A PROJECT REPORT ON STRATEGIC EVALUATION AND CONTROL IN PARTIAL FULFILLEMENT OF THE COURSE IN STRATEGIC MANAGEMENT AT MASTER OF COMMERCE (PART

1) BANKING & FINANCE SEMESTER II (2012-2013) SUBMITTED BY ANKITA B GUJAR ROLL NO. 11 UNDER THE GUIDANCE OF MR.SAMADHAN KHAMKAR

SIES COLLEGE OF COMMERCE AND ECONOMICS, Plot No. 71/72, Sion Matunga Estate T.V. Chidambaram Marg, Sion (East), Mumbai 400022.
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CERTIFICATE

This is to certify that Mr. /Ms. ____________________________________of M.Com Banking & Finance Semester II (2012-2013) has successfully completed the project work entitled

__________________________________________________________________ Under the guidance of _________________________________ ____________________ Project Guide/ Internal Examiner (MR. SAMADHAN KHAMKAR) ( ____________________ External Examiner ) _

____________________ Course Co-ordinator (MRS.SHAILASHRI UCHIL) DATE: PLACE:

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____________________ PRINCIPAL (DR. MINU THOMAS)

DECLARATION

I, __________________________, the student of M.com (Banking & Finance) semester II(2012-2013) hereby declare that I have completed the project on _________________________________________________________ The information presented through this project is true and original to the best of my knowledge.

______________ Date: Place:

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ANKITA B GUJAR Roll no. 11

ACKNOWLEDGEMENT

I would like to extend my sincere gratitude to all those people who have helped me in the successful completion of my project. I express my gratitude to our Principal, Dr. Minu Thomas for being a constant source of support and for always being there whenever we students need her guidance. I am thankful to my project guide, MR. SAMADHAN KHAMKAR who guided us throughout the completion of the project . I would like to thank my course coordinator Mrs.Shailashri Uchil who gave us the necessary guidance regarding the technical aspects of the project . I wish to thank the manager of XYZ Ltd. who threw light on the practical issues associated with the topic of study through his personal interview. I also thank the library staff at the college for their constant support and help in providing us the right books needed for the study. A special thanks to my parents for their constant support & encouragement in everything that I do.

ANKITA B GUJAR

TABLE OF CONTENT
SR NO. 01 02 03 04 05 07 08

INDEX

PG NO.

Introduction Strategic management Strategic control Budgetary control Role of PERT and CPM Conclusion Bibliography

07 12 23 31 33 37 38

STRATEGIC EVALUATION AND CONTROL

INTRODUCTION
Definition of strategy: The word strategy is derived from the Greek word stratgos; stratus (meaning army) and ago (meaning leading/moving). Strategy is an action that managers take to attain one or more of the organizations goals. Strategy can also be defined as A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process. A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment so as to meet the present objectives. While planning a strategy it is essential to consider that decisions are not taken in a vacuum and that any act taken by a firm is likely to be met by a reaction from those affected, competitors, customers, employees or suppliers.
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Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large.

Features of strategy: Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior. Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors.

Strategy, in short, bridges the gap between where we are and where we want to be. Definition of strategic management: Strategic management analyzes the major initiatives taken by a company's top management on behalf of owners, involving resources and performance in external environments. It entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. A balanced scorecard is often used to evaluate the overall performance of the business and its progress towards objectives. Recent studies and leading management theorists have advocated that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all stakeholders. Strategic management is a level of managerial activity below setting goals and above tactics. Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies. In the field of business administration it is useful to talk about "strategic consistency" between the organization and its environment or "strategic consistency." According to Arieu (2007), "there is strategic consistency when the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context." Strategic

management includes the management team and possibly the Board of Directors and other stakeholders. "Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment." Strategic Management can also be defined as "the identification of the purpose of the organization and the plans and actions to achieve the purpose. It is that set of managerial decisions and actions that determine the long term performance of a business enterprise. It involves formulating and implementing strategies that will help in aligning the organization and its environment to achieve organizational goals."

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 Process of strategic management: Strategy formulation

Strategy implementation

Strategy evaluation

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Strategy formulation: 1. Framing mission statements 2. Analysis of environment 3. Setting of objectives 4. Gap analysis 5. Framing strategies 6. Analysis of strategies 7. Choice of strategy Strategy implementation: 1. Formulation of plans 2. Identification of activities 3. Grouping of activities 4. Organizing resources 5. Allocation of resources Strategy evaluation: 1. Setting of standards 2. Measurement of performance 3. Comparison of actual performance with standards 4. Finding out deviations 5. Analyzing deviations 6. Taking corrective measures

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STRATEGIC EVALUATION
INTRODUCTION: Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in todays dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final phase of strategic management. The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.

