1.

Introduction
Strategy evaluation is that phase of the strategic management process in which
top management try to assure that the strategy formulated is being properly
implemented and is meeting its objectives of the enterprise. A follow through
on strategy and at implementation requires a control system and effective
information system, which provides managers with accurate and complete
feedback in real-time so that they can act on the data.
Control and evaluation process help strategic managers monitor the progress
of a plan. Strategy evaluation is simply an appraisal of how well an
organization has performed. Adequate and timely feedback is the cornerstone
of effective strategy.
Strategy evaluation is becoming increasingly difficult withthe passage of time
for many reasons:

a dramatic increase in the environments complexity

the increasing difficulty of predicting the future with accuracy
the increasing number of variable
the rapid rate of obsolescence of even the best plans
the increase in the number of both domestic and world events

affecting organization
the decreasing time span for which planning can be done with any
degree of uncertainty.

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.

2.Definitions of 'Strategic Evaluation and Control'

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
betweenintended 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 evaluativeaspect too because unless the results of an action are
known, control actions cannot be taken.

3.Strategic and Operational Control:A Control

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 evaluatingthe 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. Forstrategic evaluation and control following
questions are relevant:
1. Are the premises made during the strategy formulationprocess proving to be
correct?
2. Is the strategy being implemented properly?
Strategic control and operational control both differ from each other in terms
of their aim main concern focus time horizon, and techniques used.2
Differences between the two are presented .

4.Role of Stratagic Evaluation and Control

Strategic evaluation and control, though very important phaseof strategic
management, is often overlooked by strategists onthe premise that once they
have formulated a strategy andimplemented, their role in strategic management
is over. Theyremain mired with daily control reports, which can be takeneven
at lower levels. This approach may be all right when there
is not high stake involved in a strategy but fatal when the stakeis high. Without
strategic evaluation and control, strategistshave no means to measure whether
the chosen strategy isworking properly or not. When strategic evaluation and
controlis undertaken properly, it contributes in three specific areas:
1. Measurement of organisational progress,
2. Feedback for future actions, and
3. Linking performance and rewards.
Measurement of Organisational ProgressEvaluation and control measures
organisational progresstowards achievement of its objectives. When a strategy
ischosen, it specifies the likely outcomes, which are relevant forachieving
organisational objectives. The strategy is not an end initself; it is a means for

achieving something valuable toorganisational success. Therefore, measuring

this success as aresult of strategy implementation is a prime concern for every
strategist. This measurement should be undertaken during theprocess of
strategy implementation as well as after implementationto ensure the progress
as quickly as possible so thatremedial actions are taken at appropriate time.
Feedback for Future ActionStrategic management being a continuous process
with noapparent beginning and end, evaluation and control provides
clues for recycling various actions, which are relevant forachieving
organisational objectives. This is possible only whenstrategic planning and
control are well integrated. How controlas a feedback mechanism helps in
future course of action maybe seen from FigureThus, control activities are
undertaken in the light of criteria setby a strategic plan. But at the same time,
control providesinputs either for adjusting the same strategic plan or
takingfuture strategic plans. This is the way organizations progressover the
period of time. They take a strategic action, implementit, and find its results. If
the results are in tune with what wereintended the similar types of strategic
actions are taken infuture. Thus, there is a chain of strategic plan actions
andcontrol.Figure: Strategic Planning and Control RelationshipLinking
Performance and RewardThis is the most crucial aspect of strategic evaluation
andcontrol but many organizations fail in linking performance andreward. This
happens not only at the level of different organizationsbut even for a country as
a whole. For example, Abegglenhas observed that the dispersion of part of the
rewards by theorganizations without regard to performances is more

comtionsbut even for a country as a whole. For example, Abegglenhas

observed that the dispersion of part of the rewards by the
organizations without regard to performances is more commonin the less
modem parts of the country than in the moreadvance ones, and in less
developed than in more developedcountries. It is one of the reasons why
organisational control isless effective in less developed countries. Thus;
linking performanceand reward is a big issue. If taken objectively,
evaluationand control provides inputs for relating performance andreward.
This linking is vital for motivating organizational personnel more so in an era
when there is not only fight formarket share but for human talent too. A
performance-basedmotivation system works better than the one, which
considersfactors other than performance.

5. Techniques of Strategic of Evaluation and Control

Financial Performance Control
Financial performance control, or simply referred to as financial control, is
relevant for those aspects of business operations whose outcomes are
expressed in monetary terms. Financial control is exercised at operative level
as well as at overall organisation level though techniques involved are
different.
Financial control techniques are grouped into three categories from strategic
management point of view:
1. Budgetary control,
2. Financial ratio analysis, and
3. Return on investment
Budgetary Control
Budgetary control is derived from the concept and use of budgets. Budget is
the financial expression of various organisational operations and the way in
which budgets are prepared as tools for planning. Thus,budgetary control is a
system which uses budgets as a means forplanning and controlling entire
aspects of organizational activities or parts thereof. Terry has defined
budgetary control asfollows:

