DQ - Strategic Planning

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AN ASSESSMENT OF THE CONNECTION OF ELEMENTS IN A STRATEGIC PLAN:

A CASE STUDY OF SABIC COMPANY

Hana J. M. Alotaibi*

Abstract: A strategic plan consists of several elements that can be grouped into

determinants, strategic planning and outcomes. An important consideration is how well the

elements fit together. An investigation was conducted on a Saudi public-private company in

the petrochemicals sector on the strength of the connection between its elements based on

analysis of documents and interviews. Although strategic planning takes place and analytical

tools are used, several issues were uncovered pertaining to this connection, and major

obstacles noted include the lack of communication of the plans at lower levels, and the high

level of bureaucracy. Moreover, the analytical tools are not used effectively to guide the

planning. Recommendations are made both for the organisation investigated and for further

research.

Keywords: Strategic planning, Strategic plan elements, Connection of elements.

*College of Business- Umm Al-Qura University- Makkah- Saudi Arabia

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I. INTRODUCTION Strategic planning is characterised by a systematic and formalised effort by an organisation

that defines its objectives, policies and strategies (Steiner, 1979). Strategic plans usually

contain detailed information on implementing policies and strategies for achieving the

desired objectives and thereby help the company attain its purpose. Similarly, Hax & Majluf

(1996) explained that strategic planning is a well-defined effort with the aim of completely

satisfying the organisation's strategy by assigning responsibilities for its implementation.

Moreover, a strategic plan positions a company in its selected market area in an attempt for

it to compete successfully and achieve its desired performance or other desired outcomes.

Many organisations are increasingly adopting the practice of strategic planning in both the

private and public sectors in anticipation of improved performance (K'Obonyo & Arasa,

2012).

Although no one strategic model would be suitable for all organisations and contexts, there

are certain basic elements that tend to be common in a strategic plan. The typical elements

are a statement of mission, values, and vision; defining goals, aims, and objectives;

conducting a SWOT analysis and developing a scorecard, and specifying actions plans and

an organisation-wide strategy. Another important consideration however, is how well the

elements fit together. In other words, what is the strength of the linkage between the

elements? Do they work well together? This study examined the strategic plan of a

particular organisation, namely Sabic Company in Saudi Arabia, for the quality of the

connection between its elements, that is, between the determinants, strategic planning,

and outcomes.

II. BACKGROUND OF SABIC The company selected for the investigation was Sabic. This was established in 1976 as a

public company, is one of the world's largest manufacturers of petrochemicals. Its

headquarters are in Riyadh, and it also operates in Al-Jubail and Yanbu, and has a global

presence with regional offices in MENA, Asia, the Americas and Europe and operations in 40

countries. Its management team is overseen by a board of directors that include members

from both the private sector and government. The proportion of Saudi government shares

and private shares of Saudi and other GCC investors are 70% and 30% respectively. The

company has six business units: chemicals, polymers, performance chemicals, fertilizers,

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metals, and innovative plastics.

The company claims to have a corporate culture that is “characterized by its ability to adapt

quickly” to its customers' needs and requirements; that its “tradition of ingenuity has

driven continuous improvement” with respect to its operations and drive for growth. It also

claims to be forward looking and invests heavily in technology and innovation having

“hundreds of dedicated scientists” around the world engaged in ongoing development.

And, it claims its SABIC2020 project that was launched in 2006 signified its “ambition to

take a global leadership position in the field of petrochemicals”.

A key foundation of its renewed 2025 strategy is sustainability, which has the goal of

“ensuring future generations have the ability to realize their potential and improve their

quality of life”. It is “central to everything” it does, and the sustainability strategy “is

integrated and comprehensive”. For instance, the company claims, “Our approach to ethics

and compliance goes beyond our legal obligations”. On its website, the CEO specifically

mentions the commitment to the global communities in which the company operates, to

protect and sustain the environment, and proactively working to create long term

sustainable relationships with customers through finding the best solutions for them.

III. LITERATURE REVIEW A. Strategic Planning

Strategic planning is an essential part of strategic management that establishes “the

foundation upon which tactical and business planning and evaluation rest” (Cox & Radwan,

2015: 135). It helps the management define and achieve its goals. And, it helps

organisations anticipate and respond to changes effectively (Bryson, 2011).

