History of Strategic Planning 1
Table of Contents
The strategic approach to management is as old as warfare, and it even has military origins. This article traces the history of strategic planning from its ancient Greek origins through early 20th century and modern corporate practices, to recent public sector efforts.
Strategos and the Big Picture
Our term "strategy" derives from the Greek "strategos," which means, literally, "general of the army." Each of the ten ancient Greek tribes annually elected a strategos to head its regiment. At the battle of Marathon (490 BC), the strategoi advised the political ruler as a council. They gave "strategic" advice about managing battles to win wars, rather than "tactical" advice about managing troops to win battles. In time, the job of the strategoi grew to include civil magisterial duties as well, largely because of their status as elected officials.
From these military roots, strategic planning has always aimed at the "big picture." The focus is on results or outcomes, rather than products or outputs. Strategic planning is less concerned with how to achieve outcomes than with defining what those outcomes should be.
Modern Strategic Planning
In the early 1920s, Harvard Business School developed the Harvard Policy Model, one of the first strategic planning methodologies for private businesses. This model defines "strategy" as a pattern of purposes and policies defining the company and its business. A strategy is the common thread or underlying logic that holds a business together. The firm weaves purposes and policies in a pattern that unites company resources, senior management, market information, and social obligations. Strategies determine organizational structure; appropriate strategies lead to improved economic performance.
Through the late 1950's strategic planning's focus shifted away from organizational policy and structure toward the management of risk, industry growth, and market share. Business calls this approach to strategic planning the "portfolio model." Predictably, it led to the emergence of industrial conglomerates.
The next evolutionary steps led to the industrial economics model, where strategic decisions derive from analyses of competitive power relationships. In this model, the relative power of customers and suppliers, and threats posed by substitute products and services, new industry entrants and market rivals dictate competitive strategies.
Through the 1960s, strategic planning became a standard management tool in virtually every Fortune 500 company, and many smaller companies as well.
Emergence of Public Sector Strategic Planning
Until the mid-1980s strategic planning remained mostly a private sector undertaking. Notions of customers, marketing, industry growth, market share and risk management were foreign to the public sector. Instead, local governments wrote comprehensive plans that dealt with the efficiency of land use and services, while federal and state agencies relied on program plans, usually limited to narrow chains of authority on the organization chart. Strategies and organizational structure became nearly independent concerns; management committees resolved inter-program conflicts. Sound familiar?
The result was an emphasis on internal concerns, especially program inputs: taxes, fees, funding and staffing levels, computers, abuse, waste, fraud and fat. Reformers chanting, "Run government more like a business," changed the focus from inputs to outputs and unit costs, getting more "bang for the buck." Former Ford Motor Corporation President and Defense Secretary Robert S. McNamara started this trend by linking planning activities to the budget through the planning, programming, budgeting system (PPBS). Eighteen years later, President Carter brought to the federal government the related concepts of zero base budgeting (ZBB), invented at Xerox Corporation.
Later administrations reversed the ZBB experiment, returning the federal budget to its historical incremental basis. Today's system remains internally focused, and the major budget discussions--at all levels of government--again emphasize inputs: taxes, spending, fraud, waste and abuse.
Recent State Government Strategic Planning Efforts
Seeking a better way, some governments began taking a more strategic approach to public sector planning. Chief among these public sector pioneers are the states of Oregon and Texas.
The Oregon Governor's Office has long looked for ways to downsize agencies and measure their performance. It initiated Oregon Benchmarks, a document describing long term goals for the State, such as, "Reduce teenage pregnancies," and, "Create the best educated work force by the year 2000." Under the guidance of a task force made up of representatives from the executive staff, private sector, not-for-profit organizations and academia, each agency developed a mission statement, and tied it to a series of "benchmarks." They then wrote performance measures describing both efficiency and effectiveness for each benchmark. These four elements--state goals, mission statement, benchmarks, and performance measures--comprise the state's strategic plan. Some agencies, particularly in the human resources area, have made fundamental changes to their mission statements as a result of looking at their benchmarks and performance measures. The next step in Oregon's strategic planning effort is to tie the plan to the budget process.
