Good strategy creates dynamic firms

Every organisation has a strategy, which must be controlled and evaluated in order to accomplish the vision. Strategy control process is the course of action for determining what is being accomplished and enabling a manager to take a corrective measure in case of any failure or deviation so that performance remains on course.

Strategy control engulfs the evaluation process and is perpetual rather than periodical in nature, according to Peter Drucker “strategic control maintains equilibrium between ends and means, output and efforts”. The strategy control process comprises three phases; evaluation criteria, performance evaluation, and feedback.

Evaluation criteria can be done both quantitatively as well as qualitatively. The former puts stress on the data for performance evaluation where the actual results are compared with the expected results and compared with expected results. If there happens to be significant variation in performance, corrective measures are taken to meet the set objectives.

Qualitative evaluation and control of strategy is a real-time process where performance is monitored and midway corrective actions are taken. Operational managers must look out for any undesired performance. If these undesired performances are an outcome of the processes themselves, then both the top and operational managers must know about it so that midway corrections are taken or they could develop new implementation programmes.

Strategic evaluation and control is not simple, therefore certain hurdles or barriers including resistance to evaluation are common. Any change in the business processes or activities may invite resistance from different quarters within an organisation. Whenever the strategy is formulated and implemented, certain quarters such as employees or strategy business units may develop resistance.

Measurement of performance

This is generally because measurement of performance and strategic formulation and implementation is always perceived as one’s own performance by an individual or group of individuals involved in these activities or processes.

A strategy comprises two different targets, short-term and long-term. If the corporation's short-term strategy is not within or aligned to part of the long-term strategy, a corporation may start giving importance to the short-term targets overlooking the long-term objective.

In order to achieve compliance in the short run, this misalignment of short-term objectives may lead to a shortfall in implementing the strategy and result in variation of the strategy evaluation. Therefore a short-termism approach has to be avoided for successful strategy control in strategic management.

Management must be clear on the upper and lower limits of control. This remains a general dilemma of any control system. Imposing excess control and micromanagement may lead to a negative effect on the performance of the employees in the organisation resulting in low employee morale, low productivity and lack of creativity.

A recent study by Accountemps shows that as many as 59 per cent of people have been managed by a micromanager at some point in their career. Of those micromanaged, 68 per cent said it had decreased their morale, and 55 per cent claimed it had hurt their productivity. On the contrary, too less control also makes the employees lacklustre about their performance thereby making the process of evaluation and control ineffective and sometimes redundant.

The strategic intent of the organisation has to be well communicated across all levels within the firm and its stakeholders outside the organisation. Moreover, the best way to reduce the impact of barriers to evaluation and control is to change the attitude of people that is to limit the problem by increasing the perception of problems.

Business strategy is based on the assumption of how things will occur in the future. Premise control helps the management to take corrective actions of the appropriate time and discontinue the original strategy that was based on invalid assumptions. These presumptions may relate to the change in government policies, environmental factors such as inflation, interest rates, and social changes, or by industry factors such as competitive suppliers and barriers to entry.

Feedback channels

Once a strategy is formulated it has to be implemented. The managers take the necessary steps to put the strategy in action, implementation control is used to review whether the original planned programmes and projects are being well implemented and whether the corporation is guided through its predetermined objective or not.

Since the onset of Covid-19, and an upsurge in internet and mobile usage, service providers have been using feedback channels to know coverage faults and gaps, which helps recognise geographical areas within urban and deep rural settings where towers need to be installed or shut down in order to be the best service provider.

Surveillance control is an overarching control. A company has to protect its business from external threats that may hinder the success of the strategy implemented. The manager may safeguard the strategy by continually upgrading themselves about the industry-specific information through trade journals and magazines, attending trade conferences and so forth.

Special alert control is based on the trigger mechanism designed to enable the rapid response to any unexpected or sudden events that may pose threats to the strategy implemented such control is based on the immediate reassessment of the strategy formulated in a given contingency, for example, During the Covid-19 pandemic, lockdowns took place and supply chains were impacted, employment was impacted and so were household incomes. Several large commercial vehicle manufacturers across the globe including Tata Motors, Toyota and more, temporarily shut production because of falling retail demand. These companies had done so to avoid piling up inventory with dealers.

These planned closures were to ensure alignment of production with demand to bring the costs under control that would have been elevated because of the piling of inventory and to maintain the health of the ecosystem. There are various methods or techniques used in strategic control systems. Most of these methods are related to financial control and neglect the non-financial parameters.

The financial reporting system provides information on how a company has performed in the past but offers little information about how it might perform in the future. Budgeting has been accepted as one of the efficient methods of short-term planning and control. Budgets deals with the allocation of resources between different units in an organization. These include the preparation of an annual, quarterly, monthly, or zero-based budget.

Functional control including human resources, materials, marketing and sales, research and development, and administration is pertinent as is flexibility evaluation of performance at different volume levels or capacity utilisation. Ratio analysis and financial statement analysis also enable management to know if performance is on track with strategy.

Overall, auditing is a major method of evaluation and control. Internal audits are to be performed by employees of the organisation while external audits are to be conducted by independent agencies outside the firm, both equally important.

Ritesh Barot is a business and financial analyst  [email protected]