(Source: Ybanez Jr., Antonio Errol B.

Applied Strategic Management and Business Policy: A

Case Study. Makati City: Katha PublishingCo., Inc. 2014.)

Evaluating Improvement Strategy

Strategy review and evaluation refer to assessing how well an organization has
performed vis-a-vis objectives and key performance indicator (KPI). Responsible employees
should maintain control of every activity performed. As Stettinius et.al put it, “Continuous
improvement is a requisite of competitiveness. Never let it rest.

Richard Rumelt’s criteria for evaluating strategy:

1. Consonance. This refers to the need to examine sets of trends as well as individual trends
in evaluating strategies. A strategy must be an adaptive response to the external
environment and too the critical changes occurring within it. One difficulty in marching a
firm’s key internal and external factors in the formulation of strategy is that most trends
are the results of interactions among other trends. For example in the Philippines setting,
business process outsourcing (BPO), an emerging industry, is a confluence of many
trends that include among others lower operational costs and an abundant pool of English
speaking Filipinos.
2. Advantage. A strategy must provide for the creation and/or maintenance of competitive
advantage in a selected area of activity. Competitive advantages normally are the result
of superiority in one of three assets: a) resources, b) skills, c) position. The idea that the
positioning of one’s resources can enhance their combined effectiveness is familiar to
military theorist, chess players, and diplomats. Market position can also play a crucial
role in an organization’s strategy. Therefore, in evaluating strategy, organizations should
examine the nature of positional advantages associated with a given strategy. Evaluation
is important because organizations face a dynamic environment in which key external
and internal factors often change quickly and dramatically.
3. Consistency. A firm’s strategies should be aligned to its own goals and policies.
Strategic inconsistencies occur when organizational conflict and cross-functional
squabbling exist. Three guidelines help determine if organizational problems are due to
inconsistencies in strategy:
a. Managerial problems continue despite changes in personnel, and problems tend to be
issue-based rather than people-based.
b. Success for one organizational department means, or it is interpreted to mean, failure
by another department.
c. Policy problems and issues continue to be brought to the top for resolution.
4. Feasibility. This is the final test of strategy (i.e. can the strategy be attempted within the
physical, human, and financial resources). In evaluating the strategy, it is important to
examine whether an organization has previously demonstrated the abilities,
competencies, skills, and talents needed to carry out a given strategy.
Element of Evaluation Stage

Measuring Organizational Performance

Decision makers can better monitor performance if they receive accurate, timely, and
relevant measurement reports. May management gurus have said, “What you can’t measure,
can’t be managed.” Unfortunately, organizations often fail to look at the full range of activities
that may result to excellent performance.

The performances of several organizations are reported using the traditional financial
statements such as income statement, balance sheet, and statement of cash flow. Such financial
reporting is limited only on the past performance but offers no insight as to how an organization
will perform in the future. In the course of doing the strategic management process, it is likewise
imperative to know the firm’s position in relation to its corporate direction or the “Where it
wants to be.”

Stettinius, et. al shared these three ideas:

1. Monitor for success, not control: The purpose of monitoring is to minimize the effects
of poor performance and to maximize the benefits for good performance. The key to
achieving these goals is to provide feedback so employees can anticipate problems and
opportunities and better perform their jobs.
2. Keep your eyes on the strategic prize: Do not let the monitoring and evaluation efforts
focus attention on short-term setbacks to the neglect of the essential strategy
implementation effort. A good control should encourage adaptability and creativity
rather than punish shortcomings or require inflexible commitments to predetermined
milestones.
3. Monitor selectively. You cannot monitor everything, which is why there is a need to
select metrics that both matter and give early warning of variations from plans and
assumptions. What you monitor signals what you consider to be important, so choose
metrics wisely. Be open to new information; emergent trends can be as important as
deliberate plans.

Considering that the bases of current strategies are the internal and external factors where
changes take place oftentimes, continuous monitoring should be done for necessary adjustments.
Common questions in doing an evaluation of current strategies are as follows:

a. Do our strengths remain to be strengths?

b. Do we have additional strengths?
c. Do our weaknesses remain to be weakness?
d. Do we have now to her weaknesses? If so, what are they?
 e. Do our opportunities remain to be opportunities?
f. Do we have now other opportunities? If so, what are they?
g. Do our threats remain to be threats?
h. Do we now other threats? If so, what are they?

Four characteristics of a effective evaluation system

1. Relevance. The information derived from the evaluation, should be useful to the users. It
is expected to affect their decisions vis-a-vis company’s objectives. Decision makers with
useful information can control and influence the outcome of any activities. The
evaluation results should facilitate action for decision makers, therefore, it should be
given to managers who have control or influence over the areas evaluated. Only
significant information covering the key result areas should be included to avoid
complexity of information. Information overload would create confusion to the users,
and chances are these they may lead to wrong decisions or judgment. On the other hand,
limited information that does not depict the true picture of the present situation may
only aggravate problems instead of solve them. Since this will become the basis of action,
decision makers become myopic.
How much information is enough? Adequate information that substantially captures
current conditions will aid decision makers to make sound decisions. It is imperative to
fully disclose information that may impact decisions of users. For example, if the
objective is to increase profitability, then, information that are relevant to the decision
makers would be, but is not limited to, financial ratios, vertical and horizontal analysis,
and comparative analysis of company’s performance against industry standards.
2. Reliability. The information should have integrity, accurate and timely so that the
decision makers can act upon corrections and/or enhancements with dispatch. Such
timely information will trigger the conduct of analyzing the root causes of deviation from
the standard as well as will assess its impact to the organization. In whichever case, the
decision maker may come up with approaches or may select the best course of action and
even map out contingencies to anticipate possible risks and uncertainties that may occur.
In so doing, frequent measurement and rapid reporting may frustrate control rather
than give better control. The time dimension of control must coincide with the time span
of the event being measured.
3. Economical. To prepare such information, it is important to consider the cost of activities
including logistical supports such as the system of people, computers, procedures,
interactive query facilities, documents for collecting, sorting, and retrieving and
transmitting information to the users. Such costs must not exceed the benefits to be
derived from it. Too much or too little information can be too bad while too many
controls can do more harm than good.
 4. Objective. The strategy-evaluation process should foster mutual trust, understanding,
and share a common goal. As such, close coordination and cooperation with another
department will provide requisite information at each level of management in evaluating
strategies as well as in carrying out their functions. More importantly, it should support
decision-making in both structured and unstructured problem environments.

