(10)Evaluation and Control

Evaluation and Control Evaluation and Control ProcessProcess

Yes

Determine what to

measure.

Measure performance.

Take corrective

action.

STOP

NoDoes

performance match

standards?

Establish predetermined

standards.

1 2 3 4 5

Measuring PerformanceMeasuring Performance

• Appropriate measures: ROI, steering controlsAppropriate measures: ROI, steering controls• Types of controlTypes of control• Activity based costingActivity based costing• Enterprise risk managementEnterprise risk management• Primary measures of corporate performancePrimary measures of corporate performance

Evaluation and Control

Types of ControlTypes of Control

• Behavior controls : how something is to be done Behavior controls : how something is to be done (policies, rules, SOP)(policies, rules, SOP)

• Output controls: what is to be accomplished Output controls: what is to be accomplished (objectives, performance targets, milestones)(objectives, performance targets, milestones)

• Input controls: focus on resources (knowledge, Input controls: focus on resources (knowledge, skills, abilities, values, motives of employees)skills, abilities, values, motives of employees)

Activity- Based Costing Activity- Based Costing (ABC)(ABC)

• Is an accounting method for allocating indirect Is an accounting method for allocating indirect and fixed costs to individual product lines based and fixed costs to individual product lines based on the value-added activities going into that on the value-added activities going into that productproduct

• Useful in doing a value chain analysis of a firm’s Useful in doing a value chain analysis of a firm’s activities to make outsourcing decisionsactivities to make outsourcing decisions

Enterprise risk managementEnterprise risk management

• A corporate wide, integrated process for A corporate wide, integrated process for managing the uncertainties that could negatively managing the uncertainties that could negatively or positively influence the achievement of a or positively influence the achievement of a corporation’s objectivescorporation’s objectives

Process of Rating RisksProcess of Rating Risks

1.1. Identify the risks, using scenario analysis or Identify the risks, using scenario analysis or brainstorming or by performing risk self-brainstorming or by performing risk self-assessmentsassessments

2.2. Rank the risks, using some scale of impact and Rank the risks, using some scale of impact and likelihoodlikelihood

3.3. Measure the risks, using some agreed upon Measure the risks, using some agreed upon standardsstandards

Balanced ScorecardBalanced Scorecard

1. Financial1. Financial

2. Customer2. Customer

3. Internal Business Perspective3. Internal Business Perspective

4. Innovation and learning4. Innovation and learning

Primary Measures of Corporate Primary Measures of Corporate PerformancePerformance

• Traditional Financial MeasuresTraditional Financial Measures• Stakeholders measuresStakeholders measures• Shareholder valueShareholder value• Balanced Scorecard approach : using key Balanced Scorecard approach : using key

performance measuresperformance measures• Evaluating top management and the board of Evaluating top management and the board of

directorsdirectors

Primary measures of Divisional Primary measures of Divisional and Functional Performanceand Functional Performance

• Responsibility CentersResponsibility Centers• Using benchmarking to evaluate performanceUsing benchmarking to evaluate performance

Responsibility CentersResponsibility Centers

• Standard cost centers: (used in manufacturing Standard cost centers: (used in manufacturing facilities)facilities)

• Revenue centers: in terms of sales or unitsRevenue centers: in terms of sales or units• Expense centers : (resources without product Expense centers : (resources without product

costs: administrative, service and research) costs: administrative, service and research) departmentsdepartments

• Profit centers Profit centers • Investment centers : ROIInvestment centers : ROI

Definition of BenchmarkingDefinition of Benchmarking

• The continual process of measuring products, The continual process of measuring products, services, and practices against toughest services, and practices against toughest competitors or those companies recognized as competitors or those companies recognized as industry leadersindustry leaders

Steps in the Benchmarking Steps in the Benchmarking ProcessProcess

1.1. Identify area / process to be examinedIdentify area / process to be examined

2.2. Find behavioral and output measures of the area or process and Find behavioral and output measures of the area or process and obtain measurementsobtain measurements

3.3. Select a set of competitors and best-in-class companies against Select a set of competitors and best-in-class companies against which to benchmarkwhich to benchmark

4.4. Calculate differences between company’s performance Calculate differences between company’s performance measurements and those of the best-in-class and determine measurements and those of the best-in-class and determine whywhy the differences existthe differences exist

