Vijayanagara Sri Krishnadevaraya
Strategic management is generally
considered as the process of formulating,
implementing and evaluating strategies for or
organisation, business policy is usually considered
as an academic field of study, an area of
specialisation or specially named course related to
Strategic Evaluation is defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objectives and
taking corrective action wherever required
Strategy evaluation is the final step of strategy management process.
The key strategy evaluation activities are: appraising internal and external
factors that are the root of present strategies, measuring performance, and
taking remedial / corrective actions. Evaluation makes sure that the
organizational strategy as well as it’s implementation meets the organizational
Strategic Evaluation is an significant strategy
formulation because it throws light on the efficiency and
effectiveness of the comprehensive plans in achieving the
The managers can also assess the appropriateness of the
current strategy in dynamic world with socio-economic, political
and technological innovations. Strategic evaluation is the final
phase of Strategic Management.
Nature of Strategic Evaluation
Nature of the strategic evaluation and control process is to test the
effectiveness of strategy.
During 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.
Importance of Strategic Evaluation
• Strategic evaluation can help to assess whether the decisions match the
intended strategy requirements.
• Strategic evaluation, through its process of control, feedback, rewards
and review, helps in a successful culmination of the strategic
• The process of strategic evaluation provides a considerable amount of
information and experience to strategists that can be useful in new
Participants in Strategic Evaluation
• Board of Directors
• Chief executives
• Financial controllers
• Company secretaries
• External and Internal Auditors
• Audit and Executive Committees
• Corporate Planning Staff or Department
• Middle-level managers
Process of Strategic Evaluation
1) Fixing benchmark of performance
2) Measurement of performance
3) Analyzing Variance
4) Taking Corrective Action
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
In order to determine the benchmark performance to be set, it is
essential to discover the special requirements for performing the
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,
Qualitative criteria includes the factors such as
capabilities, core competencies, risk-bearing
capacity, strategic clarity, flexibility and
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.
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.
Taking Corrective Action
Once the deviation in performance is
identified, it is essential to plan for a
If the performance is consistently less than
the desired performance, the strategists
must carry a detailed analysis of the factors
responsible for such performance.