Strategic Management Online
Module Name and Strategic Management
Number 9791B
Topic Name Strategic Control
Adapted in part from:
http://www.mapnp.org/library/plan_dec/str_plan/monitor.htm and Buttery &
Richter (2001)
Evaluation of strategy is that phase of the strategic planning
process in which the top managers determine whether their
strategic choice, in its implemented form, is meeting the
objectives of the enterprise (Glueck 1976).
Control Phase in Strategic Management
Once strategies have been implemented, they must be evaluated periodically,
through a formal review process, in order to identify if strategic
implementation operates according to the original plan. Reviews, however,
can only be facilitated if the firm has set up an information system to:
a) monitor the assumptions and predictions which underpin the strategic plan,
and
(b) periodically evaluate the performance indicators which track core
capabilities and competencies
These indicators are subsequently used to compare planned performance with
actual performance. Corrective action may be required if performance
deviates from the expected standard. The processes of review, monitoring
and control are imperative because strategies attempt to align unique
organisational resources with a unique environmental condition.
There are three primary types of control (Higgins 1983):
1. Strategic control - focuses on evaluating strategy and is
practised both after the strategy is formulated and after it is
implemented.
2. Management control - focuses on the progress of major subsystems towards accomplishing strategic objectives.
3. Operational control - focuses on the performance of the
individual or work team.
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This topic concentrates on strategic and management control. Use these
links to jump straight to them.
Strategic Control
The strategic plan document should specify who is responsible for the overall
implementation of the plan, and also who is responsible for achieving each
goal and its subsets of objectives and performance targets and measures and,
for making decisions based on the monitoring of results - that is for
controlling it. For example, the board might expect the chief executive to
regularly report to the full board about the status of implementation, including
progress toward each of the overall strategic goals. In turn, the chief
executive might expect regular status reports from middle managers
regarding the status toward their achieving the goals and objectives assigned
to them.
Aims of Control
The aim of strategic control is to ensure accurate implementation of strategic
plans and the achievement of the forecast results. Strategic control has three
main thrusts, to ensure that:
1. Strategies are delivering the desired performance
2. The organisation's performance conforms to its vision and mission
3. The organisation is operating effectively and efficiently to maintain
its competitive advantage and bolster its distinctive competencies
Effectiveness and Efficiency
Effectiveness refers to how well an organisation achieves its goals (or
produces expected results). Effectiveness is the optimal relationship between
an organisation and its environment. Effectiveness relates to the
organisation's goals. Efficiency, however, is the amount of output per unit of
input and relates more to the nature of internal operations. It is not
specifically related to goals. An efficient organisation is one that does
whatever it does with the minimum consumption of resources. Ideally
organisations carry out their activities both effectively and efficiently; that is,
they do the right things in the right way. However, the other three
permutations are possible. Indeed an organisation could be neither effective
nor efficient in the conduct of its business and would experience competitive
disadvantages as well as low productivity. In other words, it would be doing
the 'wrong things wrong'.
Hofer and Schendel note that organisations that attain effectiveness without
efficiency will still outperform those that become efficient but not effective.
While it is clearly better to be both effective and efficient at the same time,
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when effectiveness and efficiency are in conflict, then positive external
relations that lead to effectiveness should be stressed instead of internal
efficiency. Although strategic management in its entirety emphasises
organisational effectiveness, the control process is concerned with both
effectiveness and efficiency.
Phases of the Control Cycle
The control process consists of the following four phases:
1. Select key variables that will become the major evaluative
criteria for determining whether goals have been achieved
and strategies appropriately carried out.
Key Variables for Control
Control systems are most often designed to measure profitability
because it is a dominant goal in most companies. However, the
particular measure of profitability of interest in a particular firm can
vary across several interpretations of the various forms of gross
profit, operating profit, and net profit. But control systems may
focus on other measurements (besides profitability), called key
variables also called 'strategic factors', 'key success factors', and
'key result areas'. Usually only a few key variables are used for
control purposes. The average, according to writers, is six.
Key variables have the following characteristics:
