CORPORATE PLANNING AND ORGANIZATIONAL GROWTH

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Around 1999, empirical researchers began to examine the performance and consequences of formal corporate planning (Thune and House, 1999; Ansoff et al., 2000; Herold, 2001) and over 40 planning performance studies have appeared since that time. However, in recent years this line of research has slowed to a trickle and with good reason. Previous studies lacked theoretical ground, produced a bewildering array of contradictory findings, drew heavy criticism for inadequate methodologies and had little or impact on corporate management research or practice (Shrader et al., 1984; Pearce et al., 1987a, b). Nonetheless, it seems evident that the corporate planning-organizational growth relationship bears significantly on strategic management research and practice and that scholars should not abandon this line of enquiry altogether. This study re-evaluates the planning-performance research; the critical assessment of strategic planning and its impact on organizational performance which has effect on its survival.

Corporate planning can be defined as the process of using systematic criteria and rigorous investigation to formulate, implement and control strategy and formally document organizational expectations (Higgins and Vincze, 1993; Mintzberg, 1994; Pearce and Robinson, 1994). Corporate Planning is a process by which we can envision the future and develop the necessary procedures and operations to influence and achieve that future. As in many other fields, corporate planning professionals often cloak their work in pseudo-scientific jargon designed to glorify their work and create client dependence. In reality, corporate planning processes are neither scientific nor complex. With modest, front-end assistance and the occasional services of an outside facilitator, organizations can develop and manage an on-going and effective planning program. Corporate planning consists of a set of underlying processes that are intended to create or manipulate a situation to create a more favorable outcome for a company. This is quite different from traditional tactical planning that is more defensive based and depends on the move of competition to drive the company's move. In business, corporate planning provides overall direction for specific units such as financial focuses, projects, human resources and marketing.

Corporate planning may be conducive to productivity improvement when there is consensus about mission and when most work procedures depend on technical or technological considerations. This study goes beyond the observation of some research that questioned the existence of direct casual relationships between the use of corporate planning and organizational growth. This study draws from some of the many publications on the use of corporate planning in the private sector and from the growing number of those that deal with its uses and potential for the public sector.

One of the major purposes of corporate planning is to promote the process of adaptive thinking or thinking about how to attain and maintain firm environment alignment. (Ansoff, 1991). Commercial banks however, appear to gain more because they can derive considerable benefits not only from adaptive thinking, but also from integration and control. Small firms can derive considerable benefits from adaptive thinking but probably gain less than large firms from the integration and control aspects of corporate planning. Evered (2000), suggested that the different uses of the term corporate planning vary from broad ones (which include the purposes of defining purpose, objectives and goals) to very narrow ones (namely, those that deal with the means for achieving given objectives). Given Evered's differentiation between broader and narrower definitions of strategy, Bozeman's definition is a narrow one; one that assumes an ultimate mission of the organization. Bozeman's definition assumes that the corporate planning/management process is triggered by changes in policies and priorities (Bozeman, 2003). Hence, according to (Eadie, 2004), corporate planning may be defined broadly or narrowly. However, this formulation still does not help managers in the public sector, for now they need to decide not only whether they want to develop corporate plans but also whether they should approach such plans with a global perspective or with a narrower one. Thus, what seems to be a problem of semantics masks a fundamental question about the inclusion or exclusion of goal definition from the corporate planning process.

According to Berry (1997), corporate planning is a tool for finding the best future for your organization and the best path to reach that destination. Quite often, an organization's strategic planners already know much of what will go into a strategic plan. However, development of the strategic plan greatly helps to clarify the organization's plans and ensure that key leaders are all on the same script but far more important than the corporate plan document is the corporate planning process itself. The corporate planning process begins with an assessment of the current economic situation. First, examining factors outside of the company that can affect the company's growth. In most cases, it makes sense to focus on the national, local or regional and industry economic forecasts. This part of the analysis should begin early, at least a quarter or so before the formal planning process begins. Hence, it's been concluded that, corporate planning positively affects organizations' growth or more specifically, the amount of corporate planning an organization conducts positively affects it's financial growth.

Since the case study used for this research study is a bank, there is a need to understand corporate planning and financial growth relationships in banks. The result from past researches suggested that the intensity with which banks engage in the corporate planning process has a direct positive effect on banks' financial growth and mediates the effect of managerial and organizational factors on bank's growth. Results also indicated a reciprocal relationship between corporate planning intensity and organizational growth. That is, corporate planning intensity causes organizational growth and in turn, organizational growth causes greater corporate planning intensity (Hopkins and Hopkins, 1997). There is a constant need for organizations, especially financial institutions like banks to think strategically about what is going on (Sclnnellller, 1995). This appears to be precisely what banks, in particular have begun to do in recent years.

