Understanding and Implementing Effective Evaluation and Control of Strategy

Strategic assessment and control, also known as strategic evaluation, is a critical process that organizations undertake to ensure that their strategic plans align with their organizational goals. This process involves several key steps to monitor, evaluate, and adjust strategies as needed. By effectively implementing these steps, organizations can refine their strategies and achieve their objectives more effectively.

Determining what to measure

One of the foundational steps in strategic assessment is determining what to measure. This requires managers to outline what aspects of the strategic implementation process and outcomes will be evaluated. It's important to measure all critical areas, even if they may not face immediate challenges.

However, due to resource constraints, it's essential to prioritize measurements. Strategists should clearly define the tolerance limits, within which variances between actual and expected performance are acceptable. For instance, if a company's strategy involves reducing operational costs, the tolerance limits might encompass a 5% variance in cost reduction targets.

Establishing a standard of performance

Once the areas to measure are defined, the next step is to set a standard of performance. These standards, or benchmarks, should be specific and measurable. They can be set for both output and intermediate levels.

For the strategy to be effective, the right measures need to be in place to ensure that the standards are tied directly to the strategic goals. If accurate measurement methods and proper standards are not established, the strategic assessment process will become more challenging.

Measuring actual performance

After setting the standards, the actual performance must be measured. This is done at predetermined intervals to ensure consistency. Regular measurements can be part of monthly or quarterly review meetings. Financial statements, such as the balance sheet and income statement, are crucial tools for measuring performance annually.

Comparing actual performance with the standard

The performance data needs to be compared with the established standards to identify any gaps or deviations. If the actual performance results fall within the acceptable tolerance limits, no further action is necessary. However, if there are significant deviations, it is important to analyze the reasons behind these discrepancies.

Competitive benchmarking can help in understanding whether these deviations are common within the industry or indicative of internal issues. By using both quantitative and qualitative criteria, organizations can conduct a comprehensive performance analysis, which can highlight where improvements are needed.

Taking corrective action

If it is determined that the performance is not meeting the expected standards, then corrective actions need to be taken. If real performance falls outside the desired tolerance range, adjustments need to be made to correct the deviation.

Strategists may need to lower performance requirements if the organization's capability does not meet the current standards. Depending on the reason for the deviation, the actions can range from taking measures to improve performance, revising the standard, or deciding not to take any action if the performance is consistently below target.

Conclusion

Strategic assessment and control is a systematic process that helps organizations achieve their long-term goals. By carefully measuring and evaluating performance, deviations can be identified and corrected, ensuring that the organization stays on track toward its strategic objectives.