Budgetary control is a process of comparing the actual resultswith the

corresponding budget data in order to approveaccomplishments or to remedy
differences by either adjustingthe budget estimates or correcting the cause of
the difference.Some people treat budgetary control only as a technique of
costcontrol. For example, Brown and Howard have definedbudgetary control
as follows:
Budgetary control is a system of controlling costs whichincludes the
preparation of budgets, coordinating the departmentsand establishing
responsibility, comparing actualperformance with budgeted and acting upon
results to achievemaximum profitability.
However, the scope of budgetary control extends beyond costcontrol with the
introduction of several types of budgeting.
Features of Budgetary Control
1. Budgetary control establishes a plan or target of performancewhich becomes
the basis of measuring progression ofactivities in the organisation.
2. It tries to measure the outcomes of activities in quantifiedterms so that
actual performance can be compared withbudgeted performance.
control activities are undertaken. Thus, managers can keep awatch whether
their efforts are proceeding in the rightdirection.
2. Budgetary control pinpoints any deviation between budgetedstandards and
actual achievement. This is communicated veryquickly and managers can take
suitable actions to overcomethe deviations so as to achieve organisational
objectives.

3. Budgetary control system also points out the reasons whichmay be

responsible for deviation between budget and actual.Thus, it provides direction
for necessary control actions.Thus, it can be seen that with the constant help of
the

budgetarycontrol

system,

attempts

can

be

made

to

keep

performanceparallel with the estimated one.Budgetary Control as an aid to

CoordinationBudgetary control system provides aid in coordination in the
organization. It helps to achieve coordination in the followingways:
1. Budgetary control system promotes cooperation amongvarious sub-units in
the organisation. Since it is aninstrument of planning, it brings activities of
variousdepartments under overall perspective. This inspires teamspirit and
promotes cooperation. For example, the wellplannedsales and production
budgets

lead

to

betterpurchasing

and

the

labour

requirement

for

timelyrecruitment by personnel department, etc.

2. The system encourages exchange of information amongvarious units of the
organisation. The preparation of specificfunctional budget inevitably needs the
free flow ofinformation among the various departments of theorganisation.
This free flow of information helps inachieving coordination.
3. The system promotes balanced activities in the organisation.Volume of each
activity depends upon the objectives of theorganisation. Therefore, each
activity should be performed inproportion to other activities. Thus, estimates of
operationslike sales, production, purchasing, etc., can be well checkedagainst
each other and likewise, the activities can beprogrammed.

Thus, budgetary control system is a vital and important devicefor planning,

controlling and coordinating the activities in anorganisation thereby
contributes to attain higher standard ofperformance and efficiency.
Problems in Budgetary ControlThough budgetary control helps a lot the
managers in planning,controlling and coordinating the activities of an
organisation, itis not a foolproof system. It has its own limitations. Therefore,
managers should be well aware about these problems so as totake adequate
precautions to minimize the impact of these.Problems in budgetary control
system emerge from twosources: problems because of planning limitations
andoperational problems.
Planning Problems
As seen earlier, planning activity has its own limitations. Sincebudget is an
outcome of planning activity, it cannot remain free Budgetary ControlFor
control purposes, variance analysis is made. Factors forvariance between
budgeted and actual are identified. For takingfurther course of action, various
factors have been divided intotwo parts: controllable and non-controllable.
Controllablefactors are like utilization of plant capacity, unit consumption
ratios of various raw materials, utilization of auxiliary materials,labour
utilization, etc. Uncontrollable factors are like price ofraw materials, price of
the final products, etc. Budget deviationsare calculated every month and for
some sections every day.Deviations due to controllable factors are
communicated torespective personnel for corrective actions. In case of
deviationsdue to uncontrollable factors, these are communicated to thechief

executive who in consultation with marketing peopledecides about a change in

product mix specially if the deviationis due to price of final products. Usually
a deviation below 5 percent is ignored.
Financial Ratio Analysis
Financial ratio analysis identifies the relationship between twofinancial
variables in order to derive meaningful conclusionabout their behaviour.
Metcalf and Titard have defined financialratio analysis as a process of
evaluating relationship betweencomponent parts of financial statements to
obtain a betterunderstanding of a firms position and performance. The type
of relationship to be investigated depends on the objective andpurpose of
evaluation. In the case of measurement of overallperformance, generally, four
groups of ratios are considered:liquidity ratios, activity ratios, leverage ratios,
and profitabilityratios. A brief description of these ratios is presented here.
Liquidity Ratios
Liquidity ratios indicate the organizations ability to pay its shortterm debts.
These ratios are generally expressed in two forms:current ratio and quick ratio.
Current ratio shows the relationshipbetween current assets and current
liabilities. This indicatesthe extent to which current assets are adequate to pay
currentliabilities. Quick ratio indicates the relationship between liquidassets
(cash in hand and with bank and short-term debtors) andcurrent liabilities. It
helps in identifying the organizations abilityto pay its current liabilities
without considering inventory inhand.
Activity Ratios

Activity ratios show how funds of the organisation are beingused. These ratios
are in the form of inventory turnover ratio,receivable turnover ratio, and assets
turnover ratio. Inventoryturnover ratio indicates the number of times inventory
isreplaced during the year and shows how effectively inventoryhas been
managed. Receivable turnover ratio shows howpromptly the organisation is
able to collect dues from itsdebtors. Assets turnover ratio indicates how
effectively assetshave been used to generate sales.
Leverage Ratios
Leverage ratios indicate the relative amount of funds in thebusiness supplied
by creditrs/financiers and shareholders/owners. These ratios are in the form of
debt-equity ratio, debttotalcapital ratio, and interest coverage ratio.
Debt-equity ratio
indicates the proportion of debt in relation to equity andindicates the financial
strength of the organization. Debt-totalcapital ratio shows the proportion of
debt to total capitalemployed. This also indicates the financial strength.
Interestcoverage

ratio

shows

the

interest

burden

being

borne

by

theorganisation in relation to its profit.