In response to increasing complexity and change in the financial services industry, banks have turned to corporate planning. The relatively new trend towards corporate planning in banks is viewed as a move designed not only to help them negotiate their environment more effectively, but to improve their organizational growth as well (Bettinger, 1996; Bird, 1991; Prasad, 1999). In consistent results of bank-related research, however, have not fully resolved the issue of whether corporate planning leads to improvements in banks organizational growth. The intensity with which managers engage in corporate planning depends on Managerial (e.g., strategic planning expertise and beliefs about planning-performance relationships), Environmental (e.g., complexity and change) and Organizational (e.g., size and structural complexity) factors. The effects of these factors on corporate planning intensity have been suggested by several studies (Kallman and Shapiro, 1990; Unni, 1990; Robinson and Pearce, 1998; Robinsonet al., 1998; Watts and Ormsby, 1990b).

Studies that have analyzed the relationship between corporate planning and organizational growth proved that the intensity with which banks engage in the corporate planning process intervene-that is cause an indirectness and lack of one-to-one correspondence-between factors such as corporate planning expertise and beliefs about planning growth relationships (managerial factors), environmental complexity and change (environmental factors), bank size and structural complexity (organizational factors) and bank's financial growth. As suggested by the inconsistent research findings, past studies have miss-specified the relationship between corporate planning and organizational growth in banks. Misspecification of this relationship might be attributed to past studies' lack of attention to the relationship among these managerial, environmental, organizational factors and their potential impact on planning intensity and performance (Hopkins and Hopkins, 1997). Subsequently, the consideration of such factors in the present study is viewed as a significant issue that holds implications for future research as well as for planning practices.

1.2 STATEMENT OF THE PROBLEM

Past and recent research studies have made it clear that there is an increased internal and external uncertainty due to emerging opportunities and threats, lack of the awareness of needs and of the facilities related issues and environment and lack of direction. Many organizations spend most of their time realizing and reacting to unexpected changes and problems instead of anticipating and preparing for them. This is called crisis management. Organizations caught off guard may spend a great deal of time and energy playing catch up. They use up their energy coping with inundate problems with little energy left to anticipate and prepare for the next challenges. This vicious cycle locks many organizations into a reactive posture. This research study is to assess the impact of corporate planning on organizational growth, which at the long, enhances organizational survival.

1.3 SIGNIFICANCE OF THE STUDY

The study will aid commercial banks in Nigeria to understand the importance of corporate planning for organizational growth. Revelations from the study will highlight the various benefits of corporate planning and how these measures if properly taken can increase organizational growth. The study will also enlighten managers of commercial banks on how to effectively implement corporate planning for substantial growth of the organization.

1.4 OBJECTIVE OF THE STUDY

This study was undertaken majorly to investigate corporate planning as a catalyst for organizational growth of commercial banks in Nigeria, using Diamond Banks Plc as a case study. Specific objectives of the study are:

i.          To examine the relationship between corporate planning and organizational growth.

ii.        To determine the corporate planning strategies used by commercial banks for effective organizational growth.

iii.      To ascertain whether corporate planning will improve the growth of an organization.

1.5 RESEARCH QUESTIONS

In-order to achieve the stated objectives for the study the following research questions will be asked:

i.          What relationship exists between corporate planning and organizational growth of Diamond Bank?

ii.        Does corporate planning improve the organizational growth of Diamond Bank?

iii.      What better ways can the organizational growth of commercial banks in Nigeria be improved?

1.6 RESEARCH HYPOTHESES

Ho: There is no significant relationship between corporate planning and commercial banks’ organizational growth.

Hi: There is significant relationship between corporate planning and commercial banks’ organizational growth.

Ho: Corporate planning does not improve the organizational growth of commercial banks.

Hi: Corporate planning does not improve the organizational growth of commercial banks.

1.7 LIMITATIONS OF THE STUDY

The study was carried out to investigate the impact of corporate planning on the organizational growth of commercial banks in Nigeria. The study is limited to Diamond banks in Lagos State. This is because of her representative nature of all commercial banks in Lagos State, proximity to the researcher, time and financial constraints.

1.8 SCOPE OF THE STUDY

This research work is on corporate planning and organizational growth of commercial banks in Lagos state, using Diamond bank as a case study. The study could not cover other banks due to in-adequate disclosures in the corporate planning strategies from these banks.

1.9 DEFINITION OF TERMS

Corporate Planning: This is a process used by businesses to map out a course of action that will result in revenue growth and increased profits.

Organization: This is an organized group of people with a particular purpose, such as a business or government department.

Growth: This is the process of increasing in size.

Organizational Growth: This means different things to different organizations. There are many parameters a company may use to measure its growth. Since the ultimate goal of most companies is profitability, most companies will measure their growth in terms of net profit, revenue, and other financial data.

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