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Strategic Control Process

9-12 minutes

Strategic Control

“ It is the process by which managers monitor the ongoing activities

of an organization and its members to evaluate whether activities
are being performed efficiently and effectively and to take
corrective action to improve performance if they are not” -Sam
Walton

Managers exercise strategic control when they work with the part of
the organisation they have influence over to ensure that it achieves
the strategic aims that have been set for it. To do this effectively, the
managers need some decision making freedom: either to decide
what needs to be achieved or how best to go about achieving the
strategic aims. Such decision making freedom is one of the
characteristics that differentiate strategic control from other forms of
control exercised by managers (e.g. Operational control – the
management of operational processes).

Strategic controls take into account the changing assumptions that

determine a strategy, continually evaluate the strategy as it is being
implemented, and take the necessary steps to adjust the strategy to
the new requirements. In this manner, strategic controls are early
warning systems and differ from post-action controls which evaluate

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only after the implementation has been completed.

Important types of strategic controls used in organizations are:

1. Premise Control: Premise control is necessary to identify the key

assumptions, and keep track of any change in them so as to
assess their impact on strategy and its implementation. Premise
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. The responsibility for premise control can be
assigned to the corporate planning staff who can identify key
asumptions and keep a regular check on their validity.

2. Implementation Control: Implementation control may be put into

practice through the identification and monitoring of strategic
thrusts such as an assessment of the marketing success of a new
product after pre-testing, or checking the feasibility of a
diversification programme after making initial attempts at seeking
technological collaboration.

3. Strategic Surveillance: Strategic surveillance can be done

through a broad-based, general monitoring on the basis of selected
information sources to uncover events that are likely to affect the
strategy of an organisation.

4. Special Alert Control: Special alert control is based on trigger

mechanism for rapid response and immediate reassessment of
strategy in the light of sudden and unexpected events called
crises. Crises are critical situations that occur unexpectedly and
threaten the course of a strategy. Organisations that hope for the
best and prepare for the worst are in a vantage position to handle

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any crisis.

Recommended reading: Strategic Control and Operational Control

Process of Strategic Control

Strategic control processes ensure that the actions required to

achieve strategic goals are carried out, and checks to ensure that
these actions are having the required impact on the organisation.
An effective strategic control process should by implication help an
organisation ensure that is setting out to achieve the right things,
and that the methods being used to achieve these things are
working.

Regardless of the type or levels of strategic control systems an

organization needs, control may be depicted as a six-step feedback
model:

1. Determine What to Control: The first step in the strategic

control process is determining the major areas to control. Managers
usually base their major controls on the organizational mission,
goals and objectives developed during the planning process.
Managers must make choices because it is expensive and virtually
impossible to control every aspect of the organization’s

2. Set Control Standards: The second step in the strategic control

process is establishing standards. A control standard is a target
against which subsequent performance will be compared.
Standards are the criteria that enable managers to evaluate future,
current, or past actions. They are measured in a variety of ways,
including physical, quantitative, and qualitative terms. Five aspects
of the performance can be managed and controlled: quantity,
quality, time cost, and behavior.

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Standards reflect specific activities or behaviors that are necessary

to achieve organizational goals. Goals are translated into
performance standards by making them measurable. An
organizational goal to increase market share, for example, may be
translated into a top-management performance standard to
increase market share by 10 percent within a twelve-month period.
Helpful measures of strategic performance include: sales (total, and
by division, product category, and region), sales growth, net profits,
return on sales, assets, equity, and investment cost of sales, cash
flow, market share, product quality, valued added, and employees
productivity.

Quantification of the objective standard is sometimes difficult. For

example, consider the goal of product leadership. An organization
compares its product with those of competitors and determines the
extent to which it pioneers in the introduction of basis product and
product improvements. Such standards may exist even though they
are not formally and explicitly stated.

Setting the timing associated with the standards is also a problem

for many organizations. It is not unusual for short-term objectives to
be met at the expense of long-term objectives. Management must
develop standards in all performance areas touched on by
established organizational goals. The various forms standards are
depend on what is being measured and on the managerial level
responsible for taking corrective action.

3. Measure Performance: Once standards are determined, the

next step is measuring performance. The actual performance must
be compared to the standards. Many types of measurements taken
for control purposes are based on some form of historical standard.
These standards can be based on data derived from the PIMS

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(profit impact of market strategy) program, published information

that is publicly available, ratings of product / service quality,
innovation rates, and relative market shares standings.

Strategic control standards are based on the practice of competitive

benchmarking – the process of measuring a firm’s performance
against that of the top performance in its industry. The proliferation
of computers tied into networks has made it possible for managers
to obtain up-to-minute status reports on a variety of quantitative
performance measures. Managers should be careful to observe
and measure in accurately before taking corrective action.

4. Compare Performance to Standards: The comparing step

determines the degree of variation between actual performance
and standard. If the first two phases have been done well, the third
phase of the controlling process – comparing performance with
standards – should be straightforward. However, sometimes it is
difficult to make the required comparisons (e.g., behavioral
standards). Some deviations from the standard may be justified
because of changes in environmental conditions, or other reasons.

5. Determine the Reasons for the Deviations: The fifth step of

the strategic control process involves finding out: “why performance
has deviated from the standards?” Causes of deviation can range
from selected achieve organizational objectives. Particularly, the
organization needs to ask if the deviations are due to internal
shortcomings or external changes beyond the control of the
organization. A general checklist such as following can be helpful:

Are the standards appropriate for the stated objective and

strategies?

Are the objectives and corresponding still appropriate in light of the

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current environmental situation?

Are the strategies for achieving the objectives still appropriate in

light of the current environmental situation?

Are the firm’s organizational structure, systems (e.g., information),

and resource support adequate for successfully implementing the
strategies and therefore achieving the objectives?

Are the activities being executed appropriate for achieving

standard?

6. Take Corrective Action: The final step in the strategic control

process is determining the need for corrective action. Managers
can choose among three courses of action: (1) they can do nothing
(2) they can correct the actual performance (3) they can revise the
standard.

When standards are not met, managers must carefully assess the
reasons why and take corrective action. Moreover, the need to
check standards periodically to ensure that the standards and the
associated performance measures are still relevant for the future.

The final phase of controlling process occurs when managers must

decide action to take to correct performance when deviations occur.
Corrective action depends on the discovery of deviations and the
ability to take necessary action. Often the real cause of deviation
must be found before corrective action can be taken. Causes of
deviations can range from unrealistic objectives to the wrong
strategy being selected achieve organizational objectives. Each
cause requires a different corrective action. Not all deviations from
external environmental threats or opportunities have progressed to
the point a particular outcome is likely, corrective action may be
necessary.

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To conclude, strategic control is an integral part of strategy. Without

properly placed controls the strategy of the company is bound to
fail. Strategic control is a tool by which companies check their
internal business process and environment and ascertain their
progress towards their goal.

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