Criteria for Evaluating the Strategy of a Firm | Company Management

The strategy adopted by a firm, for the purpose of evaluation as to its effectiveness, should be judged against the following criteria and allied aspects:- 1. Functional Evidence 2. Realism and Practicality 3. Consistency in Direction 4. Assumptions Validity 5. Contingencies Recognition 6. Appropriateness.

Criteria # 1. Functional Evidence:

(i) What are the performance indicators—quantitative and qualitative—identified for scrutiny?

(ii) How are these examined to gain an estimation of

a. The company’s current position in relation to its competitors’ performance?

b. The company’s current position with respect to its own strategic plan?

c. The company’s performance trends? Any early warning indicators providing visibility over unfavourable performance trends that have yet to impact overall financial results?

d. Degree to which short and long-term goals and objectives are being met?

Criteria # 2. Realism and Practicality:

(i) Is strategy realistic with respect to the company’s ability to carry it out?

(ii) Is strategy built on proven strengths?

(iii) Does it recognise any real or potential weaknesses or deficiencies in strategy formulation stage?

(iv) Have the resources required to implement the strategy, including capital/human/ physical/technological, have been identified? Has assessment been made of their availability?

(v) Does the strategy incorporate reallocation scheme of resource requirements? If so, what are the criteria set?

Criteria # 3. Consistency in Direction:

(i) Are the three elements—objectives and goals, policies, and major programmes— clearly defined?

(ii) Are they internally consistent from the twin aspects of—integration of plans, and plans implementation?

[For example, review of plans for analytic consistency, review of plans to pinpoint strategic issues, methodology for resource allocation, trade-offs between short and long- term results, feedback on objectives and strategy, management selection linked to strategic task, linkage of strategic priorities with budgets, etc.]

Criteria # 4. Assumptions Validity:

(i) Have all important trends and impacts been identified and critically estimated?

(ii) Are the assumptions consistent with external data? If not, are inconsistencies ascertained and justified?

(iii) Are all data consistent and integrated with all planning activities? Does everyone make decisions on the basis of same data base?

(iv) Are critical assumptions (viz., economic, environment, technology, competition, etc.) appropriately revised?

Criteria # 5. Contingencies Recognition:

(i) Have the key contingencies been recognised as each decision is subject to some probability (right or wrong)?

(ii) How the impact of one or more contingent events on strategic assumptions been assessed?

(iii) Are alternative scenarios developed on the basis of the contingency plan in relation to strategic assumptions?

Criteria # 6. Appropriateness:

(i) Is the strategy consistent with management styles, values, and risk preferences?

(ii) Is the organisation structured to attain strategic objectives?

(iii) Do management systems and processes (that is planning, budgeting and reporting systems, etc.) support overall strategies direction and key programmes?

(iv) Is there an appropriate balance between preparing for the future and maximising the present?

(v) Is there a consensus within the company as to strategy?