STRATEGIC MANAGEMENT 20MBA25

Module - 6 Strategic Control

Strategic Control: Focus of Strategic Control, Establishing Strategic Controls (Premise Control,
Strategic Surveillance, Special Alert Control, Implementation Control), Exerting Strategic
Control (through Competitive Benchmarking, Performance and Formal and Informal
Organisations). Case Study on Strategic Control.

STRATEGIC CONTROL

The process of strategic management makes it clear that a strategy is formulated on the
basis of several assumptions. These relate to the environmental and organisational factors that
are dynamic and eventful. There is a considerable gap between the time a strategy is formulated
and when it is implemented. The process of implementation is itself time-consuming. During this
intervening period, there is a possibility that the assumptions made while formulating strategy do
not remain valid or, at least, are no longer so relevant. Strategic controls take into account the
changing assumptions that determine a strategy, continually evaluate the strategy as it is being
implemented, and take the necessary steps to adjust the strategy to the new requirements. In this
manner, strategic controls are early warning systems and differ from post-action controls that
evaluate only after the implementation is completed. You could think of strategic control as
analogous to the continuous evaluation system used in your management institute and distinguish
it from the end-of-the term examination system used in traditional universities.

The four basic types of strategic controls are:

1. Premise control
2. Strategic surveillance
3. Special alert control
4. Implementation control

The following sub-sections address each of these four strategic controls.

1. Premise control:
A strategy is formed on the basis of certain assumptions or premises about the complex
and turbulent organizational environment. Over a period of time these premises may not
remain valid. Premise control is a tool for systematic and continuous monitoring of the
environment to verify the validity and accuracy of the premises on which the strategy has
been built. It primarily involves monitoring two types of factors:

(i) Environmental factors such as economic (inflation, liquidity, interest rates),

technology, social and legal-regulatory.
(ii) Industry factors such as competitors, suppliers, substitutes.

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It is neither feasible nor desirable to control all types of premises in the same manner. Different
premises may require different amount of control. Thus, managers are required to select those
premises that are likely to change and would severely impact the functioning of the organisation
and its strategy.

2. Strategic surveillance:
Contrary to the premise control, the strategic surveillance is unfocussed. It
involves general monitoring of various sources of information to uncover unanticipated
information having a bearing on the organizational strategy. It involves casual
environmental browsing. Reading financial and other newspapers, business magazines,
attending meetings, conferences, discussions and so on can help in strategic surveillance.

Strategic surveillance may be loose form of strategic control, but is capable of uncovering
information relevant to the strategy.

3. Special alert control:

At times, unexpected events may force organizations to reconsider their strategy. Sudden
changes in government, natural calamities, terrorist attacks, unexpected
merger/acquisition by competitors, industrial disasters and other such events may trigger
an immediate and intense review of strategy. To cope up with such eventualities, the
organisations form crisis management teams to handle the situation.

4. Implementation control:
Managers implement strategy by converting major plans into concrete, sequential actions
that form incremental steps. Implementation control is directed towards assessing the
need for changes in the overall strategy in light of unfolding events and results associated
with incremental steps and actions.
Strategic implementation control is not a replacement to operational control. Unlike
operational control, it continuously monitors the basic direction of the strategy. The two
basic forms of implementation control are:
(i) Monitoring strategic thrusts: Monitoring strategic thrusts helps managers to determine
whether the overall strategy is progressing as desired or whether there is need for
readjustments.

(ii) Milestone Reviews: All key activities necessary to implement strategy are segregated
in terms of time, events or major resource allocation. It normally involves a complete
reassessment of the strategy. It also assesses the need to continue or refocus the direction
of an organization.

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EXERTING STRATEGIC CONTROL

Competitive benchmarking

Competitive benchmarking is a method of researching competitors and industry leaders for

strategies, practices and services that help in establishing comparison and benchmark for
performance. This is a method of adapting to industry processes as well as prevent losing
out on market share.

In simple terms, competitive benchmarking is a process set out to find out the “best” of any
business related aspect and use it as the highest standard that the company should strive to
achieve.

For example: A company might be performing poorly when it comes to customer

engagement while their competitors might be projecting positive results. This can be a
major threat to customer retention. In order to identify gaps in performance, the said
company can conduct competitive benchmarking to find answers to questions such as:

 Which companies are performing the best when it comes to customer interaction and
generating maximum engagement?

 What is the company’s position as against their customers?

 What different practices have the competitors adopted that enhances their customer
experience?

 Is there any unexplored touch point Of the company that the competitor is using?

 Where do customers rank the company and its competitors on metrics such as ease of
use, customer service, visual appeal among others?

Competitive benchmarking is a good way of maintaining competitive edge. By observing

how your company and competitors are performing, you stay up to date with the best market
practices.

Performance measurement

Performance measurement is the process used to assess the efficiency and effectiveness of
projects, programs and initiatives. It is a systematic approach to collecting, analyzing and
evaluating how “on track” a project/program is to achieve its desired outcomes, goals and
objectives.

