evaluation and control process

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Subscribe now and be the first to receive all the latest updates! Scheduling evaluation and control in your strategic plan isn't a reflection on those who devised the plan. How good is the firms balance of investments between long term and short-term projects? It is not a mere analytical exercise that vary frequently. It has also been suggested by them that the evaluation process should neither be a periodic nor be too frequent. vii. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. What happened in the past is irrelevant except to learn from it, and you don't know what will happen in the future, so you can't plan for it.

When actual performance is less than budgeted performance we must pinpoint the areas where performance is low and take corrective action. When the performance of managers is appraised, it is their contribution to the organizational objectives which is sought to be measured. The management should assess the available resource and identify the critical one, which is the most the company poses and which is the least it has. One aspect is that the business must fit with the environment. Standards set must be related to key management tasks. (ii) The second step is to produce a range of strategic options. It leads to strategic rethinking .It consists of identification and monitoring of strategic thrusts. The criteria for setting standards may be qualitative or quantitative. (A) Setting standards of performance It must focus on questions like: The firm must identify the areas of operational efficiency in terms of people, processes, productivity and pace. Ashby pointed out that for all the feedback system multiple-loop error control is needed for stability so that system goals may undergo changes when the existing control system becomes outdated. Top executive usually dislike knowing about the negative results. 2 0 obj The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. For instance, the strategic, which are not formulated to its excel, may compromise between opposing power groups or, it may be manifested in the form of interdepartmental conflicts with the organisational conflict. Performance checks, which are a feedback in the evaluation process, are done through the motivation system. To browse Academia.edu and the wider internet faster and more securely, please take a few seconds toupgrade your browser. It helps to find out deviations. It can be expresses in terms of performance indicators. First, most quantitative measures are tied to annual objectives rather than many quantitative measures. The four basic type of strategic control are-. Introduction of new product, market or installation of a plant can be of strategic importance only if mission is accomplished within specified time. Subscribe Now and Get the latest updates in your inbox. A periodic evaluation system is more formal and is destined to be more automatic. Requirements 4. For measuring the performance, financial statements like balance sheet, profit and loss account must be prepared on an annual basis. Many of the strategic failures are due to evaluation of strategies by their planners. Should be done with average control and avoid too many controls. Your email address will not be published. Thus the evaluation requires constant checking on the consistency of goals and policies in the strategy. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. ii. An organizations approach towards strategy evaluation must vary with its own strategic posture, method of planning and control mechanism. Plagiarism Prevention 5. The organization can use both quantitative and qualitative criteria for a comprehensive assessment of performance. (ii) The risk is involved in the time period of available resources with the difficulty of predicting long-run environmental changes. You wouldn't hire someone for a job and wait until he fails completely and is let go from the job to look back and see what went wrong. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. The alternative waiting until the program ends to evaluate its success risks wasting resources on unsuccessful activities and missing opportunities to amend the program as needed. For these and other reasons, qualitative criteria are also to be taken into account while evaluating strategies. In double-loop learning system, an organization not only detects the error in strategic choice but also redefines the very norms, which currently measure the effective performance of a business firm. xZ[s6~N$Kq2nR;}`$ZNkSm9=/JW6)98;WP$^8zw,^Pbq?IOHSB~]9]2c!u^x According to Rumelt (1980), evaluation of strategy is not the simple appraisal of the business growth rate and the rate of profit. After developing a number of strategic alternatives, they should be evaluated against the criteria, in order to select the best strategy. (viii) Finally, the company will need some system for selecting future strategies as a result of these evaluations. Again the structure of objectives may be inconsistent. (vi) Suitability of each alternative should be tested. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. Some of the competitive areas are positional advantages, successful trade names, ownership of sources, geographical location, leadership in service field, reliability, and quality of the product or service. To evaluate competence in relation to strategy, the company must identify its strength whether it is good in marketing, in production or in R&D. Now, if we look at the way the evaluation process works, we will observe that its efficacy depends on the extent to which it is able to bring actual performance to the level of the standards. It should provide with an operational framework for problem solving. Content Filtration 6. Meaning of Strategy Evaluation 2. In the words of Professor William F. Glueck and Lawrence R. Jauch, Evaluation of strategy is that phase of strategic management process in which the top managers determine whether their strategic choice as implemented is meeting the objectives of the enterprise.. Competitive benchmarking can help you find out if any gaps between targets and actuals are normal for the industry, or are signs of an internal problem. How companies are creating business value from e-business application? Image Guidelines 4. In fact a good strategy should not require frequent reformulation. How good is the firms balance of investments among different divisions? The specific choice of technique will depend upon the circumstances. 3. Seymour Tiles identified six qualitative that are useful in evaluating strategies way back in 1963 thus . In fact, one should examine the appropriateness of the business objectives and major policies and plans and should indicate whether the results obtained so far approve or disapprove the critical assumptions, based on which the strategies are made. Thus, the achievement of a department or a profit centre is the sum total, or even more, synergistically, of the individual performance of managers and employees in that department or profit centre. They become more cautions, more systematic in carrying out EAD and more concerned about strategic implementation. If actual performance results fall outside the desired tolerance range then, actions must be taken to correct the deviation. When actual performance is equal to budgeted performance tolerance limits must be set. A quantitative criterion includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. The standard performance is a bench mark with which the actual performance is to be compared. Unfortunately, only during the period of crisis such things happen. Seymour Tiles suggests the following criteria to evaluate strategy soon after the implementation is over: The consistency of policy implementation of the strategy fits into the integrated pattern of the organisation should also be related to the other policies of the organisation, which has been established, and to the goals it is pursuing. <>/Metadata 225 0 R/ViewerPreferences 226 0 R>> Standards should be set not only for output but also for intermediate stages. So, these are the various steps of strategic evaluation and control. Appropriateness of the Strategy in the Light of Available Resources: The implementation of strategy has to make use of the critical resources most effectively. Then, strategic evaluation and control stands for the process of determining the effectiveness of a given strategy in attaining the organisational objectives and taking corrective action if need there be. iii. Now there has to be a way of finding out whether the strategy being implemented is guiding the organization towards its intended objectives. Perhaps you have no idea that the market has changed, but you don't want to be blindsided by it if it has changed. How good is the firms balance of investments between slow-growing markets and fast-growing markets? Strategic evaluation and control is the process of determining the effectiveness of a given strategy in achieving the organizational objectives and taking corrective action wherever required. Strategy is not problem solving by itself. Greater the magnitude of the above factors, greater is the degree of risk involved. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it. When someone has control of something, everyone else doesn't have control, and certainly, no one wants to be controlled. In practice, it is difficult to differentiate strictly between the performance of individuals and that of the organizational units they belong to. Those who analyze the cases of failure can learn more about how to avoid failures.