Profitability Ratios
Profitability ratios show the ability of an organisation to earnprofit in relation
to its sales and/ or investment. Profitabilityratios are expressed in terms of
profit margin as well as returnon investment. Profit margin, either net profit or
gross profit, isexpressed in the form of relationship between profit and
salesand indicates the degree of profitability of the business. Returnon

investment is measured by relating profit to investment.Return on investment

is the most comprehensive technique forcontrolling overall performance.
Therefore, somewhat moreelaborate discussion is presented.
Return on Investment
The efficiency of an organisation is judged by the amount ofprofit it earns in
relation to the size of its investment, popularlyknown as return on investment
(ROI). This approach hasbeen an important part of the control system of Du
PontCompany, U.S.A., since 1919, though it was actually devised
byDonaldson Brown in 1914. Since its successful operation in DuPont, a larger
number of companies have adopted it as their keymeasure of overall
performance.
This technique does not emphasize absolute profit for judgingthe efficiency of
an organisation as a whole or a division thereof,rather the amount of profit is
related with the amount offacilities or capital invested in the organisation or
the division.
The goal of a business, accordingly, is not to optimize profit,but to optimize
returns on capital invested for businesspurposes. This standard recognizes the
fundamental fact thatcapital is a critical factor in almost any business and its
scarcityputs limit on progress.

The system of control through return on investment can beseen from Figure as
operating

in

Du

Pont

Company.

Figure: Relationship of factors affecting return on investmentThe rate of return

is calculated by dividing the profit by totalinvestment. It can be computed in
respect of historical data soas to reveal the rate of return realized or it may be
applied tobudgeted data to give a projected rate of return. In the Du
Pontsystem, the investment includes total fixed and current assetswithout
reducing liabilities or reserves. The basis is that such areduction would result
in fluctuations in operating investmentsas liabilities or reserves fluctuate,
which would distort the rateof investment and render it meaningless.

On the other hand, many business organizations adopt adifferent view of

investment. Accordingly, the amount of theinvestment should be taken by
deducting depreciation from theassets. The argument is simple. Depreciation
reserves representa write-off of initial investment and that funds made
availablethrough such charges are reinvested in other fixed assets or usedas
working capital. The argument seems to be realistic as it putsheavier burden on
return on new assets, as compared to oldand obsolete assets. Moreover, the
amount of investment thuscalculated is further reduced by the amount of
current liabilities.
Advantages
The return on investment is an integral part of the productivityand efficiency
accounting. It gives following advantages:
1. It provides success to budgetary planning and control byputting restraint on
the managers demand forhigher allocation of resources for theirdepartments
even if these are not actually needed.Thus, the resource allocation in an
organisation ismade on more rational basis.
2. This system is helpful in authoritydecentralization. Each manager, in charge
of adepartment or section, is responsible for earningcertain rate of return, but
enjoys completefreedom in running his department. Suchautonomy gives
additional incentive to managersfor higher efficiency.
3. It can be treated as a total control system inthe sense that rate of return
reflects the objectiveof the organisation. If this rate is satisfactory,other control
systems like budgetary, costing,ratios, reports may be taken as satisfactory.

Limitations
There are some limitations of the rate of returnas a control tool:
1. The use of rate of return is associated withthe fixation of a standard rate of
return againstwhich the actual is compared. What should bethis standard return
is often questionable. Comparisons ofrates of return are hardly enough because
they do not tellwhat the optimum rate of return should be.
2. Another problem comes in the way of valuation ofinvestment. The question
is at what cost the assets shouldbe valued: at original cost, depreciated cost, or
replacementcost. In an inflationary economy, the problem of priceadjustment
becomes more acute, whatever basis of valuationis adopted.
3. The rate of return on investment sometimes hampersdiversification if it has
no flexibility. This is because of thefact that the rate of return is determined by
the amount ofrisk; higher the risk, higher the desirable rate of return.
4. Many times, the return on investment is followed sorigorously that
expenditure such as research anddevelopment, which can contribute to the
profitability in thelong run, are curtailed to show impressive results in terms
ofrate of return. This practice, however, is detrimental to theorganisation in the
long run.

