Strategic control: tasks, stages and evaluation criteria

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The type of strategy a team uses in a business is the key to whether a company will have long-term growth and success. The problem is that it is difficult to assess whether the chosen strategy is correct or if a correction is needed. This process becomes easier if you use common types of strategic control (strategic control, SC-control) to analyze the developed strategy, determine the effectiveness and identify strengths and weaknesses. Without this, the company will not be able to adapt to external changes in the industry, which require immediate corrective action.

History of the method

Although control was one of the six "functions of management" mentioned by Henri Fayol as early as 1917, the idea and concept of it appeared in management economic literature in the late 1970s. The work of J. H. Horowitz "Strategiccontrol: a new challenge for better management" was published in 1979. And probably the first article that discusses this topic in detail.

A key challenge in controlling strategic planning is the need to deal with uncertainty. An important analysis by Michael Gold and Andrew Campbell showed that different methods of control are used. From pure financial control on the one hand to detailed strategic planning systems on the other.

Financial control is easier, and therefore cheaper. It is more flexible in operation, but provides less potential for interaction between organizational structures. Strategic planning is time consuming and costly to use, but it provides a huge opportunity for maximum benefit.

In the middle of this range, Gould and Campbell described strategic controls that allow companies to balance their competitive and financial strengths.

FAQ on SC control

Managers exercise SC control to ensure that the strategic goals of the organization are achieved.

Decision-making freedom is one of the features that distinguishes strategic control from other forms exercised by managers. For example, operational control and management of operational processes. These characteristic differences influence how to design management processes and support systems using a balanced scorecard.

Mainthe task of SC-control is to determine whether the goals are achieved and to understand the need for adjustments in accordance with changes in the business environment. This task can only be realized through monitoring, designed as a continuous, simultaneous process of obtaining and processing information, parallel to strategic planning, development and implementation.

The essence of strategic planning control can be summarized as follows:

• constant monitoring of external and internal working conditions and progress in achieving the company's strategic goals;
• union of enterprises, organizational system, strategic divisions, operating markets;
• focus on assessing progress and performance, detecting and interpreting signals of upcoming changes and problems before they cause adverse consequences for the company, and developing the necessary response to these changes;
• implementation using information systems and collaboration tools that enable flexible company response;
• close connection with strategic planning;
• inclusion of the tools of the planning procedure, in which the strategic control system is a platform for the implementation of strategies.

Organizational structure

Organizational structure - the formal configuration of a company's roles, procedures, management and control mechanisms, and management and decision-making processes. The simple structure isan organizational form in which the owner makes all important decisions directly and controls all activities, while the staff exercises supervisory authority.

Functional structure - consists of a managing director and a limited corporate staff with functional line managers in dominant organizational areas. Such as manufacturing, accounting, marketing, research and development, engineering and human resources.

Multi-Disciplinary (M-Form) structure - consists of operating divisions, where each structure represents a separate company or profit center, with corporate participants vested with the greatest responsibility for the daily operations and strategy of the divisions to responsible managers.

The business unit form is a form of a multi-industry structure with at least three levels:

• higher level is corporate headquarters;
• next level - SBU group (strategic business unit: branch, department);
• the last level is the division into groups according to the relationship (commodity or geographic market) within each SBU.

Centralization is the extent to which decision-makers are supported at higher levels of government.

Organizations can use the main types of structures in the system of strategic control: simple, functional and diverse. Sometimes organizations find that they have grown out of a single structure and need to adapt a new form in order todeal effectively with greater complexity and production growth.

Applying a style to an organization

SC control processes ensure that the actions necessary to achieve the strategic goals are completed and have the desired impact on the organization. An effective strategic control process should indirectly help the organization ensure that the intended results are achieved and that all methods used to achieve the objectives are working.

At the same time, daily activities in organizations are controlled using operational control systems.

One way to exercise control is to engage in management processes based on the implementation of the strategic balanced scorecards described by Kaplan and Norton in their writings.

Modern design methods, such as the 3rd generation balanced scorecard, combine the latest ideas about strategic ideas and management principles into an easy-to-implement framework.

Management action

Strategic management is the set of ongoing processes and activities that an organization uses to systematically align resources and activities with the vision, mission and strategy across the business structure. In a stable environment, strategy requires establishing a competitive position and then defending it.

Through strategic management, the company gains more flexibility. It can easily move from one dominant strategy to another. Strategiccontrol can be divided into five main functions:

• planning;
• organization;
• passing orders;
• coordination;
• control.

The main tasks of strategic control include:

1. Develop strategies according to procedures and methods.
2. Analysis used in strategy selection.
3. An implementation procedure that complies with current standards.
4. Expected results.

This control examines the individual provisions of the project:

1. Control of the strategic planning stage.
2. Monitoring the implementation of the strategy.
3. Strategy analysis.

Methods for realizing success

The company cannot foresee any external threat that could affect the success of the company without having the necessary information. Strategic control allows you to identify sources of information that track these external factors.

The four types of SC control are management in management, implementation control, warning control, and strategic surveillance. Each provides different perspectives and methods of strategic control analysis to help maximize the effectiveness of a business strategy.

