STRATEGIC CONTROL

STRATEGIC CONTROL refers to the systematic process used by management to monitor the execution of a strategy, identify
deviations or changes in the underlying assumptions, and implement corrective actions to ensure organizational goals are
achieved.

QUESTIONS THAT DRIVE STRATEGIC CONTROL: Strategic control relies on critical questions to evaluate the
effectiveness of a strategy. These questions help organizations stay aligned with their goals and adapt to changes. Below is a
detailed breakdown of the two core questions, along with their significance, related tools, and example:

1. "Are we moving in the proper direction?"

(Directional Alignment Check)

• Purpose:
o Ensures the strategy remains relevant to the organization’s mission, vision, and external environment.
o Validates whether the initial assumptions (e.g., market conditions, customer needs) still hold true.

• Tools/Methods: (OPTIONAL)
o SWOT Analysis: Identifies shifts in strengths, weaknesses, opportunities, or threats.
o PESTEL Analysis: Monitors macro-environmental changes (Political, Economic, Social, Technological,
Environmental, Legal).
o Scenario Planning: Anticipates future scenarios to test strategy robustness.

• Examples: (OPTIONAL)
o A tech company revisits its AI investment strategy after new regulations restrict data usage.
o A retail chain questions its expansion direction due to rising e-commerce dominance.

• Exam Tip: (OPTIONAL) Link this question to premise control (validating assumptions) and strategic
surveillance (broad environmental scanning).

2. "How are we performing?"

(Performance Evaluation)

• Purpose:
o Measures progress against predefined goals (e.g., financial targets, market share).
o Identifies gaps between expected and actual outcomes.

• Tools/Methods: (OPTIONAL)
o KPIs (Key Performance Indicators): Metrics like ROI, customer satisfaction scores, or production efficiency.
o Balanced Scorecard: Evaluates performance across financial, customer, internal process, and learning/growth
perspectives.
o Benchmarking: Compares performance with industry standards or competitors.

• Examples: (OPTIONAL)
o A manufacturing firm tracks defect rates to assess quality control performance.
o A startup evaluates monthly user growth against its 5-year projections.

• Exam Tip: (OPTIONAL) Connect this question to implementation control (monitoring specific actions)
and corrective actions (e.g., reallocating resources).

TYPES OF STRATEGIC CONTROL

1. PREMISE CONTROL
Premise control is a systematic process of continuously validating the fundamental assumptions (premises) underlying an
organization's strategy to ensure they remain valid over time.

PURPOSE
• To detect changes in internal or external conditions that may make the strategy ineffective.
• To provide early warning signals for necessary strategy adjustments.

KEY FOCUS AREAS

FACTOR TYPE DESCRIPTION EXAMPLES

ENVIRONMENTAL Macro-level external conditions affecting the business. - Economic recessions

FACTORS - Technological disruptions
- Climate change regulations
 INDUSTRY FACTORS Conditions specific to the company's industry that impact - New competitors entering
competitiveness. - Changing customer
preferences
- Supply chain disruptions

2. STRATEGIC SURVEILLANCE
Strategic surveillance is a broad, ongoing monitoring process that scans both internal and external environments to detect potential
opportunities or threats that might impact an organization's strategy.

KEY CHARACTERISTICS(OPTIONAL)
• Unfocused by Design: Unlike premise control (which tests specific assumptions), it casts a wide net to catch unexpected
changes.

• Continuous Process: Operates as part of daily management activities.

• Dual Focus: Tracks both:

o External factors (market trends, political shifts)

o Internal factors (employee morale, operational inefficiencies)

PURPOSE(OPTIONAL)
• Early detection of weak signals that may evolve into significant trends
• Provides general awareness beyond predefined assumptions
• Complements other controls (e.g., premise control) with unstructured data

3. SPECIAL ALERT CONTROL

Special alert control is an emergency strategic response mechanism activated when sudden, high-impact events threaten to derail
organizational strategy. It involves rapid, intensive strategy reassessment and immediate action.

KEY CHARACTERISTICS(OPTIONAL)
• Trigger-Based: Activated by specific crisis events
• Urgent Timeframe: Requires immediate response (hours/days)
• High-Stakes: Addresses potentially catastrophic situations
• Cross-Functional: Involves top management and crisis teams

4. IMPLEMENTATION CONTROL
Implementation control is a strategic management process that evaluates whether an organization's core strategy needs
modification based on the performance of incremental implementation actions. It serves as a feedback mechanism between
tactical execution and strategic planning.

KEY CHARACTERISTICS(OPTIONAL)
• Incremental Focus: Assesses specific projects/actions that collectively execute the strategy
• Performance-Linked: Triggers strategy reviews based on implementation results
• Continuous Process: Operates throughout strategy execution
• Two-Way Adjustment: May lead to either strategy refinement or implementation changes

PURPOSE(OPTIONAL)
• Verify if implementation efforts are achieving desired strategic outcomes
• Identify execution gaps before they derail the overall strategy
• Provide data-driven insights for strategic adaptation

STRATEGIC THRUSTS/PROJECTS
Special efforts that are early steps in carrying out a broader strategy. These usually involve significant resource commitments, but
also include predetermined feedback to help management decide if continuing with the strategy is right or if it needs adjustment or
major change.