5. As is the case with any system of control based on financialdata, return on

investment can lead to excessive emphasis onfinancial factors. This
emphasizes that capital is the onlyscarce resource in the organisation leaving
aside the role andavailability of competent managers, good industrial relations

and good public relations. It provides success to budgetary planning and

control byputting restraint on the managers demand forhigher allocation of
resources for theirdepartments even if these are not actually needed.
Thus, the resource allocation in an organisation ismade on more rational basis.
3. This system is helpful in authoritydecentralization. Each manager, in charge
of adepartment or section, is responsible for earningcertain rate of return, but
enjoys completefreedom in running his department. Suchautonomy gives
additional incentive to managersfor higher efficiency.
4. It can be treated as a total control system inthe sense that rate of return
reflects the objectiveof the organisation. If this rate is satisfactory,other control
systems like budgetary, costing,ratios, reports may be taken as satisfactory.
These are as follows:
1. Net income contribution-earning enough to provide for thepresent and future
costs of the organizations continuedexistence but limited to legitimate socially
desirable profit;
2. Human resource contribution-development of system ofhuman resource
accounting to measure the impact of theorganisational decisions on human
asset value.
3. Creation of jobs and providing employment opportunitiesto backward and
socially

handicapped

population,contributing

towards

educational

development, relief ofpeople in distress caused by natural calamities, rural

enlistment, etc.

4. Environmental contribution-environmental improvementthrough pollution

abatement, conservation of scarce naturalresources, maintenance of ecological
balance, and so on.
5. Product or service contribution-ensuring quality, durability,safety and
serviceability of products; customer satisfaction,truthfulness in advertising,
etc. Social indicators approach measures social performance of anorganisation
in the context of various factors. Many organizationsfollow this approach
because it indicates the areas in whichthey have to work. However, one basic
problem

in

thisapproach

is

the

determination

of

expectations

of

variousindicators and the way it can be fulfilled.

Problems in Social Audit
The idea of social responsibility of which social audit is a meansof
measurement is quite valid in business world and it has beenrecognized that
business organizations have to fulfill their socialobligations in their own longterm interests. Social audit isequally logical. Social audit, however, presents
numerousproblems. These problems are of two types: determining scope
for social audit and measurement problem.

1. Scope of the Social Audit

There may be various alternatives.First, all social activities being performed by
an organisation maybe taken for reporting. However, if the social audit is
tocatalogue all such activities, verify the costs involved and evaluatethe
benefits produced, it is very impractical to carry on the socialaudit and

information may be too massive to be useful. Theactivities may be too large

because it is very difficult to say whichactivities are not social. Thus, various
activities, which anorganisationperforms, are social from one point of
viewbecause these provide some social benefits besides benefitingthe
organisation as well. Second, the various activities of clearsocial utility without
prospect of profit may be taken intoconsideration. However, if only such
activities are taken intoaccount, the scope of social audit will be too limited
todemonstrate the extent to which the organizations socialperformance is
fulfilled. The scope of social audit may bedetermined keeping in view the
information requirements ofvarious groups, such as, employees, customers,
shareholders,general public and those who influence the shaping of
publicopinions.
2. Measurement Problems
Another major problem in social audit is related to the determinationof
yardsticks for measuring the costs andaccomplishments of activities included
in the social audit.Though costs can be measured easily, these are not the true
reflection of social responsibility. These may not be the resultof social
involvement. The measurement of benefits is muchmore difficult because of
lack of objective quantification of theoutcome of any social activity. Moreover,
how much an activityis benefiting to the society and to the organisation
concerned isdifficult to measure. It happens that an activity may contributeto
both the society and the organisation.
Social Audit Report

In spite of the various problems involved in social audit, theorganizations may

think of it because a time may come whensocial audit, like financial audit,
becomes compulsory. Thevalidity of social audit report may be determined on
the basisof well-established financial audit report, that is, uses to
whichinformation will be put should govern both the conceptual andprocedural
bases on which information is prepared anddisseminated. Corson and Steiner
have emphasized that asocial audit report should contain (i) an enumeration of
socialexpectations and the organizations responses, (ii) a statementof
corporations social objectives and the priorities attached tospecific activities,
(iii) a description of the corporations goals ineach program area of the
activities it will conduct, (iv) astatement indicating the resources committed to
achieveobjectives and goals, and {v} a statement of the accomplishmentsand
progress made in achieving each objective and goal.14In India, The Tata Iron
and Steel Company Limited (TISCO)conducted a social audit in 1979-80
Exhibit presents majorreferences and findings of social audit committee.
Exhibit: Social audit in TISCO
In October 1979, TISCO appointed a social audit committeeconsisting of
Justice S.P. Kotval as chairman and Prof. RainKothari and Prof. P.G.
Mavalankar as members to examineand report whether, and the extent to
which the company hasfulfilled the objectives contained in Clause 3A of its
Articles ofAssociation regarding its social and moral responsibilities to the
consumers, employees, shareholders, society and the localcommunity. The
committee submitted its report on July 9,1980, which was subsequently
published by the company. Thereport contained ten chapters which included

various aspects ofsocial and moral obligations being discharged by theSocial

Audit Committee Report Tisco, Mumbai, August 1980Some of the major
findings of the committee were as follows:
1. In respect to city development, TISCO has taken variousmeasures such as
housing, water supplies, sewerage, healthand conservancy, medical services,
etc.
2. In respect to workers, the company provided various facilitiessuch as
housing, health services, transportation, schools, andfacilities for cultural and
social activities.
3. The company has adopted adequate pollution controlmeasures in its mines
and plants.
4. The company has maintained harmonious employeremployeerelations and
not a single day was lost due to strikeor lockout.
5. In respect to consumers, the company adhered to supply ofits products as
determined by the Government and tookample measures to ensure high quality.
6. In respect to shareholders, the company paid fair amount ofdividend
regularly. The dividend rate was reduced only underthe scheme of restriction
on dividend payment adopted byGovernment of India.
7. The company has undertaken various schemes forcommunity development
and social welfare services.
8. The company has undertaken various programs for ruraldevelopment.

