Strategic Evaluation and Control

By Yashpal Deswal Ayandev Shah

Nature of Strategic Evaluation

Evaluate effectiveness of organisational strategy in achieving organisational objectives Perform the task of keeping organisation on track

Importance of Strategic Evaluation

The need for feedback Appraisal and reward Check on the validity of strategic choice Congruence between decisions and intended strategy Successful culmination of the strategic management process Creating inputs for new strategic planning

Ability to coordinate the tasks performed

Barriers in Evaluation
Limits of Controls Difficulties in measurement Resistance to evaluation Short-termism Relying on efficiency versus effectiveness

Requirements of Effective Evaluation

Control should involve only the minimum amount of information Control should monitor only managerial activities and results Control should be timely Long term and short term control should be used Control should aim at pinpointing exceptions Rewards for meeting or exceeding standards should be emphasized

Strategic Control

Four Types of Strategic Controls

Premise Control Implementation Control Strategic Surveillance Special alert control

Premise Control
Premises control is necessary to identify the key assumptions and its implementation. Premises control serves the purpose of continually testing the assumptions to find out whether they are still valid or not. This enables the strategists to take corrective action at the right time rather than continuing with a strategy which is based on erroneous assumptions.

Implementation Control

Implementation control is aimed at evaluating whether the plans, programmes, and projects are actually guiding the organization towards its predetermined objectives or not.

Strategic Surveillance

Strategic surveillance aimed at a more generalized and overarching control designed to monitor a broad range of events inside and outside the company that are likely to threaten the course of a firms strategy.

Special Alert Control

Special alert control, which is based on a trigger mechanism for rapid response and immediate reassessment of strategy in the light of sudden and unexpected events

Operational Control
Aimed at the allocation and use of organisational resources
Concerned with action or performance

How do Strategic Control and Operational Control Differ

Attribute 1. Basic question 2. Aim Strategic Control
Are we moving in the right direction? Proactive, continuous questioning of the basic direction of strategy Steering the organizations future direction

Operational Control
How are we performing? Allocation and use of organisational resources Action control

3. Main Concern

4. Focus 5. Time Horizon 6. Main Techniques

External environment Long- term Environmental scanning, information gathering, questioning and review

Internal organization Short- term Budgets, schedules, and MBO

Process of Evaluation
Setting standards of performance Measurement of performance Analyzing variances Taking corrective action

Setting of Standards
Quantitative Criteria
It has performed as compared to its past achievements Its performance with the industry average or that of major competitors

Qualitative Criteria
There has to be a special set of qualitative criteria for a subjective assessment of the factors like capabilities, core competencies, risk- bearing capacity, strategic clarity, flexibility, and workability

Measurement of Performance
The evaluation process operates at the performance level as action takes place. Standards of performance act as the benchmark against which the actual performance is to be compared. It is important, however, to understand how the measurement of performance can take place.

Analyzing Variances
The measurement of actual performance and its comparison with standard or budgeted performance leads to an analysis of variances. Broadly, the following three situations may arise: The actual performance matches the budgeted performance The actual performance deviates positively over the budget performance The actual performance deviates negatively from the budgeted

Taking Corrective Actions

There are three courses for corrective action: checking of performance, checking of standards, and reformulating strategies, plans, and objectives.

Techniques of Strategic Evaluation and Control

Evaluation Techniques for Strategic Control
Evaluation Techniques for Operational Control

Evaluation Techniques for Strategic Control

Techniques for strategic control could be classified into two groups on the basis of the type of environment faced by the organisation. The organisation that operate in a relative stable environment may use strategic momentum control, while those which face a relatively turbulent environment may find strategic leap control more appropriate.

Evaluation Techniques for Operational Control

Operational control is aimed at the allocation and use of organisational resources The evaluation techniques are classified into three parts: Internal analysis Comparative analysis Comprehensive analysis.