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2. Strategy evaluation
Strategy evaluation is the process of analysing a strategy to assess how
well it’s been implemented and executed. A strategy evaluation is an
internal analysis tool and should be used as part of a broader strategic
analysis for the organization when making decisions about your
strategy.
Strategic evaluation is an act of reviewing a particular corporate strategy
to ensure that it’s functioning correctly. During a strategic evaluation, an
assigned evaluator reviews data about the specific strategy and
compares it to the company’s predicted amount of improvement.
Evaluations allow you to check the effectiveness of any strategies your
company implements and may help you address any potential
challenges that you find.

3. How to evaluate strategies
These are the steps you can use to evaluate strategies for your organization:
1. Establish standards
Before you evaluate a strategy or policy, try to create a set of standards that you can use to
measure the progress and goals of the strategy. These standards are goals or milestones that
you want to reach that you can use to track a strategy’s success. For example, if you want
your new strategy to improve the number of people who sign up for your mailing list, you
can set a 25% increase of new mailing list requests as an evaluation standard.
2. Measure performance
Once you’re ready to evaluate a policy, you can gather information about its performance.
This information can contain both quantitative and qualitative data that you can obtain
through a variety of ways, such as surveys, interviews and analytics software. Consider
gathering data about multiple variables of performance, such as cost, the popularity of the
strategy, amount of time the policy saves or any increase in sales.

4. 3. Analyse results
After you obtain the data about how well a strategy functioned during a set period
of time, you can compare it to the standards you’ve already set. You can also look
at other sets of data to see if it fulfills other criteria, such as how risky the strategy
is or how many resources it needs. If you discover that there are any categories
where the strategy doesn’t match or exceed your goals, you can address these
challenges by making slight adjustments.
4. Make adjustments
You can make modifications to your strategy that may increase the possibility of it
achieving the goals you set. Consider brainstorming potential adjustments to the
policy that can help increase its effectiveness and create a plan for how to
implement these changes. You can use the data from previous steps to give you
insights about solutions for any potential challenges.
5. Set goals
After you finish your evaluation and make any necessary adjustments, you can set
goals for the next evaluation. Use your gathered data to make a prediction about
how well the strategy may perform. Then schedule another evaluation so that you
can continually track the strategy’s progress.

5. Nature / Framework of Strategic Evaluation
Effective evaluation systems tend to have certain qualities in common, which are as
follows:
1) Suitable :
The strategic evaluation needs to be tailored to the needs of the organisation.
Strategic Evaluation Example, the evaluation process needs to be different for the marketing
and the HR functions in the organisation.
2) Simple :
The strategic evaluation process needs to be simple to understand and follow. It should be
easy to execute. If the strategic evaluation process is complex then people will not be able
to understand the process. This will cause frustration and
conflict in the organisation and people will make errors in the implementation of the
process. On the other hand, when the process is well-defined and understood by all the
employees, the level of motivation in the organisation is very high and employees are able
to execute the evaluation system.

6. 3) Selective :
The evaluation process cannot be all encompassing. It needs to be
selective in its approach. It needs to select the key and critical factors in
the organisation which are absolutely essential for the survival of the
organisation. By doing so, the time of the managers is optimally spent
and they can focus on the core activities of the organisation.
4) Flexible :
An organisation needs to constantly examine its strategies and plans in
the face of changes in the external activities. These changes can be
political, technological, competition and other factors. Therefore the
strategic evaluation process cannot make the mistake of being rigid. It
needs to change according to the demands of the environment and
and take advantage of opportunities that are on offer.

7. 5) Forward-Looking :
The strategic evaluation process should take the future into account and have
the capability of predicting events before they become problematic for the
organisation. It is only then that they can be helpful to the organisation. It
needs to be able to point out deviations to the managers so that they can take
the necessary corrective action.
6) Reasonable :
According to Robbins, strategic evaluation processes should be reasonable.
They need to be fair to the employees. If they set unrealistic goals then they
will end up de-motivating employees. On the other hand, they should also not
be too easy and give the employees no challenge. The strategic evaluation
process therefore needs to be reasonable. They should involve the right
amount of stretch so that employees are challenged and at the same time
should not be daunting.