5.5. Develop tactical programs for closing performance gapsDevelop tactical programs for closing performance gaps

6.6. Implement the programs, measure the results, and compare results Implement the programs, measure the results, and compare results with those of the best-in-class companieswith those of the best-in-class companies

International Measurement International Measurement IssuesIssues

• International Transfer Pricing (used to minimize International Transfer Pricing (used to minimize taxes)taxes)

• Repatriation of profitsRepatriation of profits• Piracy : counterfeit copiesPiracy : counterfeit copies

• Focus on the best competitors in benchmarking Focus on the best competitors in benchmarking and the worst ones when you go for market and the worst ones when you go for market share- not the reverseshare- not the reverse

Problems in Measuring Problems in Measuring PerformancePerformance

• Short-term orientationShort-term orientation• Goal displacementGoal displacement

Behavior substitutionBehavior substitution

SuboptimizationSuboptimization

Critical Success FactorsCritical Success Factors

• Those things that must go well to ensure Those things that must go well to ensure success: 20% of the factors that determine 80% of success: 20% of the factors that determine 80% of the performancethe performance

10.7Critical Success Factors

Strategic Incentive Strategic Incentive ManagementManagement

Approaches to Tie Rewards with Strategic PerformanceApproaches to Tie Rewards with Strategic Performance

• Weighted-factor methodWeighted-factor method• Long-term evaluation methodLong-term evaluation method• Strategic-funds methodStrategic-funds method

10.8a Strategic Incentive Management

10.8b Strategic Incentive Management

Weighted Factor Approach to Strategic Incentive Weighted Factor Approach to Strategic Incentive ManagementManagement

Strategic Business Unit Category Factor Weight

High Growth Return on assets 10%

Cash flow 0%

Strategic-funds programs (developmental expenses) 45%

Market-share increase 45%

100%

Medium Growth Return on assets 25%

Cash flow 25%



100%

Low Growth Return on assets 50%

Cash flow 50%



100%

Source: Reprinted by permission of the publisher from “The Performance Measurement and Reward System: Critical to Strategic Management,” by Paul J. Stonich, from Organizational Dynamics (Winter 1984), p. 51. Copyright © 1984 by American Management Association, New York. All rights reserved.

Table 10.5 Strategic Audit of Table 10.5 Strategic Audit of a Corporationa Corporation

I. Current SituationI. Current Situation

A. Current PerformanceA. Current Performance See Section 10.2 on pages 234–238.See Section 10.2 on pages 234–238.

How did the corporation perform the past year overall in terms of How did the corporation perform the past year overall in terms of return on investment, market share, and profitability?return on investment, market share, and profitability?

B. Strategic Posture B. Strategic Posture See Section 1.3 on pages 10–14.See Section 1.3 on pages 10–14.

What are the corporation’s current mission, objectives, strategies, and What are the corporation’s current mission, objectives, strategies, and policies?policies?

1. Are they clearly stated or are they merely implied from 1. Are they clearly stated or are they merely implied from performance?performance?

2. Mission: What business(es) is the corporation in? Why?2. Mission: What business(es) is the corporation in? Why?

3. Objectives: What are the corporate, business, and functional 3. Objectives: What are the corporate, business, and functional objectives? Are they consistent with each other, with the mission, objectives? Are they consistent with each other, with the mission, and with the internal and external environments?and with the internal and external environments?

10.9 Main Elements of Strategic Audit

Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued) (continued)

4.4. Strategies: What strategy or mix of strategies is the Strategies: What strategy or mix of strategies is the corporation following? Are they consistent with each other, with the corporation following? Are they consistent with each other, with the mission and objectives, and with the internal and external mission and objectives, and with the internal and external environments?environments?

5.5. Policies: What are they? Are they consistent with each other, Policies: What are they? Are they consistent with each other, with the mission, objectives, and strategies, and with the internal and with the mission, objectives, and strategies, and with the internal and external environments?external environments?

6.Do the current mission, objectives, strategies, and policies reflect 6.Do the current mission, objectives, strategies, and policies reflect the corporation’s international operations — whether global or the corporation’s international operations — whether global or multidomestic?multidomestic?

II. Corporate GovernanceII. Corporate GovernanceA. Board of DirectorsA. Board of Directors See Section 2.1 on pages 26–35.See Section 2.1 on pages 26–35.