a. They capture the essential elements of success (or failure) of
the organisation's strategies
b. They change dramatically with changes in organisational
performance
c. Changes in them are not easy to predict
d. They can be measured directly and objectively
To arrive at a list of possible key variables for strategic control, the
strategic analyst should ask the following three questions:
a. What management decisions will be critical to successfully
carrying out strategies?
b. What factors are important as inputs to these decisions?
c. From what sources of revenue will the organisation recover
costs associated with these factors?
In answering, a set of variables will emerge that are possible key
variables. This can then be pared down to a select few by screening
them according to the above criteria (success elements, dramatic
change, prediction difficulty, and measurability). The resulting set
of key variables that become control variables is unique to the
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organisation. These variables reflect its major strategic thrusts.
There are some common ones that are peculiar to certain functions.
The list that follows is intended merely as an example of the kinds
of key variables that may be ultimately selected for purposes of
monitoring performance in ways consistent with strategy:
 Marketing variables: Sales, bookings, market share, gross
margin, key account orders, lost orders, promotional
indicators, new customers
 Production variables: Cost control (output per labour hour,
overtime), percentage of capacity utilisation, backlogs,
quality, yield, raw materials cost, percentage of on-time
delivery
 Finance variables: Inventory, accounts receivable, return on
investment
Within the strategic management process, major objectives and
targets established for each level of strategy are also prime
candidates for key control variables. For example, a management
team striving to increase market share by one percentage point per
year for three years can take these interim values as key variables.
If, at the close of the first year, implementation of the selected
strategy has failed to produce the one percentage point increase in
share, then corrective action can be taken. The team might
establish six-month criteria, say, one half a percentage point, if
appropriate, and gain even closer control of strategy
implementation. Too often management will set a long-term target
and wait until it is not met before taking corrective action. Of
course, it is then usually too late to change operations in a
constructive way. Timely, feasible, understandable key variables are
essential for effective control systems.
2. Set standards for the key variables that represent levels of
satisfactory performance.
Setting Standards
After selecting key variables for monitoring organisational
performance, standards have to be set for them. Standards are the
levels of key variables that will be accepted as satisfactory. Anthony
and Deardon (1980:137) describe three types of standards:
predetermined standards (budgets), historical standards, and
external standards. Predetermined standards or budgets are the
goals set during the goal formulation process of a strategic
management program. A targeted five-year growth in return
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(operating profit) on sales from, say, 8 to 13 percent, defines a
direct key control variable. Annual standards, or interim targets,
would probably be set as part of business-level strategy. Whatever
annual values were given to expected return on sales goals would
be the standards against which subsequent annual performance
would be compared for control purposes. Similarly budgets,
another form of predetermined standard, are often established as
part of the functional strategy formulation process. Functional
managers, along with senior managers, decide upon the size of
budget necessary to carry out strategy when functional strategy
goals (and action plans) are established.
Historical standards are set by using past performance as a
comparative base. Thus current performance is compared with past
performance. Historical standards are often used to evaluate
performance. Management may wish to maintain a current ratio of
2 to 1, for example, or a certain inventory turnover ratio. Use of
historical standards is recommended only when it is determined
that conditions have not changed so as to invalidate the trend and
when prior performance is known to be acceptable. External
standards are those whose values are derived from sources outside
the organisation or SBU. Examples are other organisations'
performance characteristics that yours wants to exceed, such as
market share, return on assets, earnings per share, etc. The
shortcoming of this type of standard is the possible noncomparability of organisations. Of these three types of standards,
the one best suited for strategic management control purposes is
predetermined standards.
1. Measure performance against standards to detect
deviations.
Comparison of Actual Performance Against
Standards
This stage involves measuring actual key variable performance,
comparing results against standards, and informing the appropriate
people so that deviations can be detected and corrections made or
reinforcement given. Financial or management accounting systems
are usually relied on for measuring actual performance. There are,
however, many other measurement methods available, including