It is based on an assumption about how things will play out in the future. Management tools allow you to check whether this assumption remains true when the idea is put into practice. Factors such as inflation, interest rates andsocial change, or industry factors such as competitors, suppliers, and barriers to entry. These controls will help the company identify management changes that are in line with its business strategy.

After developing a business strategy, the firm will have to implement it. When taking the actions necessary to implement the strategic control plan, the company uses implementation control to ensure that there is no need to make any changes to the strategy. The two main types of management that need to be implemented are the monitoring of strategic areas and the execution of milestones. The former means that tactics are analyzed that serve to gain market share, the latter allows you to evaluate the activity at some points of the strategy.

Tracking alerts in strategic financial control is vital. Companies will need mechanisms to assess the business situation in the event of emergencies such as natural disasters, product recalls or rapid market growth. Dedicated alert controls allow the company to test the accuracy of the strategy in light of these new developments. Implementation will require preparation of methods to handle these special alerts, as well as procedures to be followed, priorities, and tools used.

Model Information

Regardless of the type or level of SC control systems an organization needs, it can be represented as a six-step feedback model:

1. Define the main areas of control - this is the first step in the SC-control process. Managers base control on the mission, goals, and objectives of the organization, developed through the planning process. They must make a choice because this model is the most expensive and it is not always necessary to control every aspect of the organization.
2. Set the standards of control. A management standard is a strategic control target against which future performance will be measured. Aspects of performance that can be controlled and managed: quantity, quality, time, behavior and management.
3. Assess performance. Actual performance must be compared with standards. Many types of measurements performed for control purposes are based on some form of historical standard before corrective action is taken.
4. Compare performance against standards. The comparison step determines the degree of difference between the actual performance and the standard. If the first two steps have been successfully completed, the third step of the monitoring process, comparing performance against standards, should be easy.
5. Determine the reasons for deviations. This step in the SC control process consists of answering the question: "Why does performance differ from standards?". Taking corrective action is the last step in the process of determining if corrective action is needed.
6. The last step in the monitoring process is for managers to decide what actions to take to improve performance in case ofdeviations.

Differences in management controls

Both strategic and operational controls have benefits that organizations can take advantage of. SC control takes into account the strategy of the process from implementation to completion and analyzes how effective the actions are and where changes can be made for improvement. Operational control is focused on day-to-day operations. Strategic and operational control - types of managerial control that have significant differences.

Factors affecting types of control and their differences:

1. SC control can be influenced by external factors and data.
2. Operational control is related to internal work factors.
3. Environment and market have much more to do with SC control, while operational control is about day-to-day problems that may arise, such as staffing issues or technological failures.
4. SC-control deals with the process over time, looking at different steps to evaluate how effective they are and where changes can be made. This process of strategic control can take several weeks or months. Once the process is complete, evaluation continues.
5. Operational control is carried out daily, studying the daily problems that arise and working to eliminate them on the spot.
6. Fixing bugs or taking action to fix problems in it is more efficient because it happens immediately.
7. There is a problem withSC control, but it takes much more time to evaluate what needs to be done to eliminate the causes that caused the problem.
8. Through operational control, issues are resolved immediately to keep the organization running smoothly.
9. Like corrective actions, the intervals between reports under SC control last several months, and in operational control reports they are issued daily and weekly.
10. SC control belongs to larger organizational issues. Such as entering a new market, so more time is needed to collect information and report.
11. Operational control takes into account production efficiency, sales results and daily operations. These figures are much simpler and therefore can be presented quickly and efficiently.

Qualitative and quantitative criteria

After completing the implementation of the strategy, the organization expects to achieve the desired goals. It is necessary to organize a process of evaluation and monitoring of the strategy in the early stages of implementation to check whether the strategy was successful and, if necessary, make adjustments in the middle of the stage. Unexpected moves by competitors can create major gaps in strategy. Therefore, listing such factors will require ongoing assessment and control strategies.

Evaluation of the organization's strategy can be carried out both qualitatively and quantitatively. Quantification is based on data and is possible using analysis to determine whether the content of the strategy is working or not working. Qualitative assessment andcontrol is a real-time process. Organizations typically use financial ratios as quantitative criteria for evaluating strategy.

Here are some of the key financial metrics that can be used as criteria for evaluating a strategy:

1. Return on investment.
2. Capital return.
3. Profitability.
4. Market share.
5. Earnings per share.
6. Increased sales.
7. Asset increase.

These factors are used by various organizations to measure the performance of an organization. It should be noted that qualitative criteria are more related to short-term goals than to long-term goals. For this reason, quality criteria are very important when evaluating strategies.

Audit functions

Audits are another method of control. Control functions are divided into three main groups, namely:

1. Independent auditors are professionals who provide their services in organizing strategic control.
2. Government auditors, does not include agencies that conduct audits for the organization.
3. Internal auditors are employees of the organization and perform their functions within the organization.

There is another group known as management audit, which examines and evaluates the overall performance of the entire management team. Audit teams evaluate the effectiveness of the various departments of the organization and the company's management system. The information thatthey provide is critical to management. Currently, most organizations are engaged in management audit.

Thus, it is clear that strategic control aims to ensure that the organization is effectively aligned with its business environment and its progress towards the strategic goal. Because SC control research is still in its early stages, there are no generally accepted models or theories in this area. In general, the development of strategic control requires structure, leadership, technology, human resources, and information and control systems.