Strategic evaluation and control is the final phase of strategic management

Strategic Evaluation and Control

Strategic evaluation operates at two levels:
Strategic level - wherein we are concerned more with the consistency of strategy with the environment.
Operational level wherein the effort is directed at assessing how well the organisation is pursuing a given
strategy.

Purpose of Strategic Evaluation
The purpose of strategic evaluation is to evaluate the effectiveness of strategy in achieving organisational objectives.

Definition
Strategic evaluation and control could be defined as the process of determining the effectiveness of a given strategy
in achieving the organisational objectives and taking corrective action wherever required.

Nature of Strategic Evaluation
Nature of the strategic evaluation and control process is to test the effectiveness of strategy.
During the two proceedings phases of the strategic management process, the strategists formulate the
strategy to achieve a set of objectives and then implement the strategy.
There has to be a way of finding out whether the strategy being implemented will guide the organisation
towards its intended objectives.
Strategic evaluation and control, therefore, performs the crucial task of keeping the organisation on the
right track.
In the absence of such a mechanism, there would be no means for strategists to find out whether or not the
strategy is producing the desired effect.

Nature of Strategic Evaluation
Through the process of strategic evaluation and control, the strategists attempt to answer set of questions,
as below.
Are the premises made during strategy formulation proving to be correct?
Is the strategy guiding the organisation towards its intended objectives?
Are the organisation and its managers doing things which ought to be done?
Is there a need to change and reformulate the strategy?
How is the organisation performing?
Are the time schedules being adhered to?
Are the resources being utilised properly?
What needs to be done to ensure that resources are utilised properly and objectives met?

Importance of Strategic Evaluation
Strategic evaluation helps to keep a check on the validity of a strategic choice.
An ongoing process of evaluation would, in fact, provide feedback on the continued relevance of the
strategic choice made during the formulation phase. This is due to the efficacy of strategic evaluation to
determine the effectiveness of strategy.
During the course of strategy implementation managers are required to take scores of decisions.
Strategic evaluation can help to assess whether the decisions match the intended strategy requirements.
In the absence of such evaluation, managers would not know explicitly how to exercise such discretion.
Strategic evaluation, through its process of control, feedback, rewards, and review, helps in a successful
culmination of the strategic management process.
The process of strategic evaluation provides a considerable amount of information and experience to
strategists that can be useful in new strategic planning.

Participants in Strategic Evaluation
Shareholders
Board of Directors
Chief executives
Profit-centre heads
Financial controllers
Company secretaries
External and Internal Auditors
Audit and Executive Committees
Corporate Planning Staff or Department
Middle-level managers

Barriers in Evaluation
Limits of control
Difficulties in measurement
Resistance to evaluation
Rely on short-term implications of activities

Requirements for Effective Evaluation

The effective control must be:
Control should involve only the minimum amount of information as too much information tends to clutter
up the control system and creates confusion.
Control should monitor only managerial activities and results even if the evaluation is difficult to perform.
Controls should be timely so that corrective action can be taken quickly.
Long-term and short-term controls should be used so that a balanced approach to evaluation can be
adopted.
Controls should aim at pinpointing exceptions as nitpicking does not result in effective evaluation.
The 80:20 principle, where 20 per cent of the activities result in 80 per cent of achievement, needs to be
emphasised.
Getting bogged down with the activities that do not really count for achievement makes the evaluation
ineffective.
Rewards for meeting or exceeding standards should be emphasised so that managers are motivated to
perform.
Unnecessary emphasis on penalties tend to pressurise the managers to rely on efficiency rather than
effectiveness

STRATEGIC CONTROL
1. 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.
2. In this manner, strategic controls are early warning systems and differ from post-action controls
which evaluate only after the implementation has been completed.
The types of strategic controls are:
1. Premise control
1. Implementation control
1. Strategic surveillance
1. Special alert control
PREMISE CONTROL
1. Premise control serves the purpose of continually testing the assumptions to find out whether they
are still valid or not.
2. This enables the strategists to take corrective action at the right time rather than continuing with a
strategy which is based on erroneous assumptions.
3. 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.
Implementation Control
4. 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.
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.
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.
Special Alert Control
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
any crisis.
Crisis management follows certain steps:
Signal detection
Preparation/prevention,
Damage limitation,
Recovery leading to organisational learning.
The first step of signal detection can be performed by the special alert control systems.

Process of Strategic Evaluation
1) Fixing benchmark of performance 2) Measurement of performance 3) Analyzing Variance 4)Taking Corrective
Action
1. Fixing Benchmark of Performance While fixing the benchmark, strategists encounter questions such as -
what benchmarks to set, how to set them and how to express them. In order to determine the benchmark
performance to be set, it is essential to discover the special requirements for performing the main task.
The organization can use both quantitative and qualitative criteria for comprehensive assessment of
performance. Quantitative criteria includes determination of net profit, ROI, earning per share, cost of
production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of
factors such as - skills and competencies, risk taking potential, flexibility etc.
2. Qualitative criteria includes the factors such as capabilities, core competencies, risk-bearing capacity,
strategic clarity, flexibility and workability.
3. Measurement of performance The standard performance is a bench mark with which the actual
performance is to be compared. The reporting and communication system help in measuring the
performance. For measuring the performance, financial statements like - balance sheet, profit and loss
account must be prepared on an annual basis.
4. Analyzing Variance While measuring the actual performance and comparing it with standard
performance there may be variances which must be analyzed. The strategists must mention the degree of
tolerance limits between which the variance between actual and standard performance may be accepted.
5. Taking Corrective Action Once the deviation in performance is identified, it is essential to plan for a
corrective action. If the performance is consistently less than the desired performance, the strategists
must carry a detailed analysis of the factors responsible for such performance.