DEFINITION: William Glueck and Lawrence Jauch define strategic evaluation as follows: Evaluation of strategy is that phase of the strategic management process in which the top managers determine whether their strategic choice as implemented is meeting the objectives of the enterprise.
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 NATURE: Process Goal oriented Guide to operations Involves measurement Effective use of resources Importance: Timely evaluations can alert management to problems or potential problems before situation becomes critical Strategy evaluation is essential to ensure that stated objectives are being achieved Adequate and timely feedback is the cornerstone of effective strategy evaluation Evaluation may be expensive and counterproductive Strategy evaluation must have a long run and short run focus Process: The process of Strategy Evaluation consists of following steps Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The
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performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria include determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis.

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 Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process.

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 How the process works: The way the evaluation and control process works is quite straightforward: set objectives, evaluate actual performance against the objectives, and, based on the evaluation, take whatever action is necessary. If you chose the first step, setting objectives, then you are right. Essentially, this involves looking at strategic targets. These could be your strategic goals and objectives, or operational plans and programs that have been set up to meet the goals and objectives while ensuring that they have measurable outcomes. The difficulty in setting objectives lies not so much in specifying the outcomes themselves as in (a) Identifying those areas where performance objectives should be set and (b) Evaluating whether the level of performance set is appropriate. To set objectives properly, the first thing to do is to establish which areas require performance objectives. Start with the big picture, and then narrow down to the most essential: What specific things must be done to ensure the success of the strategic plan? Of these, which are the most important? Those that are identified as most important then become the areas where objectives should be set. This is very important! Please do not try to set objectives in every area. This shotgun approach is doomed to fail! Be more focused.
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Another equally important consideration when setting objectives is determining whether they are realistic and attainable. There is no point in working yourself (and all those people who have to follow your orders!) to the bone if the objectives you have set are altogether unrealistic. To guard against this, a concept called benchmarking can be a useful tool. Benchmarking simply means finding out how well your main competitors are doing and comparing your performance against theirs. In this way, you can set targets that equal, or are better than, what the competition is offering. When setting performance objectives, also bear in mind these other useful pointers: Objectives should focus on three main areas of performance: How people perform How equipment functions How money is used To make sure that objectives fully describe the type of performance required, try viewing performance along five dimensions: Quantity: volume of work completed (number of tasks completed, number of units sold, volume of money spent etc) Quality: how well a task was done (number of satisfied customers, number of rejects/repeats or things that had to be redone etc) Cooperation: working well with others, providing support where needed (Interdepartmental sharing of resources and personnel, trading information etc) Dependability: doing a task according to expectations (completed work on time and when needed, reduced number of sick days, etc.)
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 Creativity: finding new or better ways of doing things (coming up with new ideas on how to increase revenue, reduce cost or complete a task, etc) Good performance objectives should always be SMART. That is, they should be: Specific: a specific area of improvement is targeted for Measurable: some indicator of when it is complete Assignable: someone is responsible for its achievement Realistic: the level of performance expected, given the resources Time-related: when the task should be completed by. Evaluating objectives (step 2) and taking action (step 3) The second and third steps in the evaluation and control process, evaluating objectives and taking action, tend not to be as problematic as the first. Once the appropriate objectives are set, the next step is to carry out the evaluation. This involves (a) Determining the types and sources of information required to compare actual performance against the standard, (b) Collecting the information, and (c) Based on the information collected, doing a comparative analysis. Once done, the final step is to determine what action is necessary. Is everything fine? Then keep up the good work and continue monitoring. Have any problem areas cropped up? Then some corrective action must be taken to ensure things remain (or go back) on track. How often you should assess deviations from objectives depends on the nature of your organization and its industry. Production, sales, expense and manufacturing figures and turnaround times are commonly collected. These are often presented in daily, weekly, monthly and twice-yearly totals.