8. 7) Objective :
There can be no room for vagueness in the strategic evaluation control systems. They
should be seen as being objective by the employees. It should apply equally to all.
This will help in getting employees to accept the evaluation parameters. On the other
hand, if the standards are vague and arbitrary then it will cause mistrust in the eyes of
the employees and they will not have faith in the evaluation and control process.
8) Responsibility for Failures :
The strategic evaluation process must fix responsibility for failures. It is not enough,
just to know about deviation in the organisation but also the reasons for its
occurrence. The strategic control system needs to point out the remedial action that
the organisation needs to take to overtake the weaknesses that have been identified.
9) Acceptable :
It is very important that the strategic evaluation and control system has the
cooperation and the trust of the employees. It must be accepted by all. This is only
possible if the standards are well-defined, objective, free from bias and reasonable.

9. Measures for Strategic Evaluation
The most critical aspect of strategic evaluation process is to
measure the output of the organisation in terms of the set goals. These
comprise both quantitative as well as qualitative criteria.

10. 1) Quantitative Factors :
i) Return on Investment :
This measures the return as a percentage of the investment done. These can be used to compare various products or
businesses in the organisation. A major drawback of the ROI method is that it relies very heavily on accounting data which
are staggered, not accurate and do not help the management in decision-making. A control based on the ROI method
makes the organisation too cautious and averse to risk-taking
ii) Return on Equity (ROE) :
ROE expresses the return as a percentage of the equity of the organisation. The ROE measures the amount of profit
generated from the equity investment of the shareholders.
iii) Profit Margin :
The profit margin as criteria evaluates the financial well being of the organisation. It is the ratio of the profits generated to
the sales of the organisation. It is the profit which gets generated for each unit of sales revenue of the organisation. It can
also be considered as a measure of efficiency as it examines the conversion of the revenue of the organisation to profits.

11. iv) Market Share :
It is the percentage of the industry's sales that is done by the company's products and
services. It is computed for a period and is the ratio of the total sales of the company and the
total sales of the industry. It gives an idea of the size of the company in the industry.
v) Debt-to-Equity :
The debt to equity measures the relative contribution of the creditors and the shareholders
of the company. It is computed by dividing the total debt of the company by the total equity.
vi) Earnings per Share :
It is the ratio of the total earnings of the company and the total number of outstanding
shares. The higher the EPS the greater is the profitability of the company.

12. 2) Qualitative Factors :
I) Consistency :
The strategy that the organisation chooses has to be consistent with
the goals and the policies of the organisation. The role of strategy is to
provide a guideline or a framework for the functioning of the
organisation.
ii) Consonance :
The strategy has to be flexible in nature and ready to adapt to changes
which occur in the external and internal environments of the
organisation.

13. iii) Advantage :
The strategy adopted by the company must be either a source of competitive
advantage for the company or maintain an existing one. Competitive strategy
aims at creating competencies in the organisation that are unique, stand the
test of time and difficult to copy by competitors. Rumelt mentions that
strategy should result in the creation of competitive advantage from three
sources – superior skills, superior resources and a superior position.
Iv) Feasibility :
The strategy should not lead to an over exertion in the resources of the
organisation or create fresh problems for the organisation. Rumelt has given
one more test of feasibility. This measures the feasibility of the strategy.

14. Importance of Strategic Evaluation
1) Performance Measurement :
The strategic evaluation process provides the organisation a set of both
qualitative and quantitative criteria against which the performance of both
individuals as well as the organisation can be measured. The qualitative
criteria contain soft factors like skills, competencies and flexibility whereas
the quantitative criteria contain more hard factors like the return on equity,
ROI, profitability, etc.
2) Helps in Analysis :
The basic premise of strategic evaluation is that the environment of the
organisation is dynamic. Some amount of variability between the
performance and the standard is natural and expected. Regular exercise of
‘strategic evaluation helps the organisation to gauge the success of the
adopted strategy and to incorporate any changes where required.

15. 3) Corrective Actions :
The organisation can take remedial action on the points which are identified weak
areas by strategic evaluation. For example, if it emerges that the lack of skills of the
employees is a major hurdle behind the failure of the strategy to meet objectives,
then a massive training program can be initiated by the organisation. Similarly, if it
is found that the organisation has set unrealistic sales targets, then course correction
can be attempted.
4) Reassessing Goals :
The evaluation of the performance of the organisation could also lead to a
questioning of the goals and objectives of the organisation. For example, the under
performance of a team to implement the strategy could be due to factors like lack of
team support, change in market dynamics or faulty strategy definition.
5) Alerts from Threat :
Strategic evaluation also makes the organisation future ready. It identifies issues and
problems in the initial stage so that the organisation can take steps to tackle the same
in the first step itself before they become too big to conquer. Strategists need to
combine the virtues of patience and rapid action.