Strategies are needed by not only for-profit, but also non-profit and governmental/public

organisations (Moore, 2000). However, literature is scarce on strategic planning in

organisations that involve the government (McHatton et al., 2011). In the public sector,

there tends to be a great emphasis on strategic planning, but there are typically delays in its

implementation or else certain activities are missed altogether (Nartisa et al., 2012). On the

other hand, many entrepreneurs in the private sector seek short-term rather than long-

term gains, as they generally lack adequate foresight and thereby forsake their chances of

greater growth.

Particular success factors that have been identified as contributing to the success of

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strategic planning; being critical for it, include leadership (Moxley, 2004), strong leaders

(McClamroch et al., 2001), and monitoring the process of implementation (Craft & Benson,

2006). In a public-private partnership, factors such as shared vision, open communication,

and high level of collaboration are also important to the extent of being success factors

(Jacobson & Choi, 2008).

Research has also been conducted on identifying critical success factors (CSF's) in strategic

planning. Knowing these can aid in strategic planning efforts by highlighting the present

situation of an organisation, and its potential future (Gates, 2010). A CSF is a key area in

which an organisation must perform well consistently in order to achieve its mission. It may

be ascertained through a review of the organisation's goals and objectives, by carrying out

interviews, or conducting document analysis. These variables are those that are most likely

to affect the success or failure of the organisation in terms of its goals. By making CSF's

explicit, the organisation can set priorities and allocate resources where they are most

needed (Bullen & Rockart, 1981).

In an investigation on the use of strategic planning tools and techniques in Saudi Arabia (Al-

Ghamdi, 2005), it was found that CSF analysis is the most widely and regularly used

techniques for strategic planning. This investigation was based on a sample of 72 Saudi

organisations that were asked about 13 different tools and techniques. Although this

technique was prominent however, only 10% of the planners reported using any of the

techniques regularly, and only a further 17% reported using them frequently. The next

common techniques were benchmarking and what-if analysis. Notably, this study was

carried out a decade ago. A more recent study on this aspect of strategic planning could not

be found. However, a more recent study in Oman showed that the non-usage of strategic

planning tools and techniques remains high at 30% (and that benchmarking is the most

commonly used tool there (Rajasekar & Raee, 2014).

There does not appear to have been any previous research on linkage of elements in a

strategic plan of any Saudi company. Research has been conducted on the use of strategic

planning tools and techniques in Saudi Arabia (Al-Ghamdi & Al-Wuhaibi, 2001; Al-Ghamdi,

2005), but not on the connection between the elements of strategic planning. Studies are

also scarce on linkage in general, on non-Saudi organisations (Poister et al., 2010;

Choonhaklai & Wangkanond, 2014).

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B. Elements of a Strategic Plan

According to Bryson (2011), a strategic plan comprises of the following components:

• Vision – a future expectation of what the organisation aspires to become;

• Philosophy and value;

• Mission – things to be done in order to achieve the vision;

• Goals/Objectives – things to be achieved after the mission is implemented;

• Strategic issues – main issues that need to be developed for achieving the goals;

• Programs and plans – those that must be implemented for progressing towards the

goals;

• Projects – things to be done for meeting indicators of different programs.

Gates (2010) provides a more thorough listing of elements of a strategic plan along with

definitions of key terms related to strategic planning. These are presented in Table 1.

Understanding the elements and the relationships between them for supporting each other

is essential to prepare for strategic thinking, and for guiding efforts in implementing the

planning.

Table 1: Strategic planning terms

Brief introduction

Mission The primary purpose or business; “it describes what an organization does, for whom, and its benefit”. It is not a time-bound objective.

Vision “An ideal that an organization intends to pursue. It links the organization to the future by articulating instantiations of successful execution of the mission… a source of inspiration and can be broader than the organization's capabilities.”

Goals “Broad, measurable aims that support the accomplishment of a mission.”

Objectives “Specific, quantifiable, lower-level targets that indicate an accomplishment of a goal.”

Guiding principles “Directive statements that articulate the constraints an organization chooses to place upon the way it achieves its goals.” They embrace “core values that are used to shape an organization's strategy”, and reflect its long-term intentions.

Enablers “External conditions or organizational strengths that facilitate an organization's ability to accomplish its goals or objectives.”

