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Strategic evaluation and control


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Strategic evaluation and control

  1. 1. Strategic Evaluation and Control Business Policy and Strategic Management
  2. 2. Strategic Evaluation and Control <ul><li>Strategic evaluation and control constitutes the final phase of strategic management. </li></ul>
  3. 3. Strategic Evaluation and Control <ul><li>Strategic evaluation operates at two levels: </li></ul><ul><ul><li>Strategic level - wherein we are concerned more with the consistency of strategy with the environment. </li></ul></ul><ul><ul><li>Operational level – wherein the effort is directed at assessing how well the organisation is pursuing a given strategy. </li></ul></ul>
  4. 4. Purpose of Strategic Evaluation <ul><li>The purpose of strategic evaluation is to evaluate the effectiveness of strategy in achieving organisational objectives. </li></ul>
  5. 5. Definition <ul><li>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. </li></ul>
  6. 6. Nature of Strategic Evaluation <ul><li>Nature of the strategic evaluation and control process is to test the effectiveness of strategy. </li></ul><ul><li>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. </li></ul><ul><li>There has to be a way of finding out whether the strategy being implemented will guide the organisation towards its intended objectives. </li></ul><ul><li>Strategic evaluation and control, therefore, performs the crucial task of keeping the organisation on the right track. </li></ul><ul><li>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. </li></ul>
  7. 7. Nature of Strategic Evaluation <ul><li>Through the process of strategic evaluation and control, the strategists attempt to answer set of questions, as below. </li></ul><ul><ul><li>Are the premises made during strategy formulation proving to be correct? </li></ul></ul><ul><ul><li>Is the strategy guiding the organisation towards its intended objectives? </li></ul></ul><ul><ul><li>Are the organisation and its managers doing things which ought to be done? </li></ul></ul><ul><ul><li>Is there a need to change and reformulate the strategy? </li></ul></ul><ul><ul><li>How is the organisation performing? </li></ul></ul><ul><ul><li>Are the time schedules being adhered to? </li></ul></ul><ul><ul><li>Are the resources being utilised properly? </li></ul></ul><ul><ul><li>What needs to be done to ensure that resources are utilised properly and objectives met? </li></ul></ul>
  8. 8. Importance of Strategic Evaluation <ul><li>Strategic evaluation helps to keep a check on the validity of a strategic choice. </li></ul><ul><li>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. </li></ul>
  9. 9. Importance of Strategic Evaluation <ul><li>During the course of strategy implementation managers are required to take scores of decisions. </li></ul><ul><li>Strategic evaluation can help to assess whether the decisions match the intended strategy requirements. </li></ul><ul><li>In the absence of such evaluation, managers would not know explicitly how to exercise such discretion. </li></ul>
  10. 10. <ul><li>Strategic evaluation, through its process of control, feedback, rewards, and review, helps in a successful culmination of the strategic management process. </li></ul><ul><li>The process of strategic evaluation provides a considerable amount of information and experience to strategists that can be useful in new strategic planning. </li></ul>
  11. 11. Participants in Strategic Evaluation <ul><li>Shareholders </li></ul><ul><li>Board of Directors </li></ul><ul><li>Chief executives </li></ul><ul><li>Profit-centre heads </li></ul><ul><li>Financial controllers </li></ul><ul><li>Company secretaries </li></ul><ul><li>External and Internal Auditors </li></ul><ul><li>Audit and Executive Committees </li></ul><ul><li>Corporate Planning Staff or Department </li></ul><ul><li>Middle-level managers </li></ul>
  12. 12. Barriers in Evaluation <ul><li>Limits of control </li></ul><ul><li>Difficulties in measurement </li></ul><ul><li>Resistance to evaluation </li></ul><ul><li>Rely on short-term implications of activities </li></ul>
  13. 13. Requirements for Effective Evaluation <ul><li>The effective control must be: </li></ul><ul><ul><li>Control should involve only the minimum amount of information as too much information tends to clutter up the control system and creates confusion. </li></ul></ul><ul><ul><li>Control should monitor only managerial activities and results even if the evaluation is difficult to perform. </li></ul></ul><ul><ul><li>Controls should be timely so that corrective action can be taken quickly. </li></ul></ul><ul><ul><li>Long-term and short-term controls should be used so that a balanced approach to evaluation can be adopted. </li></ul></ul><ul><ul><li>continued………….. </li></ul></ul>
  14. 14. Requirements for Effective Evaluation <ul><li>Controls should aim at pinpointing exceptions as nitpicking does not result in effective evaluation. </li></ul><ul><li>The 80:20 principle, where 20 per cent of the activities result in 80 per cent of achievement, needs to be emphasised. </li></ul><ul><li>Getting bogged down with the activities that do not really count for achievement makes the evaluation ineffective. </li></ul><ul><li>Rewards for meeting or exceeding standards should be emphasised so that managers are motivated to perform. </li></ul><ul><li>Unnecessary emphasis on penalties tend to pressurise the managers to rely on efficiency rather than effectiveness </li></ul>
  15. 15. STRATEGIC CONTROL <ul><li>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. </li></ul><ul><li>In this manner, strategic controls are early warning systems and differ from post-action controls which evaluate only after the implementation has been completed. </li></ul>
  16. 16. STRATEGIC CONTROL <ul><li>The types of strategic controls are: </li></ul><ul><ul><li>Premise control </li></ul></ul><ul><ul><li>Implementation control </li></ul></ul><ul><ul><li>Strategic surveillance </li></ul></ul><ul><ul><li>Special alert control </li></ul></ul>
  17. 17. Premise Control <ul><li>Premise control is necessary to identify the key assumptions, and keep track of any change in them so as to assess their impact on strategy and its implementation. </li></ul><ul><li>Premise control serves the purpose of continually testing the assumptions to find out whether they are still valid or not. </li></ul><ul><li>This enables the strategists to take corrective action at the right time rather than continuing with a strategy which is based on erroneous assumptions. </li></ul><ul><li>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. </li></ul>
  18. 18. Implementation Control <ul><li>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. </li></ul>
  19. 19. Strategic Surveillance <ul><li>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. </li></ul>
  20. 20. Special Alert Control <ul><li>Special alert control is based on trigger mechanism for rapid response and immediate reassessment of strategy in the light of sudden and unexpected events. </li></ul>
  21. 21. Special Alert Control <ul><li>Crises are critical situations that occur unexpectedly and threaten the course of a strategy. </li></ul><ul><li>Organisations that hope for the best and prepare for the worst are in a vantage position to handle any crisis. </li></ul><ul><li>Crisis management follows certain steps: </li></ul><ul><ul><li>Signal detection </li></ul></ul><ul><ul><li>Preparation/prevention, </li></ul></ul><ul><ul><li>Damage limitation, </li></ul></ul><ul><ul><li>Recovery leading to organisational learning. </li></ul></ul><ul><li>The first step of signal detection can be performed by the special alert control systems. </li></ul>