Strategic evaluation and Control

It could be defined as the process of determining effectiveness of given strategy in achieving the organisational objectives and taking corrective action wherever required. It brings the organisation on the right track. It answers two sets of questions: First set of questions are more generalized eg. Is the strategy guiding the organisation is the management on the right track. Second set of questions deals with performance and operational control issues.

Importance of strategic evaluation

The importance lies in its ability to coordinate the task

performed by individual managers, groups, divisions or SBUs through control of performance. The integration of strategy formulation and implementation forms the basis for the creation of the organisational structure and system design. Several motives for strategic evaluation are: i. Coordination of tasks ii. Need for feedback, appraisal and rewards. iii. Check on validity of strategic choice. iv. Congruence between decisions and intended strategy. v. Successful culmination of strategic management. vi. Creating inputs for new strategic planning.

Barriers in Evaluation
Limits of controls. Difficulties in measurement. Resistance to evaluation

Short terminism
Relying on efficiency versus effectiveness

Requirements for effective evaluation

Control should involve only minimum amount of

information Control should monitor only managerial activities and results Control should be timely Long term and short term controls should be used Control should aim at pin pointing exceptions Reward of meeting or exceeding standards should be emphasised.

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?

Approach to Strategic Control

Formulate Strategies Implement Strategies

Strategic Control

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 firms 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

OPERATIONAL CONTROL
Operational control is aimed at allocation and use of

organizational resources through evaluation of the performance of organizational units.

Operational control is concerned with action or

performance

PROCESS OF EVALUATION
The process of evaluation basically deals with four

steps: Setting standards of performance Measurement of performance Analyzing variances Taking corrective action

Strategy/plan/ objectives

Setting standards of performance

Actual performance Check performance

Management of performance

reformulate

Check standards

Analyzing variance

Feedback

 Setting of standards The key managerial tasks, derived from the strategic requirements, can be analyzed for finding out the key areas of performance. The special requirements for the performance of the key tasks can help to determine the type of standards to be set. Performance indicator that best express the special requirements could then be decided upon to be used for evaluation. Measurement of performance Operationally, measuring is done through the accounting, reporting and communication systems. A variety of evaluation techniques are used for measurement.

 Analyzing variances The measurement of actual performance and comparing it with the standard or budgeted performance leads to an analysis of variance. Three situation may arise:1. the actual performance matches the budgeted performance. 2. The actual performance is better from the budgeted performance. 3. The actual performance is below from the budgeted performance. Taking corrective action Three courses of corrective action: 1. Checking of performance :- it requires going into the details of the organization structure and systems. 2. Checking of standards:- standard check may result in a lowering of standards or elevation of standards. 3. Reformulate strategies, plans and objectives.

Evaluation techniques for strategic control

The essence of strategic control is to continually assess the

changing environment to observe events that may significantly affect the course of an organization's strategy.
Techniques for strategic control could be classified into two

groups on the basis of the type of environment faced by the organization.

The organization that operate in a relatively stable

environment may use strategic momentum control, while those which face a relatively turbulent environment may find strategic lead control more appropriate.

STRATEGIC MOMENTUM CONTROL

Responsibility control centre :- it form the core of

management control systems and are of four types: revenue, expenses, profit and investment centre. Each of these centre is designed on the basis of the measurement of inputs and outputs.
focus on the critical success factors to examine the factors that contribute to the success of strategies.

The underlying success factors: it enable organization to

Generic strategies: it based on the assumption that the

strategies adopted by firms similar to another firm are comparable.

STRATEGIC LEAP CONTROL

Strategic issue management:- it is aimed at identifying one or

more strategic issues and assessing their impact on the organisation.

Strategic field analysis:- it is a way of examining the nature

and extent of synergies that exists or are lacking between components of an organisation.
stimulate the essential features of the organisation and its environment. scenarios are perceptions about environment a firm could face in the future. the likely

Systems modeling:- it is based on computer-based models that

Scenarios:-

Evaluation techniques for operational control

Operational control is aimed at the allocation and use

of organizational resources rather than environmental monitoring.

Classification of evaluation techniques into three

classes: Internal analysis

Comparative analysis
Comprehensive analysis

 INTERNAL ANALYSIS: VRIO framework:- the basic idea behind the VRIO framework is

that sustainable strategic advantages results through the use of capabilities that are valuable, rare, organised for usage.

Value chain analysis:- it focuses on a set of inter-related activities

performed in a sequence, for producing and marketing a product or service.

parameters such as physical units or time in order to assess performance. feasible to measure on the basis of figure and numbers.

Quantitative analysis:- it takes up the financial and non-financial

Qualitative analysis:- it includes those aspects which are not

 COMPARATIVE ANALYSIS: Historical analysis is a frequently used method for comparing performance of a firm over a given period of time.
Industry norms is a comparative method for analysing

performance that brings with it the advantage of making a firm competitive in comparison to its rivals in the same industry.
Benchmarking is a comparative method where a firm

finds the best practices in an area and then attempts to bring its own performance in that area in line with the best practice.

 Comprehensive analysis Key factor rating is a method that takes into account the key factors in several areas and then sets out to evaluate performance on the basis of these.
Business intelligence systems is one of the concepts

used for discovering knowledge from various internal and external data available to the organization, to support effective decision- making.
The balanced scorecard method is based on the

identification of four key performance measures of customer perspective, internal business perspective, innovation and learning perspective and the financial perspective.

Thank You!!!