1.1. Who are they? Are they internal or external?Who are they? Are they internal or external?

2.2. Do they own significant shares of stock?Do they own significant shares of stock?



3.3. Is the stock privately held or publicly traded? Are there Is the stock privately held or publicly traded? Are there different classes of stock with different voting rights?different classes of stock with different voting rights?

4.4. What do they contribute to the corporation in terms of What do they contribute to the corporation in terms of knowledge, skills, background, and connections? If the corporation knowledge, skills, background, and connections? If the corporation has international operations, do board members have international has international operations, do board members have international experience?experience?

5.5. How long have they served on the board?How long have they served on the board?

6.6. What is their level of involvement in strategic management? What is their level of involvement in strategic management? Do they merely rubber-stamp top management’s proposals or do they Do they merely rubber-stamp top management’s proposals or do they actively participate and suggest future directions?actively participate and suggest future directions?

B. Top ManagementB. Top Management See Sections 2.2 to 2.4 on pages 35– See Sections 2.2 to 2.4 on pages 35–48.48.

1.1. What person or group constitutes top management?What person or group constitutes top management?



2.2. What are top management’s chief characteristics in terms of What are top management’s chief characteristics in terms of knowledge, skills, background, and style? If the corporation has knowledge, skills, background, and style? If the corporation has international operations, does top management have international international operations, does top management have international experience? Are executives from acquired companies considered experience? Are executives from acquired companies considered part of the top management team?part of the top management team?

3.3. Has top management been responsible for the corporation’s Has top management been responsible for the corporation’s performance over the past few years? How many managers have performance over the past few years? How many managers have been in their current position for less than 3 years? Were they been in their current position for less than 3 years? Were they internal promotions or external hires?internal promotions or external hires?

4.4. Has it established a systematic approach to strategic management? Has it established a systematic approach to strategic management?

5.5. What is its level of involvement in the strategic management What is its level of involvement in the strategic management process?process?

6.6. How well does top management interact with lower level managers How well does top management interact with lower level managers and with the board of directors?and with the board of directors?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued) (continued)7. Are strategic decisions made ethically in a responsible manner?7. Are strategic decisions made ethically in a responsible manner?

8. Is top management sufficiently skilled to cope with likely future 8. Is top management sufficiently skilled to cope with likely future challenges?challenges?

III. External Environment: Opportunities and Threats III. External Environment: Opportunities and Threats (SWOT)(SWOT)

A. Societal EnvironmentA. Societal Environment See Section 3.1 on pages 53–60. See Section 3.1 on pages 53–60.

1.What general environmental forces are currently affecting both the 1.What general environmental forces are currently affecting both the corporation and the industries in which it competes? Which present current corporation and the industries in which it competes? Which present current or future threats? Opportunities? See Table 3.1 on page 55.or future threats? Opportunities? See Table 3.1 on page 55.

a) Economica) Economic

b)b) TechnologicalTechnological

c)c) Political-legalPolitical-legal

d)d) SocioculturalSociocultural

2.2. Are these forces different in other regions of the world?Are these forces different in other regions of the world?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)

B. Task EnvironmentB. Task Environment See Section 3.2 on pages 60–72. See Section 3.2 on pages 60–72.

1.1. What forces drive industry competition? Are these forces the What forces drive industry competition? Are these forces the same globally or do they vary from country to country?same globally or do they vary from country to country?

a)a) Threat of new entrantsThreat of new entrants

b)b) Bargaining power of buyersBargaining power of buyers

c)c) Threat of substitute products or servicesThreat of substitute products or services

d)d) Bargaining power of suppliersBargaining power of suppliers

e)e) Rivalry among competing firmsRivalry among competing firms

f)f) Relative power of unions, governments, special interest Relative power of unions, governments, special interest groups, etc. groups, etc.

2.2. What key factors in the immediate environment (that is, What key factors in the immediate environment (that is, customers, competitors, suppliers, creditors, labor unions, customers, competitors, suppliers, creditors, labor unions, governments, trade associations, interest groups, local communities, governments, trade associations, interest groups, local communities, and shareholders) are currently affecting the corporation? Which are and shareholders) are currently affecting the corporation? Which are current or future threats? Opportunities?current or future threats? Opportunities?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)C. Summary of External FactorsC. Summary of External Factors See EFAS Table on pages 75–76.See EFAS Table on pages 75–76.

Which of these forces and factors are the most important to the corporation Which of these forces and factors are the most important to the corporation and to the industries in which it competes at the present time? Which will and to the industries in which it competes at the present time? Which will be important in the future?be important in the future?

