Week 3 - Assignment: Critique the Application of the Process

STRATEGIC PLANNING AND IMPLEMENTATION SUCCESS IN PUBLIC SERVICE ORGANIZATIONS Evidence from Canada

Said Elbanna , Rhys Andrews and Raili Pollanen

Said Elbanna Strategic Management, College of Businessand Economics Qatar University Doha Qatar E-mail: [email protected]

Rhys Andrews Public Management, Cardiff Business School Cardiff University Cardiff UK E-mail: [email protected]

Raili Pollanen Accounting, Sprott School of Business Carleton University Ottawa Canada E-mail: [email protected]

Abstract

In this article, we examine the role that for- mal strategic planning plays in determining the success of strategy implementation in a set of more than 150 public service organi- zations from Canada. We also analyse the mediating effects of managerial involvement in strategic planning and the moderating effects of stakeholder uncertainty on the planning-implementation relationship. A structured online questionnaire was used to collect the data. Our findings suggest that formal strategic planning has a strong posi- tive relationship with implementation, which, though mediated by managerial involvement, becomes even more salient in the face of stakeholder uncertainty. Several implications of these findings are discussed.

Key words Strategic planning, strategy implementation, implementation success, managerial involve- ment, public service organizations: Canada

Public Management Review, 2016

Vol. 18, No. 7, 1017–1042, http://dx.doi.org/10.1080/14719037.2015.1051576

© 2015 Taylor & Francis

INTRODUCTION

Strategy implementation is ‘the realization of strategy and what the firm does’ (Håkonsson et al. 2012, 182). The successful implementation of strategic decisions is widely thought to be critical to the achievement of organizational aims and objectives (Elbanna, Thanos, and Colak 2014; Schweiger and Sandberg 1991). This applies as much to public sector organizations as to those in the private sector. Only when the plans of the top management team are executed properly and in full, it is possible to attribute organizational outcomes to the decisions made by management and to feel some confidence that public organizations are the masters of their own destiny (Elbanna and Child 2007); at least within the limits posed by the democratically mandated ‘authorizing environment’, in which they operate (Moore 1995). Nevertheless, in spite of the widespread recognition of the critical role that strategy implementation success plays in determining organizational achievements amongst public management theorists (Bryson 2010; Poister 2010), there remain few studies that actually examine the antecedents of successful strategy implementation in public service organizations (for reviews of the state-of-the-art, see Bryson, Berry, and Yang 2010; Poister, Pitts, and Edwards 2010). In fact, the literature on strategy implementation generally remains fragmented and dispersed throughout the general and specialized management litera- tures, with little systematic investigation of any of the major themes relating to the implementation success (Bossidy and Charan 2011; Elbanna, Thanos, and Colak 2014; Noble 1999). In this article, we seek to cast light on a critical issue running through scholarly debates about strategic management in the public sector and the implementa- tion of key decisions: the role that formal strategic planning can play in determining strategy implementation success. Strategic planning is a set of concepts, procedures and tools that organizations use

when determining their overall strategic direction and the resources required to achieve strategic objectives (Bryson 2011). Although aspects of strategic planning are common to all types of organizations, the application of planning processes needs to be carefully tailored to the public sector environment when applied by public service organizations (Bryson 2011). In particular, public managers have to build-in the perspectives and the needs of those stakeholders with whom they must cooperate and collaborate in order to achieve organizational goals (Bryson, Crosby, and Bryson 2009). Not only is the formal strategic planning undertaken by public service organizations an important indicator of top management’s commitment to developing and implementing coherent and com- prehensive organizational strategies (Boyne 2010), it is also a key means for promoting inclusive public management in a democratic society (Bryson, Crosby, and Bryson 2009). The more time and effort that is devoted to analyzing the internal and external environments, developing and evaluating strategic options, the more managers may feel confident that the outcome of the process will be a positive one (Camillus 1975; Capon, Farley, and Hulbert 1987). As such, the basic assumption underpinning the

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practice of strategic planning is that it is rational to invest resources in formulating good plans because this will vastly improve the prospects of implementation success (Mintzberg 2000). In spite of the popularity of the idea that planning matters for implementation, there

have been a few empirical studies of the connection between planning and implementa- tion in public service organizations using primary and secondary data on those organiza- tions (Bryson, Berry, and Yang 2010; Poister, Pitts, and Edwards 2010). Moreover, little attention has been devoted to the boundary conditions of the relationship between formal strategic planning and strategy implementation success. In particular, the active participation of managers in strategic planning is typically regarded as an essential process for making strategic decisions work (Elbanna, Thanos, and Colak 2014; Floyd and Wooldridge 1994), and as such managerial involvement in planning is likely to mediate the connection between strategy formulation and implementation success (Collier, Fishwick, and Floyd 2004; Floyd and Wooldridge 1997). At the same time, formal strategic planning could potentially enable public service

organizations to better manage the support from stakeholders that is needed to achieve strategic objectives (Pfeffer and Salancik 1978). This is especially important in the public sector since the context in which public organizations operate has a massive influence on organizational behaviour and outcomes (see O’Toole and Meier 2015). In particular, the ways in which public organizations respond to stakeholders has become increasingly important as those organizations have to do more to collaborate and cooperate with the diverse actors who have a stake in the process of strategy implementation (and formulation) (Osborne 2006). Does formal strategic planning improve the implementation of strategic plans in

public service organizations? Might the connection between planning and implementing strategies be attributable to the active involvement of managers? Does strategic plan- ning have an even bigger implementation pay-off under conditions of stakeholder uncertainty? To answer these questions, we examine the relationship between strategic planning and strategy implementation success, the mediating role of managerial invol- vement and the moderating role of stakeholder uncertainty using data drawn from a survey of senior public sector managers in Canada. During the past two decades, strategic planning in Canadian governments has gained

importance in response to increasing public demands for accountability and transpar- ency. For example, since the late 1990s, the federal government has required govern- ment departments and agencies to produce annual reports on plans and priorities (RPP) (Pollitt and Bouckaert 2004). The RPPs, which detail departmental priorities by strategic outcome, programme, and expected results for a 3-year period, play an important role in the federal government’s planning and resource management pro- cesses, as well as provide a basis for ministerial accountability to Parliament by allowing comparisons of the actual results published in annual performance reports against the plans (Treasury Board Secretariat Canada 2014). To further improve the efficiency and

