Page 266 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes The second situation is an indication of superior performance. If exceeding the standards is
considered unusual, a check needs to be made to test the validity of tests and the measurement
system.
The third type of situation, which indicates shortfall in performance, should be taken seriously
and strategists need to pinpoint the areas where the performance is below standard and go into
the causes of deviation.
The analysis of variance is generally presented in a format called ‘variance chart’ and submitted
to the top management for their evaluation. After noting the deviations, it is necessary to find
the causes of deviation, which can be ascertained through the following questions: (Thomas)
1. Is the cause of deviation internal or external?

2. Is the cause random or expected?
3. Is the deviation temporary or permanent?
Analysis of variance leads to a plan for corrective action.

14.3.4 Taking Corrective Action

The last and final step in the operational control process is taking corrective action. Corrective
action is initiated by the management to rectify the shortfall in performance.
If the performance is consistently low, the strategists have to do an in depth analysis and
diagnosis to isolate the factors responsible for such low performance and take appropriate
corrective actions.
There are three courses for corrective action:

1. Checking performance
2. Checking standards
3. Reformulating strategies, plans and objectives.

Checking Performance

Performance can be affected adversely by a number of factors such as inadequate resource
allocation, ineffective structure or systems, faulty programmes, policies, motivational schemes,
inefficient leadership styles etc. Corrective actions may therefore include the change in strategy,
systems, structure, compensation practices, training programmes, redesign of jobs, replacement
of personnel, re-establishment of standards, budgets etc.

Checking Standards

When there is nothing significantly wrong with performance, then the strategist has to check the
standards. A manager should not mind revising the standards when the standards set are
unreasonably low or high level. Higher standards breed discontentment and frustration. Low
standards make employee unproductive. So, standards check may result in lowering of standards
if it is concluded that organisational capabilities do not match the performance requirements. It
may also lead to elevation of standards if the conditions have improved to allow better
performance. For example, better equipment, improved systems, upgraded skills etc. need
modification in existing standards.

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