IV. Internal Environment: Strengths and Weaknesses IV. Internal Environment: Strengths and Weaknesses (SWOT)(SWOT)

A. Corporate Structure See Sections 4.3 and 8.4 on A. Corporate Structure See Sections 4.3 and 8.4 on pages 87–89 and 192–197.pages 87–89 and 192–197.

1.1. How is the corporation structured at present?How is the corporation structured at present?

a) Is the decision-making authority centralized around one group a) Is the decision-making authority centralized around one group or or decentralized to many units?decentralized to many units?

b) Is it organized on the basis of functions, projects, geography, b) Is it organized on the basis of functions, projects, geography, or or some combination of these?some combination of these?

2.2. Is the structure clearly understood by everyone in the Is the structure clearly understood by everyone in the corporation?corporation?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)3.3. Is the present structure consistent with corporate objectives, Is the present structure consistent with corporate objectives,

strategies, policies, and programs as well as with the firm’s strategies, policies, and programs as well as with the firm’s international operations?international operations? 4. In what ways does it compare with similar corporations?4. In what ways does it compare with similar corporations?

B. Corporate CultureB. Corporate Culture See Section 4.3 on pages 89– See Section 4.3 on pages 89–90.90.

1.1. Is there a well-defined or emerging culture composed of Is there a well-defined or emerging culture composed of shared beliefs, expectations, and values?shared beliefs, expectations, and values?

2.2. Is the culture consistent with the current objectives, strategies, Is the culture consistent with the current objectives, strategies, policies, and programs?policies, and programs?

3.3. What is the culture’s position on important issues facing the What is the culture’s position on important issues facing the corporation (that is, on productivity, quality of performance, corporation (that is, on productivity, quality of performance, adaptability to changing conditions, and internationalization)?adaptability to changing conditions, and internationalization)?

44 Is the culture compatible with the employees’ diversity of Is the culture compatible with the employees’ diversity of backgrounds?backgrounds?

5.5. Does the company take into consideration the values of each Does the company take into consideration the values of each nation’s culture in which the firm operates?nation’s culture in which the firm operates?



C. Corporate ResourcesC. Corporate Resources

1. Marketing 1. Marketing See Section 4.3 on pages 90–91.See Section 4.3 on pages 90–91.

a) What are the corporation’s current marketing objectives, a) What are the corporation’s current marketing objectives, strategies, policies, and programs?strategies, policies, and programs?

i) Are they clearly stated, or merely implied from i) Are they clearly stated, or merely implied from performance performance and/or budgets?and/or budgets?

ii) Are they consistent with the corporation’s mission, ii) Are they consistent with the corporation’s mission, objectives, strategies, policies, and with internal and objectives, strategies, policies, and with internal and

external external environments?environments?

b) How well is the corporation performing in terms of analysis b) How well is the corporation performing in terms of analysis of of market position and marketing mix (that is, product, price, market position and marketing mix (that is, product, price, place, place, and promotion) in both domestic and international markets? and promotion) in both domestic and international markets?

What percentage of sales comes from foreign operations?What percentage of sales comes from foreign operations?

i) What trends emerge from this analysis?i) What trends emerge from this analysis?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)ii) What impact have these trends had on past performance ii) What impact have these trends had on past performance

and how will they probably affect future performance?and how will they probably affect future performance?

iii) Does this analysis support the corporation’s past and iii) Does this analysis support the corporation’s past and pending strategic decisions?pending strategic decisions?

iv) Does marketing provide the company with a competitive iv) Does marketing provide the company with a competitive advantage?advantage?

c) How well does this corporation’s marketing performance c) How well does this corporation’s marketing performance compare with that of similar corporations?compare with that of similar corporations?

d) Are marketing managers using accepted marketing d) Are marketing managers using accepted marketing concepts and techniques to evaluate and improve product concepts and techniques to evaluate and improve product performance? (Consider product life cycle, market performance? (Consider product life cycle, market

segmentation, segmentation, market research, and product portfolios.)market research, and product portfolios.)

e) Does marketing adjust to the conditions in each country in e) Does marketing adjust to the conditions in each country in which it operates?which it operates?

f) What is the role of the marketing manager in the strategic f) What is the role of the marketing manager in the strategic management process?management process?