Elbanna et al.: Strategic planning and implementation success 1019

effectiveness of such administrative functions, the Priorities and Planning Sub- Committee on Government Administration was created in 2012 (Office of Prime Minister of Canada 2012). At the provincial level, although implementation can vary significantly, all ten Canadian provinces also have priority-setting/strategic planning, budgeting and performance reporting functions as key elements of their performance management and accountability frameworks (Canadian Institute of Chartered Accountants 2004). Hence, the increasing importance of strategic planning practices across Canadian governments makes the Canadian public sector a highly relevant and contemporary context to examine the strategy planning-implementation relationship. This article begins by exploring theoretical perspectives on formal strategic planning

and strategy implementation success, developing hypotheses about the mediating effect of managerial involvement and stakeholder uncertainty on the planning-implementation relationship. The data and methods employed in the study are described and the results of the statistical analyses are reported. This article is concluded by exploring the theoretical and practical implications of the findings.

BACKGROUND AND HYPOTHESES

Strategy implementation is defined in the literature as ‘the communication, interpreta- tion, adoption, and enactment of strategic plans’ (Noble 1999, 120). As such, there is clearly a direct connection between the strategic planning process and the subsequent implementation of the decisions emerging from that process. Nevertheless, that con- nection cannot be taken for granted nor can it be regarded as something easily cultivated or maintained in organizations that are attempting to change strategic direction (Johnson 2000). Critically, whatever the challenges associated with the development of effective planning processes, the implementation of strategic decisions is regarded as considerably more difficult than their formulation, and is an area where many organizations fail (Nutt 1999; Hrebiniak 2006). For organizational leaders, it is therefore important to consider in what ways the link between strategy formulation and implementation can be strengthened to ensure that strategic decisions are fully and properly embedded within the activities of organizational members.

The role of formal strategic planning

A key feature of the conventional approach to strategic planning is that the formulation and implementation of plans are sequential activities. Strategy is first deliberately formulated and only then it is put into place. Nevertheless, while this may suggest that strategic management is a sequential activity, each of the different stages of the planning process are not typically separate in practice, and organizations invariably

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evince emergent as well as deliberate or planned strategies concurrently. Control has therefore been identified as central to the implementation process (Noble 1999), and is something that can be achieved centrally through techniques such as action plans and monitoring. According to the advocates of strategic planning in the public sector, effective implementation through formal methods, such as business or project plans that identify tasks with targets, is more likely when activities are clearly defined (Boyne 2010). All of which is to say that one way in which public service organizations can seek to bridge the gap between formulation and implementation is to ensure that they establish strong formal planning procedures. A number of studies of private firms have found that formal strategic planning is

critical to successful implementation. For example, the use of action plans can help implementers to translate strategy into a more short term and focused plan (e.g. Hrebiniak and Joyce 1984; Pinto and Prescott 1990). In the public sector, several studies associate formal strategic planning with improved organizational perfor- mance more generally (e.g. Andersen 2008; Boyne and Gould-Williams 2003). Nevertheless, there are some authors who suggest that excessive attention to the planning process may make decision-making inflexible and thereby lead inexorably to implementation failure as managers are unable to make incremental adaptations to a plan that is seemingly set in stone (Hambrick and Cannella 1989; Mintzberg 2000). Instead, these author(s) emphasize the need for fluid and open processes of planning and implementation to ensure that organizations can learn more effectively and respond to changes in the environment when implementing strategic plans (Montgomery 2008). Although there is some evidence to suggest that less formal planning processes

can generate effective strategic decisions (see Parsa 1999), Miller’s study (1997) of eleven decisions from private and public organizations finds that strategic planning has a stronger positive influence on the success of implementation than a more ad hoc approach in which decisions are made on an incremental basis as situations arise; in other words, more formal procedures for dealing with eventualities in advance lead to more successful implementation. In terms of organizational out- comes in the public sector, Poister, Pasha, and Edwards (2013) find that conducting strategic planning efforts within a larger framework of logical incremental decision- making . . . has a positive effect on some dimensions of performance, at least within the context of the public transit service industry. Nevertheless, other studies of the effects of strategy process on public service performance suggest that an incremental approach to decision-making is more likely to be unsuccessful (Andrews et al. 2009, 2011). Thus, on the balance of prior theory and the limited available evidence, our first hypothesis is:

H1. There will be a positive relationship between formal strategic planning and strategy implementation success.

