequately met, it no longer acts as a motivator. Therefore, organizations should focus on fulfilling needs that are at or higher than the employee's current position in the hierarchy (Robbins, 1993).

The measurement of job satisfaction can be approached in two ways: the global approach and the facet approach. The global approach considers the

overall attitude towards the job, while the facet approach aims to determine which specific aspects of the job contribute to satisfaction or dissatisfaction. Organizations can use the facet approach to identify areas of dissatisfaction and make improvements. This approach provides a more comprehensive understanding of an individual's job satisfaction, as different facets of the job can elicit different feelings. Facets of job satisfaction can encompass rewards, coworkers, supervisors, the work itself, and the organization. In this research, the researcher will utilize the facet approach to assess the job satisfaction of TMIB's employees.
Moreover, there is a relationship between formal strategic planning and job satisfaction. Robbins (2003) states that corporate planning aims to manage employee behavior and predict employee productivity, resignation rates, and job satisfaction. This is done in pursuance of achieving employees' active engagement with their jobs and their commitment to the company. Seashore and Taber (1975) suggest that various aspects of the internal organizational environment can influence job satisfaction.

According to Robbins (2003), various factors such as organizational climate, leadership types, and planning can influence employee job satisfaction. In his experiment with FedEx, he found that managers who adopt the transformational leadership management style not only improve work performance but also increase job promotion opportunities. This research also shows that leadership is positively correlated with better working environments, meeting demands, and overall performance of subordinates (Liu, Fellow, and Fang, 2003).

Duserick et al. (2007) conducted a study in New York City to examine the effect of formal strategic planning on employee satisfaction. The researchers found that strategic planning, leadership, and communication have a significant impact on employee satisfaction. Therefore, it can be inferred from these findings

that strategic planning positively influences job satisfaction among employees. Additionally, company performance is also crucial for success, as Boyd (1991) defines it as the actual results achieved by a company in relation to its intended goals and objectives.

For our purposes, we will use this definition to comprehend performance. Selecting one measure of firm performance is challenging. According to Shrader et al. (1984), the literature has measured performance in various ways (including sales, profit, productivity, revenue, dividends, growth, stock price, capital, cash flow, return on assets, return on capital, return on equity, return on investment, earnings per share, as well as other financial ratios). They also highlight that strategic planning may impact certain performance variables more than others. However, Glaister et al.

According to (2007), it is argued that factors such as maximizing shareholders' wealth and qualitative returns to non-financial stakeholders, like customer satisfaction, should also be considered when measuring performance. (1986) Rhyne points out that previous researches, excluding (1980) Kudla, did not include return to investors as a measure of performance. Additionally, the accounting measures used only represented part of the firm's effectiveness. (1997) Greenley et al. mention that previous studies have taken either a subjective or objective approach to measuring performance. The subjective approach, based on executives' perceptions of performance, has been extensively used in empirical studies and supported by multiple researchers.

Studies conducted by Covin et al. (1994), Dess (1987), Dess and Robinson (1984), Golden (1992), Hart and Banbury (1994), Powell (1992), Venkatraman (1990), Venkatraman and Ramanujam (1986), and Verhage and Waarts (1988) have all identified a correlation between executives’ perceptions of performance and objective measures. Conversely, Fisher and McGowan (1983) argue that the objective

approach to measuring company performance is flawed and not suitable for research purposes. Day and Wensley (1988) further suggest that there is a lack of appropriate objective measures. As a result, subjective measures have gained widespread acceptance.

Following in the footsteps of previous researchers, the researcher will also take a subjective approach to measuring the performance of TMIB. The relationship between formal strategic planning and company performance is discussed in the prescriptive strategic management literature. It is suggested that there is a positive relationship between strategic planning and company performance, with strategic planning having a causal effect on performance (Greenley, 1994). Some authors argue that the act of planning itself holds real value (Sinha, 1990; Ramanujam and Venkatraman, 1987). These authors also suggest that managers might perceive planning as contributing to effectiveness, providing them with a sense of confidence and control. Capon, Farley, and Hulbert (1994) contend that the performance improves with a higher level of sophistication in the planning process.