2. Finance 2. Finance See Sections 4.3 and 14.3 on pages 91–93 and 320–326.See Sections 4.3 and 14.3 on pages 91–93 and 320–326.

a) What are the corporation’s current financial objectives, a) What are the corporation’s current financial objectives, strategies, policies, and programs?strategies, policies, and programs?

i) Are they clearly stated or merely implied?i) Are they clearly stated or merely implied?

ii) Are they consistent with the corporation’s mission, ii) Are they consistent with the corporation’s mission, objectives, strategies, policies, and with internal and objectives, strategies, policies, and with internal and external environments?external environments?

b) How well is the corporation performing in terms of financial b) How well is the corporation performing in terms of financial analysis?analysis?


ii) Are there any significant differences when statements ii) Are there any significant differences when statements are calculated in constant versus reported dollars?are calculated in constant versus reported dollars?

iii) What impact have these trends had on past performance and iii) What impact have these trends had on past performance and how will they probably affect future how will they probably affect future performance?performance?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)iv) Does this analysis support the corporation’s past iv) Does this analysis support the corporation’s past

and and pending strategic decisions?pending strategic decisions?

v) Does finance provide the company with a v) Does finance provide the company with a competitive competitive advantage?advantage?

c) How well does this corporation’s financial performance c) How well does this corporation’s financial performance compare with that of similar corporations?compare with that of similar corporations?

d)Are financial managers using accepted financial concepts d)Are financial managers using accepted financial concepts and and techniques to evaluate and improve current corporate and techniques to evaluate and improve current corporate and

divisional performance? (Consider financial leverage, divisional performance? (Consider financial leverage, capital capital budgeting, ratio analysis, and managing foreign currencies.)budgeting, ratio analysis, and managing foreign currencies.)

e) Does finance adjust to the conditions in each country in e) Does finance adjust to the conditions in each country in which which the company operates?the company operates?

f) What is the role of the financial manager in the strategic f) What is the role of the financial manager in the strategic management process?management process?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued) (continued)3. Research and Development (R&D) See Section 4.3 on pages 93–96.3. Research and Development (R&D) See Section 4.3 on pages 93–96.

a) What are the corporation’s current R&D objectives, a) What are the corporation’s current R&D objectives, strategies, policies, and programs?strategies, policies, and programs?

i) Are they clearly stated, or merely implied from i) Are they clearly stated, or merely implied from performance and/or budgets?performance and/or budgets?


iii) What is the role of technology in corporate iii) What is the role of technology in corporate performance?performance?

iv) Is the mix of basic, applied, and engineering research iv) Is the mix of basic, applied, and engineering research appropriate given the corporate mission and strategies?appropriate given the corporate mission and strategies?

v) Does R&D provide the company with an advantage?v) Does R&D provide the company with an advantage?



b) What return is the corporation receiving from its investment b) What return is the corporation receiving from its investment in R&D?in R&D?

c) Is the corporation competent in technology transfer? Does it c) Is the corporation competent in technology transfer? Does it use concurrent engineering and cross-functional work teams in use concurrent engineering and cross-functional work teams in product and process design?product and process design?

d) What role does technological discontinuity play in the d) What role does technological discontinuity play in the company’s products?company’s products?

e) How well does the corporation’s investment in R&D e) How well does the corporation’s investment in R&D compare with the investments of similar corporations?compare with the investments of similar corporations?

f) Does R&D adjust to the conditions in each country in which f) Does R&D adjust to the conditions in each country in which the company operates?the company operates?

g) What is the role of the R&D manager in the strategic g) What is the role of the R&D manager in the strategic management process?management process?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)4. Operations and Logistics4. Operations and Logistics See Section 4.3 on pages 96–98.See Section 4.3 on pages 96–98.

a) What are the corporation’s current manufacturing/service a) What are the corporation’s current manufacturing/service objectives, strategies, policies, and programs?objectives, strategies, policies, and programs?


ii) Are they consistent with the corporation’s mission, ii) Are they consistent with the corporation’s mission, objectives, strategies, policies, and environments?objectives, strategies, policies, and environments?

b)b) What is the type and extent of operations capabilities of the What is the type and extent of operations capabilities of the corporation? How much is done domestically versus corporation? How much is done domestically versus internationally? Is the amount of outsourcing appropriate internationally? Is the amount of outsourcing appropriate

to be to be competitive? Is purchasing being handled appropriately?competitive? Is purchasing being handled appropriately?

