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

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.

Recognizing the linkages that exist between strategic planning and mgt control is vital to org success.

John C. Cammilus, Mgt Consultant.

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 Difference b/w Strategic and Operational ControlControl

Basic question

Aim

Main concern

Focus

Time Horizon Exercise control

Main techniques

Are we moving in right direction?

Proactive,continuous questioning of the basic direction of strategy

Steering the future direction of the org

External Environ

Long-term Exclu by top mgt,

may be thru lower level support

Envir scanning, info gathering, questioning& review

Attribute Strategic control Operation control

How are we performing?

Allocation & use of org resources

Action control

Internal organization

Short-term Mainly by

executive or middle mgt on the direction of top

Budgets, Schedules and MBO

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 PerformanceEvaluation 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 VariancesComparison 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 Action3 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