Strategic Control

Strategic control deals with monitoring the strategy after it has been executed in the organisation.
This involves taking stock of the strategy and making any necessary corrections or clearing out
any problems seen in its implementation. Strategic control provides the organisation the ability to
monitor the progress of the strategy implementation, to identify any flaws and to take the
necessary corrections in the implementation of the strategy. The analysis of the data pertaining to
the implementation plays a very important part in this. The data is collected and then compared
to pre designed standards so that any major deviation in the performance can be identified. The
amount of data that has to be collected for this purpose has to be of a significant quantity so that
the analysis of the data can yield logical actions for the organisation.

Importance of Strategic Control

1) Control and Efficiency :

To measure the efficiency of the production process the managers need to know how efficiently
the inputs are being combined to produce the required output. This information is provided the
managers through the control system in the organisation. These control systems provide
managers means to measure how efficient the strategy is. It also allows them to measure the
success or failure of new initiatives and strategies. In the absence of a control system, managers
will be totally handicapped and they will have no clue as how well their strategy is working and
what kind of improvements are necessary in removing the shortcomings.
2) Control and Quality :
Competition nowadays increasingly focused on improving the quality of the goods and services
being produced. Products compete within their segments and sub-segments on the basis of
features, design and quality. For example, the decision of a customer to buy a Mahindra XUV
over competitors like Tata Safari or Renault Duster hinges on features, benefits and the quality
that these products offer. Strategic control helps managers to get a feedback on the quality of
their products. The managers can keep a track on the quality of their products by keeping track of
customer complaints received or the customer satisfaction level. Nowadays, online feedback is
also available to organisations.
3) Control and Innovation :
Strategic control also helps the organisation to increase the level of innovation in the
organisation. Successful companies like Nokia or Apple create the right environment in the work
place which encourages creative thinking and they have incorporated these aspects in their
strategic control systems. This helps in creating the right culture for risk taking in these
organisations.
4) Control and Responsiveness to Customers :
Strategic control also helps organisations to measure the level of customer satisfaction by
evaluating how well the employees are in the customer facing jobs (like customer care and
retention). The organisation can also use the information generated to impart training to
employees to improve their weak areas so that the proper service can be provided to the customer
There is also an indirect pressure on employees to improve their responsiveness to customers
when they know that their behavior is being tracked.

Process of Strategic Control

1. Determine What to Control: The first step in the strategic control process is determining the
major areas to control. Managers usually base their major controls on the organizational mission,
goals and objectives developed during the planning process. Managers must make choices
because it is expensive and virtually impossible to control every aspect of the organization’s

2. Set Control Standards: The second step in the strategic control process is establishing
standards. A control standard is a target against which subsequent performance will be
compared. Standards are the criteria that enable managers to evaluate future, current, or past
actions. They are measured in a variety of ways, including physical, quantitative, and qualitative
terms. Five aspects of the performance can be managed and controlled: quantity, quality, time
cost, and behavior.

3. Measure Performance: Once standards are determined, the next step is measuring

performance. The actual performance must be compared to the standards. Many types of
measurements taken for control purposes are based on some form of historical standard.
Strategic control standards are based on the practice of competitive benchmarking – the process
of measuring a firm’s performance against that of the top performance in its industry. Managers
should be careful to observe and measure in accurately before taking corrective action.

4.  Compare Performance to Standards: The comparing step determines the degree of

variation between actual performance and standard. If the first two phases have been done well,
the third phase of the controlling process – comparing performance with standards – should be
straightforward. However, sometimes it is difficult to make the required comparisons (e.g.,
behavioral standards). Some deviations from the standard may be justified because of changes in
environmental conditions, or other reasons.
 5. Determine the Reasons for the Deviations: The fifth step of the strategic control process
involves finding out: “why performance has deviated from the standards?” Causes of deviation
can range from selected achieve organizational objectives. Particularly, the organization needs to
ask if the deviations are due to internal shortcomings or external changes beyond the control of
the organization. A general checklist such as following can be helpful:

 Are the standards appropriate for the stated objective and strategies?
 Are the objectives and corresponding still appropriate in light of the current environmental
situation?
 Are the strategies for achieving the objectives still appropriate in light of the current
environmental situation?
 Are the firm’s organizational structure, systems (e.g., information), and resource support
adequate for successfully implementing the strategies and therefore achieving the objectives?
 Are the activities being executed appropriate for achieving standard?

6. Take Corrective Action: The final step in the strategic control process is determining the
need for corrective action. Managers can choose among three courses of action: (1) they can do
nothing (2) they can correct the actual performance (3) they can revise the standard.

When standards are not met, managers must carefully assess the reasons why and take corrective
action. Moreover, the need to check standards periodically to ensure that the standards and the
associated performance measures are still relevant for the future.