In general, the committee members felt satisfied by themeasures adopted by

the company on those issues, which werereferred to the committee. The
committee observed that weare satisfied that the social performance of the
company is ofhigh order and in its magnitude, is perhaps unequalled in India.
We are satisfied that the company has amply fulfilled theobjectives contained
in Clause 3A of its Articles of Associationregarding its social and moral
responsibilities to the consum employees, shareholders, the local community
and society.

6. Reasons for Failure of Strategic Evaluation and Control

There are several reasons why a strategy may not produce desired results. The
external factors may not be in tune with the strategy. Competitors may also
spring surprises occasionally with unexpected moves that may create major
gaps in the strategy. Having spent time, effort and money while formulating
strategies, it is, therefore, not advisable to leave the implementation of strategy
to chance. Managers need to constantly monitor everything, introduce checks
and balances and carry out mid-course corrections at an early stage while
implementing the strategies. SEC helps an organization in several ways.
Feed Forward Control
Feed forward control involves evolution of inputs and takingcorrective action
before a particular sequence of operation completed. Thus, it attempts to
remove the limitations of timelag in taking corrective action. Feed forward
control monitorsinputs into a process determine whether the inputs are
asplanned. If inputs are not as planned corrective action is takento adjust the
inputs according to the plan so that the desiredresults are achieved within the
planned inputs. It is just likehunting a duck. A hunter will always aim ahead of
a ducksflight compensate for the time lag between a shot and a hopedforhit.
To be effective, feed forward control should meet thefollowing requirements:

1. Thorough and careful analysis of the planning and controlsystem must be

made, and the more important inputvariables identified.
2. A model of the system should be developed.
3. The model should be reviewed regularly to see whether theinput variables
identified and their relationship still representrealities.
4. Data on input variables must be regularly collected and putinto the system.
5. The variations of actual input data from planned inputsmust be regularly
assessed, and their impact on expectedresults is evaluated.
6. Action must be taken to show people problems and themeasure required to
solve them.
Concurrent Control
Concurrent control is exercised during the operation of aprogram. It provides
measures for taking corrective action ormaking adjustments while the program
is still in operation andbefore any ma damage is done. In the organisational
context,many control activities are based on this type of control, forexample,
quality control during the operation, or safety check in
a factory, Here, the focus is on the process itself. Data providedby this control
system is used to adjust the process. Manystrategic controls fall in this
category.
Feedback Control
Feedback control is based on the measurement of the results ofan action. Based
on this measurement, if any deviation is foundbetween performance standards

and actual performance, thecorrective action is undertaken as shown in Figure.

The controlaims at future action of the similar nature so that there isconformity
between standards and actual. This is requiredbecause, sometimes, feed
forward or concurrent control is notpossible to apply, for example, many
personal characteristics ofan individual which go into behavioral processes are
notmeasurable, hence feed forward control is difficult to apply. Inthe business
organizations, top management control is mostly .

7.Barriers in Strategic Evaluation and Control

Strategic evaluation and control being an appraisal process forthe organisation
as a whole and people who are involved instrategic management processeither
at the stage of strategyformulation or strategy implementation or both, is not

freefrom certain barriers and problems. These barriers and problemscenter

around two factors: motivational and operational.Let us see what these
problems are and how these problemsmay be overcome.
Motivational Problems
The first problem in strategic evaluation is the motivation ofmanagers
(strategists) to evaluate whether they have chosencorrect strategy after its
results are available. Often two problem;are involved in motivation to evaluate
the strategy: psychologicalproblem and lack of direct relationship between
performanceand rewards.
1. Psychological Barriers
Managers are seldom motivated to evaluate their strategiesbecause of the
psychological barriers of accepting their mistakes.Top management formulates
the strategy, which is veryconscious about its sense of achievement. It hardly
appreciatesany 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 managementand tries to
find out the faults at the level of strategyimplementation. This over-conscious
approach of top managementmay prevent the objective review of whether
correctstrategy has been chosen and implemented. This may resultinto delay in
taking correct alterative action and bringing theorganisation back at
satisfactory level. This happens more in thecase of retrenchment strategy,
particularly divestment strategywhere a particular business has failed because
of strategicmistake and in order to save the organisation from furtherdamage,