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In most activities some variation can be expected between set objectives and actual performance. Therefore it is critical to determine the acceptable degree of deviation from the standard. Another important point needs to be made here. When a set standard has been achieved or exceeded do not overlook the opportunity to recognize performance and praise staff. This is a wonderful tool for motivation. Having determined that there has been a deviation from objectives you have two options (assuming that doing nothing is not really an option). Correct the actual performance (of equipment or human resources). If the source of the deviation is inadequate performance you have a number of options. For example, you may change your sections strategy or how you structure your section; you may alter your compensation or remuneration practices; you may introduce training programs or new technologies; or you may redesign jobs. Revise the criteria of performance or the objectives set. You may determine that one or more of the original objectives were unrealistic or inappropriate. In this case it is the objectives, and not the performance, that need to be altered. Barriers in strategic evaluation: 1) Problem in reporting 2) Problem in strategic report 3) Problem in timing 4) Problem of bias 5) Organizational problem 6) Resistance to evaluation 7) Problem of evaluation techniques. Techniques of strategic evaluation:
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 Measuring Performance: Performance is the end result of activity. Which measures to select to assess performance depends on the organizational unit to be appraised and the objectives to be achieved. The objectives that were established in the strategy formulation part of the strategic management process (dealing with profitability, market share and cost reduction, among others) should certainly be used to measure corporate OR overall performance once the strategies have been implemented. Primary measures of Corporate Performance: The days when simply financial measures such as ROI or EPS were used alone to assess overall corporate performance are coming to an end. Analysis now recommended a broad range of methods to evaluate the success or failure of a strategy. Some of the important methods are: 1. Stakeholder measures 2. Shareholder values 3. Balance Score Card approach 4. Strategic Audit Balance Score Card: Rather than evaluate corporation using a few financial measures, Kaplan and Norton argue for a balanced score card, including nonfinancial as well as financial measures. BSC evaluate strategies from 4 perspectives:
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1. Financial performance: how do we appear to shareholders? 2. Customer knowledge: how do customers view us? 3. Internal business perspective: What must we excel at? 4. Innovation & Learning: Can we continue to improve and create Value? The Scorecard is used to evaluate strategies. When one is aware of the method of evaluation, it is useful to set objectives based on the evaluation method used. In other words, if strategies are to be evaluated on this method, then objectives for what the strategies should achieve can also be set using the same criteria. Strategic Audit: Strategy audit is one of the methods for evaluating the performance of the chosen strategy. It provides a checklist of questions, by area or issue, which enables a systematic analysis of various organizational functions or activities. Audit is an extremely useful diagnostic tool to pinpoint the problems areas and highlights organizational strengths and weaknesses for corporate planning. However, the main objective of strategic audit is to develop benchmarks. The process involves the following steps: 1. Identification of functions or process, usually an activity which can give a business unit competitive advantage, that has to be audited.

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2. Determination of measures of performance of the function or process. Now the questions come why Strategic Audit is important for corporate planning? Strategic Audit helps to: 1. Evaluate current performance result 2. Review corporate governance 3. Scan and assess the external environment 4. Scan and assess the internal environment 5. Analyze Strategic Factor using SWOT. 6. Generate and evaluate strategic alternatives 7. Implement strategies 8. Evaluate and control

