The Importance of Strategic Evaluation

Strategic evaluation occurs as the final step in the final step in a strategic management cycle. Without it, a business has no way to gauge whether or not strategic management strategies and plans are fulfilling business objectives. Strategic management attempts to coordinate and bring business resources and actions in line with the mission and vision of the business. Strategic plans outline the action steps necessary for achieving strategic business goals.

Strategic evaluations provide an objective method for testing the efficiency and effectiveness of business strategies, as well as a way to determine whether the strategy being implemented is moving the business toward its intended strategic objectives. Evaluations also can help identify when and what corrective actions are necessary to bring performance back in line with business objectives.

Strategic evaluations start by defining a performance ideal according to business objectives. This performance ideal includes both qualitative and quantitative performance benchmarks to which actual performance of the business as a whole and the performance of individual employees can be compared. Qualitative benchmarks are subjective factors such as skills, competencies and flexibility. Quantitative benchmarks include “hard facts” such as net profit, earnings per share of stock or staff turnover rates.

Strategic evaluations work under the assumption that because the business environment is fluid and constantly changing, variances will commonly exist between ideal and actual performance. Regular strategic evaluations provide an objective, effective way for a business to evaluate, analyze and modify performance expectations. A positive variance can tell a business what it’s doing right and confirm it’s on the right track while a negative variance can be a signal that the performance of management and staff needs to change.

When strategic evaluations pinpoint areas where the business is not meeting strategic objectives, corrective actions can attempt to solve the problem. For example, if a business discovers strategic technical objectives are not being met because employees do not have up-to-date qualifications, the business can design training programs that bring skillsets in line with technical objectives. If a business discovers the business objective itself is out of line – such as overly aggressive sales expectations – it can take steps to modify the objective and bring it line with real-life potential.