THE EFFECT OF STRATEGIC PLANNING ON THE PERFORMANCE AND OPERATIONS OF THE AGRICULTURAL DEVELOPMENT BANK

ABSTRACT

The purpose  of this  study was  to assess the  effect of  strategic planning  on the  performance of

banks in Ghana with reference to the operations of  the Agricultural Development Bank (ADB).

Secondary  and  Primary  data  was  utilized  in  this  study.  Secondar y  data  was  obtained  from

reviewing text books, publications, financial records and internal records of ADB.  Primar y data

was gathered  with  the  aid  of questionnaires.  One  hundred and sixty (160)  questionnaires  were

sent  to  employees  of  the  Greater-Accr a  region  of  ADB  and  one  hundred  and  forty  (140)

responses  were obtained representing a response rate of 87.5%. The results of the administered

questionnaires showed a fairly high level of agreement for the features of the various dimensions

of  an  effectively  managed  bank.  However,  this  study  showed  that  structures  put  in  place  for

bottom-up  information  flow  were  not  known  to  all  employees.  This  study  also  showed  that

employees  were  either  ignorant  about  program  evaluation  or  there  was  a  clear  disregard  for

program  evaluation  at  ADB.  The  researcher   recommends  that  all  factors  of  the  various

dimensions should  be  put  into  the  right  perspective so as  to  help the general  workforce of  the

bank to understand the main objectives and  strategic plans in place to achieve the objectives of

ADB. Lastly, it is recommended that, the bank develops quarterly  meetings at the zonal level to

provide employees the opportunity to be heard on matters relative to strategic planning practices

at ADB.