Tools in the Evaluation Stage

Contingency Measures

Contingency planning and risk management are essential components of any business
strategy regardless of its size. Contingency planning is about anticipation of any probable
eventualities or risks that may occur to mitigate the potential concerns. It is simply known as the
“What is scenario”. Great planners havethe wide vision necessary to keep a business from being
caught off-guard by foreseeable event and be able to match the company’s strength s and
weaknesses.

Napoleon Bonaparte said it best, “If I always appear prepared, it is because before
entering an undertaking, I have meditated long and have foreseen what occur.” And also,
“Imagination rules the world.” The more risks a business can anticipate ad the more
opportunities to uncover, the better the company is at meeting the many challenges that can arise.

Alternative strategies not selected for implementation can serve as contingency plans in
case the strategy or strategies selected do not work. When strategy-evaluation activities reveal
the need for a major change quickly, an appropriate contingency plan can be executed in a timely
way. Contingency plans can promote a strategist’s ability to respond quickly to key changes in
the external and internal bases of an organization’s current strategy. The benefits are: permits
quick response to change, prevents panic in crisis situations, and makes managers more
adaptable by encouraging them to appreciate just how variable the future can be.

The Balanced Scorecard

It is a performance measurement system that considers financial measures as well as

customer, business process, and learning measures. The development of balanced scorecard
begins with a definition of strategy, objectives, company-wide and business unit targets, and
individual measures and targets. The emphasis of this tool is that it is not only through financials
that performance can be measured but equally significant are the customers, process and
learning. The benefits of this tool are having an enhanced structure, shared objectives, positive
financial return, improved functionality raised profiles for key projects, funding and internal
support, and project implementation and success.

Kaplan and Norton explained that, it is “a strategic planning and management system
used to align business activities to the vision statement of an organization. Furthermore, it tracks
all the important elements of a company’s strategy from continuous improvement and
partnerships to teamwork and global scale. And that allows company to excel. Kaplan and
Norton introduced the framework, as a performance framework that added strategic non-
financial performance measures to traditional metrics. To embark on this tool, the following
corporate profile should be consciously grasped: vision/mission statement, financial status,
structure and operations, employee’s level of specialization and customer satisfaction level.

The balanced scorecard is a good tool to measure organizational performance because

strategic non-financial performance indicators are considered. This tool gives mangers a more
balanced appreciation of organizational performance. This tool is viewed from both internal and
external outlook evaluating the organization’s strategy into four core perspectives namely,
financial, customer, business processes, and learning and growth taken into consideration the
elements of objective, measures, targets and initiatives.

The balanced scorecard provides a framework that not only provides performance
measurements, but it also helps planners identify what should be done and how it should be
measured. Balanced scorecard enables executives to truly execute their strategies.

Evaluation: Improvement of Strategy

The SIT: A Tool for Improving Performance

The strategy improvement team (SIT) is a performance improvement tool where a

group of employees from different functional areas collaborates to improving productivity level
through identifying the trouble spots o snags in various facets of firm’s operation. It may be
thought of as a professional discussion of an event through a constructive and participative
dialogue of selected employees to understand why things have and are taking place with the
purpose of surfacing important lessons for continual improvement. The SIT will analyze the
empirical data based on the set criteria. Then the SIT output shall be presented to the
management in an effort to share ideas and recommendations that support business or corporate
strategy.

With the formation of a SIT, the first step is to create the right climate where everyone
should participate in an atmosphere free from prejudices or biases arising from positions or rank
held. This tool is not a venue for blaming or gossiping and everything discussed should be
treated confidential. During the assessment, the five basic questions are ;
 1. What was the expected outcome? This question is establishing the intended results
based on the approved roadmap.
2. What actually happened? This question focuses on knowing the actual results or
outcome of performance based on the implemented strategies. The team must
comprehend and agree on facts about what happened and not on personal opinions.
Determine whether goals and objectives, satisfaction of stakeholders and costs and
benefits are achieved.
3. Why were there differences? This question determines the variances or differences
when actual results are compared with the planned. There is a need to conduct gap
analysis. Relatedly, interpretation whether positive or negative variance should be
indicated.
4. What can we learn? This question appreciates the areas of operation that will be
sustained or improved. Recommend approaches to eliminate the causes of failures or
lapses in the course of strategy implementation. There are two approaches to eliminate
the identified root causes: first, corrective action will aid to prevent recurrence. Second,
preventive action will help to prevent occurrence of the potential problems.

After answering all the questions above,

The final query is : What can we do better next time? Evaluation should always be anchored
to improvement of performance. Productivity is synonymous to espousing quality in the
workplace. Edward Deming, guru of total quality management, highlights the importance of
improving quality. First, efficiency in production meaning the costs (of production) decreases
directly proportionate to productivity improvement. Market share increases with better quality
and lower prices. This encourages business sustainability thereby providing more jobs.