product sampling, various predictions, observation by managers,
meetings, and conferences. Whatever measurement methods are
selected, they should be timely, accurate, and cost effective.
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The need to inform people of measurement results, necessitates a
system of reporting. Anthony and Deardon (1980) identify two
types of reports for control systems: information reports and
control reports. Information reports tell managers what is
happening around them and may or may not be intended to
precipitate action. Managers study them to determine if it is
necessary to take corrective action. Control reports are those
directed at actual versus planned performance comparisons and can
take many forms.
2. Take action either to reinforce correct performance or to
correct substandard performance.
Reinforcement or Corrective Action
Detection of negative deviations from standards usually leads to
analysis of problems, decisions about how to correct them, and
adjustments to operations. Sometimes a control report will
precipitate starting a new strategic management cycle. This new
cycle may lead to the reformulation of goals or action plans, or
both. Usually, however, strategies remain intact while operations
are adjusted. The control process should be continuous so that
control information is constantly fed back to the goal and action
plan formulation stage. Deviations, therefore, should prompt
immediate analysis so that a timely decision can be made about
whether to change goals or action plans or operational
management. It is important too that performance that exceeds
standards be reinforced. Too often management focuses attention
only on negative deviations from expectations.
Management Control Process
This section is adapted from Buttery & Richter (2001:Ch9). It overlaps
strategic control in parts but helps to paint you a more complete picture.
Buttery & Richter argue that the management control process requires:
1. Motivation to evaluate strategy and its implementation
Motivation to Evaluate
Before any evaluation can take place, managers must want to
evaluate performance. This may sound trivial or inconsistent, but
all too often managers are just glad if profits and/or market share
show improvement over the previous period, and any real
evaluation gets brushed to one side. However, skipping the real
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evaluation phase is wasting much of the benefit derived from the
planning process. Motivation can be fostered if reward systems are
linked with performance objectives. It is possible to drive strategic
performance measures down through the organisation's hierarchy
to provide targets for individual performance, and also as a basis
for an incentive compensation plan that is based on current
measures of performance. The Balanced Scorecard by Kaplan and
Norton is an excellent tool in this regard. This process involves
translating the primary objectives of the organisation into its
components in terms of secondary objectives. As an example the
primary objective of customer satisfaction (rated by industry
association) could be translated into secondary objective
components. These components may include design cycle (days),
promised delivery cycle (days), on-time delivery (penalty days),
quality measured by such aspects as first pass yield (%),
complaints (numbers), warranty claims (% of sales) and quality
cost ($ cost of prevention, inspection, internal and external failure
costs).
2. A monitoring system to provide data for evaluation
Monitoring System to Provide Data for Evaluation
The second prerequisite for evaluation is the availability of data for
strategy evaluation. Every strategy is based on certain planning
premises, assumptions and predictions. Part of the monitoring
process is to build an information system which can systematically
and continuously track that the assumptions and predictions
remain sound. If a vital assumption no longer holds true, the
sooner an organisation knows, the sooner it can adjust the strategy
to suit.
The choice of what variables to monitor depends on which
strategies are being pursued, but, for the majority of organisations,
standard micro and macro environmental factors are likely
candidates. Thus technology, economic determinants such as GNP,
interest rates, exchange rates, inflation, regulatory shifts and
demographic factors are high on the agenda. Assumptions and
predictions pertaining to the micro-environment, such as
competitive forces in the industry, markets and customers,
suppliers, must also be tracked.
It is not necessary to monitor the whole range of macro and micro
environmental factors for control purposes. The most relevant are
those upon which the organisation's strategies are founded,
coupled with those factors that would have a major impact. In
addition to environmental aspects, strategy is predicated on certain
internal achievements that need to be tracked. For example, a
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certain level of productivity or progress with new product
development may have been assumed in the strategic plan.
Another practical way to effect the monitoring of the right factors is
to focus on the factors that contribute to the core competence,
core capabilities and critical success factors of the
organisation. These highlight the performance areas that are of
critical importance to strategy achievement. For example:

The important factors, which lead to success for the lowcost strategy, are control over production and distribution
costs.

Differentiation depends on the match between consumer
preference and product attributes and appropriate market
segmentation.

Focus or niche strategies depend on keeping the market
niche protected from competitors.
Monitoring corporate level strategies also focuses on tracking core
competence factors and all other factors that are important for it as
a whole. For example:

Concentric diversification depends on the ability to exploit
synergies.

Conglomerate diversification does not depend on resource
sharing but on the ability to manage business units as if
they were assets.

Market share leaders must be judged against their next
largest rivals.

Product development strategies depend on the ability to
develop technology internally, or find it by merger or cooperative means.

It is also important to monitor the impact of the firm’s
strategy on the environment. This relates particularly to the
social and natural environments.
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3. A determination of what needs controlling
Determination of What Needs Controlling
There are many criteria for judging corporate performance, but
analysts and managers tend to select one measure that they feel
symbolises success or failure and report publicly on it. Whilst such
single measures are unambiguous, and have, at times, to be
justified on the basis of giving primacy to, for example,
stockholders, a single measure is likely to give a misleading picture
of overall performance.
Not only does a single measure view performance from the point of
view of one set of stakeholders, there is also the problem that
performance measures conflict with one another. Maximising on
one measure implies minimising on another. Optimising the
interests of one stakeholder group means expropriating the
resources perceived as belonging to others. Maximising short-term
earnings will reduce the long term competitiveness of the business,
fast growth leads to risks that need to be absorbed by shareholders
and creditors. Increasing shareholder value can erode the trust of
employees and the local community (Doyle 1994). We can
conclude, therefore, that single measures of performance are
inappropriate.
By evaluating goals and objectives that have been set in the
strategy formulation stage, the organisation ensures that it remains
closely aligned with its mission and vision. In this respect, Kaplan
and Norton (1996) have created a performance measurement
system that links the organisation's long-term strategy to day-today operations. The ‘Balanced Scorecard’, as the model is known,
uses four perspectives:
(a) the financial perspective – reflecting the financial returns
for owners,
(b) the customer perspective – reflecting how customers
view the business,
(c) the business-process perspective – reflecting what a
business must excel in, and
(d) the innovation and learning perspective – reflecting how
the business continues to develop. As these four
aspects are equally important, they must be balanced
against each other and can be measured as such.
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4. A performance measurement and comparison phase
Performance Measurements
The factors which managers can use to control the organisation,
according to Ouchi (1977), range from those that measure
organisational output to those that measure organisational
behaviour. Outputs, in general, are easier to measure than
behaviour because outputs are relatively tangible, and are therefore
the first measures a firm tends to apply.
Hofer (1983) reports that researchers have found that managers in
different disciple areas will utilise different measures of
performance. Thus the manager drawn from the accounting
discipline is more likely to use current ratio, cash flows, net working
capital, quick ratios, the marketer sales growth, market share, brand
awareness, the stock price, net income and ROI, etc. A study by
Kald and Nilsson (2000) revealed the following ranking in the
structure of performance measures in 800 European business units
(with 1 being the most important and most utilised performance
measure):
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
Measures that
technology
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
reflect
profitability
cost effectiveness
the distribution of sales
quality
production efficiency
reliability of delivery
market position
customer satisfaction
employee satisfaction
product development
competence
environmental profile of unit
value to shareholders
process development/level of
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5. Financial Market Control
Financial Market Control
Market control is the most objective type of control because the
firm is able to compare the data in a competitive way. There are a
number of market controls, eg, stock price, EPS, ROE, ROI, etc. As
an objective and a measure of performance, profitability is by far
the most common measure. Sometimes it is expressed in absolute
terms, but more often as a ratio. These indices are normally
compared against other companies with similar core businesses
and evaluated over time. There are some problems related to
financial reporting and you should investigate this further.
6. Output Control
Output Control
The second most efficient means of measuring performance is
output control. This type of control is used when no market system
can be utilised to measure performance. It is the easiest and
cheapest method of control. It involves the forecasting of certain
appropriate targets at the corporate, functional and individual level.
Output controls would include dollar sales, unit sales, market
share, dollar assets, productivity, net profits, cash flow, brand
