BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai

Unit 15
Strategic Control and Evaluation
Contents
 Concept of control in strategic management
 Types of control
 Meaning and Characteristics of strategy evaluation
 Measures of corporate performance
 Types of strategy evaluation
o Strategic evaluation
o Operating evaluation
 Guidelines for proper control and evaluation.

15.1 Concept of control in strategic management

Strategic managers choose the organizational strategies and structure they hope will allow the
organization to use its resources most effectively to pursue its business model and create value and profit.
Then they create strategic control systems, tools that allow them to monitor and evaluate whether, in fact,
their strategy and structure are working as intended, how they could be improved, and how they should be
changed if they are not working. Strategic control is not only about monitoring how well an organization
and its members are currently performing, or about how well the firm is using its existing resources. It is
also about how to create the incentives to keep employees motivated and focused on the important
problems that may confront an organization in the future so that the employees work together and find
solutions that can help an organization perform better over time.1
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Strategic control is concerned with examining the fit between what the firm might do and what it can
do. Effective strategic controls help the firm understand what it takes to be successful. The strategic
controls are used to study primary and support activities to verify that the critical activities are being
emphasized and properly executed.

Strategic controls are largely subjective criteria intended to verify that the firm is using appropriate
strategies for the conditions in the external environment and the company’s competitive advantages.
- Michael A. Hitt, Duane Ireland, and Robert E. Hoskisson

Strategic control systems are the formal target-setting, measurement, and feedback systems that allow
strategic managers to evaluate whether a company is achieving superior efficiency, quality, innovation, and
customer responsiveness and implementing its strategy successfully.
- Charles W. L. Hill and Gareth R. Jones
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Control is based on a feedback loop from performance measurement to strategy formulation. 4The
strategic management process is not complete when a strategy has been executed. It is also necessary to
evaluate its success—or failure—and take steps to address any problems that may have arisen along the
way. Strategic control consists of determining the extent to which the organization’s strategies are
successful in attaining its goals and objectives. The execution process is tracked, and adjustments to the
strategy are made as necessary. It is during the strategic control process that gaps between the intended
and realized strategies (i.e., what was planned and what really happened) are identified and addressed.
The process of strategic control can be likened to that of steering a vehicle. After the strategy
accelerator is pressed, the control function ensures that everything is moving in the right direction. In a
similar manner, strategic managers can steer the organization by instituting minor modifications or resort
to more drastic changes, such as altering the strategic direction altogether.
The notion of strategic control has recently gained a “continuous improvement” dimension, whereby
strategic managers seek to improve the efficiency and effectiveness of all factors related to the strategy. In
other words, control should not be seen as an action necessary only when performance declines. Rather,
managers should think critically when considering strategic control and look for opportunities to enhance
performance even with things seem to be going well.

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15.1.1. Process of strategic control

A five-step strategic control process can be employed to facilitate this process.
1. Top management determines the focus of control by identifying internal factors that can serve as
effective measures for the success or failure of a strategy, as well as outside factors that could trigger
responses from the organization.
2. Standards (i.e., benchmarks) are established for internal factors with which the actual performance of
the organization can be compared after the strategy is implemented.
3. Management measures, or evaluates, the company’s actual performance both quantitatively and
qualitatively.
4. Performance evaluations are compared with the previously established standards.
5. If performance meets or exceeds the standards, corrective action is usually not necessary. If
performance falls below the standard, then management usually takes remedial action.

