Strategic Control and Operational Control

Strategic Control

Strategic control focuses on the dual questions of whether: (1) the strategy is being implemented as planned; and (2) the results produced by the strategy are those intended.” Strategic control is “the critical evaluation of plans, activities, and results, thereby providing information for the future action”. There are four types of strategic control: premise control, implementation control, strategic surveillance, and special alert control

Premise Control: Planning premises/assumptions are established early on in the strategic planning process and act as a basis for formulating strategies. Premise control has been designed to check systematically and continuously whether or not the premises set during the planning and implementation processes are still valid. It involves the checking of environmental conditions. Premises are primarily concerned with two types of factors:

• Environmental factors (for example, inflation, technology, interest rates, regulation, and demographic/social changes).
• Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry).

All premises may not require the same amount of control. Therefore, managers must select those premises and variables that (a) are likely to change and (b) would a major impact on the company and its strategy if they did.

Implementation Control: Strategic implantation control provides an additional source of feedforward information. “Implementation control is designed to assess whether the overall strategy should be changed in light of unfolding events and results associated with incremental steps and actions that implement the overall strategy.” The two basic types of implementation control are:

1. Monitoring strategic thrusts (new or key strategic programs). Two approaches are useful in enacting implementation controls focused on monitoring strategic thrusts: (1) one way is to agree early in the planning process on which thrusts are critical factors in the success of the strategy or of that thrust; (2) the second approach is to use stop/go assessments linked to a series of meaningful thresholds (time, costs, research and development, success, etc.) associated with particular thrusts.
2. Milestone Reviews. Milestones are significant points in the development of a program, such as points where large commitments of resources must be made. A milestone review usually involves a full-scale reassessment of the strategy and the advisability of continuing or refocusing the direction of the company. In order to control the current strategy, must be provided in strategic plans.

Strategic Surveillance: is designed to monitor a broad range of events inside and outside the company that is likely to threaten the course of the firm’s strategy. The basic idea behind strategic surveillance is that some form of general monitoring of multiple information sources should be encouraged, with the specific intent being the opportunity to uncover important yet unanticipated information. Strategic surveillance appears to be similar in some way to “environmental scanning.” The rationale, however, is different. Environmental, scanning usually is seen as part of the chronological planning cycle devoted to generating information for the new plan. By way of contrast, strategic surveillance is designed to safeguard the established strategy on a continuous basis.

Special Alert Control: Special alert controls are the need to thoroughly, and often rapidly, reconsider the firm’s basic strategy based on a sudden, unexpected event.  (i.e., natural disasters, chemical spills, plane crashes, product defects, hostile takeovers, etc.). Special alert controls should be conducted throughout the entire strategic management process.

Operational Control

Operational control systems are designed to ensure that day-to-day actions are consistent with established plans and objectives. It focuses on events in a recent period. Operational control systems are derived from the requirements of the management control system. Corrective action is taken where performance does not meet standards. This action may involve training, motivation, leadership, discipline, or termination.

Evaluation Techniques for Operational Control:

• Value chain analysis: Firms employ value chain analysis to identify and evaluate the competitive potential of resources and capabilities.   By studying their skills relative to those associated with primary and support activities, firms are able to understand their cost structure and identify their activities through which they can create value.
• Quantitative performance measurements: Most firms prepare formal reports of quantitative performance measurements (such as sales growth, profit growth, economic value-added, rational analysis, etc.) that managers review at regular intervals.   These measurements are generally linked to the standards set in the first step of the control process.   For example, if sales growth is a target, the firm should have a means of gathering and exporting sales data.   If the firm has identified appropriate measurements, regular review of these reports helps managers stay aware of whether the firm is doing what it should do.   In addition to there, certain qualitative bases based on intuition, judgment, opinions, or surveys could be used to judge whether the firm’s performance is on the right track or not.
• Benchmarking: It is a process of learning how other firms do exceptionally high-quality things. Some approaches to benchmarking are simple and straightforward. For example, Xerox Corporation routinely buys copiers made by other firms and takes them apart to see how they work.   This helps the firms to stay abreast of their competitors’ improvements and changes.
• Key Factor Rating:   It is based on a close examination of key factors affecting performance (financial, marketing, operations, and human resource capabilities) and assessing overall organizational capability based on the collected information.