In Texas, the 1991 Legislature passed House Bill 2009, requiring all state agencies to submit a strategic plan every other year, coinciding with Texas' two-year budget cycle. A committee of the Governor, Lieutenant Governor and Speaker of the House wrote Texas Tomorrow, containing state vision, mission and philosophy statements, and eight-to-12 goal statements in each of five major functional areas. Agency strategic plans showed how they contribute to achieving the statewide goals. In a variation of performance budgeting, agencies then built their budget requests around tactical objectives that contributed to achieving their strategic objectives, with multiple levels of funding and achievement.
Texas' first legislative experience with strategic planning and performance budgeting was in the spring of 1993, though agencies have submitted ZBB-type, multiple-funding-level budget requests with performance measures since 1976. While the relationship between strategic planning and the legislative process is not clear, the 1993 session was the first since the mid-1980s oil market crash that did not require a tax bill.
Chief Financial Officers Act of 1990
The Chief Financial Officers Act of 1990 (P.L. 101-576) started to change the discussions by balancing the inputs with the outputs side of the equation. The CFO Act assigns to the Office of Management and Budget's Deputy Director for Management government-wide responsibility for "managerial systems, including the systematic measurement of performance." It also assigns to agencies' Chief Financial Officers the responsibilities for developing and maintaining agency systems for "the systematic measurement of performance," and for preparing and submitting "timely performance reports."
Even with these reports, the discussions are still generally tactical, or internally focused: number of airplanes acquired, documents distributed, hills hiked, installations inspected, lawsuits litigated, satellites shuttled, soldiers schooled. These internal products are tactical concerns. They focus internally on what the organization does, or produces. They do not describe the external effects of these activities, or how the activities affect people the organization is mandated to serve. These external concerns, such as safety from terrorism, security of access to natural resources, health of the economy, or education of the populace, form the basis of public sector strategic planning.
Government Performance and Results Act of 1993
A major milestone is last summer's passage of the Government Performance and Results Act of 1993 (GPRA, P.L. 103-62). Beginning in 1997, this bill will require all federal agencies to write a strategic plan that includes: mission statement, outcome-based goals and objectives, descriptions of how goals will be achieved, resource needs and how objectives will link to performance plans, a list of external influences on goals, and a program evaluation schedule. GPRA will also require agencies to write an annual performance plan, and to submit an annual performance report, comparing actual to planned performance levels. For complying agencies, GPRA provides for waivers of administrative procedural requirements over staffing levels, salaries and funding transfers. The bill establishes pilot programs for early testing of these ideas, including a pilot test of "performance budgeting," which will relate levels of planned outcomes to corresponding budget levels.
Strategic planning has always been a government--especially military--responsibility. Somewhere along the line, the U.S. government lost this strategic perspective, and until only recently, focused almost exclusively on governmental inputs to frame major policy discussions. Various executive branch efforts to re-orient this focus have been intermittent, and then tended to emphasize internal products, or tactical concerns. The latest reform, the Congress-initiated GPRA, shows great promise in inspiring the government to re-capture its strategic focus, and to build plans around the effects of government on its external customers.
1 This document was originally published in Armed Forces Comptroller magazine, vol. 39, no. 1 (Winter 1994), pp. 23-24. This document has been slightly revised, primarily by adding the Table of Contents. Return
2 Phillip Blackerby is a Principal with Blackerby Associates, Inc., whose mission is to help any organization transform into a high-performance enterprise. An experienced management consultant, Mr. Blackerby's public sector experience includes positions in the National Institute of Standards & Technology, as Associate Deputy Treasurer of Texas, budget director for the Texas Comptroller of Public Accounts and planner for the U.S. General Accounting Office. He has also served on Boards of Directors for several not-for-profit organizations, and operated four private sector businesses. Mr. Blackerby invites readers' comments. Return
© Copyright 1993 Phillip Blackerby. All Rights Reserved. Reprinted with permission.
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