the business has to be sold. 2. Lack of Direct Relationship between

Performanceand RewardsAnother problem in motivation to review strategy is
the lack ofdirect relationship between performance achievement andincentives.
It is true that performance achievement itself is asource of motivation but this
cannot always happen. Such asituation hardly motivates the managers to
review their strategycorrectly. This happens more in the case of familymanagedbusinesses Where professional managers are treated as outsidersand
top positions, particularly at the board level, are reserved forinsiders. Naturally
very bright managers are not motivated toreview correctness or otherwise of
their strategy. The familymanagers of such organizations are even more prone
topsychological problem of not reviewing their strategy and admittheir
mistakes.
Thus, what is required for motivating managers to evaluatetheir performance
and strategy is the right type of motivationalclimate in the organisation.
Linking performance and rewards asclosely as possible can set this climate.
This linking is requirednot only for the top level but for the lower down in the
organisation too. Many forward-looking companies though fewin .number,
have taken this step when they have adopted thepolicy of taking board
members from outside their families andfriend groups. These companies have
taken this- step not onlyto satisfy the requirements of financial institutions of
broadbasing the directorship but they have taken this step tomotivate their top
level managers. Naturally top managers insuch 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 ofstrategic
evaluation is not over, though a beginning has beenmade. This is so because
strategic evaluation is a nebulousprocess; many factors are not as clear as the
managers would likethese to be. These factors are in the areas of determination
ofevaluative criteria, performance measurement, andtaking suitable corrective
actions. All these areinvolved in strategic evaluation and control.However,
nebulousness nature is not unique tostrategic evaluation and control only but it
isunique to the entire strategic management process.
We shall make an attempt later in this chapter as tohow these operational
problems may be overcome.
PARTICIPANTS OF STRATEGIC EVALUATION AND CONTROL
Participants in Strategic Evaluation andControlSince strategic evaluation and
control is a part of strategicmanagement process, all those persons who
participate instrategy formulation and implementation should also participate
in strategic evaluation except those who act in advisorycapacity Board of
directors, chief executive, other managers,corporate, planning staff, consultants
participate in strategicmanagen1ent process. Out of these corporate planning
staffand consultants act either advisors or facilitators Thus, threegroups of
personnel are actively involved in strategic evaluationand control though their
areas of evaluation and control differ.In some cases, outside agencies like
financial institutions orgovernment, mostly to the case of public sector
enterprises alsoparticipate in strategic evaluation and control either

throughtheir participation in board of directors or having power tointerfere

with management practices. However, the role offinancial institutions in
strategic evaluation and control is quitelimited excel through their nominees
on board of directors. Inthe case of public sector enterprises, the role of
government instrategic evaluation is perform through nomination of
boardmembers and through controlling ministries of particularenterprises. In
some specific situations, authorities may beconstituted at above the board level
to evaluate the performanceof group companies. For example, Tata Group has
set

upGroup

Executive

Office

(GEO)

and

Business

Review

Committees(BRCs) to review the performance of group companiesnumbering

about one hundred. If we exclude these case, therole of board of directors,
chief executive, and other managersin strategic evaluation and control is quite
significant.
Role of Board of Directors
Board of directors of a company, being the trustee of shareholdersproperty, is
directly answerable to-4hem. Thus, boardshould be directly involved in
strategic evaluation and control.However, since board does not participate in
day-to-daymanagement process, it evaluates the performance of thecompany
concerned after certain intervals in its meetings.Therefore, the role of board of
directors is limited to evaluatingand controlling those aspects of the
organisational functioning,which have long-term implications. Such aspects
are overallfinancial performance, overall social concern and performance,and
certain key management practices having significant impacton organizations
long-term survival Generally, the evaluationand control information used by

the board is concise butcomprehensive as compared to control reports used at

lower levels.
Role of Chief Executive
The chief executive of an organisation is responsible for overallperformance.
Therefore, his role is quite crucial in strategicevaluatioI1- and control. Though
he is not involved inevaluation of routine performance, which is left to other
managers, he focalizes his attention on critical variationsbetween planned and
actual. Generally, he applies the principleof management by exception, which
is a system of identificationand communication of that signal which is critical
andneeds the attention of a high-level manager. Depending on thesize of the
organisation, the chief executives role varies in thecontext of evaluation and
control on day-to-day basis. In asmaller organisation, the chief executive may,
perhaps, beinterested in daily production and cost figures, but in a
largeorganisation, these become unimportant for him from hiscontrol point of
view. Thus, in a large organisation, the chiefexecutive is more involved on
controlling through return oninvestment, value added, and other indicators,
which measureperformance of overall organisation.
Role of Other Managers
Besides board of directors and chief executive, other managersare also
involved in strategic evaluation and control. These arefinance managers, SBU
managers, and middle-level managers.
Their role in strategic evaluation and control is as follows:

1. Finance managers are primarily concerned with finding outdeviations

between planned and actual performanceexpressed in monetary terms. These
are done throughfinancial analysis, budgeting, etc.
2. SBU managers are responsible for overall evaluation andcontrol of their
respective strategic business units. In fact,they are the chief executives of their
own SBUs except thatthey report to the chief executive of the organisation
fromwhom they seek directions.
3. Middle-level managers, mostly functional managers and subunitmanagers
are responsible for evaluation and control oftheir respective functions and subunits. These managers aremore concerned with day-to-day operational control
andprepare reports to be used by higher-level managers. Forexample_ a
production manager is more interested incontrolling production volume,
production cost, productquality, etc.
Role of Organisational Systems inEvaluation
Strategic evaluation operates in the context of variousorganisational systems.
An organisation develops varioussystems which help in integrating various
parts of the -organisation. The major organisational systems are: information
system,

