Makerere University

Business School
Strategic Management Course
STRATEGY EVALUATION
& CONTROL

Strategic evaluation is the strategic
management process phase in which
managers provide assurance that the
chosen strategy is implemented and is
meeting business objectives.
By this time, plans are already specified,
activities assigned, resources provided,
policies in place and leadership system and
style formed.
There is a need for:
An evaluation and control system,
A reward system and
An effective information system
Introduction
Introduction Cont.
The evaluation system
Helps to recycle feedback into new
strategic planning
Double-checks strategic choice for
appropriateness & consistency with the
environment
Need for evaluation of consistency in
application to lower organisation levels
Questions answered by C & E
Are decisions consistent with policy?
Are there sufficient resources?
Is the environment still as anticipated?
To what extent are targets being met?
Are the plans still relevant or should
they be changed?
C & E Process
The organisation structure and style
provide the main mechanism.
There are 4 inter-related activities in
the evaluation process:
1. Establishing targets, standards &
implementation plans.
2. Measuring actual performance
3. Analysing deviations
4. Determining necessary modifications
Evaluation should take place at
different organisation levels review
levels
The corporate level executive
Evaluates overall corporate strategy
Monitors SBU evaluation
The budget is a useful control tool
It inter-connects financial elements of
the plan
The budget, however, lacks non-
financial and other assumptions for
strategic control.
The role of a strategist
A controller may be appointed near the
top position in a staff position
In charge of strategy information system
but without line responsibility
Line managers must, therefore,
maintain authority over control
Other evaluation and control set-ups:
Internal audit committees
Executive committees at board level
External auditors
These evaluate and control top
management.
The strategist Cont.
Top managers must be motivated
to evaluate
Unwillingness to evaluate is a
common cause of strategy failure
Failure experience may increase
motivation to evaluate
Performance reward for
achievement of objectives also
increases motivation to evaluate.
Motivation to evaluate
Top management rewards in many firms,
are done irrespective of strategy evaluation
Executives make proposals to the board for
themselves
These include salary changes and promotions
Strategic demands should guide the reward
system.
Performance measures should be
established in time before the actual
implementation
Rewards should then be based on these
standards after the actual performance.
The Reward System
Performance rewarded should be in
the managers discretion
Significant environmental effects on
performance should not have a big
impact on the managers penalty
Career development should also be
considered
There is need for rotations
Enough time should be allowed to
individuals
Rewards and penalties should consider
performance of predecessors
Reward system - Cont.
It is often difficult to tie cause-effect
relationships of strategic unit
performance
In case of failure, there is room for
Everyone to defend oneself
Presenting results as successful e.g.
short-term results, promise for long-term
success.
Top management tends to
Claim responsibility for good performance
Blame subordinates when there is strategic
failure
Dysfunctional evaluation behaviour
There are 3 major areas where
managers make decisions:
Criteria for evaluation
Feedback system and control
areas
Outcomes of strategic evaluation

Control & Evaluation Areas
Evaluation can be based on
objective or subjective factors
Criteria depend on the evaluation
purpose and situation
Quantitative factors (supported by
some qualitative factors) are more
relevant for the past and present
Qualitative factors are more
relevant for testing whether the
strategy will be applicable or not.
Criteria for evaluation
Performance is compared with
Historical results and
Competitors
Standard numbers / ratios
Such factors include
Profitability results e.g. net profit
Investment performance indicators
e.g. dividend rates, earnings per
share, return on capital,
Market performance e.g. market
share, sales growth
Quantitative criteria
There are challenges in
Selection of which factors to use
Set tolerance limits
The guide should come from key
success factors for strategy
success

Quantitative criteria Cont.
Subjective assessment should
supplement quantitative
performance measures
More appropriate to the entire
organisation strategy evaluation
especially before a major change
of direction
There are 3 broad qualitative
criteria categories
Consistency, appropriateness and
workability
Qualitative Criteria
Consistency with:
Objectives
Environmental assumptions
Internal conditions
Appropriateness with respect to:
Resource capabilities
Risk preference
Time horizon
Consistency & Appropriateness
Addresses
Feasibility
Stimulation managers
commitment, consensus among
executives, personal aspirations
among executives.
Workability
Timing of measurement
What feedback to provide

Measuring Feedback
Use of timely information to
Determine causes of deviations
Take corrective action
Reward performance

Evaluation & Corrective action
Reading Assignment
In Bakunda & Ngoma, read about
1. Why managers spend more time on
strategic panning and less on control.
2. Types of control
Strategic plan control,
Annual plan control and
Profitability and efficiency controls