The final phase of controlling process occurs when managers must decide action to take to
correct performance when deviations occur. Corrective action depends on the discovery of
deviations and the ability to take necessary action. Often the real cause of deviation must be
found before corrective action can be taken.

Types of Strategic Control

1. Premise Control:  Premise control is necessary to identify the key assumptions, and keep track
of any change in them so as to assess their impact on strategy and its implementation. Premise
control serves the purpose of continually testing the assumptions to find out whether they are still
valid or not. This enables the strategists to take corrective action at the right time rather than
continuing with a strategy which is based on erroneous assumptions. The responsibility for
premise control can be assigned to the corporate planning staff who can identify key asumptions
and keep a regular check on their validity.

Premise control basically extend to two kinds of factors : 

i) The Environmental factors : 
 These include factors like inflation, GDP growth rates, the technology factors, the demographics
and social changes

ii) The Industry factors : 

These include the competitors, the suppliers, the substitutes of the company's products and the
existing barriers to entry and exit.

The same level of control is not required for all these factors. The manager thus has to decide : 
 Which factors are likely to change?
 What is the impact of these factors on the company and its strategy?

2. Implementation Control: Implementation control may be put into practice through the

identification and monitoring of strategic thrusts such as an assessment of the marketing success
of a new product after pre-testing, or checking the feasibility of a diversification programme
after making initial attempts at seeking technological collaboration.

Implementation control has two aspects :

i) Monitoring Strategic Thrusts : 
Implementation controls can be set by the organisation through following two methods : 
 In the first method the organisation decides which components of the strategy (or thrusts) are
critical to the success of the strategy.
 In the second method, the organisations uses stop/go evaluations of the strategy using key
parameters like time, costs, research and development etc.

ii) Milestone Reviews : 

The organisation also sets milestones or goals at critical junctions of the programme. The
organisation reviews the progress of the strategy against these milestones and also initiates
necessary course correction where the need is felt.

3. Strategic Surveillance: The third type of strategic control is strategic surveillance. In this the
organisation keeps track of a set of critical events/ activities both within and outside the
organisation. These are very critical to the success of the strategy. The idea behind strategic
surveillance is to encourage the general data gathering and analysis of a set of critical activities
so that the organisation is not surprised by sudden occurrences in its environment. The
organisation is thus prepared for the future and not prone to events which occur and take it by
surprise. In a way strategic surveillance is similar to the environmental scanning aspect of
strategy. Strategic surveillance can be done through a broad-based, general monitoring on the
basis of selected information sources to uncover events that are likely to affect the strategy of an
organisation.
4. Special Alert Control: The special alert control defines the rapid response and evaluation of the
exiting strategy of the organisation in the face of unplanned and drastic events which take place
in the firm's environment. The organisation implements special alert control by implementing
contingency plans and initiating specific roles and responsibilities in the organisation to handle
sudden events in the environment. This can also be considered crisis management.

Special alert control is based on trigger mechanism for rapid response and immediate
reassessment of strategy in the light of sudden and unexpected events called crises.  Crises are
critical situations that occur unexpectedly and threaten the course of a strategy. Organisations
that hope for the best and prepare for the worst are in a vantage position to handle any crisis.

5) Financial Controls : 
The organisation also puts into place financial controls to monitor the progress of the strategy.
These controls are in the form of the performance of the organisation against set standards. Some
examples of financial measures are return on equity (ROE), return on net worth (RONW), and
return on assets (ROA). When the firm adopts diversification strategy, then strategic controls are
difficult to implement. In this case the organisation uses financial controls to measure the output
of the organisation against pre-defined standards. These are also used by the organisation to
compare the performance of the various SBUs and business. 

6) Output Control : Output control flows from the divisional level to the functional and
individual level. The divisional managers of the organisation set the goals and the performance
targets of the functional managers. These goals are set in such a manner that the organisation can
attain competitive advantage in the marketplace.
Managers are continuously utilizing output control for strategic implementation in organisations.

7) Behavior Control : Behavior control visualizes the adoption of a strict system of rules and
regulations to control the behavior of divisions, functions and individuals in a particular way.
The controls are established in such a way that though the goals are not specified but the way of
achieving them is set as a norm. Employees are encouraged to get the results for the organisation
but within the boundaries of the rules and regulations set. Employees thus become predictable
and their efforts are accurate and easy for the organisation to measure.

