1. Chapter 9 Strategy Review, Evaluation, and Control

2. Strategy Evaluation 3 Basic Activities –
Examining the underlying bases of a firms’ strategy
Comparing expected to actual results
Corrective actions to ensure performance conforms to plans

3. A Strategy-Evaluation Framework (Figure 9-2)
Activity One: Review Underlying Bases of Strategy
Prepare revised Internal Factor Evaluation Prepare revised External Factor
Matrix Matrix
Compare revised versus existing Internal Compare revised versus existing External
Evaluation Matrix Evaluation Matrix
Do significant differences occur?
Yes
Activity Three:
Take
Corrective
Actions No
Activity Two: Measure Organizational Performance:
Compare planned versus actual progress toward meeting
stated objectives
Do significant differences occur?
Yes No
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©1999 Prentice Hall

4. Measuring Organizational Performance
What gets measured gets produced--so measure behaviors or outcomes that you expect.
Compare expected results to actual results, investigate deviations from plans, evaluate individual performance, and examine progress being made toward meeting stated objectives.
Ratio analysis is often used to evaluate strategies:
1) compare the firm’s performance over different time periods
2) compare the firm’s performance to competitors’
3) compare the firm’s performance to industry averages.
Useful ratios include ROI, ROE, profit margin, market share, debt to equity, EPS, sales growth, and asset growth.
Qualitative criteria should also be used: evaluate absenteeism and turnover rates, production quality and quantity rates, employee satisfaction, etc.
Ask the following:
Is the measurement important?
How will the measurement be tracked?
Do employees understand the measurement?
Is the measurement stated in positive terms (shoot for a goal rather than count mistakes)?

5. Problems in Measuring Performance
Short-term orientation
Goal displacement
Behavior substitution
Suboptimization

6. Taking Corrective Action
Does not necessarily mean that current strategies will be abandoned.
Corrective actions strengthen an organization’s competitive position.

7. Characteristics of an Effective Evaluation System
Strategy evaluation activities must be:
Economical – too much information and too many controls can be harmful
Meaningful – relate to the firm’s objectives
Timely – done when needed
Accurate – provide a true picture

8. Contingency Planning
Contingency plans are alternative plans that can be put into effect if certain key events do not occur as expected.
Consider using strategies that were originally discarded.