Does it pay to plan? Or have the critics of planning won the debate? Let’s look at the evidence.

Contrary to what the critics of planning say, the evidence generally supports the position that organizations should have formal plans. Although most studies that have looked at the relationship between planning and performance have shown generally positive relationships, we can’t say that organizations that formally plan always outperform those that don’t.5 But what can we conclude?

• Formal planning generally means higher profits, higher return on assets, and other positive financial results.

• The quality of the planning process and the appropriate implementation of the plan probably contribute more to high performance than does the extent of planning.

• In those organizations where formal planning did not lead to higher performance, the environment—for instance, governmental regulations, unforeseen economic challenges, and so forth—was often to blame. Why? Because managers may have fewer viable alternatives because of constraints in the environment.

One important aspect of an organization’s formal planning is strategic planning, which managers do as part of the strategic management process.