Techniques for Strategic Control

1) Budgets :
Budgets are the most extensively used tool for strategic control. In the layman's language a
budget is an outlay of the planned income and expenditure of an organisation. However it is
more than that. It is the allocation of scarce resources amongst competing avenues for
deployment. It also highlights the future growth plans of the organisation and also an analysis of
what the organisation has been able to achieve and where the shortcomings lie. In a sense it is a
forecast about the future and thus the organisation needs to revisit it from time to time. It is of
paramount importance in being able to implement a strategy successfully.
2) Audits : 
The American Accounting Association defines audit as "a systematic process of objectively
obtaining and evaluating the evidence regarding assertion about economic actions and events to
ascertain the degree of correspondence between those assertions and established criteria and
communicating the results to interested users". In organisations, management audits are used to
measure the performance of the management in terms of its effectiveness in achieving the
organisational goals. Management audits are very popular means of control in most of the
organisations today.

3) Time-Related Control Methods : 

In this the organisation uses analytical tools and techniques for strategic control. The methods
typically used. are CPM (Critical Path Method) and PERT (Program Evaluation and Review
Technique). These are both graphical methods which measure the progress of various tasks
against the set standards of execution. It seeks to identify the critical elements. These techniques
are useful for management as instruments of control as well as allocation of scarce resources of
the organisation.

4) Management by Objectives (MBO) : 

This is another management technique used in strategic control. This technique was created by
Peter Drucker. In this the organisation establishes objectives for itself and then for functional
areas. departments and individuals. This leads to goal congruence in the organisation and
everyone works for the attainment of common goals.

5) Management Information Systems (MIS) : 

Management Information System effectively utilizes computer based tools to provide managers
with online, relevant and timely information so that they can effectively manage the various
departments of the organisation. To do this effectively, management information system relies
heavily on prediction software which assist decision making, databases which are reservoirs of
data which can be accessed, hardware support, decision management software, people
management tools and software, project management tools and computer based processes, etc.

6) Decision Support Systems (DSS) : 

Decision Support systems (DSS) are specialized type of computerized information systems
which support organisational and managerial decision-making. It is in the form of highly
customized and interactive software which collects relevant data from various sources and which
utilizes decision making models to effectively analyse these raw data into meaningful output for
top management. It is specifically applied to analyse and solve a particular management
problem.
 Guidelines for Proper Strategic Control

1) Involving Minimum Amount of Information : 

The organisation should resist the temptation of over-control. Generating too much information
can lead to paralysis. The organisation should focus on generating information based on the
80/20 rule, i.e., focus on those 20% of activities which contribute to 80% of the results.

2) Monitor Only Meaningful Activities and Results : 

The organisations should focus on those areas which are meaningful and make an impact on the
success of the organisational strategy. This should be done even if the area is difficult to
measure. For if motivation of employees is identified as a key area then the measures to evaluate
the same should be devised. These can be quantitative or qualitative.

3) Timely Control : 
The controls should be such that they are timely and provide the organisation to implement
necessary changes. The organisation should utilize steering controls so that it gets advance
warning of the problems for taking remedial action.

4) Both Long-term and Short-term Controls should be Used : 

The organisation should employ both short-term and long-term measures so that the right mix is
found otherwise the measures may end up being skewed. 

5) Pinpointing Exceptions : 
The measures should aim at pointing out the exemptions, i.e., activities which fall outside the
tolerance limit. Only these activities call for an action plan.

6) Emphasizing Reward of Meeting of Exceeding Standards :

The emphasis should be on exceeding the standards. The reward for exceeding standards should
be highlighted more. than the failure to meet them. If the punishment for failure is very high then
managers tend to doctor the performance standards so that they end up showing a decent
achievement.

7) Accurate : 
The information generated should be accurate so that the right decisions can be taken by the
managers.

8) Objective and Comprehensible : 

 The information system should be objective and easily understood by all. A complex
management information system will create unnecessary complications in the minds of the
managers and frustrate employees.

9) Focused on Strategic Control Points : 

The strategic control should focus on the critical areas where the maximum chances of deviations
are there and which can cause the maximum damage to the organisation.

10) Economically Realistic : 

The benefits that accrue from a control system should outweigh the costs of implementing it. 

11) Organisational Realistic : 

The control system has to be in sync with the realities of the organisation and the targets set have
to be realistic and practical.

12) Coordinated with the Organisation's Work Flow : 

The information needs of the control system has to be co-ordinated with the work flow and
processes of the organisation for the following reasons : 
 The step in the work flow is critical and could impact the success of the entire operation.
 The information needs to reach all people. who are in need of it.

13) Flexible : 
The controls need to be flexible and adaptable as the organisation needs to be able to respond to
changes in its environment or take advantage of opportunities that may occur.

14) Prescriptive and Operational : 

The control systems also need to be prescriptive. They need not to just point out the
shortcomings, but also how they can be overcome.

15) Accepted by Organisation Members : 

The control systems need to be accepted by all the employees of the organisation. This is only
possible if they relate to achievable and realistic goals.