Elbanna et al.: Strategic planning and implementation success 1021

The mediating role of managerial involvement

The likelihood of implementation success may well be increased by the adoption of formal planning, but it is still conceivable that those organizations that place undue emphasis on strategic planning run the risk of ‘paralysis by analysis’ (Lenz and Lyles 1985). An obsessive concern with the details of the strategic plan may lead top management to overlook the need for context-sensitive implementation within the organization, especially the buy-in of those internal stakeholders responsible for imple- menting decisions – typically middle managers. To address this potential pitfall, strategic management theorists draw attention to the role that managerial involvement in the strategy formulation process can play in improving the quality of strategy implementation (Floyd and Wooldridge 1994). The effect of formal strategic planning may be enhanced if all managers are active

participants in the process of developing strategies.1 In theory, managerial participation in strategy formulation demonstrates the commitment of top management to the plans that are being developed (Camillus 1975), and increases the prospects that there is a genuine sense of ownership and commitment to strategic plans amongst those responsible for implementing them (Rajagopalan and Rasheed 1995). At the same time, implementation quality may be improved because managerial involvement facilitates the continual adapta- tion of strategic plans as they are being implemented ensuring that they are ‘fit for purpose’. Several studies of private sector organizations suggest that strategic planning can be enhanced by encouraging managerial participation in the process. Elbanna, Thanos, and Colak (2014), Nutt (1999) and Wooldridge and Floyd (1990), in particular, find that such participation results in improved implementation. And, there is good prima facie reason for thinking that such participation will also matter in the public sector, where middle managers, especially, play an increasingly important role in strategy implementa- tion (Gatenby et al., forthcoming; Ridder, Bruns, and Spier 2006). Importantly, it is actually conceivable that the benefits of strategic planning for

strategy implementation are attributable to the managerial involvement that thorough- going planning processes presuppose. That is, it is not simply the presence of formal planning that matters for implementation success, but the managerial involvement that accompanies effective strategy formulation. Our second hypothesis is therefore:

H2. Managerial involvement will mediate the relationship between formal strategic planning and strategy implementation success.

The moderating role of stakeholder uncertainty

Resource dependence theory suggests that organizations must continually seek to acquire control over resources held by other actors and organizations within their environment in order to minimize their dependence on those entities (Pfeffer and Salancik 1978). By

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minimizing their resource dependence, organizations can attain greater control over their own destiny and so build an ever stronger power base making them immune from external threats. Only by securing as high a degree of autonomy as possible from the vicissitudes of its stakeholders can any organization effectively execute its plans (Pfeffer 1987). For public organizations, the pursuit of organizational autonomy is particularly challenging given the large number of economic and political external forces to which they are subject (Vining 2011), and the diversity of stakeholders to whom they are accountable (Rainey 2009). To lessen dependence and gain more autonomy, public organizations may adopt multiple short-term tactics ranging from internal restructuring to the cooptation of external board members (Pfeffer and Salancik 1978). In the long run though, they are likely to need to demonstrate a capacity for fulfilling their strategic mission (Goodsell 2011) and a reputa- tion for high levels of reliability and effectiveness (Carpenter 2001) if they are to shape, as well as be shaped by, the demands of powerful stakeholders, especially elected officials whose requirements may sometimes be less predictable than those of other actors (Furlong 1998). Hence, it seems likely that public service organizations will need to develop a systematic approach to integrating stakeholder management within their strategic planning processes and that the impact of this may vary depending on the degree of uncertainty around stakeholder support. Since there is a need to proactively manage environmental dependencies, the

strength of formal strategic planning may well matter more for strategy implementation success when there is a higher degree of uncertainty around sources of stakeholder support. Rigorous analysis of stakeholder needs and demands may therefore be espe- cially important when those needs and demands are difficult to predict. Although supporters of less formal strategy formulation processes suggest that a flexible approach is needed in the face of environmental uncertainty (Mintzberg 1979), it is quite conceivable that more rather than less planning will be helpful for public service organizations dealing with uncertain circumstances. As Armstrong (1982) puts it, ‘if it is clear what will happen and when, the need for planning seems small’ (202). Rather than attempting to respond to stakeholder uncertainty by making decisions on an ad hoc basis, increasing formal strategic planning processes may represent a better means for exerting managerial control over a challenging, operating environment (see Eisenhardt 1989). In fact, prior research suggests that perceived environmental uncertainty is often associated with the increased scanning of the organizational environment that is one of the key components of strategic planning (Daft, Sormunen, and Parks 1988; Ebrahimi 2000). As a result, our third hypothesis is:

H3. Stakeholder uncertainty will strengthen the relationship between formal strategic planning and strategy implementation success.

The model informing our investigation is depicted in Figure 1. It posits that formal strategic planning has a direct influence on strategy implementation success, and that this relationship is mediated by managerial involvement and moderated by stakeholder

Elbanna et al.: Strategic planning and implementation success 1023

uncertainty. The variables included in the model have been of interest to many researchers which increases the scope for comparing the findings of our study with those of previous investigations. The study model also incorporates four control variables, which are associated with three types of contexts, namely, resource slack, organization size (organization), environmental favourability (environment) and strate- gic planning expertise (managerial capabilities).

METHOD

Data collection and sample

The context of our study is the Canadian public sector. Canada has a three-tier government structure, consisting of federal, provincial and municipal levels. The three levels account for approximately 35, 45 and 20 per cent of the total governmental expenditures, respectively, and all government expenditures are approximately 40 per cent of the gross domestic product of Canada (Rosen et al. 2008). At the federal level, the Government of Canada consists of departments and more autonomous agencies, whose authorities are stipulated in their respective federal statutes. Canada follows the principle of federalism, whereby political power is divided in the Constitution Act between the federal government and the ten provincial governments (Joseph 2001), with each level being responsible for relatively distinct services. Although the provincial governments receive transfer payments from the federal government to finance some of their services, they also have the authority to levy their own provincial income taxes and sales taxes on goods and services.