i) If product-oriented, consider plant facilities, type of i) If product-oriented, consider plant facilities, type of manufacturing system, age and type of equipment, manufacturing system, age and type of equipment,

degree and degree and role of automation and/or robots, plant role of automation and/or robots, plant capacities and capacities and utilization, productivity utilization, productivity ratings, availability and type of ratings, availability and type of transportation.transportation.



ii) If service-oriented, consider service facilities (hospital, ii) If service-oriented, consider service facilities (hospital, theater, or school buildings), type of operations theater, or school buildings), type of operations

systems systems (continuous service over time to same (continuous service over time to same clientele or clientele or intermittent service over time intermittent service over time to varied clientele), age and to varied clientele), age and type of supporting type of supporting equipment, degree and role equipment, degree and role

of automation and/or use of mass communication devices of automation and/or use of mass communication devices (diagnostic machinery, video-tape machines), facility (diagnostic machinery, video-tape machines), facility capacities and utilization rates, efficiency ratings of capacities and utilization rates, efficiency ratings of

professional/ service personnel, availability professional/ service personnel, availability service service personnel, availability and type of personnel, availability and type of transportation to bring transportation to bring service staff and clientele service staff and clientele together.together.

c) Are manufacturing or service facilities vulnerable to natural c) Are manufacturing or service facilities vulnerable to natural disasters, local or national strikes, reduction or limitation of disasters, local or national strikes, reduction or limitation of resources from suppliers, substantial cost increases of resources from suppliers, substantial cost increases of

materials, materials, or nationalization by governments?or nationalization by governments?



d) Is there an appropriate mix of people and machines, in d) Is there an appropriate mix of people and machines, in manufacturing firms, or of support staff to professionals, in manufacturing firms, or of support staff to professionals, in service firms?service firms?

e) How well does the corporation perform relative to the e) How well does the corporation perform relative to the competition? Is it balancing inventory costs (warehousing) with competition? Is it balancing inventory costs (warehousing) with

logistical costs (just-in-time)? Consider costs per unit of labor, logistical costs (just-in-time)? Consider costs per unit of labor, material, and overhead; downtime; inventory control material, and overhead; downtime; inventory control management and/or scheduling of service staff; production management and/or scheduling of service staff; production ratings; facility utilization percentages; and number of clients ratings; facility utilization percentages; and number of clients successfully treated by category (if service firm) or percentage successfully treated by category (if service firm) or percentage

of of orders shipped on time (if product firm).orders shipped on time (if product firm).


ii) What impact have these trends had on past performance ii) What impact have these trends had on past performance and how will they probably affect future performance?and how will they probably affect future performance?




iv) Does operations provide the company with a iv) Does operations provide the company with a competitive advantage?competitive advantage?

f) Are operations managers using appropriate concepts and f) Are operations managers using appropriate concepts and techniques to evaluate and improve current performance? techniques to evaluate and improve current performance? Consider cost systems, quality control and reliability systems, Consider cost systems, quality control and reliability systems, inventory control management, personnel scheduling, TQM, inventory control management, personnel scheduling, TQM, learning curves, safety programs, and engineering programs that learning curves, safety programs, and engineering programs that can improve efficiency of manufacturing or of service.can improve efficiency of manufacturing or of service.

g) Does operations adjust to the conditions in each country in g) Does operations adjust to the conditions in each country in which it has facilities?which it has facilities?

h) What is the role of the operations manager in the strategic h) What is the role of the operations manager in the strategic management process?management process?

5. Human Resources Management (HRM)5. Human Resources Management (HRM) See Section 4.3 on pages See Section 4.3 on pages 98–100.98–100.

a) What are the corporation’s current HRM objectives, strategies, a) What are the corporation’s current HRM objectives, strategies, policies, and programs?policies, and programs?




ii) Are they consistent with the corporation’s mission, ii) Are they consistent with the corporation’s mission, objectives, strategies, policies, and with internal and objectives, strategies, policies, and with internal and

external environments?external environments?

b) How well is the corporation’s HRM performing in terms of b) How well is the corporation’s HRM performing in terms of improving the fit between the individual employee and the improving the fit between the individual employee and the

job? job? Consider turnover, grievances, strikes, layoffs, employee Consider turnover, grievances, strikes, layoffs, employee training, and quality of work life.training, and quality of work life.




iv) Does HRM provide the company with a competitive iv) Does HRM provide the company with a competitive advantage?advantage?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued) (continued)c) How does this corporation’s HRM performance compare with c) How does this corporation’s HRM performance compare with

that of similar corporations?that of similar corporations?