awareness, employee satisfaction, output/direct man-hour, reject
rates, getting and keeping customers and new products. Dollar
sales, a frequently-used measure of performance, could vastly
overestimate the contribution of the firm to the economy, as they
reflect assembled parts and components manufactured by
suppliers. An alternative measurement is value-added. Proponents
of “value-added” assert that prosperity over the longer-term
depends on the ability of the firm to expand their value-added at
competitive prices. Drucker (1977) calls this ‘contributed value’,
which he suggests accounts for all the resources the business itself
contributes to the final product and the appraisal of their efforts by
the market. Drucker (1995) asserts that cash flow and liquidity are
the oldest and most widely used set of diagnostic tools. The
rationale he provides is that organisations can survive long periods
of low revenues if they have adequate cash flows. Liquidity, in
turbulent times, becomes survival (Drucker 1980). He also said
that enterprises are there to create wealth, not to control costs.
Performance evaluation based on cash flow models is partly
underpinned by the philosophy that management should be
concerned with creating wealth for shareholders, and these factors
spawned shareholder value analysis (SVA). The task is to maximise
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the value this group of stakeholders receives. Their value can
increase in three ways:
1.
2.
3.
Dividend payments
Appreciation in the value of the shares
Cash repayments
From an operational point of view this means managing the
business to generate cash rather than accounting profit. Value is
created when the income stream, discounted to net present value
exceeds the cost of capital that correctly reflects the investment
risk. Economic Value (EVA) = Profit – (Net Capital x Cost of
Capital), Where profit = net operating profit after tax and net
capital (capital employed) = equity plus debt minus cash.
As cash flow streams represent the potential return to
shareholders and bondholders alike, the cash flow model
should exclude interest charges. In order to estimate the
cash flow, the firm must determine the discount rate. Once
the stream is discounted, and if it is positive, the decisionmaker knows that the activity adds value to shareholders
wealth. If a part of the business is worth more to another
organisation than to current management, then it should be
sold and the receipts handed back to shareholders.
Moreover, managers seeking to maximise shareholder
wealth will not normally pursue policies of earnings or
acquisitive growth (Doyle 1994).
7. Bureaucratic Controls
Bureaucratic Control
Bureaucratic control is control through the establishment of a
comprehensive system of rules and procedures to direct the actions
or behaviour of divisions, functions and individuals (Williamson
1975). Bureaucratic controls include rules and procedures, budgets
and standardisation of activities. They are appropriate in many
management situations, though costly to implement. A couple of
techniques are now discussed simplistically, however you should
take the time to investigate them further so as to make informed
decisions.
Management by Objectives (MBO)
1. The relationship between the MBO process and the
strategic planning process is easy to understand and has
also been set out by Harrison (1986). Within the concept
of bureaucratic control it is the MBO process, as opposed
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to the objectives themselves, that represent bureaucratic
control.
2. Managerial objectives are developed through planning
premises based on information received from the external
environment and the internal operations of the
organisation.
3. Managers and their superiors review and reach
agreement on the objectives to be accomplished both in
the short- and the long-range future.
4. The managerial objectives (ends) are used to formulate,
select, and implement managerial strategies (means).
5. The managerial objectives constitute the boundaries of
acceptable performance in the strategic control system
and serve as the foundation for the standards in the
management control system, which, in turn, provides
guidance and direction to the operating control system.
6. As the managerial strategy is implemented throughout
the organisation, management begins to receive reports
and information describing the acceptance of goods and
services in the external environment and the flow of work
in the operating areas of the organisation.
7. The information and reports indicate the variance of
actual performance from standard performance, which in
turn, is derived from the managerial objectives.
8. Periodically, managers meet with their superiors to review
and discuss implementation of managerial strategy
directed toward the accomplishment of managerial
objectives agreed upon at the outset of the MBO cycle.
9. Depending on the degree of variance of actual
performance from standard performance, timely and
appropriate corrective action is forthcoming to ensure the
successful implementation of the managerial strategy
(means) which, in turn, results in the attainment of
managerial objectives (ends).
10. The cycle of MBO is repeated, on an annual basis, as
objectives are reviewed and revised coincident with
accomplishments and changing conditions.
It should be evident that the actual objectives established within
the MBO process represent a form of output control.
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Managerial Budgets
The budget provides a link between strategy, with its emphasis on
long-term results, and the hierarchy of control systems oriented
towards maintaining an acceptable range of variances once the