In the absence of such a mechanism, there would be no means for strategists to find out whether or. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Thus, variable objectives must be created against which measurement of performance can be done. ii. But various factors such as managers contribution are difficult to measure. The measurement must be done at the right time else evaluation will not meet its purpose. Another strategic importance is the physical availability of resources in relation to its environment or physical facilities relative to markets, source of labour or materials or the efficiency of facilities. Standards are detailed expressions of strategic objectives. If it is not acceptable then corrective action steps may be taken. Strategy is the embodiment of past convictions and commitments. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. Difficulties. The cause of deviations may be External or internal, Random or expected, Temporary or permanent. Appropriates of Time Horizon of the Strategy: Strategic are not goal oriented but also time bounded. There, the thrust of discussion is on understanding the role that these systems play in strategy implementation and how they have to be adapted to suit the requirements of changing strategies. i. For long-run success, it is necessary for continuous assessment of high degree to which previously established policies are consistent with the environment and how current policies are accounted with future of the environment. The Importance of Strategic Management to Business Organizations, Strategic Management and Strategic Planning of Zimbabwe National Water Authority (ZINWA). After all, the market is continually changing. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Copyright 10. When actual performance is equal to budgeted performance tolerance limits must be set. Whether a firm is capable to compete with other firms strategy, with the environment, or the organisation possess the high degree of coordinate and integrative skill to carry out the strategy. Terms of Service 7. In this manner, through the process of strategic evaluation and control, the strategists attempt to answer the two sets of questions as given below:- Implementation control- It includes evaluating plans, programs, projects, to see if they guide the organization to achieve predetermined organizational objectives or not. There can be the following types of control . Is the strategy guiding the organization towards its intended objectives? Strategy evaluation is that phase of the strategic management process in which manager tries to assure that the strategic choice is properly implemented and is meeting the objectives of the enterprise. This is known as single-loop learning.

Anyway, the steps in the strategic evaluation and control process are shown by the following figure: Managers need to specify what implementation process and results will be monitored and evaluated. 2. High returns often go with high degree of risk. Enter the email address you signed up with and we'll email you a reset link. Activities should specifically relate to a firms objectives. STRATEGIC MANAGEMENT PRACTICES AND PERFORMANCE OF THE SME S IN BANGLADESH. The steps in the process of strategic evaluation are: (i) The first step is a strategic analysis in order to gain a clear understanding of the circumstances affecting the organisations strategic situation. This criteria does not imply that the strategy is the one with minimum risk. Strategic evaluation and control therefore performs the crucial task of keeping the organization on the right track. Should not provide too much information and provide required information at right time.

When actual performance is greater than budgeted performance one must check the validity of standards and efficiency of management. Evaluation is done by comparing actual performance with standards. As a result, one cannot talk in terms of the best way of evaluating a strategy.