d) Are HRM managers using appropriate concepts and d) Are HRM managers using appropriate concepts and techniques to evaluate and improve corporate performance? techniques to evaluate and improve corporate performance? Consider the job analysis program, performance appraisal Consider the job analysis program, performance appraisal system, up-to-date job descriptions, training and development system, up-to-date job descriptions, training and development programs, attitude surveys, job design programs, quality of programs, attitude surveys, job design programs, quality of relationship with unions, and use of autonomous work teams.relationship with unions, and use of autonomous work teams.

e) How well is the company managing the diversity of its e) How well is the company managing the diversity of its workforce?workforce?

f) Does HRM adjust to the conditions in each country in which f) Does HRM adjust to the conditions in each country in which the company operates? Does the company have a code of the company operates? Does the company have a code of conduct for HRM in developing nations? Are employees conduct for HRM in developing nations? Are employees

receiving international assignments to prepare them for receiving international assignments to prepare them for managerial positions?managerial positions?

g) What is the role of the HRM manager in the strategic g) What is the role of the HRM manager in the strategic management process?management process?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued) (continued)6. Information Systems (IS)6. Information Systems (IS) See Section 4.3 on page 100.See Section 4.3 on page 100.

a) What are the corporation’s current IS objectives, strategies, a) What are the corporation’s current IS objectives, strategies, policies, and programs?policies, and programs?



b) How well is the corporation’s IS performing in terms of b) How well is the corporation’s IS performing in terms of providing a useful database, automating routine clerical providing a useful database, automating routine clerical operations, assisting managers in making routine decisions, operations, assisting managers in making routine decisions,

and and providing information necessary for strategic decisions?providing information necessary for strategic decisions?




Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation (continued)(continued)ii) What impact have these trends had on past performance ii) What impact have these trends had on past performance

and how will they probably affect future performance?and how will they probably affect future performance?


iv) Does IS provide the company with a competitive advantage?iv) Does IS provide the company with a competitive advantage?

c) How does this corporation’s IS performance and stage of c) How does this corporation’s IS performance and stage of development compare with that of similar corporations?development compare with that of similar corporations?

d) Are IS managers using appropriate concepts and techniques to d) Are IS managers using appropriate concepts and techniques to evaluate and improve corporate performance? Do they know how evaluate and improve corporate performance? Do they know how

to to build and manage a complex database, conduct system analyses, build and manage a complex database, conduct system analyses, and and implement interactive decision-support systems?implement interactive decision-support systems?

e) Does the company have a global IS? Does it have difficulty with e) Does the company have a global IS? Does it have difficulty with getting data across national boundaries?getting data across national boundaries?

f) What is the role of the IS manager in the strategic management f) What is the role of the IS manager in the strategic management process?process?



D. Summary of Internal FactorsD. Summary of Internal Factors See IFAS Table on pages 101–102.See IFAS Table on pages 101–102.

Which of these factors are the most important to the corporation and to the Which of these factors are the most important to the corporation and to the industries in which it competes at the present time? Which will be important industries in which it competes at the present time? Which will be important in the future?in the future?

V. Analysis of Strategic Factors (SWOT)V. Analysis of Strategic Factors (SWOT)See Sections 5.1 and 5.2 on pages 107–111. See Sections 5.1 and 5.2 on pages 107–111.

A. Situational Analysis A. Situational Analysis See SFAS Table on pages 108–110.See SFAS Table on pages 108–110.

What are the most important internal and external factors (Strengths, What are the most important internal and external factors (Strengths, Weaknesses, Opportunities, Threats) that strongly affect the corporation’s Weaknesses, Opportunities, Threats) that strongly affect the corporation’s present and future performance? List five to ten strategic factors.present and future performance? List five to ten strategic factors.

B. Review of Mission and ObjectivesB. Review of Mission and Objectives See Section 5.2 on page 111. See Section 5.2 on page 111.

1. Are the current mission and objectives appropriate in light of the 1. Are the current mission and objectives appropriate in light of the key strategic factors and problems?key strategic factors and problems?



