THE STRATEGY AND ITS CRITERIA OF REVIEW, EVALUATION AND CONTROL PDF

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Notes on the nature of the strategy assessment, the revision of the basis of the strategy, the measurement of the performance of the company, the application of corrective measures, the published sources of information on the evaluation of the strategy, the characteristics of an effective evaluation...

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THE STRATEGY AND ITS CRITERIA OF REVIEW, EVALUATION AND CONTROL

The Strategic management process generates decisions that produce significant consequences of largto duration. Erroneous strategic decisions impose very difficult, if not impossible, severe punishments to reverse; Therefore, most strategists agree that the assessment of the strategy is vital to the well-being of a company; Timely assessments warn management of real problems or potential problems before a situation becomes critical. The evaluation of the strategy includes three basic activities: 1) Examining the underlying basis of a company's strategy 2) Comparison of expected results with actual results 3) The taking of corrective measures to ensure that the performance matches the plans. Adequate and timely feedback is the key piece of effective strategy assessment. The assessment of the strategy is no better than the information on which it operates, and the pressure on the part of high-level managers manages to get lower level managers to fix the figures as they feel they will be satisfactory. The evaluation of the strategy is a complex and sensitive enterprise, and the fact of giving too much importance to the evaluation of the strategies is expensive and counterproductive. Nobody likes to be evaluated too much! The more managers try to evaluate the behavior of others, the less control they have. However, insufficient or excessive evaluation creates even worse problems. Strategic evaluation is essential in order to ensure that the objectives set out are achieved. In many companies, the evaluation of the strategy is just a valuation of the performance of a company. Have The company's assets increased? Has there been an increase in profitability? Have sales increased? Have productivity levels increased? Have the levels of profit margin, investment performance and earnings per share increased? Some companies argue that their strategy must have been correct if the answers to these types of questions are affirmative. Well, the strategy or strategies may have been correct, but this type of reasoning is wrong because the strategy's assessment should have a long and short-term approach. Strategies often do not affect short-term operating results until it is too late to make the necessary changes. It Is impossible to prove conclusively that a strategy is optimal, nor does it guarantee that it will work; However, it is feasible to evaluate it in Looking for important bugs. Richard Rumelt offered four criteria for evaluating a strategy: congruence, concordance, viability and advantage. LA congruence and advantage are primarily based on the external evaluation of an enterprise, while concordance and viability are based primarily on an internal evaluation.

The evaluation of the strategy is important because companies face dynamic environments where external and internal factors often change in a rapid and drastic way. Today's success does not guarantee tomorrow's success! A company should never be pleased with success, as countless companies have prospered a year just to fight to survive the following year. The evaluation of the strategy becomes more and more difficult over time for many reasons. Domestic and global economies were more stable in previous years, product life cycles were longer, product development cycles were longer, technological advancement was slower, changes occurred less frequently, there were fewer competitors, companies were weak and there were more regulated industries. Among other reasons that the evaluation of the strategy is more difficult at the present time are the following tendencies: 1. 2. 3. 4. 5.

A drastic increase in the complexity of the environment. The increasing difficulty of forecasting the future accurately. The largest number of variables. The Rapid obsolescence rate even of the best plans. The increase in the number of domestic and global events affecting companies. 6. The less time to do the planning with a certain degree of certainty.

A fundamental problem facing managers today is how to effectively control employees in the light of the current demands of companies in terms of greater flexibility, innovation, creativity and initiative on the part of employees. How do managers ensure that employees who receive authority and act in an entrepreneurial way do not risk the well-being of the company? Remember that Kidder, Peabody & Company perdió 350 million de dólares cuando uno de sus vendedores registró supuestamente utilidades ficticias; Sears, Roebuck and Company had to pay 60 million dollars of their profits after admitting that their auto service companies made unnecessary repairs. The costs for companies like these in terms of damaged reputations, fines, missed opportunities and the diversion of management efforts are enormous. When employees with authority are responsible and pressured to achieve specific goals, in addition to having great freedom of action to achieve them, inappropriate behaviors could occur; For example, Nordstrom, the Elegant clothing store recognized for its extraordinary customer service, was subject to legal lawsuits and fines when employees recorded fewer hours of work to increase their sales per hour, the main performance criterion of the company. Nordstrom's customer service and utilities presented an improvement until inadequate behavior was reported, when severe punishments were imposed on the company. The process of evaluating strategies the evaluation of the strategy is necessary for the companies of all sizes and types. The evaluation of the strategy should initiate the questioning of the management on expectations and assumptions, to begin a

review of objectives and values and to stimulate the creativity in the generation of alternatives and the formulation of evaluation criteria. Regardless of the size of the company, a certain amount of direction walking around at all levels is basic for the effective evaluation of the strategy. Strategy evaluation activities should be carried out continuously, rather than at the end of specific time periods or just after the problems occur; For example, waiting until the end of the year could result in a company closing the barn door after the horses have escaped. The evaluation of the strategies continuously more than periodically allows to establish and to supervise in an effective way the benchmarks of the progress. Some strategies require years for implantation; As a result, the results may not be apparent for years. Successful strategists combine patience with a desire to take corrective action in a timely manner when necessary. There is Always a time when a company needs to take corrective action. Centuries Ago, a writer (perhaps Solomon) made the following remarks about change:               

Everything has its time. Time to be born and time to die. Planting Time and time to start planting. Time to kill and time to heal. Time to destroy and time to build. Time to weep and time to laugh. Time to lament and time to dance. Time to scatter stones and time to gather stones. Time to hug and time to refrain from embracing. Time to search and time to lose. Save Time and discard time. Break Time and sewing time. Time to shut up and talk time. Time to love and time to hate. Time of war and time of peace.