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Performance measurement is typically done by an organization to demonstrate

accountability, support decision making and improve processes. Note that It is not an
approach that prescribes what must be measured; organizations need to develop their own
performance measures based on their project plans and situation.

Performance measurement should be treated as an integral part of any planning process

from the outset and should be built into any plan or project that has clear goals and
objectives.

Performance measures provide the information to assist in making strategic decisions about
what an organization does and how it performs. Performance measurement frameworks are
flexible and can be used to measure the effectiveness of a pilot project, a multi-year
program or a strategic planning process and can be applied to a new or existing initiative.

Benefits of performance measures

The benefits of measuring performance are numerous and range from measuring the
effectiveness of a single project to contributing to a culture of continuous improvement
throughout an organization.

Using performance measures on a regular basis helps to inform decisions and means a plan
can be adjusted mid-course or priorities can be reset to take advantage of emerging
opportunities. An internal performance measurement system will drive results and enable an
organization to learn from its successes and failures.

Other benefits of performance measures include:

 Creates “buy-in” through stakeholders setting targets and goals together.

 Develops “best practices” and “lessons learned” that can be applied to future initiatives.
 Increases accountability by demonstrating the effectiveness and value of plans and
activities in achieving desired goals/outcomes.
 Informs decision-making including budgeting and resource allocation in an environment
where there may be competition over limited resources.
 Helps to demonstrate and document changes over time.
 Helps to communicate an organization’s story.
 Develops relationships through engaging stakeholders and building a common
understanding of the process.

Formal and Informal Organization

Formal Organisation:
When the managers are carrying on organising process then as a result of organising process an
organisational structure is created to achieve systematic working and efficient utilization of
resources. This type of structure is known as formal organisational structure.

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Formal organisational structure clearly spells out the job to be performed by each individual, the
authority, responsibility assigned to every individual, the superior- subordinate relationship and
the designation of every individual in the organisation. This structure is created intentionally by
the managers for achievement of organisational goal.

Features of Formal organisation:

(1) The formal organisational structure is created intentionally by the process of organising.

(2) The purpose of formal organisation structure is achievement of organisational goal.

(3) In formal organisational structure each individual is assigned a specific job.

(4) In formal organisation every individual is assigned a fixed authority or decision-making

power.

(5) Formal organisational structure results in creation of superior-subordinate relations.

(6) Formal organisational structure creates a scalar chain of communication in the organisation.

Advantages of Formal Organisation:

1. Systematic Working:
Formal organisation structure results in systematic and smooth functioning of an organisation.

2. Achievement of Organisational Objectives:

Formal organisational structure is established to achieve organisational objectives.

3. No Overlapping of Work:
In formal organisation structure work is systematically divided among various departments and
employees. So there is no chance of duplication or overlapping of work.

4. Co-ordination:
Formal organisational structure results in coordinating the activities of various departments.

5. Creation of Chain of Command:

Formal organisational structure clearly defines superior subordinate relationship, i.e., who
reports to whom.

6. More Emphasis on Work:

Formal organisational structure lays more emphasis on work than interpersonal relations.

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Informal Organisation:
In the formal organisational structure individuals are assigned various job positions. While
working at those job positions, the individuals interact with each other and develop some social
and friendly groups in the organisation. This network of social and friendly groups forms another
structure in the organisation which is called informal organisational structure.

The informal organisational structure gets created automatically and the main purpose of such
structure is getting psychological satisfaction. The existence of informal structure depends upon
the formal structure because people working at different job positions interact with each other to
form informal structure and the job positions are created in formal structure. So, if there is no
formal structure, there will be no job position, there will be no people working at job positions
and there will be no informal structure.

Features of informal organisation:

(1) Informal organisational structure gets created automatically without any intended efforts of
managers.

(2) Informal organisational structure is formed by the employees to get psychological

satisfaction.

(3) Informal organisational structure does not follow any fixed path of flow of authority or
communication.

(4) Source of information cannot be known under informal structure as any person can
communicate with anyone in the organisation.

(5) The existence of informal organisational structure depends on the formal organisation
structure.

Advantages of Informal Organisation:

1. Fast Communication:
Informal structure does not follow scalar chain so there can be faster spread of communication.

2. Fulfills Social Needs:

Informal communication gives due importance to psychological and social need of employees
which motivate the employees.

3. Correct Feedback:
Through informal structure the top level managers can know the real feedback of employees on
various policies and plans.

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Informal organisation can be used to get benefits in the formal organisation in the
following way:

1. The knowledge of informal group can be used to gather support of employees and improve
their performance.

2. Through grapevine important information can be transmitted quickly.

3. By cooperating with the informal groups the managers can skilfully take the advantage of both
formal and informal organisations.

Important Questions:

1. Explain four basic types of Strategic Control.

2. What is Competitive Benchmarking?
3. Differentiate between formal and informal organisation.
4. What is Special Alert control?

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