The Evaluation Of Corporate Strategy
Each organization has its own approach to evaluation. There are not absolute answers as to the proper evaluation standards. However, there are three basic questions to ask in strategy evaluation:
- Is the existing strategy any good?
- Will the existing strategy be good in the future?
- Is there a need to change a strategy?
The first question may need additional detailing to indicate whether the current strategy is useful and beneficial to the organization.
Seymour Tilles has written a classic article on the qualitative assessment of organizational performance. This article serves several particular questions to be asked for evaluation. These questions are:
- Is the strategy internally consistent? Internal consistency refers to the cumulative impact of various strategies on the organizations. According to Tilles, a strategy must be judged not only in relationships to other strategies.
- Is organizations strategy consistent with its environment? An important test of strategy is whether the chosen strategy in consistent with environment (constituent demands, competition, economy, product / industry life cycle, suppliers, customers) - whether the really make sense with respect to what is going on outside.
- Is the strategy appropriate in view of available resources? Resources are those things that company is or has and that help it to achieve its corporate objectives. Included are money, competence, facilities and other. Without appropriate resources, organization simply cannot make strategic work.
- Does the strategy involve an acceptable degree of risk? Strategy and resources, taken together, determine the degree of risk which the company is undertaken. Each company must determine the amount of risk it wishes to incur. This is a critical managerial choice. In attempting to assess the degree of risk associated with a particular strategy, management must assess such issues as the total amount of resources a strategy requires, the proportion of the organization's resources that a strategy will consume, and the amount of time that must be committed.
- Does the strategy have an appropriate time horizon? A significant part of every strategy is the time horizon on which it is based. For example, a new product developed, a plant put on stream, a degree of market penetration, become significant strategic objectives only if accomplished by a certain time. Management must ensure that the time necessary to implement the strategy is consistent. Inconsistency between these two variables can make it impossible to reach goals in a satisfactory way.
- Is the strategy workable?
- Is the strategy identifiable? Has it been clearly and consistently identified and are people aware of it?
- Is the strategy appropriate to the personal values and aspirations of key managers?
- Does strategy constitute a clear stimulus to organizational effort and commitment?
- Is the strategy socially responsible?
- Are there early indications of the responsiveness of markets and market segments to the strategy?
- Does the strategy rely on weakness or do anything to reduce them?
- Does the strategy exploit major opportunities?
- Does it avoid, reduce, or mitigate the major threats? If not, are there adequate contingency plans?
E. P. Learned and others, building on the Tilles model, suggest that the following are also proper evaluative questions:
J. Argenti adds:
All these questions can by applied as the strategy progresses through its various stages, including implementation. The answers can provide guidelines as to how the strategy should be altered or changed.
The second basic question "Will the existing strategy be good in the future?" seeks to ascertain if the strategy would continue to satisfy the firm's objective in the future. The answer to this is based upon unforeseeable changes in the organization's environment or resources, or changes in its mission, goals, or objectives.
The answer to the third question "Is there a need to change the strategy?" will provide direction toward a strategy formation task.
Qualitative measurements methods can be very useful, but their application involves significant amounts of human judgment. Thus, conclusions based on such methods must be drawn carefully.