Page 271 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 14: Strategic Evaluation and Control

Notes
necessary to arrive at those goals. The measures are designed to pull people toward the
overall vision. Senior managers may know what the end result should be, but they cannot
tell employees exactly how to achieve that result, because the conditions in which employees
operate are constantly changing.

This new approach to performance measurement is consistent with the initiatives under
way in many organisations: cross-functional integration, customer supplier partnerships,
global scale, continuous improvement, and team rather than individual accountability.
By combining the financial, customer, internal process and innovation, and organizational
learning perspectives, the balanced scorecard helps managers understand, at least implicitly,
many interrelationships. This understanding can help managers transcend traditional
notions about functional barriers and ultimately lead to improved decision making,
problem solving and enhanced performance. The balanced scorecard keeps organisations
moving forward.
4. Key factor rating: It is a method that takes into account the key factors in several areas and
then sets out to evaluate performance on the basis of these. This is quite a comprehensive
method as it takes a holistic view of the performance areas in an organisation.
5. Responsibility Centres: Control systems can be established to monitor specific functions,
projects or divisions. Responsibility centers are used to isolate a unit so that it can be
evaluated separately from the rest of the corporation. There are five major types of
responsibility centers: Cost centres, Revenue centres, Expense centres, Profit centres and
Investment centres. Each responsibility centre has its own budget and is evaluated on the
basis of its performance.

6. Network techniques: Network techniques such as Programme Evaluation and Review
Technique (PERT), Critical Path Method (CPM), and their variants, are used extensively
for the operational controls of scheduling and resource allocation in projects. When network
techniques are modified for use as a cost accounting system, they become highly effective
operational controls for project costs and performance.

7. Management by Objectives (MBO): It is a system proposed by Drucker, which is based on
a regular evaluation of performance against objectives which are decided upon mutually
by the superior and the subordinate. By the process of consultation, objective-setting leads
to the establishment of a control system that operates on the basis of commitment and
self-control. Thus, the scope of MBO to be used as an operational control is quite extensive.

8. Memorandum of Understanding: This is an agreement between a PSU and the administrative
ministry of the government in which both specify their respective commitments and
responsibilities. The system works as an effective control on the performance of the PSU.

Task Find out more about various strategic control techniques.

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