2.2. Should the mission and objectives be changed? If so, how?Should the mission and objectives be changed? If so, how?

3.3. If changed, what will the effects on the firm be?If changed, what will the effects on the firm be?

VI. Strategic Alternatives and Recommended StrategyVI. Strategic Alternatives and Recommended StrategyA. Strategic AlternativesA. Strategic Alternatives See Sections 5.3, 5.4, 6.2, and 7.1 on pages 111–See Sections 5.3, 5.4, 6.2, and 7.1 on pages 111–129, 133–147and 162–170.129, 133–147and 162–170.

1. Can the current or revised objectives be met by the simple, more 1. Can the current or revised objectives be met by the simple, more careful implementing of those strategies presently in use (for careful implementing of those strategies presently in use (for

example, example, fine-tuning the strategies)?fine-tuning the strategies)?

2.What are the major feasible alternative strategies available to this 2.What are the major feasible alternative strategies available to this corporation? What are the pros and cons of each? Can corporate corporation? What are the pros and cons of each? Can corporate scenarios be developed and agreed upon?scenarios be developed and agreed upon?

a) Consider cost leadership and differentiation as business a) Consider cost leadership and differentiation as business strategies.strategies.



b)Consider stability, growth, and retrenchment as corporate b)Consider stability, growth, and retrenchment as corporate strategies.strategies.

c) Consider any functional strategic alternatives that might be c) Consider any functional strategic alternatives that might be needed for reinforcement of an important corporate or needed for reinforcement of an important corporate or

business business strategic alternative.strategic alternative.

B. Recommended StrategyB. Recommended Strategy See Sections 7.3 and 7.4 on pages 171–See Sections 7.3 and 7.4 on pages 171–177.177.

1. Specify which of the strategic alternatives you are 1. Specify which of the strategic alternatives you are recommending recommending for the corporate, business, and functional levels of the for the corporate, business, and functional levels of the corporation. corporation. Do you recommend different business or functional Do you recommend different business or functional strategies for strategies for different units of the corporation? different units of the corporation?

2. Justify your recommendation in terms of its ability to resolve 2. Justify your recommendation in terms of its ability to resolve both both long- and short-term problems and effectively deal with the long- and short-term problems and effectively deal with the strategic strategic factors. factors.

3. What policies should be developed or revised to guide effective 3. What policies should be developed or revised to guide effective implementation?implementation?



VII. ImplementationVII. Implementation

See Chapters 8 and 9.See Chapters 8 and 9.

A.A. What kinds of programs (for example, restructuring the What kinds of programs (for example, restructuring the corporation or instituting TQM) should be developed to implement the corporation or instituting TQM) should be developed to implement the recommended strategy?recommended strategy?

1. Who should develop these programs?1. Who should develop these programs?

2. Who should be in charge of these programs?2. Who should be in charge of these programs?

B.B. Are the programs financially feasible? Can pro forma budgets be Are the programs financially feasible? Can pro forma budgets be developed and agreed upon? Are priorities and timetables appropriate to developed and agreed upon? Are priorities and timetables appropriate to individual programs?individual programs?

C.C. Will new standard operating procedures need to be developed?Will new standard operating procedures need to be developed?


Table 10.5 Strategic Audit of a Corporation Table 10.5 Strategic Audit of a Corporation

VIII. Evaluation and ControlVIII. Evaluation and Control

See Chapter 10.See Chapter 10.

A.A. Is the current information system capable of providing sufficient Is the current information system capable of providing sufficient feedback on implementation activities and performance? Can it measure feedback on implementation activities and performance? Can it measure critical success factors?critical success factors?

1. Can performance results be pinpointed by area, unit, project, or 1. Can performance results be pinpointed by area, unit, project, or function? function?

2. Is the information timely?2. Is the information timely?

B.B. Are adequate control measures in place to ensure conformance Are adequate control measures in place to ensure conformance with the recommended strategic plan?with the recommended strategic plan?

1. Are appropriate standards and measures being used?1. Are appropriate standards and measures being used?

2. Are reward systems capable of recognizing and rewarding 2. Are reward systems capable of recognizing and rewarding good good performance? performance?

Source: T.L. Wheelen and J.D. Hunger, “Strategic Audit of a Corporation,” Copyright 1982 by Wheelen and Source: T.L. Wheelen and J.D. Hunger, “Strategic Audit of a Corporation,” Copyright 1982 by Wheelen and Hunger Associates. Reprinted by permission. Revised 1988, 1994, and 1997.Hunger Associates. Reprinted by permission. Revised 1988, 1994, and 1997.


Documents

(10)Evaluation and Control