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Brief introduction

Barriers “External conditions or organizational (internal) weaknesses that hinder an organization's ability to accomplish a goal or objective.”

Strategy “A derived approach to achieving the mission, goals, and objectives of an organization.” The strategy supports its vision, takes organizational enablers/barriers into account, and “upholds its guiding principles”.

Strategic plan “A document that results from a strategic planning activity… [that] elaborates the organizational strategy and documents the elements that influence it.”

Initiative “A specific set of actions that implement a strategy.”

Actions “Specific steps to achieve a goal or objective.” These “typically have assigned staff and schedule constraints”.

Performance Measures

These “describe performance targets relevant to each objective”.

Source: Gates (2010) (adapted)

Poister et al. (2010) and Hu et al. (2014) present a conceptual framework that regards

strategic planning and management as defined by three components: (1) determinants, (2)

process, and (3) outcomes. The framework presented by Hu et al. did not specifically

mention the term 'strategic management', but is otherwise similar in pointing out the three

components. This integrated framework was also used in a study conducted in Thailand on

its Ministry of Justice (Choonhaklai & Wangkanond, 2014). This study adopts the same

framework for qualitative analysis. As per this framework, the elements of determinants,

strategic planning, and outcomes are as follows:

Determinants

1. Rules and commands overseeing the strategic planning

2. Perception and understanding of personnel that reflects their preparedness for

mobilisation;

3. Organisational leadership

Strategic planning

1. Formation and determination of strategies for analysing the process in response to

goals, environments, application of models, and application of tools

2. Communication and transmission of vision, mission, goals, strategic issues and

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indicators to all levels

3. Participation of all parties in determining the goals, strategies and indicators for

obtaining beneficial strategic issues

4. Implementation of plans, how well integrated they are, and budgeting by priority

Outcomes

1. Organisational competence;

2. Results from the implementation of the plans

Determinants include systems and laws pertaining to internal operations, the line of

command, organisational environment, and other related elements such as leadership, and

size and age of the organisation (Hu et al., 2014). As regards outcomes, Poister et al. (2010)

distinguished between two levels: those that increase organisational competence, and

those pertaining to long term performance in the implementation of a strategic plan,

providing a service, and in enforcing its laws. Examples of the former are effective

leadership, organisational culture, adaptability to changing environments, strong

partnerships, and having satisfied stakeholders, and examples of the latter are service

quality, service efficiency, client satisfaction, and number of complaints. Hu et al. (2014) on

the other hand, define outcomes in terms of the ability to prepare the missions and goals,

prioritise plans, connect between the external factors, and improve the organisation's

management and effectiveness. Notably, whereas the direction of influence is from the

determinants through strategic planning to outcomes, there may also be a feedback loop in

the reverse direction.

In regard to the strength of connection of elements in a strategic plan, previous studies on

strategic planning have mainly focused on its connection with company performance

(David, 1997; Miller & Cardinal, 1994). For instance, Thompson et al. (2007) claimed that a

good strategy is one that enables a company to build a market position that is strong

enough and makes the organisation capable enough to perform successfully despite any

unforeseen events, internal difficulties and strong competition. In practice, companies

realise no more than about 60% of the potential value of their strategy due to defects and

breakdowns in their planning and its execution (Mankins & Steele, 2005). It is therefore

important that the strategy remains relevant to the forces at work in the organisation's

environment (Johnson et al., 2005).

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Other studies have examined the underlying concepts, procedures and tools used to assist

in strategic planning tasks (Craft, 2006). There are also models that have been devised to

advise on how to operate a strategic plan from beginning to implementation (Allison &

Kaye, 2005). In general, it is advised to first assess what the organisation is doing presently,

to know the environmental context in which it is operating and the organisation's strengths,

weaknesses, opportunities and threats, and what needs to be done. Also, it is stressed that

it is not so much the approach taken to implement a strategic plan that is important; rather,

it is important to ensure that it is followed through. Identifying the steps to be involved

helps to treat strategic planning as a process, and the identification of tasks helps those

who are responsible for implementing the plan, know its prerequisites, dependencies, and

keep an eye on the schedule. In other words, structure gives confidence to the process.

IV. METHODOLOGY An assessment of the quality of the linkage in the strategic plan of Sabic was made based on

the qualitative research design highlighted in the literature review using the integrated

conceptual framework based on those of Poister et al. (2010) and Hu et al. (2014).