15.2 Types of control5

Types of control are as follows.
On the basis of focus: 6Controls can be established to focus on actual performance results (output), the
activities that generate the performance (behavior), or on resources that are used in performance (input).
1. Output controls: Output controls focus on the end result and performance targets or milestones.
Output controls (such as sales quotas, specific cost-reduction or profit objectives, and surveys of
customer satisfaction) are most appropriate when specific output measures have been agreed on but
the cause–effect connection between activities and results is not clear. 7This control is a system in
which strategic manager estimate or forecast appropriate performance goals for each division,
department, and employee and then measure actual performance relative to these goals. Often a
company’s reward system is linked to performance on these goals, so output control also provides an
incentive structure for motivating employees at all levels in the organization.
2. Behavior controls: Behavior controls specify how something is to be done through policies, rules,
standard operating procedures, and orders from a superior. These controls (such as following company
procedures, making sales calls to potential customers, and getting to work on time) are most
appropriate when performance results are hard to measure, but the cause–effect connection between
activities and results is relatively clear. 8This is control through the establishment of a comprehensive
system of rules and procedures to direct the actions or behavior of divisions, functions, and individuals.
The intent of behavior controls is not to specify the goals but to standardize the way or means of
reaching them. Rules standardize behavior and make outcomes predictable. If employees follow the
rules, then actions are performed and decisions are handled the same way time and time again. The
result is predictability and accuracy, the aim of all control systems. The main kinds of behavior controls
are operating budgets, standardization, and rules and procedures.
3. Input controls: These emphasize resources, such as knowledge, skills, abilities, values, and motives of
employees. Input controls (such as number of years of education and experience) are most appropriate
when output is difficult to measure and there is no clear cause–effect relationship between behavior
and performance (such as in college teaching).
4. 9Personal Control: Personal control is the desire to shape and influence the behavior of a person in a
face-to-face interaction in the pursuit of a company’s goals. The most obvious kind of personal control
is direct supervision from a manager further up in the hierarchy. The personal approach is useful
because managers can question and probe subordinates about problems or new issues they are facing
to get a better understanding of the situation, as well as to ensure that subordinates are performing
their work effectively and not hiding any information that could cause problems down the line.
Personal control also can come from a group of peers, such as when people work in teams. Once again,
personal control at the group level means that there is more possibility for learning to occur and
competencies to develop, as well as greater opportunities to prevent free-riding or shirking.
Corporations following the strategy of conglomerate diversification tend to emphasize output controls
with their divisions and subsidiaries (presumably because they are managed independently of each other),
whereas, corporations following concentric diversification use all three types of controls (presumably
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BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai
because synergy is desired). Even if all three types of control are used, one or two of them may be
emphasized more than another depending on the circumstances.
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Recent conceptual contributors to the strategic control literature have argued for anticipatory feed
forward controls that recognize a rapidly changing and uncertain external environment.
1. Premise Control: Premise control ensures monitoring the non-performing assets at branch levels on a
regular basis. Planning premises/assumptions are established early on in the strategic planning process
and act as a basis for formulating strategies. Premise control has been designed to check systematically
and continuously whether or not the premises set during the planning and implementation process are
still valid. It involves the checking of environmental conditions. Premises are primarily concerned with
two types of factors:
– Environmental factors (e.g. inflation, technology, interest rates, regulation, and demographic/social
changes).
– Industry factors (e.g. competitors, suppliers, substitutes, and barriers to entry).
For example, a bank may adopt an aggressive marketing strategy to achieve 15 per cent annual
growth, on a planning premise that their non- performing assets would not be more than 10 per cent.

2. Implementation Control: Strategic implantation control provides an additional source of feed forward
information. It is designed to assess whether the overall strategy should be changed in light of
unfolding events and results associated with incremental steps and actions that implement the overall
strategy. It assesses whether the results of overall strategy associate with incremental steps and actions. It
does not replace operational control. Unlike operations control, it continuously questions the basic
direction of the strategy. The two types of implementation control are:
1. Monitoring strategic thrusts (new or key strategic programs): Two approaches are useful in
enacting implementation controls focused on monitoring strategic thrusts: one way is to agree
early in the planning process on which thrusts are critical factors in the success of the strategy or of
that thrust; the second approach is to use stop/go assessments linked to a series of meaningful
thresholds (time, costs, research and development, success, etc.) associated with particular thrusts.
2. Milestone Reviews: Milestones are significant points in the development of a program, such as
points where large commitments of resources must be made. A milestone review usually involves a
full-scale reassessment of the strategy and the advisability of continuing or refocusing the direction
of the company.
For example, an internationally known fast-food center decided to maintain the ratio between
company-owned outlets and franchisee outlets at 3:1, to ensure control over quality of foods, rates, etc.
But the growing competition in this business later forced it to reverse the ratio to enable it to open outlets
at new locations.

