Barriers to implementing formal strategic planning
Limited resources
When forming performance measurement strategies, Hospitality SME operators do not always appear confident in formulating, implementing and assessing their plan. Some have difficulties in articulating the critical success factors, indicators and targets used to assess their company’s performance. Therefore, they often rely on their “hard” financial information, such as cost per unit and monetary income. However, there seemed to be an increasing awareness of the need to adopt a more “balanced” approach in order to achieve results that can directly inform business strategy. “Soft” indicators, which are not affected by the time-lag effect, are becoming more important, and cases across the industry were able to articulate examples, particularly in customer care and innovation and learning.
Finding time to keep up with the latest legislation can be annoying in addition to running a tight day to day schedule.
A lack of a fully integrated information technology based financial and management information system has been recognized to be a problem. Respondents appear to have relatively low IT investment, and even when such an investment is made, it is often used solely to replace existing manual systems.
Lack of skilled labour
Respondents appear to be frustrated by lack of skilled labour when addressing aspects of formal strategic planning such as performance measurement, operational planning and communication. Potential problems could be related to the location or part-time or seasonal based working conditions.
Another barrier mentioned was the high level of part-time employee turnover.
One challenge mentioned by an owner is that with most of their staff there always comes a point where they cannot be further developed simply because of the size of the operation and in many of those cases it was necessary for them to leave, there’s no way of promoting them...unless to make the business bigger there’s nothing to do with them to enable them to take on more responsibility. A feature of small business operation is the hands-on involvement of the owner.
Lack of competitive benchmarking (internal and external market intelligence)
This relative lack of sophistication may mean that prices are lower then they need to be across the sector as a whole and that some Hospitality SME’s may actually be under pricing.
There is obviously a real problem with this in that the national museums, some of whom have outdoor sites are now free and that is affecting people’s perception of value quite considerably. For other attractions other than us it has actually decimated their attendance.
Location
Location, which is likely to affect the continuity and frequency of supply to a business, can provide particular barriers to the implementation of formal strategic planning. For some Hospitality SME’s, their relative isolation gave them very little choice as to their suppliers and very little control over the frequency of supply. There seems to be the potential for SME’s located in the same area to work together to form purchasing consortiums of some kind.
The operation has to be sure that the benchmarking initiative it is hoping to implement is tailored specifically to its needs. There is a danger that operators can conduct benchmarking that is neither rigorous nor relevant in an attempt to gain some kind of external perspective on their business performance. Benchmarking works best when specific relevant information is collected at regular intervals and analysed in rigorous manner.
Discussion
In many ways, the barriers identified do not prevent operators from adopting formal strategic planning but they do make their implementation more difficult by creating greater turbulence in the operating environment.
It can be argued that one of the key issues in promoting formal strategic planning in SME’s is the personal hands-on and active involvement of the owner. Many of the formal strategic planning operations analysed here are owner operated and thrive on their personal commitment.
This commitment takes the form of direct active involvement in the day-to-day operation of the business and tends to be achieved through largely informal and undocumented methods. The owner is directly involved in setting the standards and the style of the operation, training the staff on what the standards are, monitoring and controlling the delivery of the product and service, and gathering immediate and direct feedback from customers.
There comes a point, as the business grows through increasing scale or scope, at which the complexity of the business becomes such that the owner cannot cope alone without moving toward more formal and more documented procedures. The key factors influencing this complexity, in addition to the barriers already identified, are the scale of the operation and its operational range. There will come a point as the business expands that the owner’s active control becomes too difficult and similarly there will be a point where the operation becomes too diverse, operates too many services or facilities, for the informal approach to continue. This formalisation can be achieved without introducing excessive amounts of bureaucracy into the business, which might lead to a loss of the pride and passion that make these operations exceptional.
Hospitality SME’s seem to inherit characteristics derived both from the small to medium size of the operation and the nature of the industry sector. The model derived from the results demonstrates the importance of strategic planning setting goals and standards, planning, and a plan approach), communication, networking, and cash flow management. However, the implementation of these concepts is no guarantee of success. The SME’s also identified a number of barriers to success, which cover three general areas. The first is general factors, which can influence any business, such as global terrorism or disease outbreaks. The second is related to the size of SME’s and their relative lack of financial and human resources with the resulting lack of knowledge of their competitors and their market. The intimate involvement of the owner or manager with all aspects of the business creates a different social dynamic.