Mediating effect

Formal strategic planning

(H1)

Control variables Resource slack; organization size; environmental favourability; strategic planning expertise

Stakeholders uncertainty (H3)

Strategy implementation success

Managerial involvement (H2)

Moderating effect

Direct effect

Figure 1: Research model

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Historically, there has been a sharp increase in provincial government expenditures relative to the total government expenditures (Rosen et al. 2008), indicating an increasing decentralization trend. Canadian municipalities are under the provincial jurisdiction, with their authorities granted by the provincial laws of each province (Joseph 2001). The majority of funding for municipalities comes from local property taxes, with very little funding from the provinces, often resulting in financial pressures (Noe and Ross 2004). Given the significant size of the Canadian public sector, and increased public pressures for accountability and transparency (Pollitt and Bouckaert 2004), effective strategy formulation and implementation are important at all three levels. An online survey of senior public administrators in Canadian public organizations was

conducted during May–June 2012. Survey participants were identified from the ‘Governments of Canada’ and ‘Canadian Almanac and Directory’ online databases accessible through the ‘Canada’s Information Resource Centre’ data portal. In some cases, participant information was confirmed or supplemented with information from other sources, for example, organizational websites. Targeted participants were senior public officials with responsibilities for strategic planning and priority setting in organizations, in which English was identified as the primary language, and for whom e-mail addresses were available. A structured online questionnaire was used to collect data from all three major levels

of Canadian Governments. It was organized into four parts: strategic planning and priority setting, environment and resources, organizational and participant profile and space for optional comments. The online survey was administered through an indepen- dent Canadian web survey host provider. Hyperlinks to the survey and the detailed cover letter were inserted into individually addressed invitation messages sent through the account established on the survey host provider’s website. In designing the online survey, close attention was paid to the easiness of navigation through the survey, readability of the questions and pleasing professional appearance. For example, the survey design allowed respondents to answer questions in any order, and save and modify partially completed responses. The respondents were assured anonymity and confidentiality of their responses, and they could unsubscribe from follow-up mailings. The research protocol was approved by the research ethics committee of the Canadian University which facilitated in conducting the survey. A total of 1,548 invitations to potential respondents (out of 1,739 names on the initial

mailing list) were successfully delivered via e-mail, after disregarding a few duplicate names detected by the survey host software and undeliverable e-mails. The initial mail-out was followed by two rounds of reminder e-mails using the same procedures. A total of 222 individuals answered at least some questions and 191 substantially completed the entire survey by the closing date for a usable response rate of 12 per cent. In the case of missing responses to a few items on a few questionnaires, the analysis is based on the number of completed responses. The number of participating organizations is 180 or 16 per cent of

Elbanna et al.: Strategic planning and implementation success 1025

the total of 1,133 organizations contacted. Multiple respondents were sought from selected organizations to allow the evaluation of inter-rater reliability. The sample included two respondents from each of eleven organizations. A profile of participating organizations is presented in Table 1. The survey participants represent organizations in provincial, municipal and federal

government sectors and, in smaller numbers, in education, health care and other public agencies. The number of responses received from each sector is consistent with the

Table 1: Profile of participating organizations

Characteristics Number Percentage*

(a) Sector 1. Federal government 13 6.8 2. Provincial government 83 43.5 3. Local government 58 30.4 4. Government-controlled agency or board 11 5.8 5. Education 8 4.2 6. Health care 5 2.6 7. Others 13 6.8

Total 191 100.0 (b) Size (number of employees)

1. Less than 500 110 58.2 2. 500–999 31 16.4 3. 1,000–4,999 30 15.9 4. 5,000 or greater 18 9.5

Total 189 100.0 (c) Age of organization

1. Less than 10 years 27 14.2 2. 11–20 years 30 15.8 3. 21–30 years 13 6.8 4. 31–40 years 19 10.0 5. Greater than 40 years 101 53.2

Total 190 100.0 (d) Establishment of strategic planning processes

1. Less than 5 years ago 34 18.1 2. 6–10 years ago 45 24.0 3. 11–15 years ago 41 21.8 4. 16–20 years ago 22 11.7 5. Over 20 years ago 46 24.5

Total 188 100.0

Note: *The percentages may not add to 100 per cent due to rounding off.

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number of mail-outs to each sector. In addition, the proportions of the organizations in the study are roughly representative of the sizes of the three main sectors (federal, provincial and municipal) at the time of the study. This suggests that the study results could be generalizable to the Canadian public sector. The number of full-time employ- ees in the organizations ranges from 10 to 35,000 with a mean of 1,696 and a median of 300 full-time employees. Close to 60 per cent of the organizations are quite small with fewer than 500 employees. Approximately, one-half of the organizations were estab- lished more than 40 years ago, and one-quarter of them had established strategic planning processes more than 20 years ago. The respondents held senior positions, for example, associate deputy minister, president, chief administrative officer, vice pre- sident and executive director, with close to two-thirds being male. We examined nonresponse bias by separating our sample into two sub-samples, early

(original mail-out within three weeks) and late (reminder mail-outs within the next five weeks) respondents, and performed t-tests on the responses of each sub-sample based on the number of employees and the sector. The two-sample t-tests were insignificant at the p < 0.05 level, indicating no significant differences between the two samples. This may suggest that our sample is representative of the population surveyed, but it does not reveal whether or not the two groups of respondents may vary on some other characteristics.

Measures

Most questions were based on 5-point Likert scales used in prior studies, with some minor adjustments made to wording to reflect the Canadian context. A few items in some questions were initially reverse-coded. On the final online questionnaire, a few questions were slightly modified based on the comments by two pre-test participants (of nineteen contacted), two research colleagues and two technical experts on sub- stantive and/or technical matters. Table 2 presents the statements of our measures.

