STRAMA CH5

Strategic Evaluation & Control

Aspect of strategic management through which an organization ensures whether it is achieving its objectives contemplated in the strategic action.

STRATEGIC CONTROL

Is the process of checking whether a company’s plans and strategies are working to achieve its long-term goals.

Continually  evaluating  the strategy as it is being implemented and  taking  corrective  actions  to adjust strategy according to changing conditions   or   taking   necessary actions    to    realign    strategy implementation.

OPERATIONAL CONTROL

Is the process of checking if daily activities and tasks are being done correctly and efficiently.

This  focuses  on  the  results  of strategic  action  and  is  aimed  at evaluating  the  performance  of  the organization  as  a  whole,  different SBUs and other units.

STRATEGIC CONTROL

Focus on Long-term Goals.

• Checks if the overall plan is working.

• Looks at the big Picture.

OPERATIONAL CONTROL

Focuses on daily activities.

• Checks if daily tasks are done correctly. 

• Looks at specific tasks and performance. 

Post-action Control

Measures results after an action is completed to see if it met the goal. 

For example:

A store manager checks the sales report at the end of the month to see if the store reached its sales target.

Steering Control

Checking activities while work is still happening so you can make changes if something goes wrong.

For example:

Quality control or a store manager notices that sales are low during the week, so they offer discounts immediately to 

increase sales.

ROLE OF BOARD OF DIRECTORS

is limited to evaluating and controlling those aspects of the organizational functioning, which have long-term implications.
They checks and guides the company’s overall plans to make sure they are good for the business

ROLE OF CHIEF EXECUTIVE

Is responsible for leading the company and making sure its strategy is properly implemented.
They make sure the company’s plans are carried out and takes action when problem arise. 

Finance Managers

Finding out deviations between planned and actual performance expressed in monetary terms

SBU Managers

Overall evaluation and control of their respective strategic business units.

Middle-level Managers

Evaluation and control of their respective functions and sub units - day-to-day operational control and prepare reports to be used by higher-level managers.

Development Systems

Concerned with developing personnel to perform better in their present positions and likely future positions that they are expected to occupy.

Feed Forward Control

Checking for possible problems before the work begins so mistakes can be prevented.

Evaluation of inputs and taking corrective action before a particular sequence of operation completed. 

 (Ex. Restaurant: Quality of Engredients)

Concurrent Control

Checking the work while it is happening so problems can be corrected immediately. 

(Ex. Restaurant manager checks if it follows correct recipe.)

Feedback Control

Checking results afer the work is finished to see what needs improvement. 

If any deviation is found between performance standards and actual performance, the  corrective action is undertaken.

(Ex. Customer reviews to find out customer satisfaction.)

Budgetary Control

Checking if the company is spending and earning money according to its budget. 

(Ex. Planned to spend Vs. actual spending.

The manager checks why the company spent more than planned.)

Financial Ratio Analysis

Using financial numbers to check the company’s financial health and performance. 

(Ex. Income vs. Expenses. Enough profit to cover cost.)

Return on Investment

Measured by relating profit to investment.

(Ex. Investment & Profit. ROI

Liquidity Ratios

Indicate the organization’s ability to pay its short-term debts These ratios are generally expressed in two forms: current ratio and quick ratio.

Current Ratios

•  shows the relationship between current assets and current liabilities.

Quick Ratios

•  indicates the relationship between liquid assets (cash in hand and with bank and short-term debtors) and current liabilities.

Activity Ratios

Shows how funds of the organization are being used. These ratios are in the form of inventory turnover ratio, receivable turnover ratio, and assets turnover ratio.

Inventory turnover Ratio

indicates the number of times inventory is replaced during the year and shows how effectively inventory has been managed.

Receivable turnover Ratio

• shows how promptly the organization is able to collect dues from its debtors.

Assets turnover Ratio

• indicates how effectively assets have been used to generate sales.

Leverage Ratios

Indicate the relative amount of funds in the business supplied by credits/financiers and shareholders/ owners.

These ratios are in the form of debt-equity ratio, debt total capital ratio, and interest coverage ratio.

Debt-equity Ratio

•  indicates the proportion of debt in relation to equity and indicates the financial strength of the organization. (It measures how much a copany relies on debt vs. its own resources.)

Deb-total Ratio

• shows the proportion of debt to total capital employed. This also indicates the financial strength. (It measure the proportion of a company’s total capital that is funded by interest-bearing debt rather than equity.)

Interest coverage Ratio

• shows the interest burden being borne by the  organization in relation to its profit. (Measures how easily a company can pay the interest on its outstanding debt uusing its operating earnings)

Profitability Ratios

Shows the ability of an organization to earn profit in relation to its sales and/ or investment. These ratio are expressed in terms of profit margin as well as return on

Profit Margin

•  is expressed in the form of relationship between profit and sales and indicates the degree of profitability of the business.

Return on Investment

• - is measured by relating profit to investment. The most comprehensive technique for controlling overall performance.

SOCIAL PERFORMANCE CONTROL

Deals with assessing the extent to which an organization is achieving its social objectives. This requires defining the basis on  which  social  performance  should  be  evaluated  and identifying  the  degree  to  which  social  performance  is effective.  Thus,  social  performance  control  involves  two aspects:

✗ Approaches for measuring social performance and

✗ Social audit.

Robert Elliot

has defined social accounting as “systematic assessment and reporting on those parts of a company’s activities that have a social impact-- the  impact  of  corporate  decisions  on environmental pollution, consumption of non-renewable resources, and ecological factors; the rights of individuals and groups; maintenance of public  services;  health,  safety,  education  and many other social concerns.

Social Audit

is a commitment to a systematic assessment of and reporting on some meaningful, definable domain of the company’s activities that have social impact. It is a formal, systematic evaluation of how an organization’s actions, policies, and operations impact  society, the community, employees, and the environment.