STRATEGIC PLANS AS CONTRACTS

No matter how unsettling, executives should think of strategic planning as a form of contract. Managers who receive, evaluate and monitor plans are very much like principals in their dealings with agents-managers who prepare, defend and implement these plans. The former cannot observe every move, every decision and action of the latter. So they must rely on various means of inducing the agents-managers to propose and implement plans which are optimal for the corporation. This paper shows how familiar issues and problems with strategic planning take a different dimension when the planning process is viewed as a contractual relationship: 1. (1) By identifying several planning models and showing where and when each is appropriate, the paper helps to understand the potential for frustration that results from a poor fit between a planning system and the firm's circumstances; 2. (2)By depicting the powerful forces which push and shove corporations away from effective strategic planning modes, the paper singles out a set of conditions for high performance strategic systems; 3. (3)By formulating recommendations and words of caution to strategic planners and CEOs, the paper may help to improve the performance of a much maligned but essential management process. © 1990.