KEY CHARACTERISTICS(OPTIONAL)
• Pilot Nature: Small-scale implementations of strategic elements
• High Visibility: Receive significant organizational attention/resources
• Measurable Outcomes: Designed with clear success/failure metrics
• Decision Points: Create natural junctures for strategy evaluation

PURPOSE(OPTIONAL)
 • Risk Mitigation: Test strategies with limited exposure
• Learning Opportunity: Generate real-world strategy validation
• Resource Allocation: Guide investment decisions for full rollout
• Stakeholder Alignment: Demonstrate strategy viability

MILESTONE REVIEWS
Milestone reviews are predetermined evaluation points during strategy implementation where management does formal "go/no-
go" assessments of the overall strategy, based on performance at critical points.

KEY CHARACTERISTICS(OPTIONAL)
• Scheduled Checkpoints: Time-based or phase-based (e.g., quarterly, post-launch)
• Decision-Oriented: Results trigger continue/change/terminate decisions
• Comprehensive: Evaluate both quantitative and qualitative factors
• Cross-Functional: Involve multiple organizational levels

PURPOSE(OPTIONAL)
• Validate strategy viability at logical breakpoints
• Prevent escalation of commitment to failing strategies
• Enable data-driven strategic pivots
• Align resource allocation with performance evidence

OPERATIONAL CONTROL SYSTEMS

Operational control systems are structured processes that ensure day-to-day organizational activities align with strategic
objectives. To be effective, operational control systems must take four steps common to all post-action controls:

THE 4-STEP CONTROL PROCESS

Set Performance Measure Actual Initiate Corrective

Identify Deviations
Standards Performance Action

• Purpose: Establish • Methods: • Analysis Techniques: • Approaches:

measurable targets o Automated systems (ERP, o Variance analysis (actual vs. o Immediate fixes: Machine
• Types of Standards: POS data) standard) recalibration
o Quantitative: Productio o Manual reporting o Trend analysis (performance o Process
n output, quality levels, (supervisor checklists) over time) changes: Revised work
time metrics o Customer feedback o Root cause analysis (fishbone procedures
o Qualitative: Customer (surveys, complaints) diagrams) o Training
satisfaction, employee • Critical • Example: Manufacturin interventions: Skill
engagement Factor: Measuremen g finds 15% defect rate upgrades
• Example: Call center sets t frequency matches vs. 5% standard • Decision
90% first-call resolution operational tempo Hierarchy: Frontlin
standard e staff vs.
management actions

CHARACTERISTICS OF THE FOUR TYPES OF STRATEGIC CONTROL

Basic Implementation Strategic Special Alert Control Premise Control
Characteristics Control Surveillance
Objects of control Planning premises and Key strategic thrusts Potential threats and Occurrence of
projections and milestones opportunities related to the recognizable but
strategy unlikely events
Degree of focusing High High Low High
Data acquisition:
Formalization Medium High Low High
Centralization Low Medium Low High
Use with:
Environmental Yes Seldom Yes Yes
factors
Industry factors Yes Seldom Yes Yes
Strategy-specific No Yes Seldom Yes
factors
Company-specific No Yes Seldom Seldom
factors
 BALANCED SCORECARD METHODOLOGY
An alternative approach that links operational and strategic control, developed by Harvard Business School professors Robert
Kaplan and David Norton, is a system called the balanced scorecard.

BALANCED SCORECARD A management control system that enables companies to clarify their strategies, translate them into
action, and provide quantitative feedback as to whether the strategy is creating value, leveraging core competencies, satisfying the
company’s customers, and generating a financial reward to its shareholders.

KAPLAN AND NORTON ON THE BALANCED SCORECARD:

“The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate
story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for
success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age
companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and
innovation.”

INTEGRATING SHAREHOLDER VALUE AND ORGANIZATIONAL ACTIVITIES ACROSS ORGANIZATIONAL

LEVELS (DIAGRAM PAGE 19) (DOUBTFUL ABOUT THE EXPLANATION)