Strategy implementation success We did not find a relevant measure for the success of implementing the strategic plan. Hence, on the basis of reviewing related research (e.g. Elbanna, Thanos, and Colak 2014; Ford, Sharfman, and Dean 2008; Miller 1997) and our concept of implementa- tion success, that showed ‘how well a strategic plan has been implemented’, we adapted our measure of strategy implementation success for the purpose of this study.

Formal strategic planning Considering related research (e.g. Armstrong 1982; Hopkins and Hopkins 1997; Song et al. 2011; Wheelen and Hunger 2012), our concept of formal strategic planning as a

Elbanna et al.: Strategic planning and implementation success 1027

Table 2: Research measures

Strategy implementation success ● To what extent did your organization properly implement its strategic plan? (minimal extent [1], great

extent [5])

● How well has each implementation task been completed? (very poorly [1], very well [5])

● How important has each implementation task been for this strategic plan? (minimally important [1], very important [5])

● In general, how satisfied are you with the implementation of this strategic plan? (very satisfied [1], very unsatisfied [5]) (reverse coded)

Formal strategic planning (minimal emphasis [1], great emphasis [5]) ● Determining the organization’s mission

● Developing major long-term objectives

● Assessing the external environment

● Assessing the internal environment

● Generating strategic options

● Evaluating strategic options

● Gaining commitment to the strategic plan Managerial involvement (highly ineffective participation [1], highly effective participation [5]) ● How would you describe the participation of top management in developing your strategic plan?

● How would you describe the participation of middle managers in developing your strategic plan?

● How would you describe the participation of operations managers in developing your strategic plan? Stakeholder uncertainty (strongly disagree [1], strongly agree [5]) ● Our stakeholders’ preferences are fairly easy to forecast

● Actions of our stakeholders are quite easy to predict

● Our organization has to frequently change its services and practices to keep up with stakeholders’ expectations

Resource slack (strongly disagree [1], strongly agree [5]) ● It is very difficult to get approval for a project that is worth doing. (reverse coded)

● In terms of the availability of money, our organization’s situation is tight. (reverse coded)

● Our organization has difficulty in obtaining sufficient funds to deliver its services. (reverse coded)

● Our organization has difficulty in obtaining sufficient funds to introduce new services. (reverse coded)

● Our organization has difficulty in implementing its strategic plan because of the lack of the required resources. (reverse coded)

● Our organization has easy access to resources for development and improvement. Organization size The number of full-time employees as reported by the respondents Environmental favourability (strongly disagree [1], strongly agree [5]) ● We faced negative unanticipated environmental conditions during the implementation of our strategic

plan, which hindered its success. (reverse coded) Strategic planning expertise (very low [1], very high [5]) How do you evaluate the level of expertise that exists to perform strategic planning in your organization?

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set of activities and procedures that organizations use to develop their strategic plan, and the setting in which we conducted our study, namely, the Canadian public service organizations, a new measure of formal strategic planning was developed for the purpose of this study.

Managerial involvement Two aspects of managerial involvement, namely, quantity and quality, have been recognized in the literature on the strategic planning process (Elbanna 2008). Based on the arguments that the quality of involvement reflects the degree to which managers at different organizational levels (Yasai-Ardekani and Haug 1997) effectively influence strategic choices (Freeman 1989), our new measure of managerial involvement gauges the quality of managerial involvement of top, middle and operations managers in the planning process.

Stakeholder uncertainty Following Miller and Droge (1986), we used a three-item scale of stakeholder uncertainty. The third item was eliminated from the scale because its total correlation was under the cut-off point of 0.30 and hence the alpha coefficient of the scale was low (i.e. 0.65).

Control variables We controlled the effects of resource slack since it is widely argued that slack plays an important role in organizational behaviour (Bradley, Wiklund, and Shepherd 2011; Elbanna 2012). Resource slack was measured with a scale of six items successfully developed and used by Elbanna (2012). Organization size was controlled because it has frequently been identified as a factor which can influence strategy processes and outcomes (Titus, Covin, and Slevin 2011). In order to fully specify our study model of implementation success, we followed Dean and Sharfman (1996) and attempted to control for the impact of environmental favourability on the strategy implementation success. The measure of favourability was adapted from Dean and Sharfman (1996). Scholars have argued that strategic planning expertise is a critical influence on formal

strategic planning (Hopkins and Hopkins 1997) and organizational performance (Steiner 1979). Following Hopkins and Hopkins (1997), strategic planning expertise was measured. Including the above control variables contributed to developing a more complete model to accurately assess the impact of our independent variables, namely, formal strategic planning and managerial involvement, on the success of strategy implementation.

Elbanna et al.: Strategic planning and implementation success 1029

Measurement of validity and reliability

Scale reliability was evaluated using Cronbach’s alpha. The results of alpha coefficients range between 0.80 and 0.88 for all scales suggesting a very satisfactory degree of internal consistency. The average variance extracted (AVE) does not go below the recommended value of 0.50 (Hair et al. 1995). This shows the convergent validity of the study constructs. Problems of memory failure were mitigated by (1) studying the current practices of strategic planning and priority setting in the sampled organizations and (2) collecting the data from managers of organizational units who are supposed to have intimate knowledge of the survey questions. This study collected questionnaires from multiple informants in eleven organizations. An inter-rater reliability analysis using the Kappa statistic was performed to determine consistency among different raters in each case. In eight out of eleven cases, Kappa was found to range between 0.32 and 0.82 with an average of 0.54, which shows fair to substantial agreement across the answers of multiple informants (Landis and Koch 1977), while in three cases, it shows agreement of 0.17 and less. Problems of bias and distortion were mitigated by (1) assuring the strict confidenti-

ality of responses; (2) explaining how the study can help public-sector managers better understand strategic planning practices and how they can contribute to sound policy decisions; (3) promising a summary report of the results to all participants; (4) reversing scale anchors in several places; (5) using objective data to measure one of our variables, namely, organization size and (6) further diminishing common method concerns by examining complex relationships, namely, moderation and mediation hypotheses, which respondents are unlikely able to guess (Elbanna 2012). Finally, an unrotated factor analysis of five focal variables resulted in a five-factor solution, as expected. Hence, common method bias is unlikely to be a concern in our data since a single factor did not emerge (Podsakoff and Organ 1986).