Conclusion
The use of the word strategy has now become so widespread within the lexicon of business language that it has become almost meaningless. Strategy is often used as a type of mantra which if repeated in the right circumstances gives the impression of action but actually provides little direction for the organisation. The use of the term as a description of longer term planning is helpful but unless it provides the right guideposts it is equally ineffective. The formal strategic plan should provide a blue print for action which can be interpreted at any level of the organisation. The nature of strategy is further obscured by its specialist applications, for instance, strategic marketing, and strategic business planning, corporate strategy and so on. The context in which the term is used is not that important as long as clear guidelines for long term action are included.
In fact, according to (Olsen et al.), hospitality SME’s are aware of the need to relate formal strategic planning to long-range, but so far the majority are just relating this information to short term decisions. Much of the planning activity of managers is informal in nature, managers are too concerned with the short term, and for this reason, their main goal is to get information about the economy, financing and customer needs and wants, and ignoring other sectors of the general environment. Olsen et al, (1994). There are many structural and psychological reasons why this happens. Some of the reasons supporting an informal strategic planning are expensive when engaged in at the highest levels of the firm. Another major reason is that any attempt to monitor both the general and task strategic comprehensively is beyond the resources and abilities of all SME’s.
There are many Hospitality SME’s where strategies are not made explicit or simply do not exist formally. Strategies can not be purely deliberate and a few can be purely emergent. How ever, considering that Hospitality SME’s will not formalise their strategies just to justify the creation of a planning activity, the justification will have to originate from managers who must realise the importance of planning the strategic of an organisation for better decision making, no matter what kind.
References
Mintzberg, H. (1992), Five Ps for strategy, in Mintzberg, H. and Quinn, J. (Eds), The Strategy Process: Concepts and Contexts, Prentice-Hall, London.
Mintzberg, H. (1994), The Rise and Fall of Strategic Planning, Prentice-Hall, London.
Olsen, M. Tse, E. and West, J. (1992), Strategic Management in the Hospitality Industry, International Thomson Publishing, London.
Olsen, M., Murphy, B. and Teare, R. (1994), CEO perspectives on scanning the global hotel business environment, International Journal of Contemporary Hospitality Management.
Fifield, P. (1992), Marketing Strategy, Butterworth-Heinemann.
Fahey, L. and Narayanan, V. (1986), Macro environmental Analysis for Strategic Management, West Publishing, St. Paul, MN.
Wheelen, T. and Hunger, J. (1989), Strategic Management, Addison-Wesley, Reading, MA.
Ashton, C. (1997), Strategic Performance Measurement, Business Intelligence, London.
Bergin, S., Jago, L.K. and Deery, M. (2000), Benchmarking in the hospitality industry: an important but misinterpreted concept, Australian Journal of hospitality Management.
Bowen, A., Jones, P. and Lockwood, A. (2003), Best Practice in Tourism, hospitality and Leisure, Threshold Press, Newbury.
Cassell, C., Nadin, S., Gray, M. and Clegg, C. (2002), Exploring human resource management practices in small and medium sized enterprises, Personnel Review.
Francis, G., Hinton, M., Holloway, J. and Humphreys, I. (1999), Best practice benchmarking: a route to competitiveness?, Journal of Air Transport Management.
Gunasekaran, A. (2003), Benchmarking in small and medium enterprises, Benchmarking: An International Journal, Editorial comment.
Jones, P. and Hwang, L.J.J. (2002), Improving business performance in service SME’s: modeling ‘formal strategic planning’, paper presented at 25th ISBA National Small Firms Conference: Competing Perspectives of Small Business and Entrepreneurship, 13-16 November.
Kozak, M. and Rimmington, M. (1998), Benchmarking: destination attractiveness and small hospitality business performance, International Journal of Contemporary Hospitality Management.
Kyro, P. (2003), Revising the concept and forms of benchmarking, Benchmarking: An International Journal.
McAdam, R. and Kelly, M. (2002), A business excellence approaches to generic benchmarking in SME’s, Benchmarking: An International Journal.
Monkhouse, E. (1995), The role of competitive benchmarking in small- to medium-sized enterprises, Benchmarking for Quality Management and Technology.
Ogden, S.M. (1998), Comment: benchmarking and best practice in the small hotel sector, International Journal of Contemporary Hospitality Management.
Patton, M.Q. (1990), Qualitative Evaluation and Research Methods, 2nd ed.