Strategic evaluation and controlis the process of determining the effectiveness of a given strategy in achieving the organizational objectives and taking corrective actions whenever required. (B) Measurement of performance Standards of performance act as a benchmark in evaluating the actual performance. Differences also arise out of the fact that objectives are devices for ensuring coherence in action but are mostly treated as values. Once standards are set, the next step is to measure your performance. Thus strategy evaluation and control deals with ensuring as to whether a particular strategy contributes to the organisational objectives or not. B) How is the organization performing? (iv) It is helpful to establish the underlying rationale for each strategy by explaining why the strategy might succeed. The validity of the organizations mission otherwise will be questioned. Once youve determined why performance deviated from standards, youll decide what to do about it. Required fields are marked *. Executives find it easier to talk in terms of goals and objectives. But the information system should be designed in such a way that even the negative results can draw their attention without any unnecessary delay. 6. The strategic inconsistency noticed between the organisational objectives and the values of managerial groups. But strategists themselves cannot evaluate the performance of their strategies in an unbiased way, as they will remain emotionally attached with their strategic choice. Depending on the cause of each deviation, youll either decide to take action to correct performance, revise the standard, or take no action. (iii) The third step is to develop a basis of comparison. Those who devised the strategic plan take control by evaluating it at this point, and they: Management strategists have defined four types of control: The evaluation and control process allows you to intelligently adjust your strategic plan, changing its course or putting it back on track so it continues to work for you. Strategic surveillance- It aims at generalized control. What needs to be done to ensure that resources are utilized properly and objectives are met? This may be available from the strategic analysis or may need to be specially developed. In the context of the phrase "evaluation and control," however, "control" means that those who evaluate the strategic plan have the ability to control the strategy by making changes as needed while the plan is still operational. The need for evaluation of business strategy arises out of the fact that a strategy may fail during implementation and an early corrective action is to be taken based on the detailed evaluation report. The analysis of economic relationship and the scope of business are related with economic and social conditions over time. Thus strategic evaluation and control could be defined as the process of determining the effectiveness of a given strategy in achieving organizational objectives and taking corrective action wherever required. The control system, of course, is at the heart of any evaluation process, and is used for setting standards, measuring performance, analyzing variances, and taking corrective action. In fact for each business the choice of strategy is different as it depends on the situational logic. The critical factors that could help in evaluating a strategy may broadly be classified into two categories: Quantitative criteria commonly employed to evaluate strategies are financial ratios, which strategies use to make three important comparisons (i) comparing the firms performance over different time periods (ii) comparing the firms performance to competitors and (iii) comparing the firms performance to industry averages. Account Disable 12. Periodicity may induce efficiency in collection and analysis of data but is bound to fix the question frame and inhibit broad-ranging reflection. The task of planning, reviewing and controlling is an integral part of the organization. Privacy Policy 9. (i) Operational control- It is aimed at allocation and use of organizational resources through evaluation of performance of organizational units, divisions, SBU`s to assess their contribution in achieving organizational objectives. You can download the paper by clicking the button above.

The key to evaluate consonance is to understand the existence of business, how it is valued currently assumed to be and current pattern differs with earlier patterns. For measuring the performance, financial statements like balance sheet, profit, and loss account must be prepared on an annual basis. The appraisal system actually evaluates performance and so is a part of the wider control system. Argyris and Schon (1978), in their study on organizational learning, introduced the concepts of single-loop and double-loop learning. v. Does the strategy have an appropriate time framework? Measurement must be made at predetermined times. Therefore standards can be set keeping in mind past achievements, compare performance with industry average or major competitors. The strategy evaluation should look beyond the short-term state of the organization and examine the fundamental factors that govern the business success. Uploader Agreement. They refuse to deviate from the existing strategy because of which strategic evaluation takes a back seat for them. A direct tie is very much needed to motivate the process of evaluation. Evaluation and control is a step built into a strategic plan so the plan can be evaluated while it's being implemented and changes can be made to the plan as needed. One may hardly meet with a manager who has never experienced any strategic failure in his life. Incentive systems are directly related to the amount of deviation. Failures are inevitable. vi. %PDF-1.7 not the strategy is producing the desired effect. <> The positive deviation indicates a better performance but it is quite unusual exceeding the target always. During the two proceeding phases of strategic management process, the strategists formulate the strategy to achieve a set of objectives and then implement the strategy. The main reason behind such indifference towards evaluation can be traced back to their lack of training in problem structuring. Change is natural over time, and the need to make adjustments to strategic plans is very common. Strategic alternatives may be ranked, based on their relative merits and demerits. It is designed to monitor a broad range of events inside and outside the organization that are likely to threaten the course of the firm. Reformulate strategies,plans,objectives Giving a fresh start to the strategic management process, Your email address will not be published. Introduction to Management: Strategy Evaluation and Control, ClearPoint Strategy: Strategic Control: Breaking Down the Process and Techniques, Pinpoint where the plan is not working well, Look for gaps that need to be filled to cover unexpected actions, Decide if adjustments or changes need to be made to the plan, Alter the strategic plan by making changes. 4 0 obj Are the organization and its managers doing things which ought to be done? Learn about:- 1. These difficulties might be absent for external evaluators. However, its significant role in evaluation is yet to be acknowledged.

endobj Critical Factors 8. <>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612.25 792.25] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> Many managers feel that qualitative organizational measurement is best arrived at simply by answering a series of important questions aimed at revealing important facets of organizational operations. In fact, with the increasing sophistication of the information management systems and the use of it is possible to devise elaborate methods for evaluation. iv. Measurement helps compare actual performance with standards. Further, organizational hierarchy may not ensure full freedom to them as evaluators. Content Guidelines 2. Operating problems are brought on the top to reformulate the policies for its effective implementation.

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