Saturday, April 08, 2017

Monitor Strategic Performance: 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 sub-systems towards accomplishing strategic objectives.

3. Operational control - focuses on the performance of the individual or work team.

This topic concentrates on strategic and management control. Use these links to jump straight to them.

Reporting Results of Monitoring and EvaluationAlways 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 is okay to deviate from the plan if needed. Remember it is a guideline - a living document, not a strict road-map 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 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 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 are deviating from the plan; ie, having a solid understanding of what ïs 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.

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 well-designed structure will help managers and employees understand their responsibility and authority and their various interrelationships within the control system.

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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