MODULE 6 |

Strategy Evaluation & Control

Topics:
A. Strategic Control Process
B. Modes of Correction
C. Characteristics of a Good Evaluation

Topic #1: Strategic Control Process

Definition and nature of Controlling

 A process of monitoring performance and taking action to ensure desired results.

 It sees to it that the right things happen, in the right ways, and at the right time.

 Done well, it ensures that the overall directions of individuals and groups are consistent with short
and long range plans.

 It helps ensure that objectives and accomplishments are consistent with one another throughout an
organization.

 It helps maintain compliance with essential organizational rules and policies.

The Control Process

1. Establish objectives and standards. Standards serve as our ruler for measurement. It is hard to know
if a result is good or bad if we do not have a standard to compare it to. For example, if one of my
students get a score of 16 points, is that a good score or bad? Without having a standard, it would be
impossible to answer that question. Here, the standard is the number of items of the test.

There are two types of standards:

A. Output Standards - measures performance results in terms of quantity, quality, cost, or time.
B. Input Standards - measures work efforts that go into a performance task.

2. Measure actual performance. After setting a target standard, implement the plans then look at your
results. If you planned to sell 45 pancakes today (standard), how many did you ACTUALLY sell? You
might have sold 35, 47 or 60. Each result will have different interpretations.

3. Compare results with objectives and standards. Put your actual performance side by side with your
planned output. Did it have a negative or positive deviation? Did you get exactly the targeted amount,
did you sell less, or did you sell more?

Ways of making such comparisons include:

 Historical / Relative / Engineering
 Benchmarking

4. Analyze and interpret deviations. Seeing the differences covers only the “what”. A thinking manager
should be able to see the “why”. Why did we sell more? Why did we sell less? Try to see all the
possible reasons. You will need to adjust to these reasons when you do everything again.

5. Take necessary action to correct negative deviations. After confirming the “whys” make an adjusted
plan for implementation for the next time we do things. If the reason why we sold less is due to a
competitor, include competitive strategies in your next plan. If the reason for selling less is being slow
to create the commodities, then include better production plans next time. If the reason you sold less
is that people were unaware of what you are selling, include better marketing plans.

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Strategic control focuses on the evaluation of the strategies implemented, if they have resulted on what was
planned. It ensures that the strategic aims are achieved.

Schreyogg and Steinmann developed a strategic control process that operates on a continuous
basis. Strategic control for them is the critical evaluation of plans, activities and end results which form a basis
for future actions.

They designed a 3-step model that is far better than the classical feedback model. Pearce and
Robinson added another step in the strategic control process called special alert control.

 PREMISE CONTROL
STEP 1

 IMPLEMENTATION CONTROL
STEP 2

 STRATEGIC SURVEILLANCE
STEP 3

FIGURE 6.1. Strategic Control Process Model by Schreyogg and Steinmann

The first step is premise control. It is designed to check whether the premises is set at the
beginning of the planning and implementation processes are still in place. Premise control also involves the
checking of the conditions of the environment which would affect the strategies.

Implementation control is designed to monitor the overall strategy vis-à-vis the results associated
with the steps in the implementation of the overall strategy. It functions on a continuous basis.

The first approach is the monitoring of strategic programs. Managers can approve early in the
planning process which programs are critical in the success of the strategy. The second approach is to
assess whether to push through or not particular programs based on time, costs, among others.

The second approach is the review of significant highlights in the development of a particular
program. The review will help in determining the direction of the company whether the implementation of the
strategy should continue or not; whether it should be refocused or realigned.

Strategic surveillance is focused on monitoring a broad range of events, bot external and internal
that is likely to affect or pose a great impact on the firm’s strategy. In a way, it is generally environmental
scanning because it is designed to safeguard or protect the established strategies on a continuous basis.

An additional step, theorized by Pearce and Robinsons is special alert control. It is a fast yet
thorough monitoring of strategies on the grounds of sudden or unexpected events such as disasters,
chemical spills, product defects, are, and the like.

Strategic control should look at strategies to be consistent with goals and policies. Inconsistencies
should be changed when needed. To be consistent, it is necessary for strategies to be adaptable and flexible
with the external environment.

Types of Strategic Control According to Purpose

1. Presupposition control – is designed to check systematically and regularly whether the arguments
set during the planning and implementation processes are still binding. When strategies are
formulated, these are based on certain premises or assumptions.

2. Implementation control – is applied to evaluate whether the intermediate strategies are consistent
with the overall strategy.

3. Strategic surveillance – is a monitoring system whereby a broad range of occurrences inside and
outside the organization threatens the implantation of an organization’s strategy.

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Surveillance – means shadowing, observing, and scrutinizing the milieu.

It demands constant awareness, consciousness, and knowledge of how the implantation of the
strategy/ strategies is faring.

4. Vigilance control – is a special type of strategic control that is applied when immediate
reconsideration of an organization’s strategy/ strategies is pursued.