organisation implements its strategies to achieve its objectives. The
organisational structure must be well defined; and the
accountability for performing within the budget must be closely tied
to individual managers and organisational units. The relationship
between managerial strategy and the managerial budgets should
be well understood by all managers. Budgets should guide rather
than dominate decisions. Budgets are tools of management. There
should be some participation among the managers in the
development and use of the managerial budgets. Participation can
help to overcome the natural human dislike for instruments of
control (Steiner 1969).
Rules and Procedures
Formal rules, operating policies, work procedures and similar
devices are adopted by management to guide employee behaviour
(including that of executives) in certain ways (Lawrence & Lorsch,
1967). Clearly, rules and procedures are more suitable where
routine situations occur so that the guidelines can guide the
employee in all situations.
Bureaucratic Control Issues
The major drawbacks of bureaucratic controls relate to their
cost, (bureaucratic control is very expensive), and their
applicability in the modern organisation. Environmental
turbulence abounds and employees must be capable of
reacting to unforeseen events. The new organisation
demands increasingly flexible responses and dynamic
thinking, not standardised behaviour. Also, rules are easily
made, but very difficult to eradicate. One current thought is
that firms should relinquish their rules annually and simply
retain those that are still meaningful. What do you think?
8. Clan Control
Clan Control
Clan control is ‘control through the establishment of internal
system of organisational norms and values’ (Ouchi 1980). The goal
of clan control is self-control. It is a concept, often referred to, but
seldom managed and measured. It is usually associated with a
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team environment based on collectivism and not individualism. It
could be argued that this is particularly difficult for Western
organisations. However, organisations such as Benneton, and
Fisher & Paykel have demonstrated its effectiveness. In addition,
many Japanese organisations are said to be associated with good
organisational climates. The development of a unique clan system
would therefore appear to be worthwhile. It does, however, not
work in all circumstances; for example, in industries that
traditionally experience high labour turnover, clan control will be
difficult to establish. Clan control should always be used in
conjunction with other control mechanisms.
9. Joint Venture/Alliance Controls
Control in Joint Ventures and Alliances
Organisations increasingly realise competitive advantage through
cooperative strategies. Buttery and Buttery (1994) have provided
guidance for evaluating such a situation. The evaluation of
alliances adds an extra dimension to the control process. The
management control system for an alliance is invariably a hybrid
system as it interfaces and works in tandem with the control
systems of all partners in the relationship. Segil (1998) considers
that one aspect of alliance success is the constant evaluation and
monitoring of the relationship. Unlike single entities, joint
ventures are complex and vulnerable. They are more complex
because multiple interests must be balanced and because of the inbuilt risk, often the very reason why partners have joined the
venture in the first place.
It is important for alliances to start evaluation by assessing the
rationale for the relationship. Did we contemplate the relationship
to reduce risk, or to reduce the innovation to market cycle, gain
economies of scale or scope? Evaluation criteria should be
developed in accordance with the relative importance of each
strategic objective in the relationship. These are likely to change as
the relationship develops. Suppose a relationship has been entered
into to research a new technology, with a view to exploit the new
technology jointly, by producing and marketing jointly after the
breakthrough. Clearly, prior to breakthrough, other performance
measures are necessary than following the breakthrough.
There is also the question of whether the relationship is rated from
the point of view of each partner, or whether it is the alliance as a
stand-alone that should be evaluated. Anderson (1990) argues for
the stand-alone appraisal where the joint venture seeks to optimise
its own performance not that of the parents. In doing so, the joint
venture is freed from parent policies and parochial viewpoints. The
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use of profitability measures for alliances is particularly
troublesome if the alliance is used for risky and uncertain
situations. ‘But when risk and uncertainty are high, profitability by
itself is a poor measure of the joint venture’s value (or, for that
matter, any business’ value). The use of policies is important to the
alliance situation. Policies set by networks may be designed to
control only internal operations, or may also be used to govern the
relationship with major stakeholders including suppliers and
customers. Policies are of benefit in guiding behaviour of business
and alliance partners.
10. Decisions about the strategic evaluation outcome
Areas of Strategic Evaluation
Managers still have to appraise performance; ie, they must
compare the actual performance with the desired standard. If a
deviation occurs, management may initiate a review of the causes
of the deviation.
Key Questions when Evaluating Status of Plan
Are goals and objectives being achieved or not? If they are, then
how will we acknowledge, reward and communicate the progress.
If not, then we should consider the following questions:

Will the goals be achieved according to the timelines
specified in the plan? If not, then why?

Should the deadlines for completion be changed (be careful
about making these changes - know why efforts are behind
schedule before times are changed)?

Do personnel have adequate resources (money, equipment,
facilities, training, etc) to achieve the goals?

Are the goals and objectives still realistic?

Should priorities be changed to put more focus on achieving
the goals?

Should the goals be changed (be careful about making these
changes - know why efforts are not achieving the goals
before changing the goals)?
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
What can be learned from our monitoring and evaluating in
order to improve future planning activities and also to
improve future monitoring and evaluation efforts?
Questions for evaluating business unit strategies

Are business unit goals clearly specified in terms of
revenues, profits, market shares, and budgets? Are they
consistent with corporate objectives and goals?

Is the business unit strategy specified comprehensively in
terms of functional task requirements in production,
marketing, finance, and administration? Is it based on a
clearly-established competitive advantage?

Is the business unit’s strategic plan based on accurate
demand forecasts? Are product line composition, price
structure, packaging, and distribution channels positioned
competitively?

Are internal resources and attributes of the business in
terms of technology, production systems, marketing,
distribution, and finances sufficient to meet requirements of
the strategy? Does the organisation have the resources to
carry out the plan to its completion?
Questions for assessing strategy implementability

Does the organisation have, or can it develop, organisational
structures and systems compatible with strategies, both at
the corporate and business unit levels?

Does the organisation have the financial and managerial
resources necessary to implement the strategic plan fully?
Does it have the necessary skills and staff to carry out the
plan?

Is there consensus among the organisation's key managers
on strategic objectives and the means of achieving them?
Are there any major sources of conflict that can thwart
implementation of the strategic plan?

Are there major regulatory threats or trends that can force
the firm to abandon the strategic plan in the future?

Does the organisation have a culture to support its new
strategy?
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Questions for assessing the strategic decision-making
process

Is the strategic decision-making process sufficiently
developed and codified to be clear to all participants?

Does the decision process provide for the participation of
technical and business experts and all-important members
of the top management?

Is the decision process adequately connected to the
budgeting system, capital appropriations process, resource
allocation process, and other pertinent systems of the
organisation?

