Barriers in Strategic Evaluation and Control

Strategic evaluation and control is related to that aspect of strategic management through which an organisation ensures whether it is achieving its objectives Contemplated in the strategic action. If not, what corrective actions are required for strategic effectiveness? Glueck and Jauch have defined strategic evaluation as follows:

“Evaluation of strategy is that phase of the strategic management process in which the top managers determine whether their strategic choice as implemented is meeting the objectives of the enterprise.

There are two aspects in this phase of strategic management: evaluation which emphasizes measurement of results of a strategic action and control which emphasizes on taking necessary actions in the light of gap that exists between intended results and actual results in the strategic action. However, because of on-going nature of strategic evaluation and control process Both these are intertwined. In practice the term control is used in a broad sense which includes evaluative aspect too because unless the results of an action are known, control actions cannot be taken.

Strategic and Operational Control: A Comparison: Before we proceed further, it is worthwhile to make a comparison of strategic and operational control because the emphasis in both differs though an integrated control system may contain both. Strategic control is the process of taking into account the changing assumptions. Both external and internal to the organisation on which a strategy is based, continually evaluating the strategy as it is being implemented and taking corrective actions to adjust strategy according to changing conditions or taking necessary actions to realign strategy implementation. For strategic evaluation and control following questions are relevant:

• Are the premises made during the strategy formulation process proving to be correct?
• Is the strategy being implemented properly?
• Is there any need for change in the strategy? If yes, what is the type of change required to ensure strategic effectiveness?

Operational control focuses on the results of strategic action and is aimed at evaluating the performance of the organisation as a while, different SBUs and other units. The relevant questions for operational control are:

• How is the organisation performing?
• Are the organisational resources being utilized properly?
• What are the actions required to ensure the proper utilization of resources in order to meet organisational objectives?

Operational control is used by almost every organisation in some form or the other. There are two types of operational control post-action and Steering to evaluate the outcome of a strategy. In post-action control which measures results after an action is completed, for example Measurement of organisational performance in terms of return on investment. Second is the steering control which is designed to detect deviations from standards and to permit corrective actions before an operation is fully completed, for example, quality control. Both these are used in the organisation tem different purposes and at different levels. For example post-action control is mostly used by the top management so as to identify the total results of a strategy, while second type of control is exercised by functional and tower level managers to affect periodic control so that the results are achieved.

Difference between Strategic and Operational Control: Strategic control and operational control both differ from each other in terms of their aim main concern. Focus, time horizon, and techniques used.

Table: Difference between strategic and operational control

Attribute	Strategic control	Operational control
Basic question	Are we moving in right direction?	How are we performing?
Aim	Proactive, continuous questioning of the basic direction of strategy	Allocation and use of resources   organisational resources
Main concern	Steering the future direction of the organisation	Action control
Focus	External environment	Internal organisation
Exercise of control	Exclusively by top   management, may be through lower-level support	Mainly by executive or middle   management or the direction of top management
Main techniques	Environmental scanning, information gathering, questioning and review	Budgets, schedules and MBO

Strategic evaluation and control being an appraisal process for the organisation as a whole and people who are involved in strategic management process either at the stage of strategy formulation or strategy implementation or both, is not free from certain barriers and problems. These barriers and problems centre around two factors: motivational and operational. Let us see what these problems are and how these problems may be overcome.

Motivational Problems

The first problem in strategic evaluation is the motivation of managers (strategists) to evaluate whether they have chosen correct strategy after its results are available. Often two problem; are involved in motivation to evaluate the strategy: psychological problem and lack of direct relationship between performance and rewards.

