Strategic Evaluation

Strategic Evaluation is defined as the process of determining the

effectiveness of a given strategy in achieving the organizational objectives and
taking correct action wherever required.

Three basic activities are involved in strategic evaluation:

1. Examine the underlying bases of a firm’s strategy.

2. Compare expected results with actual results.
3. Take corrective actions to ensure that performance conforms to plans.

Strategic Evaluation Process:

Following steps are included in strategic evaluation process:

1. Fixing benchmark of performance:

In order to evaluate the strategies the best benchmark performance to be

set, it is essential to discover the special requirements for performing the main
task.

2. Measurement of performance:

The standard performance is a bench mark with which the actual

performance is to be compared. The reporting and communication system help in
measuring the performance. If appropriate means are available for measuring the
performance and if the standards are set in the right manner, strategy evaluation
becomes easier.

3. Analyzing Variance:

While measuring the actual performance and comparing it with standard

performance there may be variances which must be analyzed. The strategists
must mention the degree of tolerance limits between which the variance
between actual and standard performance may be accepted.
 4. Taking Corrective Action:

Once the deviation in performance is identified, it is essential to plan for a

corrective action. If the performance is consistently less than the desired
performance, the strategists must carry a detailed analysis of the factors
responsible for such performance.

Balance Scorecard:
The Balanced Scorecard is a strategy evaluation and control technique.
Balanced Scorecard derives its name from the perceived need of firms to
“balance” financial measures that are oftentimes used exclusively in strategy
evaluation and control with nonfinancial measures such as product quality and
customer service.

An effective Balanced Scorecard contains a carefully chosen combination of

strategic and financial objectives tailored to the company’s business.

As a tool to manage and evaluate strategy, the Balanced Scorecard is currently in

use at Sears, United Parcel Service, 3M Corporation, Heinz, and hundreds of other
firms.

Broadly, this could include the following steps:

 Set up a vision, mission and strategic objectives.

 Perform a stakeholder analysis to gauge the expectations of customers and
shareholders.
 Make an inventory of the critical success factors
 Translate strategic objectives into (personal) goals
 Set up key performance indicators to measure the objectives
 Determine the values for the objectives that are to be achieve
 Translate the objectives into operational activities.
Characteristics of an Effective System:
The strategy-evaluation process must exhibit several characteristics to be
effective.

 Strategy evaluation activities must be economical

 Activities should be meaningful and specifically relate to a firm’s objectives
 Activities should provide timely information
 Activities should be designed to provide a true picture of what is happening
 Activities should not dominate decisions and decision taken should be
taken by mutual understanding, trust, and common sense