planning

system,

motivation

system,

appraisalsystem,

and

development system. All these systems play theirrole in strategic evaluation

and control some of these systemsare closely and directly related and some are
indirectly related toevaluation and control. For example, information system is
closely linked to evaluation as it provides clue as to how theorganisation is
progressing. Development system, on the otherhand, is not closely linked to

evaluation system but is under takenas a post-control action. In the light of

this, let us see

8.Structural Mechanisms to Implement Strategy

Information System

Evaluation and control action is guided by adequate informationfrom the

beginning to the end. Management informationand management control
systems are closely interrelated; theinformation system is designed on. the
basis of control system.Every manager in the organisation must have adequate
information about his performance, standards, and how he iscontributing to the
achievement of organisational objectives.
There must be a system of information tailored to the specificmanagement
needs at every level, both in terms of adequacyand timeliness.Control system
ensures that every manager gets adequateinformation. The criterion for
adequacy of information to amanager is his responsibility and authority that is
in the contextof his responsibility and authority, what type of information
the manager needs. This can be determined on the basis ofcareful analysis of
the managers functions. If the manager isnot using any information for taking
certain action, theinformation may be meant of informing him only and not
falling within his information requirement Thus, an effectivecontrol system
ensures the flow of the information that isrequired by an executive, nothing
more or less. There is anotheraspect of information for control and other
function, that is,the timeliness information. Ideally speaking, the manager
should be supplied information when he needs it for takingaction. For
correcting the deviation, timely action is require bythe manager concerned. For
this purpose one must have theinformation at proper time and covering the
functioning of aperiod, which is subject to control. The control system

functions effectively on the basis of the information, which issupplied in the

organisation. -However, the information is usedas a guide and on this basis
identifies what action can be taken.
Planning System
Planning is the basis for control in the sense that it provides theentire spectrum
on which control function is based. In fact,these two terms are often used
together in the designation ofthe department, which carries production
planning, schedulingand routing. It emphasizes that there is a plan, which
directs thebehaviour and activities in the organisation. Control measures
thesebehaviour and activities and suggests measures to removedeviation, if
any. Control further implies the existence of certaingoals and standards. The
planning process provides thesegoals. Control is the result of particular plans,
goals, or policies.Thus, planning offers and affects control. Not only that, the
planning is also affected by control in the sense that many ofthe information
provided by control is used for planning andpreplanning. Thus, there is a
reciprocal relationship betweenplanning and control, as discussed earlier in
this chapter.
Since planning and control systems are closely interlinked, thereshould be
proper integration of the two. This integration canbe achieved by developing
consistency of strategic objectives andperformance measures. Prescribing
performance measures,which are strategically important, is quite significant
becauseoften it is said what you measure is what you get. In developing

performance measures, two considerations must be takeninto account. First,

the performance measures should focus onwhether short-term profitability, or
growth and technologicalascendancy, or logistic efficiency, or some other
objectives shouldbe of primary concern. Second, the measures should relate to
the managerial domain of each of the managers, as each ofthem is responsible
to exercise control in his own domain.
Motivation System
Motivation system is not only related to evaluation and controlsystem but to
the entire organisational processes. As we haveseen earlier in this chapter, lack
of motivation on the part ofmanagers is a significant barrier in the process of
evaluation andcontrol. Since the basic objective of evaluation and control is
toensure that organisational objectives are achieved, motivation
plays a central role in this process. It energizes managers andother employees
in the organisation to perform better which isthe key for organisational
success.
Appraisal System
Appraisal or performance appraisal system involves systematicevaluation of
the individual with regard to his performance onthe job and his potential for
development. While evaluating anindividual, not only his performance is taken
into considerationbut also his abilities and potential for better performance.
Thus,appraisal system provides feedback for control system abouthow
individuals are performing.
Development System

As discussed in Chapter 15, development system is concernedwith developing

personnel to perform better in their presentpositions and likely future positions
that they are expected tooccupy. Thus, development system aims at increasing
organisational capability through people to achieve betterresults. These results,
then, become the basic for evaluation andcontrol.

9. Stages of Control
Depending on the stages at which control is exercised, it may beof three types:

1 Control of inputs that are required in an action, known asfeed forward

control
2 Ccontrol at different stages of action process, known asconcurrent, real-time,
or steering control; and
3 Post action control based on feedback from the completedaction, known as
feedback control. Control at various stagesof action is presented in Figure