• Psychological Barriers: Managers are seldom motivated to evaluate their strategies because of the psychological barriers of accepting their mistakes. The strategy is formulated by top management which is very conscious about its sense of achievement. It hardly appreciates any mistake it may community at the level of strategy formulation. Even if something goes wrong at the level of strategy formulation, it may put the blame on the operating management and tries to find out the faults at the level of strategy implementation. This over-conscious approach of top management may prevent the objective review of whether correct strategy has been chosen and implemented. This may result into delay in taking correct alterative action and bringing the organisation back at satisfactory level. This happens more in the case of retrenchment strategy, particularly divestment strategy where a particular business has failed because of strategic mistake and in order to save the organisation from further damage, the business has to be sold.
• Lack of Direct Relationship between Performance and Rewards: Another problem in motivation to review strategy is’ the lack of direct relationship between performance achievement and incentives. It is true that performance achievement itself is a source of motivation but this cannot always happen. Such a situation hardly motivates the managers to review their strategy correctly. This happens more in the case of family-managed businesses Where professional managers are treated as outsiders and top positions, particularly at the board level, are reserved for insiders. Naturally very bright managers are not’ motivated to review correctness or otherwise of their strategy. The family managers of such organizations are even more prone to psychological problem of not reviewing their strategy and admit their mistakes.

Thus, what is required for motivating managers to evaluate their performance and strategy is the right type of motivational climate in the organisation. This climate can be set by linking performance and rewards as closely as possible. This linking is required not only for the top level but for the lower down in the organisation too. Many forward-looking companies, though few in number, have taken this step when they have adopted the policy of taking board members from outside their families and friend groups. These companies have taken this- step not only to satisfy the requirements of financial institutions of broad basing the directorship but they have taken this step to motivate their top level managers. Naturally top managers in such companies can take any step to fulfill the organizational requirements including the evaluation of their strategy.

Operational Problems

Even if managers agree to evaluate the strategy, the problem of strategic evaluation is not over, though a beginning has been made. This is so because strategic evaluation is a nebulous process; many factors are not as clear as the managers would like these to be. These factors are in the areas of determination of evaluative criteria, performance measurement, and taking suitable corrective actions. All these are involved in strategic evaluation and control. However, nebulousness nature is not unique to strategic evaluation and control only but it is unique to the entire strategic management process.

Role of Strategic Evaluation and Control

Strategic evaluation and control, though very important phase of strategic management, is often overlooked by strategists on the premise that once they have formulated a strategy and implemented, their role in strategic management is over. They remain mired with daily control reports which can be taken even at lower levels. This approach may be alright when there is not high stake involved in a strategy but fatal when the stake is high. Without strategic evaluation and control, strategists have no means to measure whether the chosen strategy is working properly or not. When strategic evaluation and control is undertaken properly, it contributes in three specific areas:

• Measurement of organizational progress,
• Feedback for future actions, and
• Linking performance and rewards.

Measurement of Organizational Progress: Evaluation and control measures organizational progress towards achievement of its objectives. When a strategy is chosen, it specifies the likely outcomes which are relevant for achieving organizational objectives. The strategy is not an end in itself; it is a means for achieving something valuable to organizational success. Therefore, measuring this success as a result of strategy implementation is a prime concern for every strategist. This measurement should be undertaken during the process of strategy implementation as well as after implementation to ensure the progress as quickly as possible so that remedial actions are taken at appropriate time.

Feedback for Future Action: Strategic management being a continuous process with no apparent beginning and end, evaluation and control provides clues for recycling various actions which are relevant for achieving organizational objectives. This is possible only when strategic planning and control are well integrated. Thus, control activities are undertaken in the light of criteria set by a strategic plan. But at the same time, control provides inputs either for adjusting the same strategic plan or taking future strategic plans. This is the way organizations progress over the period of time. They take a strategic action, implement it, and find its results. If the results are in tune with what were intended the similar types of strategic actions are taken in future. Thus, there is a chain of strategic plan actions and control.

Linking Performance and Reward: This is the most crucial aspect of strategic evaluation and control but many organizations fail in linking performance and reward This happens not only at the level of different organizations but even for a country as a whole. For example Abegglen has observed that “the dispersion of part of the rewards by the organizations without regard to performances is more common in the less modem parts of the country than in the more advance ones, and in less developed than in more developed countries. It is one of the reasons why organisational control is less effective in less developed countries. Thus; linking performance and reward is a big issue. If taken objectively, evaluation and control provides inputs for relating performance and reward. This linking is vital for motivating organisational personnel more so in an era when there is not only fight for market share but for human talent too. A performance-based motivation system works better than the one which considers factors other than performance.