According to their perspective, strategic planners are expected to outperform non-planners. Numerous studies have classified firms as planners or non-planners based on the extent of their formal planning system (Glaister et al. 2007). Greenley (1994) reports that nine different studies have concluded that companies with strategic planning tend to outperform those without it (Gershefski, 1970; Thune and House, 1970; Herold, 1972; Karger and Malik, 1975; Wood and Laforge, 1979; Robinson, 1982; Ackelsberg and Arlow, 1985; and Rhyne, 1986, 1987).

Greenley (1994) also offers two explanations for the need for strategic planning within companies. First and foremost, it should enhance company performance. The conventional theory of strategic management revolves around planning a mission and objectives, including company performance

as a component, implementing strategies to achieve these objectives, and maintaining control to ensure their accomplishment. Secondly, strategic planning aims to enhance management effectiveness across the entire organization.

This could result in indirect improvements in performance, although its effectiveness may be overshadowed by various factors that can influence performance. Based on the previous discussions, it can be concluded that strategic planning has a positive impact on company performance. The study aims to investigate the following research questions within the context of TMIB in Bangladesh: 1) How does formal strategic planning, when moderated by organizational structure, affect company performance? 2) How does formal strategic planning, when moderated by environmental turbulence, affect company performance? 3) How does formal strategic planning, when moderated by organizational structure, affect job satisfaction? 4) How does formal strategic planning, when moderated by environmental turbulence, affect job satisfaction? The hypotheses derived from these research questions are: 1) Formal strategic planning, when moderated by organizational structure, significantly impacts firm performance in the context of TMIB in Bangladesh. 2) Formal strategic planning, when moderated by environmental turbulence, significantly affects company performance in the context of TMIB in Bangladesh.

3) The present study aims to investigate the impact of formal strategic planning on company performance and job satisfaction in the context of TMIB in Bangladesh. This investigation will consider organization structure and environmental turbulence as moderating variables. Additionally, formal strategic planning will be treated as the independent variable, while company performance and job satisfaction will be treated as dependent variables. Causal study, which seeks to establish causal relationships between variables, will be utilized by the researchers to gather data on the research questions. The most common method for

this type of research, as identified by Andaleeb (1995), is the use of a structured questionnaire.

Maintaining respondent anonymity is possible through the use of this survey method. The study will have limits on both time and budget, and it is anticipated that approximately 80 employees from TMIB will be surveyed. Given the constraints of time and budget, conducting personal interviews is not a viable option. Additionally, the postal system in this country is known for being unreliable and slow, making mail surveys impractical for this particular study.

Sampling method: The population size of this research is comprised of the top and mid level employees of TMIB working in Dhaka city. The official list of employees of Dhaka city, created by the TMIB management, will serve as the sampling frame for this research. The researchers conducting this study will utilize the systematic sampling method. Systematic sampling involves selecting elements from the population at a consistent interval that can be measured in time, order, or space (Levin & Rubin, 1998). The main advantage of systematic sampling is its simplicity and flexibility (Cooper & Schindler, 2001).

The researchers chose this sampling method for its ease of understanding and application. The population size for this study is around 400. If not already sorted alphabetically, the provided names in the list will be organized in that manner. The researchers will select every 5th name from the list, resulting in a sample size of approximately 80. The survey instrument for data collection will be a structured questionnaire, divided into 6 sections. The aim of this research is to create a measure of formality in the planning process, rather than debating its level

of flexibility.

The formality of strategic planning will be assessed using 12 items (Appendix I, Section I) determined by Gluck et al. (1982). Glaister et al. (2007) utilized this scale, and the reliability coefficient (alpha) for formal strategic planning was calculated to be 0.