Figure: Stages of control

Feed Forward Control
Feed forward control involves evolution of inputs and takingcorrective action
before a particular sequence of operation _completed. Thus, it attempts to
remove the limitations of timelag in taking corrective action. Feed forward
control monitorsinputs into a process determine whether the inputs are as
planned. If inputs are not as planned corrective action is takento adjust the
inputs according to the plan so that the desiredresults are achieved within the
planned inputs. It is just likehunting a duck. A hunter will always aim ahead of
a ducksflight compensate for the time lag between a shot and a hopedfor

hit. To be effective, feed forward control should meet thefollowing

requirements:
1. Thorough and careful analysis of the planning and controlsystem must be
made, and the more important inputvariables identified.
2. A model of the system should be developed.
3. The model should be reviewed regularly to see whether theinput variables
identified and their relationship still representrealities.
4. Data on input variables must be regularly collected and putinto the system.
5. The variations of actual input data from planned inputsmust be regularly
assessed, and their impact on expectedresults is evaluated.
6. Action must be taken to show people problems and themeasure required to
solve them.
Concurrent Control
Concurrent control is exercised during the operation of aprogram. It provides
measures for taking corrective action ormaking adjustments while the program
is still in operation andbefore any ma damage is done. In the organisational
context,many control activities are based on this type of control, forexample,
quality control during the operation, or safety check in
a factory, Here, the focus is on the process itself. Data providedby this control
system is used to adjust the process. Manystrategic controls fall in this
category.
Feedback Control

Feedback control is based on the measurement of the results ofan action. Based
on this measurement, if any deviation is foundbetween performance standards
and actual performance, thecorrective action is undertaken as shown in Figure.
The controlaims at future action of the similar nature so that there is
conformity between standards and actual. This is requiredbecause, sometimes,
feed forward or concurrent control is notpossible to apply, for example, many
personal characteristics ofan individual which go into behavioral processes are
notmeasurable, hence feed forward control is difficult to apply. Inthe business
organizations, top management control is mostlybased on feedback. To Intake
feedback control effective, it isessential that corrective action is taken as soonas possible.

10. CASE STUDY

Wal-Mart Stores, Inc.: Under Attack (2006)
I.CASEABSTRACT

Wal-Mart Stores, Inc. was not only the largest retail organization by sales
volume in the U.S. in 2006, but also the largest company in the world. As of
January 31, 2006, Wal-Mart Stores, Inc. was structured into three business
units, Wal-Mart Stores USA, SAMS CLUB, and Wal-Mart International. The
Wal-Mart Stores unit had 3,289 locations and included the companys
Supercenters, discount stores, and Neighborhood Markets in the U.S., as well
as Walmart.com. The SAMS CLUB unit had 567 locations and included the
warehouse membership clubs in the U.S. plus samsclub.com.

Wal-Mart

International had 2,285 locations in 10 countries. Sales and profits for the year
ending January 31, 2006 were a record high $312.4 billion and $11.2 billion,
respectively. Earnings per share jumped from $2.41 in 2005 to $2.68 in 2006.
Wal-Marts management faced significant challenges in 2006 challenges
that could significantly affect the achievement of its growth objectives. The
company was being condemned for business practices ranging from low pay
and stingy healthcare benefits to exporting jobs and destroying small
businesses.

Wal-Mart was also the subject of litigation, including a class

action discrimination suit. The companys second highest executive had been
forced to leave the company after being convicted of fraud and tax evasion. In
addition, filmmaker Robert Greenwald premiered a scathing documentary in
2005

titled,

Wal-Mart:

The

High

Cost

of

Low

Prices.

Of special concern to management was the behavior of the companys stock.

Contrary to the upward direction of the firms sales and profits, the price of
Wal-Marts stock had fallen from $56.98 in January, 2002 to $46.11 in January,
2006 and to $45.06 in March, 2006. Even though the board of directors had

both repurchased stock and continually raised dividends, the stock had failed
to respond.

Conclusion

Evaluation and control play a central role in the strategic management process
to assess how well things are going at every phase of the process and to take
whatever action is necessary to improve performance. We evaluate to know
how good our strategic plans are and how well they are implemented. The
information we get from evaluation enables us to exercise better control over
the strategic management process.
We evaluate and control for three good reasons: to ensure that the
organisationis headed in the right direction, to provide guidance on how good
performance can beachieved, and to inspire confidence in the organisations
ability to produce desired results.
How the evaluation and control process works is quite straightforward: set
performance objectives, compare actual performance against objectives, take
whatever action is necessary to improve performance. By setting performance
objectives the organisation is forced to constantly re-examine its targets
(usually the strategic goals and objectives) and ensure they have measurable,
realistic outcomes. Performance objectives should be set in those areas most
critical to success, and the level of performance set should constantly be
examined to ensure that it remains realistic and in tune with present and
anticipated conditions. Evaluation and control do not merely look at the
implementation process, they should also be used to assess the validity of the
strategic plan itself.

Bibliography

Books/Articles

Michael Vaz : Strategic Management (M.com I )

Anita Bobade : Strategic Management (TYBBI /SYBMS )

Chisnall, Peter: Strategic Business Marketing, 1995.

McGraw-Hill, NY. Day, Georges: Strategic Marketing Planning, 1994

Jain, SubhashC.:International Marketing Management, 1993.

Jain, Subhash C.: Marketing Planning & Strategy, 1997.

Lambin, Jean-Jacques: Strategic Marketing Management, 1996.

Murray, Johan &O'Driscoll, Aidan: Strategy and Process in Marketing, 1996.

Weitz, Barton A. &Wensley, Robin: Readings in Strategic Marketing, 1997

Wilson, Richard & Gilligan, Colin: Strategic Marketing Management, 1992.

Webliography
http://www.investopedia.com/terms/d/strategic.asp#ixzz276fG1EHt
http://www.investorwords.com/1504/strategic.html#ixzz276fni79e