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Techniques of Strategic Control

Organisations use many techniques for strategic control including management information systems, benchmarking, balanced scorecards, key factor rating, responsibility centres, network techniques, management by objectives, memorandums of understanding, system modelling, and scenario writing. These techniques allow organisations to monitor performance, ensure objectives are met, and adapt to changes in the environment.

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255 views

Techniques of Strategic Control

Organisations use many techniques for strategic control including management information systems, benchmarking, balanced scorecards, key factor rating, responsibility centres, network techniques, management by objectives, memorandums of understanding, system modelling, and scenario writing. These techniques allow organisations to monitor performance, ensure objectives are met, and adapt to changes in the environment.

Uploaded by

wqg8j5bwj2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Techniques of Strategic Control

Organisations use many techniques or mechanisms for strategic


control. Some of the important
mechanisms are:
1. Management Information systems: Appropriate information
systems act as an effective control system. Management will come to
know the latest performance in key areas and take appropriate
corrective measures.

2. Benchmarking: It is a comparative method where a firm finds the


best practices in an area and then attempts to bring its own
performance in that area in line with the best practice. Best practices
are the benchmarks that should be adopted by a firm as the standards
to exercise operational control. Through this method, performance
can be evaluated continually till it reaches the best practice level. In
order to excel, a firm shall have to
exceed the benchmarks. In this manner, benchmarking offers firms a
tangible method to evaluate performance.

3. Balanced scorecard: It is a method based on the identification of


four key performance measures i.e. customer perspective, internal
business perspective, innovation and learning perspective, and the
financial perspective. This method is a balanced approach to
performance measurement as a range of financial and non-financial
parameters are taken into account for evaluation.
Financial perspective: Measures reflecting financial performance,
for example, number of debtors, cash flow or return on investment.
The financial performance of an organization is fundamental to its
success. Even non-profit organisations must make the books balance.
Financial figures suffer from two major drawbacks
Customer perspective: This perspective captures the ability of the
organization to provide quality goods and services, effective delivery,
and overall customer satisfaction for both Internal & External
customers. For example, time taken to process a phone call, results of
customer surveys, number of complaints or competitive rankings.
Business Process perspective: This perspective provides data
regarding the internal business results against measures that lead to
financial success and satisfied customers. To meet the organizational
objectives and customers expectations, organizations must identify
the key business processes at which they must excel.
Key processes are monitored to ensure that outcomes are satisfactory.
Internal business processes are the mechanisms through which
performance expectations are achieved. For example, the time spent
prospecting new customers, number of units that required rework or
process cost.
Learning and Growth perspective: This perspective captures the
ability of employees, information systems, and organizational
alignment to manage the business and adapt to change. Processes will
only succeed if adequately skilled and motivated employees, supplied
with accurate and timely information, are driving them. In order to
meet changing requirements and customer expectations, employees
are being asked to take on dramatically new responsibilities that may
require skills, capabilities, technologies, and organizational designs
that were not available before. It measures the company's learning
curve for example, number of employee suggestions or total hours
spent on staff training.

4. Key factor rating: It is a method that takes into account the key
factors in several areas and then sets out to evaluate performance on
the basis of these. This is quite a comprehensive method as it takes a
holistic view of the performance areas in an organisation.

5. Responsibility Centres: Control systems can be established to


monitor specific functions, projects or divisions. Responsibility
centres are used to isolate a unit so that it can be evaluated separately
from the rest of the corporation. There are five major types of
responsibility centres: Cost centres, Revenue centres, Expense
centres, Profit centres and Investment centres. Each responsibility
centre has its own budget and is evaluated on the
basis of its performance.

6. Network techniques: Network techniques such as Programme


Evaluation and Review Technique (PERT), Critical Path Method
(CPM), and their variants, are used extensively for the operational
controls of scheduling and resource allocation in projects. When
network techniques are modified for use as a cost accounting system,
they become highly effective strategic controls for project costs and
performance.

7. Management by Objectives (MBO): It is a system proposed by


Drucker, which is based on a regular evaluation of performance
against objectives which are decided upon mutually by the superior
and the subordinate. By the process of consultation, objective-setting
leads to the establishment of a control system that operates on the
basis of commitment and self-control. Thus, the scope of MBO to be
used as an strategic control is quite extensive.

8. Memorandum of Understanding: This is an agreement between a


PSU and the administrative ministry of the government in which both
specify their respective commitments and responsibilities. The system
works as an effective control on the performance of the PSU.

9. System modelling: - systems modelling is founded on computer-


based models that simulate the essential features of the organization
and its environment. Organizations are able to exercise preaction
control by accessing the impact of the environment on the firm by
following a particular strategy through system modelling. This
computer aided model is more accurate as it is an attempt to simulate
the ground realities.

10. Writing of scenarios: - scenario writing we have referred as a part


of environmental analysis. Scenario is a perception of the likely
environment a firm is likely to face in the future. There will be set of
scenarios – which written with various permutations and combination
of the environmental forcers. This scenario writing as a tool of
analysing the environment, helps in creating the possible
environments – as an artist used hues and shades to give different
perspectives for an on looker. Thus, strategies, contingent can be
prepared like a flexible budget that fits most of the likely situation.

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