The data was obtained by carrying out exploratory research to determine the determinants,

strategic planning and outcomes of Sabic; carrying out structured interviews, gathering

relevant company information and documents.

After transcription of the interview data, content analysis was undertaken to identify

patterns and themes. A total of eight interviews were carried out of management

personnel involved in strategic planning at the company.

V. FINDINGS The findings are presented below on each of the three components assessed.

A. Determinants

The rules and regulations of the company investigated were clearly defined and

communicated. These rules and regulations pertain to several areas and aspects of the

organisation. In addition, the company has a code of ethics to guide the organisational

culture, establish its commitment to performance, and uphold its core values. The latter are

in relation to its employees, defining of standards, and the company's relationship with

communities. The company also has other policies to guide how the organisation should be

run.

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In regard to perception and understanding, the interview findings suggest there is a

shortage of personnel for the important task of strategic planning and its implementation.

Existing personnel are preoccupied with other duties and responsibilities. For instance, one

interviewee pointed out, “We don't have time to consider additional tasks that are best left

to the higher management. We are already overburdened with our routine work and

duties.”

Leadership in the company seemed to be strong and well-informed of the strategic planning

at the top, but somewhat variable and relatively less-informed at the middle and bottom. In

other words, some inconsistencies were apparent, and it also appeared that there may be a

small rift between the views of the government personnel involving in the running of the

company and its private leadership. Consequently, the lower level managers and

administrators were not in a position to satisfactorily lead the company in meeting its

indicators directly related to the company's strategic planning. It was apparent that at this

lower level, the management were not so involved in the strategic planning, or that there is

a deficiency in the communication of the plans.

B. Strategic planning, tools and techniques

1) Main elements

Table 2 presents four main elements of the selected company's strategic plan: its vision,

mission, values and standards.

Table 2: Main elements of the company's strategic plan

Element Description

Vision “to be the preferred world leader in chemicals”

Mission “to responsibly provide quality products and services through innovation, learning and operational excellence while sustaining maximum value for our stakeholders”

Values “With uncompromising integrity as our foundation we will: Inspire, Engage, Create and Deliver”

Standar ds

“We will use our natural resources and human talent to their best advantage by innovating, educating and using the latest technology. This care for people and natural resources is reflective of our standards. SABIC prides itself on its integrity, and we set ourselves the highest standards in relation to business practices, safety and the care of the environment. We will not compromise these standards”

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2) Use of tools and techniques

There was evidence of the use of such tools as SWOT analysis (identification of Strengths,

Weaknesses, Opportunities and Threats) and PEST analysis for analysing the external

environment. In addition, some critical success factors had also been identified although

they were not well communicated. However, as with the strategic planning overall, the

specified goals and objectives of the organisation did not take into account the results of

the SWOT analyses conducted by the company. That is, these tools were not used to inform

the devising of the company's vision, mission statement, and other descriptives, and

awareness of the points and factors identified from the use of the aforementioned tools

was not spread throughout the company.

3) Communication and information transmission

The company has a website on which the vision, mission, values and other standards are

stated in the 'about' section, as was expected. However, the interviews revealed that these

indicators had remained the same for a long time. Moreover, it was found that there was

no formal process in place for communicating information about the company's strategic

planning and direction. This was conveyed during executive meetings and was known

among those in the executive body, but there was little evidence of an attempt to

stringently implement those plans, and to communicate them to non-executive members of

the company.

4) Involvement of stakeholders

Participation in the strategic planning process involved a number of different stakeholders,

but this merely reflected its shareholders/investors, and was largely engaged in by those

making the strategic plans. The management involves its Board of Directors in its strategic

planning activities, but as noted earlier, there is relatively little involvement of personnel

from lower levels of management. This included participation by the company's

management, key private investors and representatives of the government with interests in

the company. Other external stakeholders are not included. Moreover, participation in

meetings to discuss strategic planning issues tends to be low compared to the numbers of

potential participants, and many that do appear are present to merely express their

opinions and raise their concerns rather than offer constructive suggestions for improving

the strategic planning process.

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The interviews revealed that the strategic planning process is viewed as a complicated

exercise that is best left to the key personnel in the management and board of directors. A

typical interviewee response was, “It is not our responsibility to ensure of the company's

strategic direction. That is what management is for. We already have plenty of tasks to do.