Does the decision process provide opportunities for review,
evaluation, feedback and monitoring of strategic decision?
Once the cause of the deviation is determined, management must
decide on the appropriate action.
Reporting Results of Monitoring and Evaluation
Always write down the status reports. In the reports, describe:
1. Answers to the above key questions while monitoring
implementation
2. Trends regarding the progress (or lack thereof) toward goals,
including which goals and objectives
3. Recommendations about the status
4. Any actions needed by management
Deviating from Plan
It’s OK to deviate from the plan if needed. Remember it is a guideline - a
living document, not a strict roadmap only republished once every couple of
years. Usually the organisation ends up changing its direction somewhat as it
proceeds through the planning period. Changes in the plan usually result from
changes in the organisation’s external environment and/or client needs
requiring different organisational goals, changes in the availability of
resources to carry out the original plan, changes in timeframes, etc. Even the
most comprehensive plans usually require some 'fine tuning'. As you work
through the implementation phase and new, better, more complete
information becomes available and the degree of uncertainty surrounding
some forecast events lessens or disappears, it is possible to modify or take a
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course of action with more certainty. In this respect deviation is providing
management with better forecasts of actual future outcomes. The most
important aspect of deviating from the plan is knowing why you’re deviating
from the plan; ie, having a solid understanding of what’s going on and why.
Changing the Plan
Be sure some mechanism is identified for changing the plan, if necessary. For
example, regarding changes, write down:
1. What is causing changes to be made
2. Why the changes should be made (the "why" is often different to
"what is causing" the changes)
3. The changes to be made, including to goals, objectives,
responsibilities and timelines
Manage the various versions of the plan (including by putting a new date on
each new version of the plan). Always keep old copies of the plan. Always
discuss and write down what can be learned from recent planning activity to
make the next strategic planning activity more efficient.
Celebration
Rarely, when a plan is completed, do organisations really acknowledge
the success they have achieved. Instead, planners are often so focused
on "progress" and problem solving, that they're too eager to move on to
the next version of the plan. Celebration of a plan's success is as
important as accomplishing objectives along the way. Celebration
provides reflection, reward, motivation and a sense of closure. Without
it, the next planning cycle can become a grind.
Suggestions for Control System Development
Any negative results of control can be minimised by following Steiner's (1979)
suggestions for developing control systems. They are:
1. Enlist top management support. The involvement of top
management can enable appropriate assignment of resources to
the control effort as well as lend legitimacy to the system.
2. Have a clear organisational structure. A well-defined and welldesigned structure will help managers and employees understand
their responsibility and authority and their various interrelationships
within the control system.
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3. Establish clear control responsibility. Someone should be appointed
as director of control operations so that accountability for its phases
is clearly assigned.
4. Do not permit control to become an end in itself. If the control
system is allowed to dominate decisions, then creativity and
initiative can be thwarted.
5. Keep accounting "buzzwords" to a minimum. Use of esoteric
accounting terminology may alienate those employees who do not
understand it. Even a widely understood concept such as profit can
evoke negative reactions from employees. A profit goal will often be
interpreted by employees as an attempt to get more out of them
with nothing given to them in return. For this reason positive
reinforcement is important as a control method.
6. Keep it simple. Before very long a control system can evolve into a
"can of worms." When this is allowed to happen, frustrations,
resentment, and then inaction can result.
7. Communicate the purposes and limitations of control. Fewer
negative results will develop the more employees understand and
see an opportunity to benefit from the control system.
8. Encourage participation. Especially in the standard-setting process,
participation fosters understanding and commitment to the control
effort.
9. Keep controls simple and few in number. The easier control
variables are to understand, the greater will be chances of
acceptance and support by employees. Also, control variables
should be kept to as few as possible to prevent unnecessary
complexity, confusion, and cost.
10. Make controls meaningful. There must be widespread recognition of
the importance and significance of control variables and their
standards for the system to be accepted.
11. Customise the control system. "Canned" systems should be avoided
in favour of ones that reflect the idiosyncrasies and needs of the
organisation.
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