STRATEGIC EVALUATION AND CONTROL
Strategic evaluation and control is the process of determining the effectiveness of a given strategy in
achieving the organizational objectives and taking corrective actions whenever required.
STRATEGIC EVALUATION PROCESS:
STEP [Link] standards of performance: It must focus on question like:
PROCESS
Setting standards of
performance
Measurement of
performance
Analyzing variances
Taking corrective
actions
What standards should be set?
How should the standards be set?
In what terms should these standards be expressed?
The firm must identify the areas of operational efficiency in terms of people,
process, productivity and pace. Standards set must be related to key management
tasks. The special requirement for performance of these tasks must be studied. It
can be expresses in terms of performance indicators.
The criteria for setting standards may be qualitative or quantitative. Therefore
standards can be set keeping in mind past achievement compare performance with
industry average or major competitors. Factors such as capabilities of a firm core
competencies ,risk bearing ability, strategic clarity, and flexibility and workability
must also be considered.
STEP [Link] of performance: Standards of performance act as a
benchmark in evaluating the actual performance. Operationally it is done through
accounting, reporting and communication system. The key areas which must be
kept in mind are difficulty in measurement, timing of measurement (critical points)
and periodicity in measurement (task schedule).
STEP [Link] variances: The two main tasks are noting deviations and
finding the cause of deviations.
When actual performance is equal to budgeted performance tolerance
limit must be set.
When actual performance is greater than budgeted performance one
must check the validity of standard and efficiency of management.
When actual performance is less than budgeted performance we must
pinpoint the areas where performance is low and take corrective
action.
The cause of deviations may be:
External or internal
Random or expected
Temporary or permanent
The two main questions to focus upon are:
Are the strategies still valid?
Does the organization have the capacity to responds to the changes needed?
STEP [Link] corrective actions: It consists of the following:
Checking of performance: It includes in depth analysis and
diagnosis of the factors that might b responsible for bad
performance.
Checking of standards: It results in lowering or elevation of
standards according to the conditions.
Reformulate strategies, plans, objectives: Giving a fresh start to the
strategic management process.
Strategic control is also focused on the achievement of future goals, rather than
the evaluation of past performance.
Strategic control the process of monitoring and correcting a firm’s strategy and
performance.
Traditional control system
1. strategies are formulated and top management sets goals
2. strategies are implemented
3. performance is measured against the predetermined goal set
Most appropriate when
Environment is stable and relatively simple
Goals and objectives can be measured with certainty
Little need for complex measures of performance
Contemporary control system
Informational control
a method of organizational control in which a firm gathers and
analyzes information from the internal and external environment in
order to obtain the best fit between the organization’s goals and
strategies and the strategic environment.
Primarily concerned with whether or not the organization is “doing the
right things”
Key question
“Do the organization’s goals and strategies still ‘fit’ within the
context of the current strategic environment?”
Two key issues
Scan and monitor external environment (general and industry)
Continuously monitor the internal environment
Behavioral control
a method of organizational control in which a firm influences the
actions of employees through culture, rewards, and boundaries.
Behavioral control is focused on implementation—doing things right
Three key control “levers”
Culture
Rewards
Boundaries
Types of strategic control
Premise Control
Your business strategy is based on an assumed premise of how things will occur
in the future. Premise controls allow you to examine whether this assumption
still holds true once you actually put your ideas into action. Premises may be
affected by environmental factors such as inflation, interest rates and social
changes or by industry factors such as competitors, suppliers and barriers to
entry. These controls will help you recognize changes in the premise so you can
adapt your strategy accordingly.
Implementation Control
Once you design a strategy for your business, you will need to implement it. As
you take the steps necessary to put your plan into action, use implementation
controls to ensure no adjustments to your strategy are necessary. Two basic
types of implementation controls are monitoring strategic thrusts and doing
milestone reviews. The former means you analyze the tactics you're using to
gain market share. The latter allows you to conduct a full-scale assessment of
your business at designated points in your strategy.
Special Alert Control
You will need mechanisms in place to assess the position of your business in the
case of sudden events, such as natural disasters, product recalls or market
spikes. Special alert controls allow you to reconsider the relevancy of your
strategy in light of these new events. Prepare how you will handle these special
alerts with procedures to be followed, priorities to keep and tools to be used.
Strategic Surveillance Controls
As a small-business owner, you need to protect your business from external
threats that may hinder the success of your strategy. Strategic surveillance
controls allow you to monitor multiple sources for these threats. Continually
safeguard your strategy by following trade journals, attending conferences and
keeping awareness of industry trends to meet these risks as they arise.
Techniques of Strategic control
1)Gap Analysis
The gap analysis is one strategic evaluation technique used to measure
the gap between the organization’s current position and its desired
position.
The gap analysis is used to evaluate a variety of aspects of business, from
profit and production to marketing, research and development and
management information systems.
Typically, a variety of financial data is analyzed and compared to other
businesses within the same industry to evaluate the gap between the
organization and its strongest competitors.
2)SWOT Analysis
The SWOT analysis is another common strategic evaluation technique
used as a part of the strategic management process. The SWOT analysis
evaluates the organization’s strengths, weaknesses, opportunities and
threats.
Strengths and weaknesses are internal factors, while opportunities and
threats are external factors.
This identification is essential in determining how best to focus resources
to take advantage of strengths and opportunities and combat weaknesses
and threats.
3) PEST Analysis
Another common strategic evaluation technique is the PEST analysis,
which identifies the political, economic, social and technological factors
that may impact the organization’s ability to achieve its objectives.
Political factors might include such aspects as impending legislation
regarding wages and benefits, financial regulations, etc
Economic factors include all shifts in the economy, while social factors
may include demographics and changing attitudes. Technological
pressures are also inevitable as technology becomes more advanced each
day.
These are all external factors, which are outside of the organization’s
control but which must be considered throughout the decision making
process.
4) Benchmarking
Benchmarking is a strategic evaluation technique that’s often used to
evaluate how close the organization has come to its final objectives, as
well as how far it has left to go.
Organizations may benchmark themselves against other organizations
within the same industry, or they may benchmark themselves against
their own prior situation.
A variety of performance measures, as well as policies and procedures,
may be evaluated regularly to identify where adjustments are necessary to
maintain the sustainable competitive advantage.