It is the management's responsibility to guide us.” Notably, a few expressed the opinion

that seems to diminish the importance of strategic planning. For instance, one interviewee

who participated in important meetings commented, “The company is already doing well.

We don't need to discuss to keep changing our direction all the time. Besides, we know

what we have to do, so it's not necessary to crystallize our plans and tell everyone about

them.” Another emphasized the importance of focusing on present circumstances and

needs.

C. Outcomes

The findings for outcomes pertain to organisational competence and implementation

outcomes. The findings reveal that an empowerment strategy was lacking that utilised

networking. The working atmosphere can be described as a strange combination of some

creative and innovative practices, and an overall bureaucratic one. In particular, there was a

strict level of conformity to the company's rules and regulations at the expense of

facilitating strategic planning. As one interviewee said, “We have to strictly abide by the

rules and regulations imposed on us. We are not allowed to introduce anything new

without permission.”

There was also evidence of lacking in the second set of outcomes pertaining to

implementation. The implementation of company plans were not well documented in

literature that was accessible to all levels of management and employees. Information on

minute details of the strategic planning discussed at the higher level meetings was even

more rare to be found.

VI. DISCUSSION AND RECOMMENDATIONS A. Determinants

The determinants as far as the rules and regulations are concerned are as expected because

organisations need to carry out routine tasks, and ensure they meet relevant laws and

other commitments with higher authorities (Poister et al., 2010).

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B. Strategic planning

1) Process

Strategic planning pertains to the process of formation and determination of strategic

plans, their communication and their transmission prior to implementation. Having a vision

is vital for strategic planning to be successful because it provides the organisation with a

sense of direction. For instance, members of the organisation become acquainted with its

aspirations and know what improvements need to be made in order to help it realise them.

Responding effectively to changing environments requires organisations to be able to

understand both their internal and external environments so that they can build

appropriate strategies according to the contexts (Bryson, 2004). As per this thinking, the

strategic planning processes carried out by the company investigated were not adequate

because they did not utilise all of the information from the SWOT analyses in preparing the

strategic plans, and in wording the vision, mission and objectives.

2) Perception and understanding

In regard to perception and understanding, there appears to be inadequate attention to

strategic planning. Existing personnel are too preoccupied with their routine work, and

there is also an additional hindrance from too frequent transfers of some personnel.

Furthermore, there were insufficient provisions for systematic training and improvement of

non-managerial personnel so that they could understand and contribute to strategic

planning. The company would be well advised to improve in this area to enable them to

implement the strategic planning more effectively and make useful contributions to further

planning.

3) Leadership

The company's leadership is another critical factor that determines the effectiveness of its

strategic planning. The finding that the leadership did possess vision and adopted a creative

approach was promising, but this was not prevalent throughout the management,

especially among the government representatives. Moreover, deficiencies in

communicating the strategic planning from the management level also hindered its

effective implementation, and the inability of lower level managers and administrators to

focus on those outcomes that could help the company to directly meet its main indicators.

Given the critical role of leadership, it is recommended for the higher management to give

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greater attention to conducting strategic planning in meetings by involving more lower level

management, senior employees and other valuable stakeholders. Furthermore, there is a

need to give greater attention to facilitating the implementation of the plans. Additional

goal oriented personnel would be better for the company than having all of them too

preoccupied with carrying out the routine work. In short, they can adopt the practices of

those organisations that have specifically aligned their strategies with their missions (Hu et

al., 2014).

4) Stakeholder involvement

The involvement of stakeholders was found to be confined to the those directly responsible

for the task of strategic planning. Moreover, there was insufficient communication of the

strategic planning being done throughout the company. Involving stakeholders is important

(Mercer, 1991) because their participation can potentially help improve the quality of

strategic planning (Allison & Kaye, 1997), and their feedback may help to re-examine or

adjust the plans. The lack of involvement compared to what may be more common in the

private sector may be due to the fact that this is a joint public-private enterprise with

government involvement. As was observed in the study by Choonhaklai & Wangkanond

(2014), a similar situation may be common in Saudi Arabia in that government departments

tend to be in the habit of carrying out more routine work, and are unaccustomed to

rigorous planning and evaluation.

