Strategy Evaluation

MODULE 6

STRATEGY EVALUATION

Meaning of strategy evaluation

Strategy evaluation is a critical process in the field of strategic management and business
planning. It involves the systematic assessment and analysis of an organization's strategies to
determine their effectiveness and success in achieving the desired objectives and goals. The
purpose of strategy evaluation is to ensure that the implemented strategies are aligned with the
overall vision of the organization and are capable of delivering the intended results.

The Process of Evaluating Strategy

The process of evaluating a strategy involves several steps to systematically assess its
effectiveness. Below is a step-by-step guide to the strategy evaluation process:

 Establish Clear Objectives: Before evaluating a strategy, it's essential to have well-
defined objectives and goals. These objectives should be specific, measurable, achievable,
relevant, and time-bound (SMART). They serve as benchmarks for measuring the strategy's
success.

 Identify Key Performance Indicators (KPIs): Determine the key metrics that will be
used to measure the strategy's performance. KPIs should align with the established objectives
and provide meaningful insights into the strategy's impact.

 Gather Data and Information: Collect relevant data and information related to the
strategy's implementation and outcomes. This can include financial data, customer feedback,
market research, and any other relevant performance indicators.

 Analyze Performance: Compare the actual results with the predefined objectives and
KPIs. This analysis will help identify any gaps between the expected outcomes and what was
achieved.

 Assess Internal and External Factors: Consider internal factors such as

organizational capabilities, resources, and workforce, as well as external factors like market
conditions, competition, regulatory changes, and technological advancements. These factors
could have influenced the strategy's performance.

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 Identify Strengths and Weaknesses: Evaluate the strengths and weaknesses of the
strategy. Identify aspects that worked well and contributed to success (strengths) and those that
hindered progress or led to subpar performance (weaknesses).

 Review Assumptions: Reassess the assumptions made during the formulation of the
strategy. Some assumptions might have changed or become invalid, affecting the strategy's
viability.

 Consider Feedback from Stakeholders: Gather feedback from various stakeholders,

including customers, employees, suppliers, and investors. Their perspectives can provide
valuable insights into the strategy's impact on different aspects of the business.

 Revise and Update the Strategy: Based on the evaluation findings, make necessary
adjustments to the strategy. This might involve refining the objectives, reallocating resources,
changing tactics, or even developing an entirely new strategy.

 Implement Changes: Ensure that the changes and adjustments are effectively
communicated and implemented throughout the organization. The new strategy should be well-
understood by all relevant stakeholders.

 Monitor and Review Continuously: Strategy evaluation is an ongoing process.

Continuously monitor the performance of the revised strategy and repeat the evaluation process
at regular intervals to ensure the strategy remains effective and relevant.

Strategy Evaluation Framework:

Suitable:
The strategic evaluation needs to be tailored to the needs of the organisation. Strategic
Evaluation Example, the evaluation process needs to be different for the marketing and the HR
functions in the organisation.
Simple:
The strategic evaluation process needs to be simple to understand and follow. It should be easy
to execute. If the strategic evaluation process is complex then people will not be able to
understand the process. This will cause frustration and conflict in the organisation and people
will make errors in the implementation of the process. On the other hand, when the process is
well-defined and understood by all the employees, the level of motivation in the organisation is
very high and employees are able to execute the evaluation system.

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Selective:
The evaluation process cannot be all encompassing. It needs to be selective in its approach. It
needs to select the key and critical factors in the organisation which are absolutely essential for
the survival of the organisation. By doing so, the time of the managers is optimally spent and
they can focus on the core activities of the organisation.
Flexible:
An organisation needs to constantly examine its strategies and plans in the face of changes in
the external activities. These changes can be political, technological, competition and other
factors. Therefore, the strategic evaluation process cannot make the mistake of being rigid. It
needs to change according to the demands of the environment and take advantage of
opportunities that are on offer.
Forward-Looking:
The strategic evaluation process should take the future into account and have the capability of
predicting events before they become problematic for the organisation. It is only then that they
can be helpful to the organisation. It needs to be able to point out deviations to the managers so
that they can take the necessary corrective action.
Reasonable:
According to Robbins, strategic evaluation processes should be reasonable. They need to be
fair to the employees. If they set unrealistic goals then they will end up de-motivating
employees. On the other hand, they should also not be too easy and give the employees no
challenge. The strategic evaluation process therefore needs to be reasonable. They should
involve the right amount of stretch so that employees are challenged and at the same time
should not be daunting.
Objective:
There can be no room for vagueness in the strategic evaluation control systems. They should be
seen as being objective by the employees. It should apply equally to all. This will help in
getting employees to accept the evaluation parameters. On the other hand, if the standards are
vague and arbitrary then it will cause mistrust in the eyes of the employees and they will not
have faith in the evaluation and control process.
Responsibility for Failures:
The strategic evaluation process must fix responsibility for failures. It is not enough, just to
know about deviation in the organisation but also the reasons for its occurrence. The strategic
control system needs to point out the remedial action that the organisation needs to take to
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overtake the weaknesses that have been identified.

