Strategy evaluation is an integral part of any organization's success. It involves assessing the performance of a strategy and determining whether it is achieving its objectives. To do this, there are four criteria that must be taken into consideration: quantitative, qualitative, conflicts, and strategic incoherence. Quantitative criteria involve the determination of net profit, ROI, earnings per share, cost of production, employee turnover rate, and other numerical measurements.
Qualitative factors include the subjective evaluation of skills and competencies, the potential to take risks, flexibility, and other non-numerical elements. Conflicts within the organization can refer to management problems or strategic incoherence. According to Argyris and Schon (197), the ideal method for evaluating the strategy cannot be specified in abstract terms. Managers should be rewarded based on the company's performance to motivate them to carry out a systematic evaluation.
The introduction of a new product, market, or plant can only be of strategic importance if the mission is accomplished within a certain period of time. The evaluation process should not be too frequent or periodic. It should measure actual performance and provide the basis for the control system to work. Performance controls are feedback in the evaluation process and are carried out through the motivation system.
The evaluator must examine the basic pattern of economic relationship that characterizes the company and determine whether the value created is sufficient to maintain the strategy or not. The first step in strategy evaluation is a strategic analysis to obtain a clear understanding of the circumstances affecting the strategic situation of the organization. This is followed by assessing the viability and acceptability of strategies that appear reasonably appropriate on the basis of the analysis. Finally, debate should focus on understanding how systems can be adapted to meet changing strategies. Evaluating a strategy requires careful consideration of all four criteria: quantitative, qualitative, conflicts, and strategic incoherence. Quantitative criteria involve numerical measurements such as net profit, ROI, earnings per share, cost of production, and employee turnover rate.
Qualitative factors include subjective evaluations such as skills and competencies, risk-taking potential, and flexibility. Conflicts within an organization can refer to management problems or strategic incoherence. Strategic incoherence occurs when there is a lack of alignment between objectives and strategies. Managers should be rewarded based on their organization's performance to motivate them to carry out a systematic evaluation. The evaluation process should measure actual performance and provide feedback for improvement.
The evaluator must examine the economic relationship that characterizes the company and determine whether it is creating enough value to sustain its strategy. Strategy evaluation is an essential part of any organization's success. By taking into account quantitative, qualitative, conflicts, and strategic incoherence criteria, managers can ensure that their strategies are effective in achieving their objectives.