STRATEGY EVALUATION

We have already discussed a five-component framework that highlights

the strategic management process. We have also completed discussions
on the first four components. Now we turn to the last component of the
framework. This unit addresses the strategy-critical performance
evaluation and, whenever necessary, initiating corrective adjustments in
an organizations vision, objectives, strategy, or implementation
approaches in the light of actual experience and changing conditions in
the organizations internal and external environments. The essence of
strategy evaluation is keeping track of current performance and
anticipating changes. Managers usually make evaluation to find new
opportunities or avoid threats, keep performance in line with
managements expectations, and/or solve specific problems.

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Lesson-1: Strategy Evaluation: Meaning, Nature and

Characteristics
Learning Objectives:
After studying this lesson, you should be able to:

Define strategy evaluation.

Understand the nature of strategy evaluation.

Discuss the importance of strategy evaluation and corrective

adjustments.

Identify the characteristics of an effective strategy evaluation system.

Introduction
Strategy evaluation aims at unfolding any constraints in the process of
strategy implementation and/or identifying deviations. When strategy is
formulated, it is not obviously possible to foresee all the problems and
events that might arise in the future when strategy would be executed.
Thus, it becomes imperative for mangers to evaluate strategy
implementation process and then to revise strategy or fine-tune the
strategy execution approaches. This lesson would help you understand
the pros and cons of strategy evaluation.
Meaning and Nature of Strategy Evaluation
Once the prerequisites for implementation of strategy have been fulfilled,
the next thing to be done by the organization is the evaluation of strategy.
Evaluation of strategy is that phase of the strategic management process
in which managers try to assure that the strategic choice is properly
implemented and is meeting the objectives of the enterprise
(organization).2 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 for providing managers with timely feedback in order to enable
them 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 monitoring system of the organization. Both the
systems help the managers monitor the progress of a strategic plan.
Strategy evaluation and control systems help managers to find out (i)
whether the implementers of strategy are making decisions consistent
with the organizational policies; (ii) adequate resources have been
allocated and they are being used wisely; (iii) the events in the external
environment are occurring as anticipated; (iv) the long-term and shortterm goals are being met; and (v) the strategy-implementers are on the
right track. The evaluation process alerts the implementers to any
unexpected events in the above issues. Thus, they can take corrective

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Strategy evaluation is
one kind of followthrough on strategy.

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actions either to get back to the track or change the track or make
changes in other relevant aspects of strategy.
The status of strategy-evaluation in the entire strategic management
process is shown in Figure 10.1.
Need for Strategy Evaluation and Corrective Adjustments
Systematic review
provides adequate
information for
finding out any
deviations in the
actual activities from
the planned activities.

Strategy-managers need to continually evaluate and monitor the progress

in the strategic actions undertaken for strategy implementation.
Systematic review provides adequate information for finding out any
deviations in the actual activities from the planned activities. Based on
these information, managers can then undertake appropriate actions.
Here we discuss the necessity of strategy evaluation under the following
heads:
Analysis of
External
Environment

Strategic
Analysis of
Organization
Setting
Long-Term
Objectives

Analysis of
Internal
Environment

Formulating
Strategy

Implementing
Strategy

Strategy
Evaluation

Figure 10.1: Structural position of strategy evaluation in the strategic

management process

Obtaining data for corrective actions: Organizations are constantly

facing dynamic environments. The key internal and external factors
change quickly and dramatically. These changes affect strategy
implementation. Regular evaluation of strategy while being implemented
provides relevant data for taking corrective actions.

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Keeping track of progress of activities: Strategy evaluation helps

managers keep track of progress in the implementation of strategy. If
progress seems to be slow or something wrong has occurred or new
developments have taken place in the external situations of the
organization, it becomes mandatory to undertake corrective actions and
adjustments.
Detection of flaws: Nobody could guarantee that a particular strategy
will work or that it is the most sound strategy. Therefore, strategy should
be evaluated for critical flaws. The strategy-managers, through review of
results and future possibilities, determine whether the strategy is
working. If any flaw is detected in the implementation of 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
environments. 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 or mission, or
objectives or 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.
Characteristics/Requirements of an Effective Strategy Evaluation
System
A strategy-evaluation system in order to be effective and successful must
meet certain requirements. These requirements are the basic
characteristics of an effective evaluation system. We discuss below the
major requirements of an ideal strategy-evaluation system:
Economical: The activities related to evaluation of strategy must be
economical. If they are not cost-effective, wastage would 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 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
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A strategy-evaluation
system in order to be
effective and
successful must meet
certain requirements.