3. Strategic Surveillance (निगरािी): Compared to premise control and implementation control, strategic
surveillance is designed to be a relatively unfocused, open, and broad search activity. It is designed to
monitor a broad range of events inside and outside the company that are likely to threaten the course
of the firm's strategy. The basic idea behind strategic surveillance is that some form of general
monitoring of multiple information sources should be encouraged with the specific intent being the
opportunity to uncover important yet unanticipated information. It appears to be similar in some way
to "environmental scanning”. The rationale, however, is different. Environmental scanning usually is
seen as part of the chronological planning cycle devoted to generating information for the new plan. By
way of contrast, strategic surveillance is designed to safeguard the established strategy on a continuous
basis.
For example, in the early years of its attempt to sell the CFA courses, the Institute of Chartered
Financial Analysts of India (ICFAI) made its course more finance oriented, covering all conceivable finance
papers, targeting the financial services sector as the prospective employers of their students. Later on,
since the financial services sector became highly unstable and volatile, ICFAI felt the need to target other

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BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai
sectors as prospective employers of their students, and therefore shifted its focus to PGDBA papers like
marketing, HRD, information technology, strategic management, etc.
4. Special Alert Control: Another type of strategic control is a special alert control. A special alert control
is the need to thoroughly, and often rapidly, reconsider the firm's basis strategy based on a sudden,
unexpected event. The analysts of recent corporate history are full of such potentially high impact
surprises (i.e., natural disasters, chemical spills, plane crashes, product defects, hostile takeovers etc.).
While Pearce and Robinson suggest that special alert control be performed only during strategy
implementation, Preble recommends that because special alert controls are really a subset of strategic
surveillance that they be conducted throughout the entire strategic management process.
For instance, a likely political coup or internal disturbances in a country will create pressure on
exporters to that particular country, who may have to thoroughly reconsider their export market strategy.
Again, a sudden incident like a major air crash could have a devastating effect on the concerned airline
company.

15.3 Meaning and Characteristics of Strategy Evaluation

15.3.1. Meaning of Strategy Evaluation
It is essential for the strategist to constantly evaluate the performance of the strategies on a timely basis.
Strategic evaluation and control ensures that the organization is implementing the relevant strategy to reach
its objectives. It compares the current performance with the desired results and if necessary, provides
feedback to the management to take corrective measures.
Strategic evaluation consists of performance and activity reports. If performance results are beyond the
tolerance range, new implementation procedures are introduced. One of the obstacles to effective strategic
control is the difficulty in developing appropriate measures for important activities. Strategic control
stimulates the strategic managers to investigate the use of strategic planning and implementation. After the
evaluation, the manager will have knowledge about the cause of the problem and the corrective actions.
Evaluation and control is the process in which corporate activities and performance results are monitored
so that actual performance can be compared with desired performance. Managers at all levels use the
resulting information to take corrective action and resolve problems. Although evaluation and control is the
final major element of strategic management, it also can pinpoint weaknesses in previously implemented
strategic plans and thus stimulate the entire process to begin again.
Strategic evaluation is to employ a variety of methods and process to provide timely, credible, and useful
information that can be acted upon to increase organizational effectiveness and impact. 11Strategic evaluation
is a way for businesses to evaluate the health and productivity of their company and their future endeavors.
Typically, strategic evaluations attempt to see past the obvious factors that influence short-term plans, and
seek a more-dynamic study of the trends that will dictate the future success or failure of the company. Like a
chess match, strategic evaluation succeeds when companies are able to accurately analyze and predict several
moves ahead into the future, in order to best tailor their present policies.

