Once your organization has implemented strategic management and planning, the next step is to monitor the development and performance process for your chosen strategy.
This is accomplished through “strategic control.” Strategic control can be understood as a particular type of organizational control focused on monitoring and evaluating strategic performance, to ensure that a strategy generates the expected results. The objective of carrying out strategic control is to create the conditions for senior management to achieve established organizational goals and objectives.
Ram Charan, in the article “How to Strengthen your Strategy Review Process,” published in The Journal of Business Strategy in 1982, adds other purposes, such as:
- evaluate the strategy with regard to consistency and timeliness
- ensure that the principal manager is well aware of the organization’s scope of activities and those in development
- assess the changes that managers make in changing environments
- monitor and follow the results of what was agreed between the top management and unit / area managers
- negotiate and integrate strategic issues between areas
- expand the scope of knowledge of all participants about the environment, choices and strategies
- establish a forum in which managers and other employees can assess one another’s motivation, commitment and attitudes
Strategic control is developed in three main stages: measuring organizational performance, comparing actual performance with established objectives and goals, and applying the FCA methodology (fact, cause, action), as illustrated in Figure 1.
Phase 1 involves measuring organization performance. It implies identifying the organization’s current performance via performance indicators.
In phase 2, these measurements must be compared with the goals previously established for each of the chosen performance indicators. Readings above 110% of established targets generally indicate goals have been exceeded. Readings of 100%-109% indicate achievement of goals. Readings of 95%-99% mean slightly below target. Below 95% indicates failure to achieve the goal.
These ranges may vary from indicator to indicator; however, it is important to keep in mind that if a goal has not been reached, you will need time to identify and implement corrective actions, as well as time to observe the results of the corrective action. For this reason, I do not recommend accepting any reading much below 94%.
In phase 3, the organization must define which corrective actions to take through applying FCA methodology. The action is nothing more than the change that the manager will make in the organization to ensure that established objectives and goals for each of the indicators, and consequently the strategies, are reached.
If you want to go deeper into the subject, I recommend reading the previously published issues of Management Tips that deal with the definition of objectives, performance indicators, goal-setting and applying FCA.
Until the next Management Tips!