This document discusses strategy evaluation and control. It outlines that strategic evaluation assesses whether the chosen strategy is being implemented and meeting objectives. There needs to be an evaluation system, reward system, and effective information system. Evaluation should happen at different organizational levels and determine if modifications are needed. Criteria for evaluation can include quantitative factors like financial results compared to history and competitors, as well as qualitative factors like consistency with objectives and environmental assumptions. Feedback is used to determine causes of deviations and take corrective action.

1. Makerere University
Business School
Strategic Management Course
STRATEGY EVALUATION
& CONTROL

2.  Strategic evaluation is the strategic
management process phase in which
managers provide assurance that the
chosen strategy is implemented and is
meeting business objectives.
 By this time, plans are already specified,
activities assigned, resources provided,
policies in place and leadership system and
style formed.
 There is a need for:
 An evaluation and control system,
 A reward system and
 An effective information system
Introduction

3. Introduction – Cont.
 The evaluation system
 Helps to recycle feedback into new
strategic planning
 Double-checks strategic choice for
appropriateness & consistency with the
environment
 Need for evaluation of consistency in
application to lower organisation levels

4. Questions answered by C & E
 Are decisions consistent with policy?
 Are there sufficient resources?
 Is the environment still as anticipated?
 To what extent are targets being met?
 Are the plans still relevant or should
they be changed?

5. C & E Process
 The organisation structure and style
provide the main mechanism.
 There are 4 inter-related activities in
the evaluation process:
1. Establishing targets, standards &
implementation plans.
2. Measuring actual performance
3. Analysing deviations
4. Determining necessary modifications

6.  Evaluation should take place at
different organisation levels – review
levels
 The corporate level executive
 Evaluates overall corporate strategy
 Monitors SBU evaluation
 The budget is a useful control tool
 It inter-connects financial elements of
the plan
 The budget, however, lacks non-
financial and other assumptions for
strategic control.
The role of a strategist

7.  A controller may be appointed near
the top position in a staff position
 In charge of strategy information system
but without line responsibility
 Line managers must, therefore,
maintain authority over control
 Other evaluation and control set-ups:
 Internal audit committees
 Executive committees at board level
 External auditors
 These evaluate and control top
management.
The strategist – Cont.

8.  Top managers must be motivated
to evaluate
 Unwillingness to evaluate is a
common cause of strategy failure
 Failure experience may increase
motivation to evaluate
 Performance reward for
achievement of objectives also
increases motivation to evaluate.
Motivation to evaluate

9.  Top management rewards in many firms,
are done irrespective of strategy evaluation
 Executives make proposals to the board for
themselves
 These include salary changes and promotions
 Strategic demands should guide the reward
system.
 Performance measures should be
established in time before the actual
implementation
 Rewards should then be based on these
standards after the actual performance.
The Reward System

10.  Performance rewarded should be in
the manager’s discretion
 Significant environmental effects on
performance should not have a big
impact on the manager’s penalty
 Career development should also be
considered
 There is need for rotations
 Enough time should be allowed to
individuals
 Rewards and penalties should consider
performance of predecessors
Reward system - Cont.

11.  It is often difficult to tie cause-effect
relationships of strategic unit
performance
 In case of failure, there is room for
 Everyone to defend oneself
 Presenting results as successful – e.g.
short-term results, promise for long-term
success.
 Top management tends to
 Claim responsibility for good performance

Blame subordinates when there is strategic
failure
Dysfunctional evaluation behaviour

12.  There are 3 major areas where
managers make decisions:
 Criteria for evaluation
 Feedback system and control
areas
 Outcomes of strategic evaluation
Control & Evaluation Areas

13.  Evaluation can be based on
objective or subjective factors
 Criteria depend on the evaluation
purpose and situation
 Quantitative factors (supported by
some qualitative factors) are more
relevant for the past and present
 Qualitative factors are more
relevant for testing whether the
strategy will be applicable or not.
Criteria for evaluation

14.  Performance is compared with
 Historical results and
 Competitors
 Standard numbers / ratios
 Such factors include
 Profitability results e.g. net profit
 Investment performance indicators
e.g. dividend rates, earnings per
share, return on capital,
 Market performance e.g. market
share, sales growth
Quantitative criteria

15.  There are challenges in
 Selection of which factors to use
 Set tolerance limits
 The guide should come from key
success factors for strategy
success
Quantitative criteria – Cont.

16.  Subjective assessment should
supplement quantitative
performance measures
 More appropriate to the entire
organisation strategy evaluation
especially before a major change
of direction
 There are 3 broad qualitative
criteria categories

Consistency, appropriateness and
workability
Qualitative Criteria

17. Consistency with:
 Objectives
 Environmental assumptions
 Internal conditions
Appropriateness with respect to:
 Resource capabilities
 Risk preference
 Time horizon
Consistency & Appropriateness

18.  Addresses
 Feasibility
 Stimulation – managers’
commitment, consensus among
executives, personal aspirations
among executives.
Workability

19.  Timing of measurement
 What feedback to provide
Measuring Feedback

20.  Use of timely information to
 Determine causes of deviations
 Take corrective action
 Reward performance
Evaluation & Corrective action

21. Reading Assignment
 In Bakunda & Ngoma, read about
1. Why managers spend more time on
strategic panning and less on control.
2. Types of control

Strategic plan control,

Annual plan control and

Profitability and efficiency controls