15.3.2. Characteristics of Strategy Evaluation and Control

Some of the important characteristics of strategy evaluation are as follows.
1. Right direction: Strategy evaluation and control ensures that the strategy is moving in the right
direction. It is objective oriented.
2. Proactive (अग्रसक्रिय): Strategy evaluation and control is an early warning system of control. It pro acts by
continual questioning the direction of strategy. It is based on timely information.
3. Future oriented: Strategy evaluation and control aims to steer the future direction of strategy.
4. Focus: Strategic evaluation and control focuses on forces and events in the external environment.
5. Time horizon: Strategic evaluation and control has a long term time horizon.
6. Responsibility to top level management: Strategic evaluation and control is the responsibility of top
management.
7. Techniques: Strategic evaluation and control is based on environment surveillance, premises
reexamination, implementation review, information gathering and special alert technique.

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BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai
8. Corrective actions: They are the essence of strategic evaluation and control. It is action oriented. Timely
evaluation and control alerts management about problems before they are critical. It is essential to
face dynamics environments. It ensures environmental relevance.

15.3.3. Criteria for evaluating strategies

A strategy should be continuously evaluated. The criteria that can be used for evaluating strategy are:
1. Consistency: A strategy should not have inconsistent objectives. Inconsistencies are reflected by
conflicts and interdepartmental bickering (backbiting). Conflicts are people-based rather than issue
based.
2. Sub-optimization: Out of many units or departments, one department tries to gain success over others.
This is happening or not is evaluated. Top management spending lot of time in solving problems and
issues.
3. Consonance (harmony): It refers to set of treads or individual trends that need examination to evaluate
strategy. The strategy should be adaptive capabilities in terms of abilities, competencies, skills and
talents to carry out a strategy. It must be responsive to the internal and external environment.
4. Advantage: A strategy must provide strategic advantage. It result from superiority in resources, skills or
position. Size can provide positional advantage. The nature of positional advantage in relation to
competitors should be examined for evaluation a strategy.
5. Flexibility: A strategy should be feasible to the organization in terms of its resources and capabilities. As
the consequences changes it must be ready to get changed.

15.4 Importance of Strategy Evaluation and Control

Strategic evaluation is important due to several factors.
1. Need for feedback: Within an organization, there is a need to receive feedback on current
performance, so that good performance is rewarded and poor performance is corrected.
2. Validates strategic choice: Strategic evaluation helps to keep a check on the validity of a strategic
choice. An ongoing process of evaluation would, in fact, provide feedback on the continued relevance
of the strategic choice made during the formulation phase.
3. Congruence (समानजस्यता) between decisions and intended strategy: During the course of strategy
implementation managers are required to take scores of decisions. Strategic evaluation can help to
assess whether the decisions match the intended strategy requirements.
4. New Strategy planning: The process of strategic evaluation provides a considerable amount of
information and experience to strategists that can be useful in new strategic planning.

15.5 Process of Evaluation and Control

The evaluation and control processes could be as follows:
1. Determine what to measure/Establish standards of Performance/Set Control Standards:
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A control standards 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. Each aspect of control may need
additional categorizing.
Figure 15.1: Evaluation process
Determine Measure Compare Determine the Take
No
what to Actual Performance causes for corrective
measure Performance to Standard deviation actions

Yes

Improve more
and STOP
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BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai

An organization must identify the targets, determine the tolerances those targets, and specify the
timing of consistent with the organization's goals defined in the first step of determining what to control.
For example, standards might indicate how well a product is made or how effectively a service is to be
delivered. Standards may also reflect specific activities or behaviors that are necessary to achieve
organizational goals. Goals are translated into performance standards by making them measurable. An
organizational goal to increase market share, for example, may be translated into a top-management
performance standard to increase market share by 10 percent within a twelve-month period. Helpful
measures of strategic performance include: sales (total, and by division, product category, and region),
sales growth, net profits, return on sales, assets, equity, and investment cost of sales, cash flow, market
share, product quality, value added, and employees productivity.
Management must develop standards in all performance areas touched on by established
organizational goals. The various forms standards are depend on what is being measured and on the
managerial level responsible for taking corrective action.

