CHPT 8 Strategy Evaluation

CHAPTER 8 STRATEGY EVALUATION & CONTROL INTRODUCTION: The basic premise of strategic management is that the chosen strategy
y will achieve the organization's mission and objectives. Strategy evaluation and control is the final phase of strategic management. The basic purpose of strategy evaluation and control is to determine the effectiveness of a given strategy in achieving the organizational objectives and taking appropriate corrective action whenever required. Strategic control focuses on the dual questions of whether: (i) the strategy is being implemented as planned; and (ii) the results produced by the strategy are those intended. Adequate and timely feedback is the cornerstone of effective strategy evaluation. Strategy evaluation can be no better than the information on which it is based. Too much pressure from top managers may result in lower managers contriving numbers they think will be satisfactory. Importance of Strategy Evaluation and Control Strategic control is concerned with tracking the strategy as it is being implemented, detecting any problems areas or potential problem areas, and making any necessary adjustments. Also the environmental situation and the firm's internal situation are developing and evolving. Strategic controls are necessary to guide the firm through these events. They
must provide some means of correcting the directions on the basis of intermediate performance and new information. Strategic evaluation can be a complex and sensitive undertaking. Too much emphasis on evaluating strategies may be expensive and counterproductive. No one likes to be evaluated too closely. Strategy evaluation is essential to ensure that stated objectives are being achieved. In many organizations, strategy evaluation is simply an appraisal of how well an organization has performed. Strategy evaluation is important because organizations face dynamic environments in which key external and internal factors often change quickly and dramatically. Success today is no guarantee of success tomorrow. An organization should never be lulled into complacency with success. Types Of Control Management can implement controls before an activity commences, while the activity is going on, or after the activity has been completed. The three respective types of controls based on timing are feedforward, concurrent, and feedback. (i) Feed-forward Control: Feed-forward control focuses on the regulation of inputs (human, material, and financial resources that flow into the organization) to ensure that they meet the standards necessary for the transformation process. Feedforward controls are desirable because they allow management to prevent problems rather than having to cure them later. Unfortunately, these controls require timely and accurate information that is often difficult to develop. Feed-forward
control is also sometimes called preliminary control, pre-control, preventive control, or steering control. (ii) Concurrent Control: Concurrent(simultaneous / parallel) control takes place while an activity is in progress. It involves the regulation of ongoing activities that are a part of the transformation process to ensure that they conform to organizational standards. Concurrent control is designed to ensure that employee work activities produce the correct results. It often involves checkpoints at which determinations are made about whether to continue progress, take corrective action, or stop work altogether on products or services. (iii) Feedback Control: This type of control focuses on the outputs of the organization after the transformation is complete. Sometimes called post-action or output control, it fulfills a number of important functions. For one thing, it is often used when feed-forward, and concurrent controls are not feasible or are too costly. Sometimes, feedback is the only viable type of control available. The major drawback of this type of control is that, the time the manager has the information and if there is a significant problem the damage is already done. But for many activities, feedback control fulfils a number important functions. The function of strategic control: Controlling is the process of regulating organizational activities so that actual performance conforms to expected organizational standards. It is the process of monitoring and adjusting
organizational activities in such a way as to facilitate accomplishment of organizational objectives. There are two broad types of control: (i) Strategic control, (ii) Operational control. Strategic control, the process of evaluating strategy, is practiced both after the strategy is formulated and after it is implemented. Operational controls are concerned with individual and group performance as compared with the individual and group role prescriptions required by organizational plans (for example, "Are individual sales quotas being met?"). Types of Strategic Control There are four types of strategic controls: (i) Premise control, (ii) Implementation control, (iii) Strategic surveillance, and (iv) Strategic alert control. (i) Premise control: Strategies are often based on premises, i.e. assumptions or predicted conditions. A strategy may be valid only as long as the planning premises remain valid. A strategy may be based on certain premises related to the industry and environmental factors like government policies and regulations. Changes in the vital premises may necessitate changes in strategy.
(ii) Implementation control: In several cases, the implementation control is designed to assess whether overall strategy should be changed in the light of unfolding events and results associated with incremental steps and actions that implement the overall strategy. (iii) Strategic surveillance: Strategic surveillance: SS is designed to monitor a broad range of events inside and outside the company that are likely to threaten the course of the firms strategy. The strategy of the company could be defeated by such certain events. It is therefore necessary, that the company exercise surveillance for timely detection of such developments and corrective action. (iv) Special alert control: sudden and unexpected developments like alliance between competitors, takeovers, a major competitive move by a competitor etc. could have serious impact on a firms strategy.
Operational control: While strategic control attempts to steer the company over an extended time period, OC provide post-action evaluation and control over short time periods. The OC system involves the following steps: (a) Establishing criteria and standards: Criteria and standards prove the basis for evaluation. Selection of the criteria for evaluation depends on a number of factors. For e.g. the evaluation criteria appropriate for stability strategy may not be appropriate for growth strategy or retrenchment strategy. (b) Measuring and comparing performance: the actual performance is measured and compared with the standards to identify the shortfall if any. (c) Performance gap analysis (PGA): Performance gap is difference between the actual performance of a given organizational unit and planned performance of that unit. If there is any gap, it is necessary to identify the reasons for the gap to determine corrective steps. (d) Taking corrective measures: PGA will reveal the reasons for the gap and will help to decide the corrective measures.

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CHAPTER 8 STRATEGY EVALUATION & CONTROL INTRODUCTION: The basic premise of strategic management is that the chosen strategy

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