Strategy evaluation and controlPresentation Transcript
Strategy Evaluation and Control
Strategic Control Process• Quantitative• Qualitative In both cases process consists of three phases – 1. Evaluation Criteria . 2. Performance Evaluation 3. Feedback
Quantitative• To compare the performance of the organization over different time periods• To compare the performance with it’s competitors in the industry• To compare the performance against industry averages
Financial Ratios• ROI• Return on Equity• Profit Margin• Market Share• Debt to Equity• EPS• Sales Growth• Asset Growth
Methods of Control• DuPont Chart• Budgets• Audits
Time Related Control• Critical Path Method• PERT• MBO
Problems of Control System• Reporting data validity• Criteria for measurement in question• Performance standards may be set with inherent contradictions• Over emphasis on short term measures
Evaluation of Strategy• Strategy Formulation• Strategy Implementation• Strategy Evaluation
Business Portfolio Analysis• BCG Matrix• McKinsey Matrix• Strategic Planning Institute’s Matrix• Arthur D’Little Company’s Matrix• Hofer’s Product / Evolution Matrix
Qualitative Factors• Balanced Score Card by Norton and Kaplan
The Basic Performance Pyramid What are we in business for? Mission Where are we going? Vision What do we want to achieve? Goals/Objectives How will you achieve your goals/objectives? Strategies What do you need to do well? Success Drivers How will you measure how well you are Performance Measures doing?
Balanced Scorecard Approach• The Balanced Scorecard translates an organization’s mission and strategy into goals and measures, organized into four different perspectives » customer » financial » internal business process » innovation and learning
Balanced Scorecard Approach (Cont’d)• The Balanced Scorecard helps an organization to: – determine progress towards its goals/objectives – communicate strategic direction – determine success or failure of its strategies/initiatives – define future strategies – establish benchmarks – demonstrate value-added
Balanced Scorecard Approach (Cont’d)• The best Balanced Scorecards will tell the story of the organization’s strategy and cause the overall performance to be managed such that the stated mission is accomplished.