2. Measure Actual Performance:

Once standards are determined, the next step is measuring performance. The actual performance must
be compared to the standards. In some work places, this phase may require only visual observation. In
other situations, more precise determinations are needed. Many types of measurements taken for control
purposes are based on some form of historical standard. These standards can be based on data derived
from the PIMS (profit impact of market strategy) program, published information that is publicly available,
ratings of product / service quality, innovation rates, and relative market shares standings.
Measurements must be made at predetermined regular time intervals. Measures of performance
would depend on the type of organization. Some examples would include measures such as: Return on
Investment (ROI), which would prove to be a post-mortem analysis. Steering Controls (real time controls,
enabling corrective action in quality. Example, Statistical Process Control (SPC) Actual performance should
be compared with the standard performance, which serves as a benchmark.

3. 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.

4. Determine the Reasons for the Deviations:

Any variation identified while comparing actual performance with the standard performance must be
thoroughly analyzed. However, while making this analysis, the strategist must bear in mind the degree of
tolerance limits within which the variance between actual and standard performance may be accepted. If
the actual performance results are within the desired tolerance range, the measurement process stops
here.
The fight step of the control process involves finding out: "why performance has deviated from the
standards?" Causes of deviation can range from selected 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?

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BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai
– 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?
The focus of the cause, either internal or external, has different implications for the kinds of corrective
action.

5. Take Corrective Action:

The final step in the 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; or
3. they can revise the standard.
Maintaining the status quo if preferable when performance essentially matches the standards. 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. Causes of deviations can range from unrealistic objectives to the wrong strategy being
selected achieve organizational objectives. Each cause requires a different corrective action. Not all
deviations from external environmental threats or opportunities have progressed to the point a particular
outcome is likely, corrective action may be necessary.
There are three choices of corrective action:
1. Normal mode - follow a routine, no crisis approach; this take more time
2. As hoc crash mode - saves time by speeding up the response process, geared to the problem in hand.
3. Preplanned crisis mode - specifies a planned response in advance; this approach lowers the response
time and increases the capacity for handling strategic surprises.
The below checklist suggest the following five general areas for corrective actions:
1. Revise the Standards: If the standards are not in line with objectives and strategies selected. Too high
or too low are the outset.
2. Revise the Objective: Because of changes in environmental conditions, or other reasons.
3. Revise the Strategies: A strategy that was originally appropriate can become inappropriate during a
period because of environmental shifts.
4. Revise the Structure, System or Support: If an inadequate organizational structure, systems, or
resource support are creating deviations.
5. Revise Activity: The most common adjustment involves additional coaching by management, additional
training, more positive incentives, more negative incentives, improved scheduling, compensation
practices, training programs, the redesign of jobs or the replacement of personnel.
6. Revise to influence: Managers can also attempt to influence events or trends external to itself through
advertising or other public awareness programs.

15.6 Measures of corporate performance

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In order to better understand what strategic control performance measures are and how a manager
can take such measurements, we need to introduce two important topics: (1) strategic audits and (2)
strategic audit measurement methods.
There are several generally accepted methods for measuring organizational performance. One way for
categorizing these methods divides into the distinct types: qualitative and quantitative. However, a few
methods do not fall neatly into one or other of these categories but rather are a combination of both types.

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Qualitative Organizational Measurements
There is no universally endorsed list of critical questions designed to reflect important facets of
organizational operations. However, several that might be useful to the practicing managers are presented
below. Sample Questions to be asked for Qualitative Organizational Measurement.
– Are the financial policies with respect to investment, dividends and financing consistent with
opportunities likely to be available?
– Has the company defined the market segments in which it intends to operate sufficiently specifically
with respect to both product lines and market segments? Has it clearly defined the key capabilities
needed for success?
– Does the company have a viable plan for developing a significant and defensible superiority over
competition with respect to these capabilities?
– Will the business segments in which the company operates provide adequate opportunities for
achieving corporate objectives? Do they appear as attractive as to make it likely that an excessive
amount of investment will be drawn to the market from other companies? Is adequate provision being
made to develop attractive new investment opportunities?
– Are the management, financial, technical and other resources of the company really adequate to justify
an expectation of maintaining superiority over competition in the key areas of capability?
– Does the company have operations in which it is not reasonable to expect to be more capable than
competition? If so, can the board expect them to generate adequate returns on invested capital? Is
there any justification for investing further in such operations, even just to maintain them?
– Has the company selected business that can reinforce each other by contributing jointly to the
development of key capabilities? Or are there competitors that have combinations of operations which
provide them with an opportunity to gain superiority in the key resource areas? Can the company's
scope of operations be revised so as to improve its position vis-à-vis competition?
– To the extent that operations are diversified, has the company recognized and provided for the special
management and control systems required?

