A strategy is a plan that guides an organization to move from its current state to the desired future state to achieve its goals. Developing and approving a strategy does not in itself guarantee success.
The board, management, and staff have to walk the talk in implementing the strategy to achieve the goals. In addition, the strategy has to be regularly reviewed to ensure the organization is still on the right track and any gaps are promptly identified and necessary corrective action taken.
What is a strategy review?
This is an objective assessment of the strategic plan to ensure it is still looking at the big picture, focused, relevant, and on course in meeting the organization’s goals.
The review is done to identify areas of improvement. The strategic plan is finally revised to include identified areas of improvement.
Phases in the strategy review process
The exercise has the following four phases;
This is the phase when the team agrees on the approach for the evaluation exercise.
The approach is put into practice and if need be training is carried and a trial run is done.
The results are summarized and the impact is evaluated and remedial action is recommended.
The report is forwarded to management for action.
Why is it important to review the performance of strategy?
Strategy review is done to confirm that the organization is still on course and up to date. The detailed reasons for the review exercise include the following among others;
- To obtain information about the performance of the strategy to understand it better;
- It reinforces organizational alignment on the strategic direction and how to achieve it;
- Enhances customer satisfaction as a strategy review considers customers’ perspective
- Allows timely corrective action;
- The challenges are known early enough;
- The evaluation checks the validity of the strategy and decision;
- Promotes comradeship among team members;
- Promotes the culture of continuous improvement;
- Allows the employees the chance to re-engage with the strategy and
- Identifies new opportunities for growth and improvement
When is the strategy evaluation carried out?
Strategy evaluation comes after strategy formulation and implementation phases. It is done immediately after the strategy is fully implemented before the experience is forgotten.
Strategy performance criteria
There are two types of strategy evaluation criteria namely qualitative and quantitative.
The qualitative criteria refer to measuring the quality of the strategy rather than its quantity aspects.
Quantitative criteria refer to measuring the quantity aspects of the strategy rather than its quality aspects.
Both criteria are necessary for measuring the performance of the strategy over time.
The strategy has several quality aspects that management can select from for evaluation but they should not be too many. The number selected should not exceed ten. The following are some of the qualitative aspects among others;
The information collected must be adequate and not too much. Too much information might confuse the analytics
The strategy should not contradict any existing policies and should perform a unique function that helps further the organization’s goals.
Big picture or strategic direction
The organization should remain focused on the strategic direction.
Does the organization remain viable under the strategy being implemented?
Consistency with the current trends
The strategy should interact with the current trends in the market.
The organization has adequate and proper resources to implement the strategy.
Degree of risk
The strategy should be within the approved risk appetite of the organization.
Appropriate time horizon
The time horizon between the implementation of a strategy and evaluation should be enough to fix any challenges. Also, the time for implementation of strategy should be appropriate.
Workability is a strategy’s ability to complete the function that it’s meant to perform.
Review the unique mix of qualities that sets your organization apart from the competition considering the categories of cost, service, quality, and flexibility.
Study all the activities that help or hurt the organization’s ability to achieve its goals.
Confirm effective support for the implementation of the strategy
Provides insights into how the strategy counteracts threats and seizes opportunities.
The ability of the leaders to communicate the new strategic direction, priorities, and desired goals, outcomes, and impact to staff and stakeholders.
Access to credible and privileged insights
Does the management have access to credible and privileged insights that enable it to look at the big picture, detect new patterns and trends, and experience the world from the customer’s point of view.
Achievement of the goals will depend on the clarity, specificity, creativity, and flexibility of the strategic action plan.
Several quantitative aspects can be used by management to evaluate the strategy but they should not be too many. In my view, the number should not exceed 10 quantitative aspects. The following are some of the quantitative aspects among others;
- Share of the market;
- Profit margin;
- Return on capital;
- Customer satisfaction;
- IT support employees per end-users;
- Revenue growth;
- Average time for conversion;
- Net promoter score;
- Inventory turnover and
- Monthly website traffic.
Steps in the Strategic Review
The following are the steps one may follow in the strategy review;
Establish the criteria
The criteria will provide a standard against which the actual will be compared. Examples of criteria could include productivity rate, customer satisfaction rate, profit margin, return on investment, return on assets, return on equity, and share of the market among others.
This involves collecting information relating to the performance of the organization that will help in ascertaining actual performance.
Evaluate the results
This phase involves analyzing and evaluating the results of the actual performance and comparing it with the criteria. It also involves ascertaining the gap between actual and criteria.
In case of actual performance being materially different from the criteria then the reviewer recommends to management to make adjustments to the strategy to increase its effectiveness.
In light of the recommended adjustment to the strategy, the goals are revised for the next evaluation.
What can go wrong during the strategy evaluation?
There are several obstacles that the evaluation team can face during the exercise. These may include the following among others;
Lack of co-operation
Success will depend on the cooperation the team receives from management, staff, and other key stakeholders.
Lack of objectivity in measurement
This is when the evaluation process is swayed by the personal opinions of the evaluators.
Skill of the team
The team of evaluators may not be skilled and experienced enough to carry out the exercise.
The time the exercise is scheduled is not appropriate.
Lack of skills in Technology
The team members may lack the technology skills that are necessary to carry out the exercise.
The resources allocated for the exercise are not adequate.
Quality of information
The information available is not of the right quality to lead to correct evaluation.