V

TABLE OF CONTENTS

Page

Title Page

I

Declaration

II

Dedication

III

Acknowledgement

IV

Abstract

V

Table of Contents

VI

List of Tables

XI

Figure

XII

CHAPTER ONE

INTRODUCTION

1

1.1 Background to the Study

1

1.2 Statement of the Problem

4

1.3 Objectives of the Study

5

1.4 Research Questions

5

1.5 Significance of the Study

6

1.6 Brief Research Methodology

6

1.7 Scope of the Study

7

1.8 Limitation of the Study

7

1.9 Organization of the Study

7

VI

CHAPTER TWO

LITERATURE REVIEW

9

2.0 Introduction

9

2.1 Concept of Strategy

9

2.2 The Concept and Evolution of Strategic Planning  11

2.3 Mission, Vision, Goals and Objectives of an organization  14

2.3.1 Mission (Statement)

14

2.3.2 Vision (Statement)

15

2.3.3 Goals and Objectives

15

2.4 Relationship between Strategic Management and Strategic Planning  16

2.4.1 Strategy Formulation

16

2.4.2 Strategy Implementation

17

2.4.3 Strategy Evaluation

18

2.4.4 Related Concepts

18

2.4.5 Strategic Planning and Long- Range Planning  18

2.4.6 Strategic Planning and Strategic Thinking  19

2.4.7 Strategic Planning and Operational Planning  20

2.5 Linkage of Strategic Planning with Performance  20

2.6 The Impact of Strategic Planning on Performance  22

2.7 Performance Measurement in the Banks  26

2.7.1 Performance Measurement Methodologies  27

2.7.2 Refining Profitability Reporting

28

2.7.3 Aligning the Components of Performance  29

VII

2.7.4 Improving Systems Support and Automation  29

2.7.5 Investing in Data Availability, Quality and Consistency  29

CHAPTER THREE

METHODOLOGY

31

3.0 Introduction

31

3.1 Research Design

31

3.2 Population

31

3.3 Sample and Sampling Procedure

32

3.4 Sources of Data

33

3.4.1 Secondary Data Source

33

3.4.2 Primary Data Source

33

3.5 Data Collection Instruments

34

3.5.1 Questionnaire

34

3.5.2 Administration of the Questionnaires  34

3.5.3 Piloting and Evaluation of Questionnaires  35

3.6 Data Analysis Plan

35

3.7 Limitations of the Methodology

36

3.8 Brief History of Agricultural Development Bank (ADB)   36

VIII

CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION OF RESULTS

38

4.0 Introduction

38

4.1 Personal Data

38

4.2 Measurement for the Study

40

4.3 Strategic Planning Dimensions

40

4.3.1 Mission

40

4.3.2 Planning

42

4.3.3 Structure

43

4.3.4 People

44

4.3.5 System

46

4.3.6 Result and Quality

47

4.3.7 Leadership

48

4.3.8 Relationship

50

4.4 Conclusion

52

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

53

5.0 Introduction

53

5.1 Summary of Findings

53

5.1.1 Efficiency of Strategic Planning Operations in ADB  53

5.1.2 Main factors that Affect Strategic Planning at ADB  53

5.1.3 Effect of Strategic Planning on the Performance of ADB  54

IX

5.2 Conclusion

54

5.3 Recommendations

55

REFERENCES

57

APPENDIX I

60

APPENDIX II

70

X

LIST OF TABLES

Table 4.1 Sex and Age Group of Respondents

38

Table 4.2 Descriptive Statistics on Mission of the Bank  41

Table 4.3 Descriptive Statistics on Planning of the Bank  42

Table 4.4 Descriptive Statistics on Structure of the Bank  44

Table 4.5 Descriptive Statistics on People of the Bank  45

Table 4.6 Descriptive Statistics on System of the Bank  47

Table 4.7 Descriptive Statistics on Result and Quality of the Bank  48

Table 4.8 Descriptive Statistics on Leadership of the Bank  49

Table 4.9 Descriptive Statistics on Relationship of the Bank  51

Table 4.10 Validity and Reliability of the Strategic Planning Dimension  52

XI

FIGURE

Figure 4.1 Educational levels of Respondents

39

1

CHAPTER ONE

INTRODUCTION

1.1       Background to the study

In  order  to  assess  the  level  of  success  or  otherwise  of  a  corporate  body,  its  established

strategic plans relative to the performance of the organization in all fronts of operations have

to  be  ascertained.  For mulating,  implementing  and  the  evaluation  of  a  Strategic  Plan

indisputably  become  a  major  activity  in  both  profit  and  not-for-profit  organizations,

especially, the banking sector.

Strategic  Plan  provides  the  basic  direction  and  rationale  for  determining  the  focus  of  an

organization;  and  also  provides  the  specification  against  which  any  organization  may  best

decide what to do and how to do it. Simply put, it is a process for creating and describing a

better  future  in  measurable terms  and the selection of  the  best means to achieve the  results

desired. It is important to note that not all planning is actually strategic even though they may

be termed so. It is said that failure to plan leads to planning to fail.

Strategic  planning  standardizes  the  processes  of  goal/objective  setting,  situation  analysis,

alternative consideration, implementation and evaluation that enable an organization to attain

its goals and objectives (Tapinos et. al. 2005). Sarason and Tegarden, (2003) asserted to the

positive  correlation  between  strategic  planning  and  performance  achievements  as  very

beneficial  for  organizations.  In  their  studies  D yson,  (2000);  McAdam  and  Bailie,  (2002)

further emphasized the need for organizations to align their strategies with their performance

measurement systems.

2

Performance  measurement  has  significant  influence  in  supporting  the  achievement  of  an

organization's  goals  and  the  effectiveness  and  efficiency  of  its  strategic  planning  process.

Thus, in order to assess the level of success or otherwise of a corporate body, its established

strategic plans in connection with the performance of the company in all fronts of operations

had to be established.

Strategic management expert Toffler (2003) writes that a company without a strategy is like

an airplane weaving through the skies, hurled up and down, slammed by winds and lost in the

thunder heads.  If lightning or crushing winds do not destroy it, it will simply run out of gas.

In a similar line of thought, Ross et al (2000) note that, without a strategy an organization is

like a ship without a rudder. It goes round in circles and like a tramp, has no specific place to

go.

Clearly,  these  statements  emphasize  the  importance  and  the  need  for  a  comprehensive,

systematic  and  dynamic  strategic  planning  for   ever y  company  which  seeks  to  survive

competition  in  the  ever  changing  global  competitive  business  environment.  Ansoff  (1970)

argues that planning generally produces  better alignment  and financial  results in companies

which  are  strategically  managed  than  those  which  are  not.  This  suggests  an  apparent

correlation between strategic planning  and the ultimate performance  of a  company in terms

of  its  growth,  profits,  attainment  of  objectives  and  sustained  competitiveness  (Strickland,

2004).