Quantitative Organizational Measurements

Quantitative measurements provide information and insight as to how well an organization is
accomplishing its goals and objectives. In attempting to evaluate the effectiveness of corporate strategy
quantitatively, we can see how the firm has done compared with its own history, or compared with its
competitors.
Many quantitative measures may be developed to determine performance results. These standards
expressed in quantitative terms include:
1. Sales (growth of sales)
2. Net profit
3. Dividend returns
4. Return on equity
5. Return on investment
6. Return on capital
7. Marker share
8. Earnings per share
The list is long and many other factors could be included. The objective of all of these endeavors is
financial control. But financial control is only part of the total strategic management control process. Much
of the activity affects financial performance in non-financial nature. This include consideration of labor
efficiency and productivity; production quantity turnover, and tardiness; on a very limited basis, human
resources accounting and personnel satisfaction measures; more commonly, management by objectives
systems; social analysis; operational audits of any functional, divisional, or staff component, distribution
cost and efficiency; management audits modeling; and so forth.

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15.7 Types of strategy evaluation

Types of strategy evaluation are as follows.
15.5.1 Strategic evaluation
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The core aim of strategic management succeeds only if it generates a positive outcome. Strategic
evaluation and control consists of data and reports about the performance of the organization. Improper
analysis, planning or implementation of the strategies will result in negative performance of the
organization. The top management needs to be updated about the performance to take corrective actions
for controlling the undesired performance.
All strategies are subject to constant modifications as the internal and external factors influencing a
strategy change constantly. It is essential for the strategist to constantly evaluate the performance of the
strategies on a timely basis. Strategic evaluation and control ensures that the organization is implementing
the relevant strategy to reach its objectives. It compares the current performance with the desired results
and if necessary, provides feedback to the management to take corrective measures.
Strategic evaluation consists of performance and activity reports. If performance results are beyond the
tolerance range, new implementation procedures are introduced. One of the obstacles to effective
strategic control is the difficulty in developing appropriate measures for important activities. Strategic
control stimulates the strategic managers to investigate the use of strategic planning and implementation.
After the evaluation, the manager will have knowledge about the cause of the problem and the corrective
actions.

15.5.2 Operating evaluation

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The operations function of a business is the key to successful performance because it produces what
the business sells. In many companies, operations consume a large part of the company resources and
generate most of the revenue. The strategic importance of operations means that an evaluation of
operations strategy is critical. The operations strategy must support the overall company goals, supply
operational targets that are realistic and propose a plan that the company can implement to achieve the
goals and reach the targets. As the company carries out the plan, it must continually evaluate the
operations strategy in terms of performance. If operations doesn't meet its performance goals, the strategy
has to be updated with corrective action to put it back on track. Criteria for evaluation of operations
strategy are as follows.
– Consistency in different elements of the strategy like cost structure, production targets, manpower
etc. must match and reinforce each other.
– Consonance of operations plans and products or services demanded by the market, planned pricing
and projected production costs, demand projections and production targets.
– Feasibility of the operations strategy to satisfy the financing and resource requirements, pricing
estimates, wage projections and new development.
– Advantages for the business that the operations strategy creates such as low-cost initiatives or new
procedures to improve quality, unique qualities or strong marketing propositions.
– Performance of operating plans to achieve objectives.

Process of operating evaluation16

1. Setting performance standard: Performance standard is based on performance goals or target of the
organization. Realistic, acceptable, flexible and environmental specific standard must be set.
2. Measurement of performance: Actual performance on both qualitative and quantitative bases must be
measured.
3. Identify deviation: A performance standard and actual performance are compared to find the
deviation, if any.