1. The Big Picture: What Shareholders Care About

Exxon measures success through financial metrics that show how well they're using investors' money:
• ROCE (Return on Capital Employed): Profit from every dollar invested
• Economic Profit: Real profit after all costs
• Margins: Profit percentage per sale
2. How This Trickles Down Through the Company
A. CEO Level (Big-Picture View)
Focus: Overall company health
Key Metrics:
• ROCE
• Economic Profit
• Sales Targets
B. Corporate/Division Level (Department Coordination)
Focus: Efficiency across regions/functions
Key Metrics:
• Cost Control: COGS/Sales, Inventory Turnover
• Asset Use: Capital Turnover, Capacity Utilization
• Cash Flow: Cash Turnover
C. Functional Level (Daily Operations)
Focus: Specific business areas
Key Metrics:
• Sales: Order Size, Customer Mix
• Customer Service: Complaints, Churn Rate
• Production: Defect Rates, Downtime
D. Teams/Departments (Ground-Level Work)
Focus: Task execution
Key Metrics:
 • Logistics: Cost per Delivery
• R&D: New Product Development Time
• Accounting: Payable/Receivable Time
3. Real-World Example: Oil Delivery Process
1. Team Level: Truck drivers track cost per delivery
2. Functional Level: Logistics monitors downtime
3. Division Level: Calculates inventory turnover
4. CEO Level: Shows up in improved ROCE
4. Why This Matters
• Alignment: Everyone understands how their work affects profits
• Accountability: Clear metrics at each level
• Decision Making: Data shows where to improve

THE FOUR PERSPECTIVES OF THE BALANCED SCORECARD

Learning & Growth ("Are we getting better?") Business Processes ("Are we working efficiently?")
What it measures: What it measures:
Employee skills and training Quality of products/services
New technology adoption Speed of production/delivery
Company culture and innovation Cost to make things
Example: Google's policy of letting employees spend 20% time on new ideas Example: Toyota's system to reduce car manufacturing defects

FOUR PERSPECTIVES OF
THE BALANCED
SCORECARD
Customer ("Do customers love us?")
Financial ("Are we making money?")
What it measures:
What it measures:
Customer satisfaction scores
Profits
Market share
Costs
Repeat business
Return on investment
Example: Amazon tracking delivery times and returns
Example: Exxon tracking profit per gallon of gasoline

EXXONMOBIL NAM&R DIVISION'S BALANCED SCORECARD (DIAGRAM 22-25)

1. FINANCIAL PERSPECTIVE (MAKING MONEY)

Goals:
1. F1: ROCE - Get good returns on money invested in gas stations/refineries
How They Measure:
2. F2: Cash Flow - Always have money available to run business
• Compare their costs per gallon to competitors
3. F3: Profit Margins - Earn enough on every gallon sold
• Track if sales are growing compared to industry
4. F4: Low Costs - Spend less than competitors to deliver fuel
5. F5: Grow Smart - Increase sales faster than other gas companies • Calculate a "risk score" for big decisions
6. F6: Safety Net - Don't take big financial risks
2. CUSTOMER PERSPECTIVE (KEEPING BUYERS HAPPY)
Goals:
1. C1: Happy Drivers
o Check "mystery shopper" ratings at gas stations
o Track what types of customers buy most
2. C2: Profitable Partners
o Make sure gas station owners earn good money
o See if dealers like Exxon's programs
Example:
If gas station owners make more money, they'll keep selling Exxon fuel instead of switching to Shell or BP.
3.INTERNAL PROCESSES (WORKING EFFICIENTLY)

Key Areas:
Department What They Improve How They Measure

Marketing New products/services Revenue from snacks in gas stations

Manufacturing Refinery performance Cost to make each gallon

Supply Chain Delivery efficiency Inventory levels at gas stations

 Safety Worker protection Number of accidents

Real Impact:
When refineries work better → Gas costs less to make → Prices can be lower → More customers buy Exxon gas

4. LEARNING & GROWTH (PREPARING FOR FUTURE)

Goals:
1. L1: Skilled Workers 2. L2: Good Information
o Train employees on new equipment Check if managers get useful data
o Survey if staff feel prepared Track how quickly teams solve problems
Why It Matters:
Smarter employees → Fewer refinery accidents → Less downtime → More gas to sell

DASHBOARD
A user interface that organizes and presents information from multiple digital sources simultaneously in a user-designed format on
the computer screen to support decision-making.

KEY CHARACTERISTICS: (OPTIONAL)

• Customizable Layout: Users design widget placement and hierarchy
• Multi-Source Integration: Connects to ERPs, CRMs, IoT devices
• Visual Analytics: Uses charts, gauges, and heat maps
• Drill-Down Capability: From KPIs to granular data

USES OF DASHBOARD
• Key management tool for timely strategic and operational control
• Users can decide the key indicators that tell them about the unfolding success of their strategies

WHY ARE DASHBOARDS USEFUL? (OPTIONAL)

QUICK DECISIONS: Instead of digging through reports, managers see key info at a glance.
TRACK PROGRESS: Shows if the company is hitting its goals (like sales targets or safety records).
CUSTOMIZABLE: Each team can choose what metrics matter most to them.

SUMMING UP STRATEGIC CONTROL

• Strategic control and comprehensive control programs like the balanced scorecard bring the entire management task into
focus.

• Organizational leaders can adjust or radically change their firm’s strategy based on feedback from a balanced scorecard
approach as well as other strategic controls.