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Evaluation and Control Process

• Ensures that a company is achieving what it set out to accomplish


• It compares performance with desired results and take corrective action, as needed

• Determine what to measure


• Top managers and operational managers need to specify what implementation processes and results will be
monitored and evaluated.
• Processes and results must be capable of being measured in a reasonably objective and consistent manner
• The focus should be on the most significant elements in a process – the ones that account for the highest
proportion of expenses or the greatest number of problems
• Measurements must be found for all important areas, regardless of difficulty.
• Establish standards of performance
• Standards used to measure performance are detailed expressions of strategic objectives
• They are measures of acceptable performance results
• Each standard usually includes a tolerance range, w/c defines acceptable deviations
• Standards can be set not only for final output but also for intermediate stages of production output
• Measure actual performance
• Measurements must be made at predetermined times
• Compare actual performance with the standard
• If actual performance results are within the desired tolerance range, measurement process stops here
• Take corrective action
• If actual results fall outside the desired tolerance range, action must be taken to correct the deviation.
• Is the deviation only a chance fluctuation?
• Are the processes being carried out incorrectly?
• Are the processes appropriate to the achievement of the desired standard? Action must be taken that will
not only correct the deviation but also prevent its happening again.
• Who is the best person to take corrective action?

Nucor – unusual in its ability to deal with the entire evaluation and control process

Evaluation and Control Information


• Consists of performance data and activity reports
• If undesired performance results because the strategic management processes were inappropriately used,
operational managers must know about it so that they can correct the employee activity
• Top management need not be involved
• If undesired performance results from the processes themselves, top managers, as well as operational
managers, must know about it so that they can develop new implementation programs or procedures.

• E&C I must be relevant to what is being monitored


• One of the obstacles to effective control is the difficulty in developing appropriate measures of important
activities and outputs

Figure 11-2
• Provides strategic managers with a series of questions to use in evaluating an implemented strategy.
• Strategy review: initiated when a gap appears between a company’s financial objectives and the expected results
of current activities.
• Answering proposed set of questions: manager should have a good idea of where the problem originated and
what must be done to correct the situation

Performance
• End result of activity
• Select measures to assess performance based on the organizational unit to be appraised and the objectives to be
achieved
• Objectives that were established earlier in the strategy formulation part of the strategic management process
(dealing w/ profitability, market share, and cost reduction, among others) should certainly be used to measure
corporate performance once the strategies have been implemented

Types of Control
• Controls – established to focus on actual performance results (output), activities that generate the performance
(behavior), or on resources that are used in performance (input).

• Behavior Control – specify how something is to be done through policies, rules, standard
operating procedures, and orders from a superior.
• Following company procedures, making sales calls to potential customers, and getting to work on time: most
appropriate when performance results are hard to measure, but the cause-effect connection between activities
and resukts is clear.

• Output Control – specify what is to be accomplished by focusing on the end result of the
behaviors through the use of objectives and performance targets or milestones
• Sales quotas, specific cost-reduction or profit-objectives, and surveys of customer satisfaction: most appropriate
when specific output measures have been agreed on but the cause-effect connection between activities and
results is not clear.

• Input Control – emphasize resources, such as knowledge, skills, abilities, values, and
motives of employees
• Number of year of education and experience: most appropriate when output is difficult to measure and there is
no clear cause-effect relationship between behavior and performance (college teaching)

Example of increasingly popular behavior controls:


• ISO 9000 Standards Series
• Composed of 5 sections from 9000 to 9004
• A way of objectively documenting a company’s high level of quality operations
• ISO 14000 Standards Series
• A way to document the company’s impact on the environment