The managers and employees of the company must always be aware of the progress that is made towards the achievement of the objectives of the company. As Critical success Factors Change, the company's members must participate in determining appropriate corrective measures. If assumptions and expectations deviate significantly from forecasts, then the company must renew the strategy's formulation activities, perhaps sooner than planned. In evaluating the strategy, as well as in formulating and implementing the strategy, people make a difference. Through participation in the strategy assessment process, managers and employees undertake to keep the company in a constant direction towards achieving the goals. A scheme for evaluating the Strategy

LAs strategy evaluation activities in terms of the key questions to ask, the alternative responses to these questions and the appropriate measures that a company should take. Note that corrective measures are almost always necessary except when 1) external and internal factors have not changed significantly; and 2) The company progresses satisfactorily towards achieving the established objectives. Review of the basis of the strategy LA revision of the underlying bases of a company's strategy could be carried out by means of the elaboration of an EFE matrix and a revised EFI matrix. A revised EFI matrix should focus on changes in company strengths and weaknesses in the areas of management, marketing, finance and accounting, production and operations, IyD and management information systems. A revised EFE matrix should indicate how effective a company's strategies have been in response to key opportunities and threats. This analysis could also address questions like the following: 1. 2. 3. 4. 5. 6.

How have competitors reacted to our strategies? How have competitors ' strategies changed? Have the strengths and weaknesses of our main competitors changed? Why do competitors make certain strategic changes? Why are some competitors ' strategies more successful than others? How satisfied are our competitors with their current market positions and profitability? 7. How much can our main competitors be pressured before we counterattack? 8. How can we cooperate more effectively with our competitors? Many external and internal factors prevent companies from achieving their annual and long-term goals. external factors, competitors ' actions, demand changes, technology changes, economic changes, demographic changes, and government actions impede the fulfilment of objectives. Among the internal factors are the selection of ineffective strategies or the deficiency of implementation activities. The objectives could have been very optimistic; Therefore, failure to achieve goals may not be the result of unsatisfactory work by managers and employees. ALL members of the company should know this to encourage them to support the strategy's evaluation activities. Companies need to know urgently and as soon as possible the time when strategies are ineffective. Sometimes managers and employees in contact with customers discover this much earlier than strategists. External opportunities and threats, as well as internal strengths and weaknesses, which represent the basis of present strategies, must be monitored for change. In fact, the question is not whether these factors will change, but rather when they change and in what way. Some key questions to be addressed in the evaluation of the strategies are presented below:

1. 2. 3. 4. 5. 6. 7. 8. 9.

Are Our internal strengths still strong? Have We added any other internal strengths? If So, what are they? Are our internal weaknesses still weaknesses? Do We Have any other internal weaknesses? If So, what are they? Are our external opportunities still opportunities? are There Any Other external opportunities now? If So, what are they? Are our external threats still threatening? are There Any Other external threats now? If So, what are they? are We vulnerable to hostile takeovers?

Measuring Company Performance Another important strategy evaluation activity is the measurement of the company's performance. This activity includes comparing expected outcomes with actual results, investigating plan deviations, evaluating individual performance, and examining progress toward meeting established goals. Both long and short-term objectives are often used in this process. The criteria for the evaluation of the strategies must be quantifiable and verifiable with ease. The criteria that predict results are more important than those that reveal what already happened; For example, instead of just receiving information that sales in the last quarter were 20% below expectations, strategists need to know that sales in the next quarter will be 20% below the standard unless to take some measures to counteract the trend. In fact, effective control requires an accurate prognosis. The inability to progress satisfactorily towards achieving annual or long-term objectives indicates the need to take corrective action. Many factors, such as unreasonable policies, unexpected changes in the economy, unreliable suppliers or distributors, or ineffective strategies, result in unsatisfactory progress towards achieving the goals. Problems arise from inefficiency (not doing the right things) or inefficiency (doing the right things in poor form). Determining What objectives are most important, in evaluating strategies, is difficult. The evaluation of the strategy is based on both quantitative and qualitative criteria. The selection of the exact set of criteria for evaluating strategies depends on the size, industry, strategies and management philosophy of a company; For example, a company that follows a spending-cut strategy could have a completely different set of evaluation criteria than a company that uses a market development strategy. The quantitative criteria commonly used to evaluate strategies are the financial reasons that strategists employ to make three major benchmarks: 1) Comparing the performance of the company in different periods 2) Comparing company performance with competitor performance 3) The comparison of the company's performance with the industrial averages. Key financial reasons that are particularly useful as criteria for the evaluation of the Strategy are as follows: 1. Investment Performance (RSI).