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STRATEGIC CONTROL
Introduction: Controls can be established to focus either on actual performance results (output), on the activities that generate the performance (behavior) or resources that are used in performance (input). Definition: Schendel and Hofer define strategic control as follows: Strategic control focuses on the dual questions whether: (1) the strategy is being implemented as planned; (2) the results produced by the strategy are those intended. HOW STRATEGIC CONTROL WORKS: Strategic control, like the rest of strategic management, is focused on both external and internal factors. Even though environmental factors are largely beyond the control of top managers, the managers must deal with those factors, and strategic control provides a method for doing so. This is much different from the challenges faced in traditional management control, which is mostly internally focused and typically used in situations that are under the managers' influence. Strategic control is also focused primarily on the future. Because of the long time horizons used in
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strategic planning and strategy implementation, and the high cost of unsatisfactory outcomes, the corrections often used in management control are likely to be inadequate. Strategic control is more forward-looking than traditional management control, so that unsatisfactory results can be avoided or alleviated, whenever possible, rather than waiting for them to occur and then attempting merely to prevent a recurrence. There are, unfortunately, contradictions in the strategic control literature that appear to be the result of identifying the concept's activities out of context. In one study that attempted to identify strategic control activities, business policy professors cited almost all the activities that are normally considered to be part of strategic planning and strategy formulation. The resulting definition of strategic control resembled generally accepted descriptions of the entire strategic management framework so closely that it was not useful. A way to identify the strategic control "forest" without getting lost in the activity "trees" is to focus on the purpose and responsibilities of the concept. The purpose is to identify the need for corrective actions at the strategic level and to direct that the actions be undertaken. A list of strategic control responsibilities is contained in Table 1. These provide an outline of the content of strategic control. The specific activities required to fulfill the responsibilities are contextdependent; they depend on the situation in which the top manager and his business are operating. The strategic control responsibilities listed in Table 1
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address the needs for an external focus and proactive corrections. They are focused on the monitoring of external and internal forces that can disrupt the success of strategic plans, on measurements and forecasts of the results of previously implemented plans, and on making appropriate changes in the implementation of plans or, when appropriate, changing the plans themselves. Identifying a need for changes in the implementation of plans and/or the content of ongoing plans is part of strategic control, but the actual selection of implementation activities, new strategies, strategic objectives, or missions is not. When a need for changes in implementation methods or the modification of plans is identified by the strategic control process, the demand for corrective actions is fed back into the strategy implementation or strategic planning stages of the strategic management process for necessary action. Receipt of this strategic control feedback restarts the strategic management process at the point where the feedback is received. TABLE 1 STRATEGIC CONTROL RESPONSIBILITIES 1. Monitoring Internal & External Planning Assumptions. 2. Monitoring other Relevant Internal and External Forces. 3. Measuring Results. 4. Forecasting Results. 5. Identifying Past, Present Future Variances from Planned Results. 6. Directing corrective Implementation Activities. 7. Directing Corrective Strategic Planning Activities.
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Figure 1 is a simplified model of strategic management that illustrates the relationship of strategic control with strategic planning and strategy implementation. Identification by the strategic control stage of actual or projected shortfalls in organizational performance initiates corrective action, which may be centered on changing the way the strategic plan is being implemented or, if appropriate, on changing the plan itself. Because it is usually easier and faster to change the way in which a strategic plan is being implemented than to change the plan itself, top management first examines the strategy implementation activities to determine if they can be modified to achieve the desired results. If so, appropriate actions are ordered; if not, the need for a change in the plan is indicated and the strategic planners make the necessary choices. Corrective actions in the strategic planning stage of the model may range, depending on the nature and extent of the performance shortfall, from minor strategy modifications to, in rare cases, a change in the mission of the business. Wherever the corrective action is taken, whether in strategy implementation or strategic planning, the strategic management process begins again at that point. Since specific strategic control activities are context-dependent, they may overlap slightly with the activities of the strategy implementation stage of strategic management. This is depicted in Figure 1 by the arrowhead shape of the boundary between these stages. A similar relationship exists between the strategic planning and strategy
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implementation stages. The need for proactive strategic control is met by relying heavily on forecasted results, which in turn rely on external and internal monitoring of events. The strategic control standards are based on, but are more precise than, the objectives established during the preparation of the strategic plan. Be- cause of the forward-looking nature of strategic control, its standards will often be milestones on the path to the strategic objectives. CHARACTERISTICS OF EFFECTIVE CONTROL SYSTEMS Effective control systems have certain characteristics. For a control system to be effective, it must be: Accurate: Information on performance must be accurate. Evaluating the accuracy of the information they receive is one of the most important control tasks that managers face. Timely: Information must be collected, routed, and evaluated quickly if action is to be taken in time to produce improvements. Objective and Comprehensible: The information in a control system should be understandable and be seen as objective by the individuals who use it. A difficult-to understand control system will cause unnecessary mistakes and confusion or frustration among employees. Focused on Strategic Control Points: The control system should be focused on those areas where deviations from the standards are most likely to
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take place or where deviations would lead to the greatest harm. Economically Realistic: The cost of implementing a control system should be less than, or at most equal to, the benefits derived from the control system. Organizational Realistic: The control system has to be compatible with organizational realities and all standards for performance must be realistic. Coordinated with the Organization's Work Flow: Control information needs to be coordinated with the flow of work through the organization for two reasons: (1) each step in the work process may affect the success or failure of the entire operation, (2) the control information must get to all the people who need to receive it. Flexible: Controls must have flexibility built into them so that the organizations can react quickly to overcome adverse changes or to take advantage of new opportunities. Prescriptive and Operational: Control systems ought to indicate, upon the detection of the deviation from standards, what corrective action should be taken. Accepted by Organization Members: For a control system to be accepted by organization members, the controls must be related to meaningful and accepted goals. These characteristics can be applied to controls at all levels of the organization.
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 Sign of Inadequate Control Systems: Financial control and other control techniques are designed to provide adequate control for the organization. Often, however, management control systems are not working properly. Indicators of the need for a more effectively control approach or revised management control systems are as follows: Deadlines missed frequently. Poor quality of goods and services. Declining or stagnant sales or profits. Loss of leadership position or market share within the industry. Inability to obtain data necessary to evaluate employee or departmental performance. Low employee morale and high absenteeism. Insufficient employee involvement and managementemployee communications. Excessive company debts or unpredictable borrowing requirements. Inefficient use of human and material resources, equipment, and facilities. Properly used, controls help management respond to unforeseen developments and achieve strategic plan. Improperly designed and used, management control systems can lead a company into bankruptcy. Guidelines for Proper Control: Measuring performance is a crucial part of Evaluation and Control. The lack of quantifiable objectives or performance

