Is strategic planning completely useless? That was the question the CEO of a global manufacturer recently asked himself. Two years earlier, he had launched an ambitious overhaul of the company’s planning process. The old approach, which required business-unit heads to make regular presentations to the firm’s executive committee, had broken down entirely. The ExCom members—the CEO, COO, CFO, CTO, and head of HR—had grown tired of sitting through endless PowerPoint presentations that provided them few opportunities to challenge the business units’ assumptions or influence their strategies. And the unit heads had complained that the ExCom reviews were long on exhortation but short on executable advice. Worse, the reviews led to very few worthwhile decisions.

The revamped process incorporated state-of-the-art thinking about strategic planning. To avoid information overload, it limited each business to 15 “high-impact” exhibits describing the unit’s strategy. To ensure thoughtful discussions, it required that all presentations and supporting materials be distributed to the ExCom at least a week in advance. The review sessions themselves were restructured to allow ample time for give-and-take between the corporate team and the business-unit executives. And rather than force the unit heads to traipse off to headquarters for meetings, the ExCom agreed to spend an unprecedented six weeks each spring visiting all 22 units for daylong sessions. The intent was to make the strategy reviews longer, more focused, and more consequential.

It didn’t work. After using the new process for two planning cycles, the CEO gathered feedback from the participants through an anonymous survey. To his dismay, the report contained a litany of complaints: “It takes too much time.” “It’s at too high a level.” “It’s disconnected from the way we run the business.” And so on. Most damning of all, however, was the respondents’ near-universal view that the new approach produced very few real decisions. The CEO was dumbfounded. How could the company’s cutting-edge planning process still be so badly broken? More important, what should he do to make strategic planning drive more, better, and faster decisions?

Like this CEO, many executives have grown skeptical of strategic planning. Is it any wonder? Despite all the time and energy most companies put into strategic planning, the process is most often a barrier to good decision making, our research indicates. As a result, strategic planning doesn’t really influence most companies’ strategy.

In the following pages, we will demonstrate that the failure of most strategic planning is due to two factors: It is typically an annual process, and it is most often focused on individual business units. As such, the process is completely at odds with the way executives actually make important strategy decisions, which are neither constrained by the calendar nor defined by unit boundaries. Not surprisingly, then, senior executives routinely sidestep the planning process. They make the decisions that really shape their company’s strategy and determine its future—decisions about mergers and acquisitions, product launches, corporate restructurings, and the like—outside the planning process, typically in an ad hoc fashion, without rigorous analysis or productive debate. Critical decisions are made incorrectly or not at all. More than anything else, this disconnect—between the way planning works and the way decision making happens—explains the frustration, if not outright antipathy, most executives feel toward strategic planning.

Who Makes More Decisions?

But companies can fix the process if they attack its root problems. A small number of forward-looking companies have thrown out their calendar-driven, business-unit-focused planning processes and replaced them with continuous, issues-focused decision making. By changing the timing and focus of strategic planning, they’ve also changed the nature of top management’s discussions about strategy—from “review and approve” to “debate and decide,” meaning that senior executives seriously think through every major decision and its implications for the company’s performance and value. Indeed, these companies use the strategy development process to drive decision making. As a consequence, they make more than twice as many important strategic decisions each year as companies that follow the traditional planning model. (See the exhibit “Who Makes More Decisions?”) These companies have stopped making plans and started making decisions.