This lesson explains why managers measure the results of strategic plans and how they use performance standards to evaluate activities. Measurement matters because it helps a firm determine whether its actions are producing the results the strategy is intended to achieve.
The strategy cycle does not end when a plan is created. Managers must also check whether the plan is working. The measurement step provides evidence about whether the firm’s actions are accomplishing their intended purpose.
All flashcards
Why do managers measure strategic performance?
To determine whether a firm’s actions are achieving intended objectives and whether plans should be continued or improved.
What are the three basic steps of performance evaluation?
Set a performance standard, measure results, and compare those results with the standard.
What is a performance measure?
A way to assess an activity’s results and compare them with an expected standard.
What is benchmarking?
Setting a performance standard by referring to another firm’s superior performance.
How can a strategic objective connect to an operational measure?
A broad objective can guide tactical actions and specific operational activities, which can be assessed with a relevant measure; product differentiation, for example, may be supported by product development measured by new products launched.
Quiz questions
Why do publicly held companies disclose financial performance?Answer: To help investors make informed investment decisions.
Which measure most directly reflects innovation activity?Answer: Number of new products launched.
Which measure most directly evaluates manufacturing quality?Answer: Defect rate per 10,000 units produced.
What may leaders do when performance meets or exceeds objectives?Answer: Report the success to higher-level managers and consider more ambitious objectives.
Where does performance feedback enter the strategic management cycle?Answer: It informs the firm’s next round of strategic analysis and planning.
Based on Principles of Management by David S. Bright, Anastasia H. Cortes, Eva Hartmann, K. Praveen Parboteeah, Jon L. Pierce, Monique Reece, Amit Shah, Siri Terjesen, Joseph Weiss, Margaret A. White, Donald G. Gardner, Jason Lambert et al. (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.