Strategy Evaluation and Control

1. Chapter 7 Strategy Evaluation and Control

2. chapter objectives • after finish chapter student will understand: • The controlling process • What is Key Performance Indicators • How to take action correction?

3. The Nature of Strategy Evaluation Controlling and evaluation is the last activity in the strategic management process. Most strategists agree, therefore, that strategy evaluation is vital to an organization’s well-being, timely evaluation can alert management to problem or potential problems before a situation become critical. Strategy Evaluation includes three basic activities: Examining the underlying bases of a firm’s strategy, Comparing expected results with actual results, Taking corrective actions to ensure that performance conforms to plans.

4. Set performance standard Measure Performance Compare actual work Determine Deviation Standards Within limit? Take Correction action Yes No Continues works The Process of Evaluation Strategies

5. Key Performance Indicators (KPIs) • -Key performance indicators are quantifiable measurements that reflect the critical success factors of an organization. • -In order to set performance standards according to the controlling process mentioned above, strategist should established KPI to measure the organization implementation. • 4 KPI should be consider during evaluation: • Financial Perspective • Customer Perspective • Internal Process Perspective • Learning and Growth Perspective

6. Financial Perspective • Return of Investment • Revenues • Cost per Unit • asset utilization • Unit cost...

7. Customer Perspective • Firms should realize that its revenue comes from their customers who willing to pay for firms value. • market share • customer retention • customer acquisition • customer satisfaction

8. Internal Process Perspective • Customer satisfaction to our products or services come from employee’s effort. • employee willing to work according to better work environment.

9. Learning and growth perspective • Organization capabilities • competencies • We can measure by: • Employee skills • Attitude • employee turnover • employee satisfaction • ...

10. Taking Corrective Actions The final strategy evaluation activity, taking corrective action, requires making changes to reposition a firm competitively for the future. Examples of changes that may needed are alerting an organization’s structure, replacing one or more key individuals, selling a division, or revising a business mission. Other changes could include establishing or revising objectives, devising new policies, issuing stock t raise capital, adding additional salespersons, allocating resources differently, or developing new performance incentives.