EMPIRICAL ANALYSIS AND RESULTS

The means, standard deviations, Cronbach’s alphas, AVE and correlations among the variables, are presented in Table 3. All the correlation coefficients among indepen- dent variables are below 0.60. Moreover, tolerance is well above 0.10 and the variance inflation factor (VIF) is well below ten for all regression models. These results do not suggest multi-collinearity problems. The relatively low to moderate correlations provided evidence of discriminant validity. Following Anderson and Gerbing (1988), we purified the measures by assessing their

validity and unidimensionality. After performing the exploratory factor analysis, a useful technique for scale construction, a subsequent confirmatory factor analysis was conducted to assess the resulting scales and verify the validity and unidimensionality of

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Ta bl e 3:

D es cr ip tiv e st at is tic s an d co rr el at io ns

Va ria bl es

M ea n

SD Al ph a

AV E

1 2

3 4

5 6

7 8

1. St ra te gy

im pl em

en ta tio n su cc es s

3. 75

0. 71

0. 80

0. 57

1 2.

R es ou

rc e sl ac k

2. 57

0. 78

0. 85

0. 50

0. 38 **

1 3.

Fo rm

al st ra te gi c pl an ni ng

3. 85

0. 90

0. 88

0. 50

0. 59 **

0. 32 **

1 4.

M an ag er ia li nv ol ve m en t

3. 55

0. 75

0. 80

0. 59

0. 59 **

0. 34 **

0. 58

** 1

5. St ak eh ol de r un

ce rt ai nt y

2. 74

0. 90

0. 84

N A

− .0 2

− 0. 03

0. 02

0 1

6. O rg an iz at io n si ze

1, 69

6 4, 45 9

N A

N A

− .0 8

0. 00

0. 04

− 0. 14

0 1

7. En vi ro nm

en ta lf av ou ra bi lit y

3. 04

0. 99

N A

N A

0. 11

0. 26 **

0. 11

0. 10

− 0. 05

0. 01

1 8.

St ra te gi c pl an ni ng

ex pe rt is e

3. 59

0. 92

N A

N A

0. 44 **

0. 20 **

0. 44 **

0. 51 **

− 0. 10

0. 02

0. 06

1

N ot e:

** co rr el at io n is si gn ifi ca nt

at th e 0. 01

le ve l.

Elbanna et al.: Strategic planning and implementation success 1031

the study measures. Adequate convergent validity for the items was established since all item measures had standardized factor loadings of more than 0.50 with only one exception (0.43). The results indicate the good fit of the confirmatory measurement model by different indices (χ2 = 272.30, degrees of freedom [df] = 197, χ2/df = 1.38, incremental fit index [IFI] = 0.96, Tucker-Lewis index [TLI] = 0.93, comparative fit index [CFI] = 0.96, root mean square error of approximation [RMSEA] = 0.05, confidence interval [CI] = 0.03–0.06, PClose = 0.67).

Hypotheses testing

The next step in analysing the data was to test the hypothesized model using regression analysis (see Table 4 for results). In order to examine the first hypothesis, we regressed strategy implementation

success on our first independent variable (formal strategic planning), and the five control and moderating variables (resource slack, organization size, environmental favourability, strategic planning expertise and stakeholder uncertainty). The first hypothesis that there will be a positive relationship between formal strategic planning and strategy imple- mentation success was supported in the hypothesized direction (β = 0.44, p < 0.01) (Model 1 in Table 4). This model explains 43 per cent of the variance of the dependent variable (p < 0.01). Following Elbanna and Child (2007), hierarchical regression was used in order to examine the relative importance of planning in predicting the success of strategy implementation. Two equations were generated. First, strategy implementation success was regressed against the five control and moderating variables. Formal strategic planning was then added into the equation. The addition of formal planning to the model with five control and moderating variables in the next step added almost 14 per cent (p < 0.01) to the explained variance of strategy implementation success which provides additional support to the first hypothesis. Hypothesis 2 states that the effects of formal strategic planning on strategy

implementation success are mediated by managerial involvement and it was exam- ined by following Baron and Kenny (1986). Model 1 in Table 4 shows that strategic planning significantly affects strategy implementation success, the dependent variable (β = 0.44, p < 0.01) and hence achieving the first condition for the existence of a mediating effect. Model 2 was statistically significant (R2 = 0.47, p < 0.01), and shows that strategic planning significantly affects the mediator variable, managerial involvement (β = 0.41, p < 0.01) which achieves the second condition. The regression shows that when both formal strategic planning and managerial involve- ment are incorporated in the same model (Model 3 in Table 4), the results were significant (R2 = 0.47, p < 0.01) and the explained variance in strategy implemen- tation success increased significantly (ΔR2 = 0.04, p < 0.01). Although we found that both variables – formal strategic planning (β = 0.32, p < 0.01) and managerial