5) Implementation of the strategic planning

The effective implementation of the strategic planning was beset by a number of obstacles

for two main reasons. Firstly, the implementation was not based on strong strategic

planning, one reason being that the results of many analytical tools were not used to guide

the planning. Secondly, the lack of adequate communication of the strategic plans also

hinders its effective implementation. An effective implementation of strategic planning

requires that the strategic plan is incorporated throughout the system so as to create real

value for the organisation (Bryson, 2011). The implementation strategy should include

methods for creating the capacity to sustain the implementation, achieve goals, and create

ongoing learning opportunities.

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C. Outcomes

1) General outcomes

The poor quality of outcomes was expected given the several issues present relating to

determinants and strategic planning. The company needs to make a firm commitment to

adopting an innovative orientation and discarding its practices that are holding it back from

undertaking and implementing effective strategic planning. In particular, it should work

with the government and strive to remove as many bureaucratic hurdles as possible, and

minimise the stringency and complexity of its extensive rules and regulations. The high level

of bureaucracy present in the company is typical of government departments (Sun & Xu,

2010), but this is a joint public-private enterprise and flexibility is needed for strategic

planning to be effective.

Moreover, the company must work on improving the documentation of its strategic plans,

and review how its implementation can be facilitated. A main step in this direction would

be to make the missions clearer for each department and to provide them with key

indicators for them to attain.

2) Sustainability

Besides the above assessed components, the company expressed a strong inclination for

sustainability, and has an expressed goal in this regard. Moreover, it claims its sustainability

strategy is “integrated and comprehensive”. This expression was also evident in the

interviews with repeated references to the environment, and pointing out the company's

role in protecting and sustaining it. The company's mission statement does hint at being

responsible, and its standards do mention “safety and care of the environment”, but

otherwise there is little evidence of a sustainability attitude in working practices. For

instance, there are no environmental targets that are stringently applied. It is as if an

illusion of being concerned for the environment is being presented, and although the

brochures depict some notable efforts, the sustainability attempt is not aligned with the

company's strategic planning and is not therefore given sufficient priority. The company

should make sustainability a more central concern if it wants to be serious about it, and

align to defined objectives and achievable targets.

VII. CONCLUSION This study investigated the connection between the elements of a strategic plan in a

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particular Saudi company to see how well the elements fit together. The selected company

is a public company involved in the manufacture of petrochemicals and related products. Its

board of directors includes members from both the private sector and government. These

elements were grouped into determinants, the strategic planning process itself, and its

outcomes. A qualitative research design was employed in which document analysis and

structured interviews were carried out. Evidence of strategic planning in all the different

forms was present. The main elements such as vision, mission, values and standards were

well defined and communicated, and tools such as SWOT and PEST among others were

used, but there were some deficiencies in other areas and strength of connection between

the elements was not strong.

Many of the management personnel were too strictly preoccupied with routine duties and

responsibilities to give attention to ensuring implementation of the strategic plan, and the

plans were not well communicated at the lower levels of management. There was no

formal process in place for communicating information about the strategic planning and

direction. Other main obstacles that were identified as contributing to obstructing the

effectiveness of the strategic planning and its implementation were its bureaucratic culture,

and lacking in involvement of more stakeholders. Consequently, the implementation of the

planning was not deemed to be as effective as it could be. The results of the analytical tools

were not used effectively to guide the planning, lack of communication hindered its

effective implementation. This was evident from the generally poor quality of strategic

planning outcomes.

A well connected strategic plan would be characterised, for instance, by effective utilisation

of the results from the use of tools such as SWOT analysis in guiding the planning.

Improvements are needed particularly in the area of perception, understanding and

communication of the plans in order to spread more awareness of the strategic planning

throughout the company, and have more goal oriented personnel devoted to ensuring its

implementation. Also, lower levels of management should be permitted to be more

involved in this task of planning and implementation. In particular, the bureaucratic hurdles

need to be minimised, and key indicators should be identified for different departments to

work towards attaining. Also, if the company's core strategic foundation of sustainability is

to be taken seriously, it should be reflected in its working practices in these targets.

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The research recommendations are to investigate this area of connections between the

elements further, and to find more ways of strengthening them. Further investigation in the

private sector may also reveal companies with excellent connections that can serve as

models for others.

Acknowledgment:

The Author would like to express her gratefully thank to Sabic Company for their

cooperation in gathering the data and facilitating the interviews process.

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