Acceptable:
It is very important that the strategic evaluation and control system has the cooperation and the
trust of the employees. It must be accepted by all. This is only possible if the standards are
well-defined, objective, free from bias and reasonable.

Balance Score Card:

The balanced scorecard is a strategic management tool that helps organizations align their
activities with their vision and strategy. It was developed by Robert Kaplan and David Norton
in the early 1990s. The balanced scorecard provides a comprehensive view of an organization's
performance by measuring and monitoring key performance indicators (KPIs) from four
different perspectives. These perspectives are:

1. Financial Perspective: This perspective focuses on financial metrics and objectives. It

includes measures such as revenue growth, profitability, return on investment, and cost
management. The financial perspective helps organizations understand how they are
performing in terms of generating value for their shareholders and investors.
2. Customer Perspective: This perspective focuses on the customer's needs and
expectations. It involves measuring customer satisfaction, customer loyalty, market share, and
other indicators related to customer perception and experience. Understanding and meeting
customer expectations are crucial for long-term success.
3. Internal Processes Perspective: This perspective examines the internal processes and
operations that drive the organization's ability to deliver value to customers and achieve its
financial goals. It involves identifying key processes and improving efficiency, quality, and innovation
within the organization.
4. Learning and Growth Perspective: This perspective addresses the organization's ability
to learn, innovate, and develop its capabilities to support long-term success. It includes
measures related to employee training, skill development, employee satisfaction, and fostering
a culture of learning and innovation.

By considering these four perspectives, the balanced scorecard helps organizations balance
short-term financial objectives with long-term strategic goals. It also ensures that actions and
initiatives are aligned across different areas of the organization to achieve the desired
outcomes.

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The process of implementing a balanced scorecard typically involves the following steps:

1. Define the organization's vision, mission, and strategic objectives.

2. Identify key performance indicators (KPIs) for each perspective that align with the
strategic objectives.
3. Set targets and goals for each KPI to measure progress toward achieving the strategic
objectives.
4. Implement a system to collect and track data for the selected KPIs regularly.
5. Communicate the balanced scorecard to all levels of the organization to ensure
understanding and commitment.
6. Use the balanced scorecard to monitor progress, identify areas for improvement, and make
data-driven decisions.

Characteristics of an Effective Evaluation System:

An effective evaluation system is integral to the management of any organization, as it helps

assess employee performance, monitor organizational effectiveness, and inform strategic
decisions. An effective evaluation system should include the following characteristics:

1. Clear Objectives: The system should have clearly defined objectives. The purpose of the
evaluation should be clear, whether it's to measure performance, improve efficiency, or identify
areas of improvement.

2. Reliability: The evaluation system should provide consistent results across different
evaluators and times when the same conditions are observed. This consistency is crucial for an
evaluation to be trusted and acted upon.
3. Validity: The system should measure what it purports to measure. If an evaluation system
aims to assess teamwork skills, for instance, it must accurately and reliably measure those
skills, not some other factor.
4. Standardization: Standard procedures and protocols should be in place to ensure that all
evaluations are conducted in the same manner. This allows for more accurate comparisons
across employees or departments.
5. Fairness: The system should be unbiased and equitable, providing a fair assessment for
all individuals. This also includes providing clear feedback and an opportunity for individuals
to improve.

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6. Comprehensiveness: The system should consider all aspects of performance or

effectiveness relevant to the subject of evaluation. It should not overly focus on one aspect
while ignoring others.
7. Transparency: The process of evaluation and the criteria used should be transparent and
well-communicated to those being evaluated. This prevents misunderstandings and fosters trust
in the system.
8. Feedback: An effective evaluation system must provide feedback. The results should be
communicated in a constructive way to help the individual or team understand their strengths
and weaknesses, and how they can improve.
9. Timeliness: Feedback should be provided promptly so that individuals can immediately
begin to work on their areas of improvement. Prolonged feedback can result in lost
opportunities for growth and development.
10. Continuous Improvement: The system should be regularly reviewed and updated based
on its effectiveness, changes in the organization, and feedback from those being evaluated.
11. Participatory: Where possible, those being evaluated should be involved in the process.
This can increase engagement and ownership of the outcomes.
12. Simplicity: While the system needs to be thorough, it should also be simple enough to be
understood and implemented. Overly complex systems may not be practical or efficient.

Contingency Planning:

Contingency planning in strategic evaluation refers to incorporating plans and actions to

address potential risks, uncertainties, and unexpected developments that may impact the
implementation of a strategic plan. While strategic evaluation assesses the progress and
effectiveness of a strategic plan, contingency planning takes a forward-looking approach to
anticipate and mitigate risks that could hinder the successful execution of the strategy.