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BBS 3rd Year, Business Environment and Strategic Management, Unit-15 By: Dev Raj Rai
4. Take corrective action: Last step of operating evaluation is to take action for the correction of
deviation. Re-examination of the plans, programs, goals and strategies may be the corrective action.

15.8 Guidelines for proper control and evaluation

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In designing a control system, top management should remember that controls should follow
strategy. Unless controls ensure the use of the proper strategy to achieve objectives, there is a strong
likelihood that dysfunctional side effects will completely undermine the implementation of the objectives.
The following guidelines are recommended:
1. Control should involve only the minimum amount of information needed to give a reliable picture of
events/Provide true picture: Too many controls create confusion. Focus on the strategic factors by
following the 80/20 rule: Monitor those 20% of the factors that determine 80% of the results.
2. Controls should monitor only meaningful activities and results, regardless of measurement
difficulty/Economical: If cooperation between divisions is important to corporate performance, some
form of qualitative or quantitative measure should be established to monitor cooperation.
3. Controls should be timely so that corrective action can be taken before it is too late: Steering
controls, controls that monitor or measure the factors influencing performance, should be stressed so
that advance notice of problems is given.
4. Long-term and short-term controls should be used: If only short-term measures are emphasized, a
short-term managerial orientation is likely.
5. Controls should aim at pinpointing exceptions/Action oriented: Only activities or results that fall
outside a predetermined tolerance range should call for action.
6. Emphasize the reward of meeting or exceeding standards rather than punishment for failing to meet
standards/Convincing: Heavy punishment of failure typically results in goal displacement.
7. 18Simple: Complexity creates confusion.
8. Foster mutual trust, understanding and common sense: Evaluation and control should foster trust,
understanding and common sense among units, departments or divisions.

1
Charles W. L. Hill and Gareth R. Jones, Strategic Management Theory An Integrated Approach, 8th Edition, p. 423
2
Michael A. Hitt, Duane Ireland, and Robert E. Hoskisson, Strategic Management: Competitiveness and Globalization: Concepts, Ninth Edition,
published by South-Western, a Part of Cengage Learning, p. 320
3
Gregory G. Dess, G. T. Lumpkin, Alan B. Eisner, Gerry McNamara, Strategic management : creating competitive advantages, seventh edition 2014,
Published by McGraw-Hill Education, p. 278
4
Parnell, John A. (John Alan), 1964, Strategic management: theory and practice / John A. Parnell. — 4th edition, published by SAGE Publications, p.
327
5
Fred R. David and Forest R. David, Strategic Management: A Competitive Advantage Approach, Concepts & Cases, 15th Edition, 2015, published by
Pearson Education, p. 284
6
Thomas L. Wheelen, J. David Hunger, Alan N. Hoffman and Charles E. Bamford, Strategic Management and Business Policy Globalization,
Innovation, and Sustainability, 14th edition (2015), published by Pearson Education Limited, p. 339
7
Charles W. L. Hill and Gareth R. Jones, Strategic Management Theory An Integrated Approach, 8th Edition, p. 411
8
Ibid, p. 411
9
Charles W. L. Hill and Gareth R. Jones, Strategic Management Theory An Integrated Approach, 8th Edition, p. 411
10
Ryszard
11
http://www.ehow.com/info_7819558_strategic-evaluation.html, 31 March 2016
12
Ryszard
13
ibid
14
http://smu-mba-mb00.blogspot.com/2012/06/mb0052-set1-4th-sem-assignments.html, 31 March 2016
15
http://smallbusiness.chron.com/evaluation-operations-strategy-50818.html, 6 April 2016
16
Dilli Ram Bhandari, Business Environment and Strategic Management, Asmita Publication, 2015, First Ed., p. 319
17
Thomas L. Wheelen, J. David Hunger, Alan N. Hoffman and Charles E. Bamford, Strategic Management and Business Policy Globalization,
Innovation, and Sustainability, 14th edition (2015), published by Pearson Education Limited, p. 357
18
Dilli Ram Bhandari, Business Environment and Strategic Management, Asmita Publication, 2015, First Ed., p. 320

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