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Strategic Evaluation & Control
By Shalu Pal
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Strategic Evaluation & Control Process of determining the
effectiveness of a given strategy in
achieving the organizational objectives,and taking corrective actions whereverrequired
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Importance of Strategic
Evaluation Coordinate the tasks performed by individual
managers The provide feedback Decide appraisal & reward Check on validity of strategic choice Enable congruence between decisions &
intended strategy Successful culmination of the strategic
management process Creating inputs for new strategic planning
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Participants in Strategic
Evaluation Board of Directors
Chief executives
SBU or Profit centre heads
Financial controllers, companysecretaries, internal & external auditors
Middle level managers
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Barriers in Evaluation Limits of controls
Difficulties in measurement
Resistance to evaluation
Short termism
Relying on efficiency VS effectiveness
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Strategic Control Are the premises made during strategy
formulation proving to be correct?
Is the strategy guiding the organizationtowards its intended objectives?
Are the organization & the managers
doing things which ought to be done? Is there a need to change &
reformulate the strategy?
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Types of Strategic Controls Premise control
Implementation control
Strategic surveillance
Special alert control
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Premise Control Necessary to identify the key
assumptions (government policies,
nature of competition, breakthrough inR&D) & keep track of any change inthem so as to assess their impact on
strategy & its implementation Continually tests the assumptions
Responsibility: Corporate Planning Staff
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Implementation Control To evaluate whether the plans, programmes
& projects, resulting from implementation of
the strategy, are actually guiding theorganization towards its predeterminedobjectives or not
May lead to Strategic rethinking
Can be put into practice through
- Identification & monitoring of strategicthrusts
- Milestone review
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Strategic Surveillance Designed to monitor a broad range of events
inside & outside the company that are likely to
threaten the course of a firm’s strategy Is a more general form of control Information for this can be obtained through
formal yet simple strategic information scanning
systems like Knowledge managementsystems & organizational learning
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Special Alert Control Based on a trigger mechanism for rapid
response & immediate reassessment of strategy in light of sudden & unexpected
events (eg: sudden fall of a govt., naturalcatastrophe, unfortunate industrial disasteretc.)
Hope for the best ~ Prepare for the worst
Can be handled by formulation of contingency strategies, & by assigning responsibility of unforeseenevents to crisis management teams
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Operation Control
It takes the last phase of mgt functions.
In order to ensure if the org achieves the obj or not.
To measure the strategic actions.
To give feedback and action decision.
Recognizing the linkages that exist betweenstrategic planning and mgt control is vitalto org success.
John C. Cammilus, Mgt Consultant.
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It is aimed at the allocation and use of organizational resources through an
evaluation of the performance of organizational units, such as divisions,SBUs and soon, to assess their
contribution to the achievement of organizational objectives.
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Difference b/w Strategic and Operational Controlifference b/w Strategic and Operational Control
Basic question
Aim
Main concern
Focus
Time Horizon Exercise control
Main techniques
Are we moving inright direction?
Proactive,continuous questioning of thebasic direction of strategy
Steering the futuredirection of the org
External Environ
Long-term Exclu by top mgt,
may be thru lowerlevel support
Envir scanning, info
gathering,uestionin & review
Attribute Strategic control Operation
control How are we
performing?
Allocation & use of org resources
Action control
Internal
organization Short-term
Mainly by executiveor middle mgt onthe direction of top
Budgets, Schedulesand MBO
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Process of evaluation for
operational control
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Setting of Standards How to set these standards?Key managerial tasks can be analyzed to find out
key areas of performance. Standards can be
set in these key areas. What standards to set?The special requirements for the performance of
the key tasks help to determine the type of
standards to set. How do we express these standards?Performance indicators that best express the
special requirements could then be decided upon
to be used for evaluation.
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Measurement of Performance
Evaluation process operates at the performancelevel as action takes place. Standards of performance act as benchmarks against
which actual performance is measured.Can be done through: accounting, reporting,
communication systems etc.Problems faced during measurement:
Difficulties in measurement Timing of measurement Periodicity of measurement
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Analyzing Variances
Comparison of actual performance (AP) with thestandards (S) leads to Analyzing the variances.
AP = S: Ideal but not realistic. Specify a range of tolerance limits.
AP > S: Welcome situation. Also should beconsidered unusual, & a check needs to bemade to test the validity of standards & theefficacy of the measurement system.
AP < S: Alarming. Need to pin point areas whereperformance is below standard & go into thecauses of the deviation.
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Taking Corrective Action
3 courses of corrective action: Checking of Performance: If the evaluation process shows
that performance is consistently lower than expected, in-
depth analysis & diagnosis of the factors that might beresponsible for bad performance. Checking of Standards: is less frequent, but done when it
is found there is nothing wrong with the performance.May result in lowering or elevation of standards as
required. Reformulation of Strategy: Most radical & infrequent.
Strategic control will lead to conclusion that strategiesneed to reformulated. Takes the organization right to the
beginning of the Strategic management process.
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References
Strategic Management by Arthur A.Thompson & A.J. Strickland
Business Policy by Azhar Kazmi
Business Policy: Strategic Management byL.M. Prasad
Management by James A. F. Stoner et al