Strategic Control

STRATEGIC CONTROL- ERIK TREFFTZ Strategic Control refers to the activity of analysis and surveillance of the Strategic Planning. Its main objective is to monitor and implement corrective measures when facing any kind of deviation in the original Strategy, after comparing it with the Strategic Standards, and thus granting the good-riddance of the company? s targets. It works through the establishment of reference points, rules, methods and devices that allow to measure the development efficiency and effectiveness of the Strategy in whatever concerns seizing its goals, and also allows a better comprehension of the periods of crisis

In other words, Strategic Control seeks to provide an answer to the following issues: 1. Whether the Strategy is being implemented as planned. Any possible failure in a company achieving its goals might be due to wrong performance from Operational and/or managerial personnel. The responsibility of regulating and correcting possible deviations in the course of the strategy. 2. If targets continue being valid. It is, Strategic Control is in charge of spotting any alteration in the behavior of external forces, and uncontrollable environment that require a change in the Corporative targets.

Since environment is submitted to constant change, Opportunities and risks may arise that weren’t acknowledged when the original Corporative Strategy was conceived, and thus, the pertinent measures weren? t taken. For instance, a certain company provides a country with its products, but, all of a sudden, inner armed conflicts spark in that country, rendering it instable and dangerous. Under that conditions, the company might reconsider if it is still worth trading with this country, or perhaps it may regard abandoning transactions with it, thus, modifying its original targets. . Whether Outcomes of the Strategy are the expected or not. It means that Strategic Control also needs to verify whether the Strategy has been properly raised. Managerial and Operational personnel may have properly fulfilled their tasks to whatever concerns to the Strategy, but it may not have produced the desired outcomes. This might be due to the fact that the Strategy is not properly formulated. Strategic Control is in charge of re-formulating it so as to eventually achieve desired goals.

Unlike conventional ways of Organizational Control, Strategic Control operates “a Posteriori”, which means that it is focused on the events that have already taken place, identifying past mistakes, and distributing responsibilities. Under no circumstances this kind of Control seeks to recover losses, but rather to acknowledge them, note them down, and develop the pertinent mechanisms to avoid them in future operations. This way of operating, nevertheless, may render negative repercussions on the very own internal engine of the enterprise.

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The tight surveillance exerted by those in charge of applying this Strategic Control, strictly girded to stiff itineraries generates a feeling of insecurity and fear within the staff. Another negative “side-effect” of Strategic Control is that the exhaustive scrutiny to which the company? s operations are subjected leads to a slower pace. The process of Strategic Control is subdivided into 3 steps: 1st: Measuring the performance of the Organization:

Before Business managers can take any action concerning the future of the Enterprise, they need to dispose of any measure of its current performance. They perform so via the so-called Strategic Audit. This Audit consists in a series of exams that intend to evaluate the whole range of operations within any organizations which undergo a process of Strategic Planning. Its main target is to promote the development and integration of interrelated functions. It is, to ultimately enhance the enterprise? productivity. Its function is clearly represented in the following graphic, in which “t” stands for the variable “Time”. Strategic Audit provides managers with the tools necessary to perform their tasks as Strategic Controller, known as “Strategic Audit Measurement Methods”: Strategic audit is divided into three stages: 1st stage – Diagnosis: It implies reviewing key documents such as the strategic plan, organizational structure, operative plans, resource allocation plans, etc.

Afterwards operational, financial and commercial results during a given period are analyzed and compared with the company? s standards so as to identify possible deviations and unnoticed newborn constants. The Diagnosis also provides the manager with vital knowledge about the division of labor, different positions of responsibility, and processes of decision-making, as well as psychic perceptions of the organizations from its members, and their attitudes towards it, (via Interviews, sets of fixed questions, etc. and also from relevant customers, so as to get an accurate picture of the brand image of the organization within the environment in which it operates. Posed in other terms, Diagnosis allows decision-makers to become fully aware of the intrinsic functioning processes of their companies, and the perception the rest of the world has of it, thus allowing them to perform an optimum control, and identify the functioning aspects of the strategy, eventually being able to formulate several hypothesis about problems and opportunities, and how to implement changes in their strategy. nd stage – Focus of the Analysis: This stage consists in applying the different hypothesis to the strategic problems and opportunities of improvement that shall arise and challenge the organization, via the analysis of specific issues, and identify interrelations and interdependence among components of the strategic system, and afterwards, reaching conclusions concerning weaknesses and deficiencies in the execution and / or the formulation of the Strategy. rd stage – Recommendations: 3. 1. Develop alternative ways of solving eventual problems and also of making profit out the opportunities that might arise, always taking into account potential costs, risks and compensations these measures may bring. 3. 2. Finally, the last step consists on developing concrete recommendations that will help to develop the right plan of action that will improve strategic results. 2nd: Comparing Organizational performance with pre-set standards

Once pertinent measurement of the organizational performance has been done, top-managers shall compare them with current objectives and standards. Objectives are established in previous stages of the Strategic Planning, whereas standards may differ from one organization to another. Standards imply the desirable position concerning a certain aspect of the organizational strategy that the enterprise seeks to achieve. The most common standards, first adopted by the well-known General Electrics, and then implemented by almost each and every business during the 90? range from standards of profitability, of market-seizure, of productivity, standards of innovation and leadership, of staff development, of optimum staff attitudes, of public responsibility (of increasing importance nowadays), and finally standards of equilibrium between long-term and short-term objectives. 3rd: Implementing the proper corrective measures This implies a major change in the organizational operation that makes sure it will be able to seize its targets as efficiently and profitably as possible.

Its complexity may vary from changing a product? s price, to renew the productive chain System, re-locating resources, improving the efficiency of the labor force, etc. The whole process of strategic control can be summed up as follows: Still, Strategic Control needs to take into account the following variables so as to perform its activity correctly: Organization? s structure: Strategic Control needs to take into a high account the composition of the enterprise, to be able to implement an accurate overview and regulation over the Organization? strategy. If this structure is unknown, it is not possible to manage to comprehend its inner functioning, and therefore no control will be implemented properly. System of Values /Culture: The main values of the organization and its members, its culture may be a defining factor of the activities it may carry out, and therefore, it is necessary to come to a closer understanding of these cultural nuances, so as to be able to apply control properly. Information system: To perform right control over the company? becoming, it is necessary to dispose of an effective information system that allows managers to gather the sufficient amount of information that enables them to exert their task. Compensation system: As mentioned before, Strategic Control implies a tighter control upon organizational operations, and this directly results in an increase of the pressure to which staff is undergone. Therefore, a system of compensation shall be established that makes it up to the personnel for the increased pressure. For instance, economic compensation, translated into higher wages.

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