Once the prerequisites for the implementation of strategy have been fulfilled, the next thing to be done by the organization is strategic evaluation.
Strategy Evaluation: Necessity, Requirements, Strategy Evaluation Framework
What is Strategic Evaluation?
Strategy evaluation is the last phase of the strategic management process in which managers try to ensure that the strategic choice is properly implemented and meets the objectives of the organization.
In fact, in strategy evaluation, managers review or appraise the progress in the performance related to strategy implementation, try to find out any deviations of actual performance from the chosen strategy that has been put into action, and then take appropriate actions for making the strategy work.
Strategy evaluation is one kind of follow-through on strategy. Strategy evaluation requires an effective computerized information system to provide managers with timely feedback to promptly act on the data.
In practice, strategy evaluation during (and/or after) implementation requires a control system -both are integral parts of the organization’s monitoring system.
Both systems help managers monitor the progress of a strategic plan. The essence of strategy evaluation is keeping track of current performance and anticipating changes
The Necessity of Strategic Evaluation and Control Systems
Strategy evaluation and control systems help managers to find out;
- whether the implementers of strategy are making decisions consistent with the organizational policies;
- Adequate resources have been allocated, and they are being used wisely;
- the events in the external environment are, occurring as anticipated;
- the long-term and short-term goals are being met; and
- The strategy implementers are on the right track. The evaluation process alerts the implementers to unexpected events in the above issues. Thus, they can take corrective action to get back on track, change the track, or make changes in other relevant aspects of strategy.
Strategy managers need to continually evaluate and monitor the progress in the strategic actions undertaken for strategy implementation.
The systematic review provides adequate data for finding out any deviations in the actual activities from the planned activities. Based on these data, managers can then undertake appropriate actions.
Here we discuss the necessity of strategy evaluation under the following heads;
Obtaining data for corrective actions
Dynamic environments compel organizations to evaluate their strategic actions carefully. The key internal and external factors change quickly and dramatically. These changes affect strategy implementation.
Regular evaluation of strategy, while implemented, provides relevant data for taking corrective actions.
Keeping track of progress
Regular evaluation of strategic actions during competitive strategy implementation facilitates progress tracking.
Evaluation results/information help managers gauge the actual situations in respect of the implementation of strategies. They can go for instant actions if there is slow progress.
Detection of flaws
Nobody can guarantee that a particular strategy will work or that it is the soundest strategy. Therefore, the strategy should be evaluated for critical flaws.
Through a review of results and future possibilities, the strategy managers determine whether the strategy is working. If any flaw is detected in the implementation of the strategy, they take steps to make it work.
Making managers proactive
Installation of an evaluation system puts the managers in a systematic trap, which compels them not to/ neglect the importance of assessing the impact of changes in the organizational environment.
It reminds them not to be complacent about the present achievement. It makes them feel that success today is no guarantee for success tomorrow.
Developing a sense of commitment
When all managers and employees are involved in the process of evaluating strategy on a continuing basis, they become committed to keeping the company moving steadily toward achieving objectives.
Adjustments or modifications may be needed in the vision of the mission, objectives strategies, or in the approaches to execution of the strategies. If corrective actions or adjustments are not initiated properly and on time, it may invite catastrophic consequences for the organization.
Requirements of Effective Strategic Evaluation Systems
A strategy-evaluation system in order to be effective and successful, must meet certain requirements. These requirements are the characteristics of an effective evaluation system.
We discuss below the-major requirements of an ideal strategy-evaluation system:
Economical
The activities related to the evaluation of strategy must be economical. If they are not cost-effective, wastage will creep up. A balance needs to be maintained in obtaining information; not too much or not too little Very often, too much data and too many controls do more harm than good.
Meaningful
The strategy-evaluation activities must be meaningful in the sense that they have to be related specifically to the objectives against which the strategy has been adopted.
Providing useful information
The information collected through evaluation must be useful. Redundant information is useless to managers in decision-making.
Providing timely information
The strategy-evaluation system should be established in such a way that it can provide information to relevant managers on time. Untimely delivery of information may mean ‘no information’ because it cannot be used whenever they were heeded.
Providing a true picture of events
The strategy-evaluation activities should be able to provide a true picture of what is happening in the organization regarding the implementation of the strategy.
Being directed towards the right persons
The strategy-evaluation system should be: directed to the right persons who matter in taking actions based on data. Thus, it should try to facilitate rather than simply provide information for information’s sake.
Being elaborate and detailed
In large organizations, the strategy evaluation system should be elaborate and detailed. This is needed because the existence of many departments/divisions requires effective coordination.
Strategy Evaluation Framework: 3 Activities of Strategy Evaluation
3 activities of strategy evaluation are;
Reviewing bases of strategy
Internal strengths and weaknesses, as well as external opportunities and threats, form the bases for a strategy. The opportunities, threats, strengths, and weaknesses are hot likely to remain valid for a long time.
So, when the implementation of a strategy takes a long time (some strategies may even take several years for full implementation), these bases (i.e., SWOT data) of strategy should be reviewed.
A review would reveal how competitors have reacted to the firm’s strategies, how competitors have changed their strategies in response to (our) company’s strategies, whether strengths and weaknesses have changed, and whether new opportunities by now have emerged or new threats have surfaced.
Above all, whether the already-identified opportunities, threats, strengths, and weaknesses are still as they were at the time of SWOT analysis, and many other issues like these. Review of the bases of strategy enables the managers to identify the real reasons for unsatisfactory results.
It may so happen that an ineffective strategy has been chosen, or a strategy has been implemented very poorly, or sudden changes in the external factors (such as changes in demand, changes in technology, new policies by the government, or actions by competitors) have prohibited the company from achieving the objectives.
The review helps in discovering these changes.
Measuring organizational performance
The second component or activity of the strategy-evaluation framework is the measurement of organizational performance.
Managers need to compare the planned activities against the actual progress toward achieving stated objectives. That is, actual results are compared with the planned results.
Then, deviations are detected if there are any. Evaluation is also made of individual performance. Progress toward achieving original objectives is evaluated.
Taking corrective actions
Corrective actions are not necessary if there are no significant differences between the planned resort and the actual results.
In such a situation, managers will continue to present a course of action managers take corrective actions only when significant deviations exist.
Actions need to be undertaken based on the nature of the deviation and the causes of such deviation.
It may be necessary to make directives in objectives, the strategy itself, organization structure, human resources deployed on strategy implementation, policies, resource allocation, reward systems, and more.