Here's how contingency planning fits into the process of strategic evaluation:

1. Identifying Strategic Risks: During the strategic evaluation process, potential risks and
uncertainties are identified. These risks could include changes in market conditions, regulatory
changes, technological disruptions, unexpected competitor actions, or internal challenges.
2. Risk Assessment: Once risks are identified, they are assessed in terms of their potential
impact on the strategic objectives and the likelihood of their occurrence. This assessment helps
prioritize risks and determine which ones require contingency planning.

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3. Developing Contingency Plans: Contingency plans are created to address specific risks
that have been identified as critical or likely to occur. These plans outline alternative actions or
strategies that can be implemented if certain risk events unfold.
4. Integration with Strategic Plan: Contingency plans should be integrated into the overall
strategic plan, aligning with the organization's mission, vision, and strategic goals. They should
be complementary to the main strategy, ensuring that they do not conflict with the primary
objectives.
5. Resource Allocation: Adequate resources, such as finances, personnel, and technology,
need to be allocated to support the implementation of contingency plans. These resources are
vital in enabling a swift response to unforeseen events.
6. Monitoring and Trigger Points: Contingency plans should include specific trigger points
or indicators that signal when the contingency actions should be initiated. Regular monitoring
of the environment can help identify when a risk event is likely to occur.

7. Testing and Drills: Just like in traditional contingency planning, conducting tests and
drills specific to the strategic context helps ensure that the contingency plans are practical,
effective, and can be activated seamlessly if needed.
8. Flexibility and Adaptability: Contingency plans should be flexible and adaptable to
changing circumstances. As the strategic evaluation provides new insights, the contingency
plans may need to be revised to reflect emerging risks or opportunities.
9. Communication and Awareness: Effective communication is critical for contingency
planning in strategic evaluation. All stakeholders, including employees, managers, and board
members, should be aware of the contingency plans and their roles in implementing

21st Century Challenges in Strategic Management:

Strategic management in the 21st century faces a rapidly evolving and complex business
landscape, characterized by various challenges that organizations must navigate to remain
competitive and successful. Some of the key challenges include:

1. Rapid Technological Advancements: Technology is advancing at an unprecedented

pace, leading to constant disruptions in various industries. Organizations must keep up with
technological changes, adopt digital transformation strategies, and leverage emerging
technologies to stay competitive.
2. Globalization: The interconnectedness of economies and markets across the globe

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presents both opportunities and challenges. Organizations need to navigate international trade,
diverse cultures, and geopolitical uncertainties while considering global competition.
3. Digital Disruption: Disruptive technologies and innovative business models are reshaping
entire industries. Established companies must adapt or risk becoming obsolete, while new
startups can rapidly scale and disrupt traditional players.

4. Data Privacy and Cyber security: As organizations collect and store vast amounts of
data, ensuring data privacy and protecting against cyber threats is paramount. Cyber attacks can
have severe consequences, including reputational damage and financial losses.
5. Talent Management and Workforce Changes: Managing a diverse and multi-
generational workforce, attracting top talent, and retaining skilled employees are crucial
challenges in today's labor market.

6. Environmental Sustainability: Organizations face increasing pressure to adopt

environmentally sustainable practices and address climate change concerns. Balancing
profitability with social and environmental responsibility is a significant challenge.
7. Changing Consumer Behavior: Consumer preferences are evolving rapidly, driven by
factors like sustainability, social responsibility, and convenience. Understanding and adapting
to these changing behaviors is essential for market relevance.
8. Regulatory Compliance: Organizations must comply with a complex web of regulations,
which can vary significantly across countries and industries. Failure to comply can result in
legal consequences and damage to reputation.
9. Shortening Product Lifecycles: Product lifecycles are getting shorter due to rapid
technological advancements and changing consumer demands. Organizations must innovate
continuously and introduce new products or services to stay ahead.
10. Economic Uncertainty: Economic fluctuations and geopolitical tensions can create
uncertainty, affecting strategic decision-making and financial planning.
11. Social and Political Challenges: Organizations must navigate social issues such as
diversity, inclusion, and ethical concerns while dealing with political instability and policy
changes.
12. Customer-Centricity: The focus on customer experience and personalization is becoming
more critical than ever. Organizations must tailor their strategies to meet individual customer
needs.

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13. Innovative Competition: Startups and agile competitors can enter the market swiftly and
disrupt traditional industries, making it crucial for established companies to foster a culture of
innovation.
14. Artificial Intelligence and Automation: Embracing AI and automation can improve
efficiency, but it also brings challenges like workforce displacement and ethical considerations.
15. Supply Chain Vulnerabilities: Global supply chains face disruptions due to natural
disasters, political events, and trade issues, leading to increased supply chain risk management
concerns.

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