Concept and Overview of Strategy Evaluation

The best-formulated and best-implemented strategies become obsolete as a firm’s external and internal environments change. It is essential, therefore that strategists systematically review, evaluated, and control the execution o strategies. This post presents a framework that can guide managers’ efforts to evaluated strategic-management activities, to make sure they are working, and to make timely changes. Management information systems being used to evaluate strategies are discussed.

“Complicated controls do not work. They confuse. They misdirect attention from what is to be controlled to the mechanics and methodology of the control.” (Seymour Tilles)

This category presents a strategy-evaluation framework that can facilitate accomplishment of annual and long-term objectives. Effective strategy evaluation allows an organization to capitalize on internal strength as they develop, to exploit external opportunities ad they emerge, to recognize and defend against threats, and to mitigate internal weaknesses before they become detrimental.

Strategists in successful organizations take the time to formulate, implement, and then evaluate strategies deliberately and systematically. Good strategist move their organizations forward with purpose and direction, continually evaluating and improving the firm’s external and internal strategic positions. Strategy evaluation allows an organization to shape its own future rather than allowing it to be constantly shaped by remote forces that have little or no vested interest in the well-being enterprise.

Although not a guarantee for success, strategic management allows organizations to make effective long-term decision’s to execute those decisions efficiently, and to take corrective actions as needed to ensure success. Computer networked and the Internet helps to coordinate strategic-management activities and to ensure that decisions are based on good information. Tehe checkmate Strategic Planning Software is especially good in the regard (www. Checkmateplan.com). A key to effective strategy evaluation and to successful strategic management is an integration of intuition and analysis.

Strategists in successful organizations realize that strategic management is first and foremost a people process. It is an excellent vehicle for fostering organizational communication.People is what makes the difference in organizations.

The nature of Strategy Evaluation

The strategic –management process results in decisions that can have significant, long-lasting consequences. Erroneous strategic decisions can inflict severe penalties and can be exceedingly difficult, if not impossible, to reverse. Most strategists agree, therefore, that strategy evaluation is vital to an organization's well-being; timely evaluations can alert management to problems or potential problems before a situation becomes critical. Strategy evaluation includes three basic activities; (1) examining the underlying bases of a firm's strategy, (2) comparing expected results with actual results, and (3) taking corrective actions to ensure that performance conforms to plans. The strategy-evaluation stage of the strategic-management process.

“Although Plane A may be selected as the most realistic, the other major alternatives should not be forgotten. They may well serve as contingency plans.”

( Dale McConkey)

Adequate and timely feedback is the cornerstone of effective strategy evaluation. Strategy evaluation can be no better than the information on which it is based. Too much pressure form top managers may result in lower managers contriving numbers they think will be satisfactory.

Strategy evaluation can be a complex and sensitive undertaking. Too much emphasis on evaluating strategies may be expensive and counterproductive. No one likes to be evaluated to closely! The more managers attempt to evaluate the behavior of other, the less control they have. Yet to little or no evaluation can create even worse problems. Strategy evaluation is essential to ensure that stated objectives are being achieved.

In many organizations, strategy evaluation is simply an appraisal of how well an organization has performed. Hove the form’s assets increased? Has there been an increase in profitability? Have sales increased? Have productivity levels increased? Have profit margin, return on investment, and earnings-per-share ratios increased? Some firms argue that their strategy must have been correct if the answers to these types of questions are affirmative. Well, the strategy or strategies may have been correct, but this type of reasoning can be misleading because strategy evaluation must have both a long-run and short-run focus. Strategies often do not affect short-term operating results until it is too late to make needed changes.

It is impossible to demonstrate conclusively that a particular strategy is optimal or even to guarantee that its will work. One can, however, evaluate a strategy: consistency, consonance, feasibility, and advantage.

Strategy evaluation is important because organizations face dynamic environments in which key external and internal factors often change quickly and dramatically. Success today is no guarantee of success tomorrow! An organization should never be lulled into complacency with success. Countless firms have thrived one year only to struggle for survival the following year. Organizational trouble can come swiftly, as further evidenced by the examples

Strategy evaluation is becoming and world becoming increasingly difficult with the passage of time, for many reasons. Domestic and world economies were more stable in years past, product life cycles were longer, product development cycles were longer, technological advancement was slower, and change occurred less frequently, there were fewer competitors, foreign companies were weak, and there were more regulated industries. Other reason why strategy evaluation is more difficult today includes the following trends.

A dramatic increase in the environment’s complexity
The increasing difficulty of predicting the future with accuracy
The increasing number of variables
The rapid rate of obsolescence of even the best plans
The increase in the number of both domestic and world events affecting organizations
The decreasing time span for which planning can be done with any degree of certainty

A fundamental problem facing managers today is how to effectively control employees in light of modern organizational demands for greater flexibility, innovation, creativity and initiative from employees. How can managers today ensure that empowered employees acting in a entrepreneurial manner do not put the well-being of the business at risk? Recall that Kidder, Peabody & Company lost $350 million when one of its traders allegedly booked fictitious profits; Sears, Roebuck and Company took a $60 million charge against earnings after admitting that its automobile service businesses were performing unnecessary repairs. The costs to companies such as these in terms of damaged reputation, finance, missed opportunities, and diversion of management’s attention are enormous.

When empowered employees are held accountable for and pressured to achieve specific goals and are given wide latitude in their actions to achieve them, the can be dysfunctional behavior. For example, Nordstrom, the upscale fashion retailer known for outstanding customer services, was subjected to lawsuits and finance when employees underreported hours worked in order to increase their sales per hour- the company’s primary performance criterion. Nordstrom’s customer service and earnings were enhanced until the misconduct was reported; at which time severs penalties were levied against the firm.

The Process of Evaluating Strategies

Strategy evaluation is necessary for all sizes and kinds of organizations. Strategy evaluation should initiate managerial questioning of expectations and assumptions, should trigger a review of objectives and values, and should stimulate creativity in generating alternatives and formulating criteria of evaluation. Regardless of the size of the organization, a certain amount of management by wandering around at all levels is essential to effective strategy evaluation. Strategy-evaluation activities should be performed on a continuing basis, rather than at the end of the year, for example, could result in a firm closing the van door agar the horses have already escaped.

Evaluating strategies on a continuous rather than on a periodic basis allows benchmarks of progress to be established and more effectively monitored. Some strategies take years to implement; consequently, associated results may not become apparent for years. Successful strategies combine patience with a willingness to promptly take corrective actions when necessary. There always comes a time when corrective actions are needed in an organization! Centuries ago, a writer perhaps Solomon made the following observations about change.

There is a time for everything.

A time to be born and a time to die,
A time to plant and a time to uproot,
A time to kill and a time to heal,
A time to tear down and a time to laugh,
A time to mourn and a time to dance,
A time to scatter stones and a time to gather them,
A time to embrace and a time to refrain,
A time to search and a time to give up,
A time to keep and a time to throw away,
A time to tear and a time to mend,
A time to be silent and a time to speak,
A time to love and a time to hate,
A time for war and a time for peace,

Managers and employees of the firm should be continually aware of progress being made toward achieving the form’s objectives. As critical success factors change, organizational members should be involved in determining appropriate corrective actions. If assumptions and expectations deviate significantly form forecasts, then the firm should renew strategy-formulation activities, perhaps sooner than planned. In strategy evaluation, like strategy formulation and strategy implementation, people make the difference.

Through involvement in the process of evaluating strategies, managers and employees become committed to keeping the firm moving steadily toward achieving objectives.

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