Types of Strategic Control According to Approach

1. Sequential strategic control – is the traditional way of looking at strategic monitoring. It is

sequential, in that the formulation of strategy/strategies is followed progressively by the
implementation of these designed strategies. Once the strategies have been employed, it is only then
that strategic monitoring is carried out. This type of strategic control approach is shown in Figure 8.1

Formulate Implement
Strategies Strategies Strategic Control

Figure 8.1 Sequential Strategic Control

While sequential strategic control looks simple, straightforward, and less threatening due to
its chronological order, the approach does not lend itself to change and versatility. The order is
limiting and as a result, strategic control does not become beneficial and may sometimes be
disadvantageous to the organization. Chances of introducing urgent strategy improvements become
restrictive and slow. As a result, the interactive strategic control is presented.

2. Interactive strategic control is the more appropriate approach for strategic control. Described as
interactive, this approach shows the communicating and collaborative nature of the processes of
strategy formulation, strategy implementation, and strategy control.
As shown in Figure 8.2 the interactive strategic control presents the interrelationships of each
of these processes.

Formulate Strategies Implement Strategies

Strategic Control

Figure 8.2 Interactive Strategic Control

In other words, as strategies are being formulated, the implementation of the strategies is constantly
being evaluated. Instantaneous suggestions and improvements are implemented to better improve
what has been initially formulated. This is likewise true with strategy monitoring. Strategic control is
simultaneously being carried out as a way of determining whether the strategies designed and how
they are being implemented are systematically and thoroughly assessed.

Better than sequential strategic control, interactive strategic control is advantageous in all aspects.
The approach is open, in that it takes into consideration the limitless possibilities that may occur in
the external and internal environments and thus, opportunities for improvements are easily executed.
Secondly, the interactive strategic control is flexible. It creates an organization that is willing to adapt
and change for its own benefit. Thirdly, this approach minimizes the so-called “time leaks”. Due to the
urgency of competition, time is not a luxury for any company. Immediacy of strategic choices and
moves is expected of every organization when situations demand for such actions. Lastly, better
strategic options can be crafted when needed.

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 3. Feedback strategic control is a combination of the sequential and interactive approaches.
Although strategy formulation, strategy implementation, and strategy monitoring appear to be
sequential as shown in Figure 8.3, the feedback loop is essentially interactive. Constant feedback are
effected with respect to the formulation and implemented strategies.

Financial
Performance
Formulate
Implement Monitoring
Strategies
Strategies Of Strategy Market
Performance

Efficiency/
Productivity

People
Performance

Figure 8.3 Feedback Strategic Control

In summary competitive organizations implement strategic control that is greatly dependent on the
purpose of the organization and the approach that it intends to adopt. As such, organizations are able
to streamline its processes, ensure the attainment of its goals and objectives thus contributing to
financial viability and sustainability.

General Electric’s Standards

A global brand like General Electric has the following standards of control:

Profitability standards. These provide the basis for the generation of profits of General Electric.

Market position standards. These enable GE to know its market share in the industry where it competes.

Productivity standards. These indicate the criteria by which final products should be generated within the
organization.

Product leadership standards. These provide the levels of innovation and development which would make
GE products as leaders in the market.

Personnel development standards. These indicate GE’s standards on honing and improving employees’
performance.

Employee attitude standards. These provide basis on the attitudes and behavior employees should
inculcate and adopt.

Public responsibility standards. These are standards on GE’s obligation to society where it operates.

Standards reflecting balance short-range and long-range goals. These indicate the relationship between
short and long range objectives of GE.

Topic #2: Modes of Correction

Managers can choose from different modes of corrective action based on control standards.

 Normal mode
 Crash mode
 Preplanned crisis mode
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 Usually managers identify the areas that need corrective action. There is a need to revise the
standards when they are not attuned to the strategies being implemented. Sometimes, the objectives have to
be revised. There are certain forces in the environment which may affect the strategic objectives; therefore,
circumstances may prompt managers to change them rather than the standards.

In some cases, the strategies are revised. As a form of corrective action, strategies are changed
which are more appropriate to the given objectives.

One underlying reason is an error in the organizational structure and reporting relationship. But the
most common corrective action is seen in the activities or programs during the implantation of the strategies.

Organizational Control Systems

There are many elements in an organization and all of them requires monitoring and control, since all
of them may become sources of problems. Here are some of the more important areas that managers need
to focus on, to make sure everything goes according to plan:

1. Management Processes

a. Strategy and objectives

b. Policies and procedures
c. Selection and training
d. Performance appraisal
e. Job design and work structures
f. Performance modeling, norms, and organization culture

2. Compensation and Benefits

a. Attract talented people and retain them.

b. Motivate people to exert maximum effort in their work.
c. Recognize the value of their performance contributions.

3. Employee Discipline

a. Discipline is defined as influencing behavior through reprimand.

b. Progressive Discipline ties reprimand to the severity and frequency of the employee’s
infractions.
c. Positive Discipline tries to involve people more positively and directly in making decisions to
improve their behavior.

Topic #3: Characteristics of a Good Evaluation

A good strategic evaluation possesses several qualities. Strategic control should neither be too costly
nor too cheap. It does not work well when there is too much information or there is too little information either.
In line with this, the evaluation should be in consonance with the firm’s objectives.

Strategic control should project a true picture of what is really happening in the company subject to
environmental conditions.

Controls should be action-oriented. They should work hand in hand with the goal of achieving
company objectives and not determine decisions. To be action-oriented, it should therefore be familiar with
the external environment.

On the other hand, control system should be sound. There should always be a wise use of
information without becoming an information-overload. Information should be used meaningfully without
exaggeration or reservation.

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