The value of 76 is significantly higher than the suggested threshold value of 0.70 according to Nunnally (1978). The respondents were asked to indicate how their business performed compared to their main competitors on various financial performance criteria over the past three years. These criteria include profit growth, sales volume growth, market share growth, after-tax returns on sales, the ratio of sales to assets, and overall performance/success. Performance was assessed using 14 questions defined by Dees and Robinson (1984). Pearce et al. reported a reliability coefficient of 0.90 for performance.

(1987). Job satisfaction will be assessed using 14 questions (Appendix, Section IV) outlined by Hackman and Oldham (1975). In order to obtain a more comprehensive understanding of an individual's job satisfaction, the questionnaire incorporates five facet items from the Job Diagnostic Survey conducted by Hackman ; Oldham (1975). The inter-item reliability coefficient (alpha) for job satisfaction has consistently shown high values, ranging from 0. 64 to 0. 87. Organization structure will be evaluated using 5 questions (Appendix, Section V).

The purpose of the questions is to assess the organization's organicity, which refers to whether the company is structured in a mechanistic or organic form. Covin and Slevin (1988) originally created this scale based on Burns and Stalker's (1961) work. Glaister et al. (2007) calculated an alpha value of 0.83 for organization structure. Environmental turbulence will be evaluated using five questions found in the

Appendix, Section II. Miller and Droge (1986) developed an approach to measure environmental uncertainties, specifically focusing on changes and unpredictability in market-related and technology dimensions.

Glaister et al. (2007) found that the coefficient (alpha) for inter-item reliability of environmental turbulence was 0.72. Section VI of the questionnaire is specifically meant for collecting demographic data related to the respondent's age, gender, and education.

Pilot test of questionnaire: A pilot test is conducted to detect weaknesses in design and instruments and to provide proxy data for selection of probability sample (Cooper and Schindler, 2001). Burns and Bush (1998) suggest that a pre-test of 5-10 representative respondents is usually sufficient to identify problems with a questionnaire. The researcher plans to distribute the questionnaire among 15 TMIB employees to evaluate its clarity, ambiguous questions, and relevance. Since this research is unique within the context of Bangladesh, there are no available secondary sources of data. Therefore, primary data will be gathered to investigate the research problem. The researchers will use the questionnaire method to collect data from the primary sources.

Data Analysis Procedure: Correlation analysis will be used to determine whether there is any relationship between the independent, dependent, and mediating variables. According to Levin and Rubin (1998), correlation analysis is the statistical tool that can be used to describe the degree to which one variable is linearly related to another.

The researchers will employ path analysis, which enables them to examine both the direct and indirect effects of an independent variable on a dependent variable, as well as their alignment with the formulated theory (Kerlinger and Pedhauzer, 1982). Path analysis is a valuable tool for testing theory rather than creating it. Its utility

relies on the researchers' ability to establish clear assumptions about the causal relationships among the explanatory variables in the proposed model (Pedhauzer, 1997). In this study, the researchers conducted a thorough literature review to illustrate the suggested relationships among the variables under investigation.

The Analysis of Moments Structure (AMOS) software will be used in this research to measure the direct and indirect effects of the proposed model. However, there are certain limitations to consider in this study. The size and composition of the sample population are restricted. Only individuals from Dhaka city will be included, excluding other corporate branches in different cities. Moreover, only top level and mid level employees will be part of the study, neglecting the perspectives of shareholders or customers. Additionally, the data will be collected at a single point in time, providing a limited view rather than an ongoing picture. Nevertheless, this study holds significance for several reasons. Firstly, it addresses concerns specific to Bangladesh that have not been explored before. Previous studies on the impact of formal strategic planning on performance and job satisfaction have primarily focused on developed countries.

The current research aims to analyze the influence of formal strategic planning on company performance and job satisfaction in the context of Bangladesh. Additionally, this study could offer valuable insights for TMIB on enhancing performance and promoting employee satisfaction, thereby potentially encouraging further investigations. Moreover, as a distinctive study in Bangladesh, it is anticipated that other organizations could derive benefits from the findings presented here. References: Ackelsberg, R., & Arlow, P.

(1985). Small businesses do plan and it does pay off.