1032 Public Management Review

Ta bl e 4:

R es ul ts

of re gr es si on

an al ys is

Va ria bl es

M od

el 1 (s tr at eg y

im pl em

en ta tio n su cc es s

re gr es se d on

pr ed ic to rs )

M od

el 2 (t he

m ed ia to r

(m an ag er ia li nv ol ve m en t)

re gr es se d on

pr ed ic to rs )

M od

el 3 (s tr at eg y

im pl em

en ta tio n

su cc es s re gr es se d on

pr ed ic to rs

an d th e

m ed ia to r)

M od el 4 (s tr at eg y im pl em

en ta tio n

su cc es s re gr es se d on

pr ed ic to rs ,

th e m ed ia to r an d th e in te ra ct io n

te rm

of m od er at or

(s ta ke ho ld er

un ce rt ai nt y) )

Fo rm

al st ra te gi c pl an ni ng

0. 44 **

0. 41 **

0. 32 **

0. 34 **

St ak eh ol de r un ce rt ai nt y

− 0. 01

0. 03

− 0. 01

− 0. 01

R es ou rc e sl ac k

0. 20 **

0. 15

* 0. 16

** 0. 18 **

O rg an iz at io n si ze

− 0. 10

− 0. 17

** − 0. 06

− 0. 07

En vi ro nm

en ta lf av ou ra bi lit y

− 0. 01

0. 00

− 0. 01

− 0. 00

St ra te gi c pl an ni ng

ex pe rt is e

0. 21 **

0. 31

** 0. 12

0. 10

M an ag er ia li nv ol ve m en t

0. 28

** 0. 27 **

St ak eh ol de r un ce rt ai nt y × fo rm

al st ra te gi c pl an ni ng

0. 15 **

R 2

0. 43 **

0. 47

** 0. 47

** 0. 49 **

Ad ju st ed

R 2

0. 41 **

0. 45

** 0. 45

** 0. 47 **

Δ R 2 fr om

M od

el 1 to

M od

el 3

0. 04

**

Δ R 2 fr om

M od

el 3 to

M od

el 4

0. 02 **

N ot e:

*S ig ni fic an t at

th e 0. 05

le ve l; ** si gn ifi ca nt

at th e 0. 01

le ve l.

Elbanna et al.: Strategic planning and implementation success 1033

involvement (β = 0.28, p < 0.01) were significantly related to strategy implemen- tation success, the explanatory value of strategic planning went down when the mediating variable, managerial involvement, was included in the regression as shown in Model 3 (β = 0.32, p < 0.01) compared to its explanatory value in Model 1 (β = 0.44, p < 0.01). This supports the third and fourth conditions for the existence of a mediating effect. In conclusion, the above results show a partial mediation effect of managerial involvement since the impact of formal strategic planning on strategy implementation success was reduced when the mediator, managerial involvement, was controlled for in Model 3. Hence, Hypothesis 2 is supported. Hierarchical moderated regression was used to examine Hypothesis 3 concerning the

moderating effect of stakeholder uncertainty on the relationship between formal strategic planning and strategy implementation success. Prior to the creation of the interaction terms, we mean-centred the independent variable (i.e. strategic planning) and the moderator (i.e. stakeholder uncertainty) based on the recommendation of Aiken and West (1991). As demonstrated in Table 4 (Model 4), stakeholder uncer- tainty positively moderates the relationship between formal planning and strategy implementation success since the interaction term produced a significant ΔR2

(ΔR2 = 0.02, p < 0.01; β = 0.15, p < 0.01). To illustrate the nature of the interaction, we plotted the equation at high (i.e. 1 SD above the mean value) and low values (i.e. 1 SD below the mean value) (Aiken and West, 1991). As depicted in Figure 2, at high levels of stakeholder uncertainty, the relationship between strategic planning and strategy implementation success becomes stronger (β = 0.36, t = 5.66, p < 0.01), compared to low levels (β = 0.18, t = 2.77, p < 0.01). These results lend empirical support to Hypothesis 3 that the higher the level of stakeholder uncertainty, the greater the positive impact that formal strategic planning will exert on strategy implementation success.

1

1.5

2

2.5

3

3.5

4

4.5

5

Low formal strategicplanning High formal strategic planning

S t a

r t e

g y

i m

p le

m e

n t a

t io

n s

u c c e

s s

Moderator

Low stakeholder

uncertainty

High stakeholder

uncertainty

Figure 2: Interaction plot

1034 Public Management Review

DISCUSSION

Strategy implementation is widely held to be a critical element of the strategy process and hence, to fully understand the connections between strategy process and public service outcomes, scholars should also assess how well strategies are implemented (Bryson, Berry, and Yang 2010; Poister, Pitts, and Edwards 2010). Our study contributes to fill this gap in the literature by providing scholars and practitioners of strategic management in the public sector with some important insights into strategy implementation and pointing to the variables which may influence its success in Canadian public organizations. First, we provide evidence showing the impact of strategic planning on strategy implementation success, which lends support to our first hypothesis about the value of formal planning. Although this proposition has been widely discussed, it is rarely examined in the public sector, in which managerial strategic planning follows and is based on the public policy decisions made by elected officials. A major strength of strategic planning is its ability to reduce uncertainty by inducing managers to look ahead and forecast the future, at least within the political term of the current government. It in turn helps to foresee changes, examine their impact and develop appropriate responsive actions. It also helps in coordinating and integrating efforts, knowledge and capabilities across the organization, which can contribute to successful strategy implementation. However, a central concern in the strategy process literature has been the relative