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managers on time. Untimely delivery of information may mean no

information as because they cannot be used whenever they were needed.
Providing a true picture of events: The strategy-evaluation activities
should be able to provide true picture of what is happening in the
organization regarding the implementation of strategy.
Being directed towards right persons: The strategy-evaluation system
should be directed to the right persons who really matter in taking actions
based on data. Thus, it should try to facilitate rather than simply
providing information for informations sake.
Being elaborate and detailed: In large organizations, strategyevaluation system should be elaborate and detailed. This is needed
because existence of many departments/divisions require effective
coordination

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Review Questions
1. Define strategy evaluation.
2. Explain the nature of strategy evaluation.
3. Discuss the importance of strategy evaluation and corrective
adjustments.
4. What are the characteristics of an effective strategy evaluation
system? Discuss them briefly.

Application Discussion Questions

1. Talk to a senior manager of an organization known to you about the
strategy evaluation system in his/her company. Do you think this
organization has all the characteristics of an effective evaluation
system?

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Lesson-2: Components of an Effective Evaluation

System/Strategy-Evaluation Framework
Learning Objectives:
After studying this lesson, you should be able to:
Identify the major components of an effective evaluation system.
Discuss the features of each of the components of effective
evaluation system.
Introduction
From Lesson-1 of this unit we understand that managers cannot escape
their responsibility of evaluating strategy. If they do escape, they will
naturally be doomed to fail. Keeping this in mind, we have highlighted
the importance of strategy evaluation in the previous lesson. This lesson
attempts to detail out the components of effective strategy evaluation
system and the process of making corrective adjustments.
Components of Effective/Ideal Strategy Evaluation System
There are three major components of an ideal strategy-evaluation
system:3

A review of the bases

of strategy enables the
managers to identify
the real reasons for
unsatisfactory results.

Reviewing underlying bases of strategy

Measuring organizational performance
Taking corrective actions

1. Reviewing underlying 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 not likely to remain valid for long time. So, when
implementation of a strategy takes a long time (some strategies may even
take several years for full implementation), these bases of strategy should
be reviewed. A review would reveal many issues like the following:
(a) How competitors have reacted to the firms strategies;
(b) How competitors have changed their strategies in response of (our)
companys strategies;
(c) Whether strengths and weaknesses have changed;
(d) Whether new opportunities by now have emerged or new threats
have surfaced; and
(e) Above all, whether the already-identified opportunities, threats,
strengths and weaknesses are still as they were at the time of SWOT
analysis.
A review of the bases of strategy enables the managers to identify the
real reasons for unsatisfactory results. It may so happen that ineffective
strategy has been chosen or strategy has been implemented very poorly,
or sudden changes in the external factors (such as changes in demand,
changes in technology, new policies by government, actions by
competitors, or sudden natural disaster like cyclone or flood) have
prohibited the company from achieving the objectives. Review helps in
discovering these changes.
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2. 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 is any. Evaluation
is also made of individual performance. Progress toward achieving
original objectives is evaluated.
3. Taking corrective actions
Corrective actions are not necessary if there are no significant differences
between the planned results and the actual results. In such a situation,
managers will continue the present course of action. Mangers take
corrective actions only when significant deviations exist. Actions need to
be undertaken on the basis of the nature of deviations and the causes of
such deviations, It may be necessary to make corrections in objectives,
strategy itself, organization structure, human resources deployed for
strategy implementation, policies, resource allocation, reward systems,
etc.
Process of Making Corrective Adjustments
Whatever the area for making corrections or adjustments, the
organizational leaders must first decide when to make adjustments, and
then they must specify what adjustments need to be made. This is a
leadership challenge. Although the process of making adjustments is
situation-specific, the leaders may follow the following general
guidelines for making corrective adjustments:
1. Gather information by yourself and also by subordinates who are
competent and trustworthy.
2. Critically analyze the information and try to deepen your
understanding of the situation.
3. Identify as many alternative options as possible for making
adjustments and explore their details for clear understanding of the
issues.
4. Evaluate the identified alternative options to find out the appropriate
one most relevant to the situation.
5. Based on the information generated through the above steps, prepare
a provisional set of action proposals (recommendations) for
consideration.
6. Convene a meeting of the subordinates/team members and others
who matter, and ask them to review the preliminary action proposals
and give their suggestions.
7. Try to build a consensus among the mangers and employees.
8. Finalize the recommended actions for adjustments.
Since the process of making corrective adjustments varies according to
situations, business leaders can adopt any process as the situation
demands. However, the success in making adjustments depends mostly
on the clear understanding of the situation and the leaders use of good
business judgment.
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Review Questions
1. Make a list of the major components of an effective evaluation
system.
2. Discuss the components of effective evaluation system.

Application Discussion Questions

1. Suppose that you are operating a business organization which does
not have an effective evaluation system. Suggest an appropriate
evaluation system for your organization.
NOTES (for Unit-10)
1. David W. Cravens, C.W. Lamb and Victoria L. Crittenden, Strategic
Marketing Management (Boston: McGraw-Hill, 1999), p. 486.
2. Lawrence R. Jauch and William F. Glueck, Business Policy and
Strategic Management (New York: McGraw-Hill, 1988), p.375.
3. Fred R. David, Strategic Management (New Jersey: Prentice-Hall,
1999), pp. 285-290.

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