Strategic & Operational

Evaluation & Control

Strategic Evaluation &
Control
 Process of determining the
effectiveness of a given strategy in
achieving the organizational
objectives, and taking corrective
actions wherever required
Importance of Strategic
Evaluation
 Coordinate the tasks performed by
individual managers
 The provide feedback
 Decide appraisal & reward
 Check on validity of strategic choice
 Enable congruence between decisions &
intended strategy
 Successful culmination of the strategic
management process
 Creating inputs for new strategic planning
Participants in Strategic
Evaluation
 Board of Directors
 Chief executives
 SBU or Profit centre heads
 Financial controllers, company
secretaries, internal & external
auditors
 Middle level managers
Barriers in Evaluation
 Limits of controls
 Difficulties in measurement
 Resistance to evaluation
 Short termism
 Relying on efficiency VS
effectiveness
Strategic Control
 Are the premises made during strategy
formulation proving to be correct?
 Is the strategy guiding the organization towards
its intended objectives?
 Are the organization & the managers doing things
which ought to be done?
 Is there a need to change & reformulate the
strategy?
Types of Strategic Controls
 Premise control
 Implementation control
 Strategic surveillance
 Special alert control
Premise Control
 Necessary to identify the key assumptions
(government policies, nature of competition,
breakthrough in R&D) & keep track of any
change in them so as to assess their impact
on strategy & its implementation
 Continually tests the assumptions
 Responsibility: Corporate Planning Staff
Implementation Control
 To evaluate whether the plans, programmes &
projects, resulting from implementation of the
strategy, are actually guiding the organization
towards its predetermined objectives or not
 May lead to Strategic rethinking

 Can be put into practice through

- Identification & monitoring of strategic thrusts

- Milestone review
 Strategic Surveillance
 Designed to monitor a broad range of events
inside & outside the company that are likely to
threaten the course of a firm’s strategy
 Is a more general form of control
 Information for this can be obtained through
formal yet simple strategic information scanning
systems like Knowledge management
systems & organizational learning
Special Alert Control
 Based on a trigger mechanism for rapid
response & immediate reassessment of
strategy in light of sudden & unexpected
events (eg: sudden fall of a govt., natural
catastrophe, unfortunate industrial disaster
etc.)
 Hope for the best ~ Prepare for the worst
 Can be handled by formulation of contingency
strategies, &
by assigning responsibility of unforeseen
events to crisis management teams
 Operation Control
Recognizing the linkages that exist
between strategic planning and mgt
control is vital to org success.
 John C. Cammilus, Mgt Consultant.
 It takes the last phase of mgt functions.
 In order to ensure if the org achieves the obj or not.
 To measure the strategic actions.
 To give feedback and action decision.
 It is aimed at the allocation and
use of organizational resources
through an evaluation of the
performance of organizational
units, such as divisions, SBUs and
soon, to assess their contribution
to the achievement of
organizational objectives.
Difference b/w Strategic and Operational
Control
Attribute Strategic control Operation
control
 Basic question  Are we moving in  How are we
right direction?
performing?
 Proactive,continuou
 Aim s questioning of the
 Allocation & use
basic direction of of org resources
strategy
 Steering the future
 Main concern direction of the org  Action control
 External Environ
 Focus  Internal
 Long-term organization
 Time Horizon  Exclu by top mgt,
may be thru lower
 Short-term
 Exercise control level support  Mainly by
 Envir scanning, info executive or
gathering, middle mgt on
questioning& review
 Main techniques the direction of
top
Process of evaluation
for operational control
 Setting of Standards
 How to set these standards?
Key managerial tasks can be analyzed to
find out key areas of performance.
Standards can be set in these key areas.
 What standards to set?

The special requirements for the

performance of the key tasks help to
determine the type of standards to set.
 How do we express these standards?

Performance indicators that best express the

special requirements could then be
decided upon to be used for evaluation.
Measurement of
Performance
Evaluation process operates at the performance
level as action takes place. Standards of
performance act as benchmarks against which
actual performance is measured.
Can be done through: accounting, reporting,
communication systems etc.
Problems faced during measurement:
 Difficulties in measurement

 Timing of measurement

 Periodicity of measurement
 Analyzing Variances
Comparison of actual performance (AP) with the
standards (S) leads to Analyzing the variances.
 AP = S: Ideal but not realistic. Specify a range

of tolerance limits.
 AP > S: Welcome situation. Also should be

considered unusual, & a check needs to be

made to test the validity of standards & the
efficacy of the measurement system.
 AP < S: Alarming. Need to pin point areas

where performance is below standard & go into

the causes of the deviation.
 Taking Corrective Action
3 courses of corrective action:
 Checking of Performance: If the evaluation process

shows that performance is consistently lower than

expected, in-depth analysis & diagnosis of the
factors that might be responsible for bad
performance.
 Checking of Standards: is less frequent, but done

when it is found there is nothing wrong with the

performance. May result in lowering or elevation of
standards as required.
 Reformulation of Strategy: Most radical & infrequent.

Strategic control will lead to conclusion that

strategies need to reformulated. Takes the
organization right to the beginning of the Strategic
management process.
 References

 Strategic Management by Arthur A.

Thompson & A.J. Strickland
 Business Policy by Azhar Kazmi
 Business Policy: Strategic Management
by L.M. Prasad
 Management by James A. F. Stoner et
al