merits of planned and emergent approaches in strategy formulation (Andrews et al. 2011; Elbanna and Child 2007). Our findings indicate that a planned or formal approach to strategy enhances its implementation in traditional bureaucratic public organizations, which typically operate within the constraints posed by prior public policy decisions and short-term political orientation. This finding differs from the prior arguments of several scholars who advocate decentralized and emergent strategy formulation (e.g. Mintzberg 2000). The difference between our results and some in prior research may be explained in part by methodological and structural differences. As pointed out by Poister et al. (2013), the impact of strategic planning may vary considerably depending on the specification of the dependent variables, namely, the dimensions of the organizational outcomes under observation. For example, since strategy implementation is amenable to managerial control and highly affected by strategy formulation, formal strategic planning may be important, particularly in public organizations where outcomes are typically difficult to control and manage. As such, effective control in the public sector may be best exercised ex ante, that is, through formal planning, instead of ex post through organizational performance measurement. Hence, it is not surprising that formal strategic planning would lead to superior strategy implementation in public organizations.

Elbanna et al.: Strategic planning and implementation success 1035

Second, another contribution of this study is that it leads to a better under- standing of the connection between strategic planning and strategy implementation success in public organizations. In particular, it shows that, in addition to its direct effect, formal planning has an indirect effect on strategy implementation in part through the mediating role of managerial involvement which provides support to our second hypothesis. This finding reflects Canadian practices, as department managers are responsible for implementing public policy and priorities approved at political levels, that is, managerial involvement is essential to formal planning and imple- mentation processes. Future research should examine the effects of other mediating variables, such as employee strategic alignment, organizational learning and flex- ibility, which may influence the planning-implementation relationship (e.g. Ouakouak and Ouedraogo 2013). Third, the study supports our third hypothesis and shows that for public

organizations operating in less stable or unstable environments, formal strategic planning can be especially beneficial for implementation under conditions of uncer- tainty. Environmental variables may moderate the planning-implementation rela- tionship by strengthening its effects, as is the case in this study. Due to a large number of diverse stakeholders and their interdependency in public organizations, particularly in the decentralized Canadian public sector, stakeholder uncertainty is especially relevant. Nevertheless, the strategy-implementation relationship may also be moderated by other important variables in addition to stakeholder uncertainty; and hence future research needs to take into account the moderating effects of other environmental factors, such as economic uncertainty, environmental complexity, political uncertainty and organizational factors, such as past performance and structure.

IMPLICATIONS AND CONCLUSION

This study carries some implications for practicing public managers. First, although they are not directly involved in public policy decisions, they should know that their efforts to strategically plan for their organizations is neither a waste of time nor resources, but can, in fact, lead to successful strategy implementation. This is an indication that formal strategic planning is beneficial to public organizations. Second, the fact that strategic planning has a positive and significant impact on managerial involvement in strategic planning may mean that one of the outcomes of this involvement is the enhancement of managers’ commitment to and alignment with public policy and organizational priorities, in addition to helping managers in acquiring the knowledge necessary for strategy implementation, which in turn increases the possibility of its success. In other words, to get the full benefit of formal strategic planning, public managers should conduct it in a way that enhances

1036 Public Management Review

the effective involvement of managers in its process. Third, managers should exercise caution when tempted to assume only a direct relationship between strategy formulation and implementation because this relationship may be moder- ated by other factors such as stakeholder uncertainty. Our study has some inherent limitations that should be kept in mind when

interpreting and applying our results. The first important limitation is our low survey response rate. Another potential limitation concerns the inherent subjectivity and possible bias of the items used in our survey. Moreover, the single respondent design requires caution in interpreting the results; and it would have been prefer- able to have had multiple respondents in order to minimize the level of systematic response bias. Fourth, the sampled organizations belong to variant government sectors, for example, federal, provincial and municipal. Hence, the same hypotheses could be examined in sub-samples, controlling for the type of sector. In addition, due to data limitations, we are unable to identify which specific stakeholder groups are the source of uncertainty on this occasion. Studies that compared the moderat- ing influence of different groups on the planning-implementation success relation- ship would be extremely valuable, particularly those that cast light on the relationship between bureaucrats and politicians. Future research could enhance the understanding of strategic management speci-

fically in public organizations in several ways. First, researchers can examine the impact of blending formal strategic planning with logical incrementalism on strategy implementation success and search for the optimal approach to use them in practice, which can further develop management theory (see Elbanna and Child 2007; Poister et al. 2013). Second, it is beneficial for future research to carefully consider other determinants of strategy implementation success, since it is largely influenced by a host of variables, some reasonably controllable by public organiza- tions, for example, organizational capabilities, systems and processes, and others mostly beyond their control, for example, economic conditions and political instability. In conclusion, the research presented in this study has contributed to the knowledge

of strategic management and theories of strategy implementation in general and concludes that what public managers do, in terms of strategic planning practices, matters for their organizations and the implementation of their strategies.

ACKNOWLEDGEMENTS

A part of this paper was written during the visit of the first author, as a visiting scholar, to Carleton University in Canada in the winter of 2013.

Elbanna et al.: Strategic planning and implementation success 1037

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

FUNDING

The authors are grateful for the 2-year research grant received from the National Research Foundation, United Arab Emirates [UAE-NRF#: RSA-1108-00788], which enabled this research study to be carried out.

NOTE 1 Strategic planning in the public sector is distinct from political public policy decision-making by elected officials.

Elected officials do not participate in managerial strategic planning per se, and their roles are not part of this study.

ORCID

Said Elbanna http://orcid.org/0000-0002-5891-8258

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