2. 3. 4. 5. 6. 7. 8.

Performance on Stockholders ' equity (CSR). Profit Margin. Market Share. Debt and net worth of capital. Earnings per share. Sales Growth. Asset Growth.

However, there are some potential problems related to the use of quantitative criteria for the evaluation of strategies. First, most of the quantitative criteria are linked to the annual objectives rather than to the long-term objectives. Second, different accounting methods provide different results on many quantitative criteria. Thirdly, intuitive judgments are almost always involved in obtaining quantitative criteria; For these and other reasons, the qualitative criteria are also important in the evaluation of the strategies. Human factors such as Absenteeism and turnover rates, poor quality and quantity of production measures, or employee dissatisfaction are underlying causes of declining performance. Factors related to marketing, finance and accounting, IyD or management information systems also cause financial problems. Seymour Tilles identified six qualitative questions that are useful in evaluating strategies: 1. 2. 3. 4. 5. 6.

is the strategy congruent within the company? is the strategy congruent with the environment? is the strategy appropriate in view of the resources available? Does THE strategy imply an acceptable degree of risk? Does THE strategy have a suitable time program? is the strategy viable?

Some additional key questions that reveal the need for qualitative or intuitive judgments in the evaluation of the Strategy are as follows: 1. How good is the company's investment balance between high-risk and lowrisk projects? 2. How good is the balance of the company's investments between long and short-term projects? 3. How good is the company's investment balance between slow-growing markets and fast-growing markets? 4. How good is the balance of the company's investments between different divisions? 5. To What extent are the company's strategy alternatives responsible to society? 6. What are the relationships between the key internal and external strategic factors of the company? 7. How are the main competitors likely to respond to certain strategies? Application of corrective measures

The final activity of the strategy evaluation, the taking of measures Corrective It requires the making of changes to reposition the company in a competitive way for the future. Examples of changes that might be needed include changing organizational structure, replacing one or more key individuals, selling a division or reviewing the company's mission. Other changes could include the establishment or revision of the objectives, the design of new policies, the issuance of shares to obtain capital, the hiring of additional vendors, the distribution of resources in a different way or the design of new Performance incentives. The taking of corrective measures does not necessarily mean that the existing ones will be abandoned, even that new strategies will be formulated: The possibilities and probabilities of performing incorrect or inadequate actions increase geometrically with an arithmetic increase in personnel. Anyone running a company in general should supervise the actions of the participants, as well as the results they have achieved. If the results or actions do not match the preconceived or planned accomplishments, then corrective action is required. No Company has the possibility of surviving if it remains isolated; No company escapes change. Taking corrective action is necessary to keep a company on the road to achieving the goals set. Alvin Toffler, in his books inviting reflection, Future Shock and The Third Wave, argued that business environments become so dynamic and complex that they threaten people and businesses with a future shock, which occurs when nature, types and Speed of change exceeds the ability and ability of an individual or company to successfully adapt to changing circumstances. Brown and Agnew called this concept corporate agility. Taking corrective action increases the anxiety of managers and employees. Research suggests that participation in strategy evaluation activities is one of the best ways to overcome resistance to change of individuals. According to Eres and Kanter, people accept the changes better when they have a cognitive understanding of the changes, a sense of control of the situation and the awareness that the necessary measures will be taken to implement the changes. The evaluation of the strategy leads to changes in the formulation or implementation of the strategy, to changes in both the formulation and implementation or any change at all. Strategists will have to revise strategies and methods of implantation sooner or later. Hussey and Langham offered the following reflection on the taking of corrective measures: Resistance to change is often based on emotions and is not easy to overcome through rational arguments. Resistance is based on feelings such as loss of prestige, implicit critique of present competition, fear of failure in the new situation, irritation for not being consulted, lack of understanding of the need for change or insecurity by Change the fixed and well-known methods; This resistance must therefore be overcome through the creation of participatory situations and a complete explanation when changes are envisaged.

Corrective action should place a company in a better position to leverage its internal strengths and key external opportunities; Avoid, reduce or mitigate external threats and improve internal weaknesses. Corrective measures should have an appropriate amount of time and adequate risk, must be congruent within the company and accountable to society and, perhaps most importantly, must strengthen the competitive position of A company in its basic industry. The Ongoing assessment of the strategy keeps strategists close to a company's activity and provides the information needed to implement an effective strategic management system. Carter Bayles described the benefits of the strategy assessment in the following way: Evaluation activities should renew confidence in the current business strategy or point out the need for measures to correct some weaknesses, such as declining product superiority or technological advantage. In many cases, the benefits of the strategy assessment are far greater in scope, as the result of the process could be a new strategy that generates considerable profits, even in a company that already renders a respectable utility. This possibility justifies the eva...