3

Though these assertions  are largely true, Pitts et al (2003) affirm that  exceptional situations

also arise when some companies gain not because they  had in place any strategy but because

they just  benefited from some  sudden conditions  in  the  external environment. Nonetheless,

and  still  consistent  with  the  need  for  evolving  and  constantly  reviewing  strategy,  it  is

important  to  note  that  having  a  sound  strategy  in  itself  does  not  necessarily translate  into

desired   performance   goals   if   it   is   not   properly   implemented.   Both   strategy   and

implementation must be good and timely to achieve positive results. As for a company driven

by wrong  strategic  planning,  Malamud (2004)  likens it to a train  on a  wrong track  saying,

every station it comes to is the wrong station.

These fundamental principles essentially hold true for all industries globally and as should be

expected, management is subject no less to the dynamics of these tendencies. It is  assumed

that  strategic  planning,  like  other  management  initiatives  developed  basically  for  business,

can be adapted in spite of the differences between profit and not-for-profit organizations.

The need for or ganisations to plan and monitor their activities in order to focus resources and

efforts  to  ensure  their  future  survival has  spawned  an  industr y  of  practitioners,  consultants

and  educational  programmes.  Strategic  planning  is  now  a  routine  part  of  business  or

organisations with an accompanying set of beliefs and protocols that underpin the day-to-day

practice. As indicated in the works of Ring and Perry (1985), Br yson and Roering (1987) as

well as Nutt and Backoff (1993), the conceptualization that best recognizes and appropriates

all the possibilities of strategy may be termed strategic. Each of the three aspects is essential

to the others: Strategic Thinking, Strategic Planning, and Strategic Action.

4

1.2       Statement of the Problem

Managements   lead role  requiring strategic thinking,  planning,  decision

-making  and ultimate

implementation  could  also  have  much  to  contribute  to  the  fortunes  or  otherwise  of  the

various  organizations  in  their  respective  industries.  Much  as  the  differences  in  the

performance levels  of  various  organizations  are to be expected,  it  is  still strongly  believed

that the strategies pursued by each organization are largely accountable for the outcome of

their performances.

Strategic  planning  increases the efficiency  and  effectiveness  of  organizations by  improving

both  current  and  future  operations.  Strategic  planning  provides  a  framework  for

management s vision  of the future. The process  determines how  the organization will  change

to  take  advantage of  new  opportunities  that  help  meet  the  needs  of  customers  and  clients.

Strategic planning is  a  difficult process  which requires that  people think and  act creatively.

The strategic planning process is used by management to establish objectives, set goals, and

schedule activities  for achieving  those goals  and includes a method for measuring  progress.

These goals can be accomplished through  the  steps of the strategic plan, beginning with  an

external  and  internal  analysis,  a  clearly  defined  mission  statement,  goals  and  objectives,

formulation  of  specific  strategies,  concluding  with  the  implementation  of  the  str ategy  and

managed control process.

This  research  explores  the  extent  to  which  a new  organizational  structure,  policy  direction

and business models affect the performance and operations of ADB.

ADB s business models

and policies appear to have created new relationships and roles which demand employees to

5

stay focused, know exactly what part they play in the plan and ultimately what is expected of

them  as  a  result.  These  demands  have  created  some  interest  and  apprehension  among

employees and these seem to have significant implications in the new strategic plan of ADB.

It  is  against  this  background  that  the  researcher  is  exploring  into  the  effect  of  strategic

planning on the performance of the Agricultural Development bank.

1.3       Objectives of the Study

The  main  objective  of  the  study  is  to  evaluate  the  effect  of  strategic  planning  on  the

performance of banks in Ghana with refer ence to the operations of Agricultural Development

Bank.

The specific objectives of this study are:

To find out the operational efficiency of the strategic plan at ADB.

To find out the main factors that affect strategic planning practices at ADB.

To find out how strategic planning affects

ADB s corporate performance.

1.4       Research Questions

In order to attain the above stated objectives, the study will hunt for answers to the following

questions:

Is ADB s strategic planning

operationally efficient?

What are the main factors that affect strategic planning practices at ADB?

How is strategic planning affecting the corporate performance of ADB?

6

   

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