Evaluation and Control Process can he viewed as a five-step model:
To determine what to measure - this means that the processes and results must he capable of being measured in an objective and consistent manner
To establish performance standards = these specify the measures & acceptable results i.e. provide a tolerance range
Actual performance measurement
Comparison of actual with standard
Taking corrective action - this becomes necessary when the actual results are outside tolerance range. Before acting, the manager has to ensure whether the deviation is due to chance fluctuation and whether the process is correct and appropriate.
Problems in Measurement of Performance
Short-term orientation (high ROI in short-term)
Goal displacement - refers to the confusion of means with end. It occurs when activities intended to help managers achieve corporate objectives become ends in themselves or are adapted to meet ends other than those for which they are intended.
Goal displacement can be of two types
Behaviour Substituti.n and Sub-optimisation.
Behaviour Substitution: refers to a phenomenon where activities that do not lead to goal accomplishment are substituted for activities that do lead to goal accomplishment. In other words, the wrong activities and people who focused on these activities are being rewarded.
Sub-optimisation: is a situation where optimisation occurs for a unit or a functional area to the detriment of an organisation as a whole.
The idea of strategy audit is to develop benchmarks. This process involves the following steps:
Identification of area or process to be examined - usually an activity which can give competitive advantage to a business unit.
Determination of measures of performance of the area or process. Competitors against whom the company has to benchmark - these have to be generally the best among the industry.
Difference in performance measurement of the company and the best in class.
To develop tactical program for bridging performance gap.
Implementation of programs and comparing the results of new measures with those of best in class.
The following guidelines can be made use offer proper control of strategic planning implementation exercise:
Controls can be both long term and short term.
Focus should be on critical success factors i.e. 20% that determine 80% of the results.
Control should be directed towards monitoring meaningful activities and results and should be timely.
Controls should help in pinpointing exceptions.
There should be emphasis on rewards on meeting or exceeding standards of performance.