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standards and the inability of the information system to provide timely, valid information are two obvious control problems. In designing a control system, top management should remember that controls should follow strategy. Unless controls ensure the use of the proper strategy to achieve objectives, dysfunctional side effects may completely undermine the implementation of the objectives. The following guidelines are very important to develop the control system in any organization: 1. Controls should involve only the minimum amount of information needed to give a reliable picture of events. Too many controls create confusion. Focus on the strategic factors by following the 80/20 rule: Monitor those 20% of the factors that determine 80% of the results. 2. Controls should monitor only meaningful activities and result. 3. Controls should be timely. 4. Controls should be long term and short term 5. Controls should pinpoint exceptions. 6. Controls should be used to reward meeting or exceeding standards rather than to punish failure to meet standards.

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BUDGETORY CONTROL
Budgets are the most widely used control system, because the plan and control resources and revenues are essential to the firm's health and survival. Budgeting is the formulation of plans for a given future period in numerical terms. By stating plans in terms of numbers and breaking them into parts of an organization, budgets correlate planning and allow authority to be delegated without loss of control. The Budgeting Process: Many traditional companies use top-down budgeting, a process of developing budgets in which top management outlines the overall figures and middle and lower-level managers plan accordingly. The top-down process has certain advantages: top managers have comprehensive knowledge of the organization and its environment, including their familiarity with the company's goals, strategic plans, and overall resources availability. Thus, the top-down process enables managers set budget targets for each department to meet the needs of overall company revenues and expenditures. Other organizations use bottom-up budgeting, a process developing budgets in which lower-level and middle managers anticipate their departments' resource needs, which are passed up the hierarchy and approved by top management. The bottom-up approach builds on the specialized knowledge of operating managers about environment and marketplace, which they have gleaned
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from day-to-day operations. In reality, the budgetary process usually involves a mixture of both styles. Advantages and Disadvantages of Budget Control Like other control methods, budgets have the potential to help organizations and their members reach their goals. Budget control offers several advantages to managers. Some of these are: The major strength of budgeting is that it coordinates activities across departments. Budgets translate strategic plans into action. They specify the resources, revenues, and activities required to carry out the strategic plan for the coming year. Budgets provide an excellent record of organizational activities. Budgets improve communication with employees. Budgets improve resources allocation, because all requests are clarified and justified. Budgets provide a tool for corrective action through reallocations. However, budgets control can also create problems. The disadvantages of budgets are: The major problem occurs when budgets are applied mechanically and rigidly. Budgets can demotivate employees because of lack of participation. If the budgets are arbitrarily imposed top down, employees will not understand the reason for budgeted expenditures, and will not be committed to them. Budgets can cause perceptions of unfairness. Budgets can create competition for resources and politics.
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 A rigid budget structure reduces initiative and innovation at lower levels, making it impossible to obtain money for new ideas. These dysfunctional aspects of budgets systems may interfere with the attainment of the organization's goals. One generally accepted guideline for effective budgeting is to establish goals that are difficult but attainable. Therefore, skilled managers who understand budgets and how to use them have a powerful control tool with which to attain departmental and organizational goals.

Role of PERT and CPM

Program Evaluation and Review Technique (PERT) and the Critical Path Method (CPM) are two popular quantitative analysis techniques that help managers plan, schedule, monitor, and control large and complex projects. After the Special Projects Office of the U.S. Navy introduced it on the Polaris missile project in 1958, PERT was widely credited with helping to reduce by two years the time for the completion of the missile's engineering and development programs. Around the same time, Du Pont, with the help of RemingtonRand, created a similar network planning approach called the Critical Path Method (CPM). The result of their effort was a network model termed the critical path method. There are six steps common to both PERT and CPM. The procedure is as follows:
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1. Define the project and all of its significant activities or tasks. 2. Develop the relationships among the activities. Decide which activities must precede and follow others. 3. Draw the network connecting all of the activities. 4. Assign time and/or cost estimates to each activity. 5. Compute the longest time path through the network; this is called the critical path. 6. Use the network to help plan, schedule, monitor, and control the project. Finding the critical path is a major part of controlling a project. Although PERT and CPM are similar in their basic approach, they do differ in the way activity times are estimated. PERT is a probabilistic technique: it allows us to find the probability the entire project will be completed by any given data. CPM is called a deterministic approach. It uses two time estimates, the normal time (the time we estimates it will take under normal conditions to complete the activity) and the crash time (the shortest time it would take to finish an activity if additional funds and resources were allocated to the task) for each activity. Because of their similarity, only PERT will be discussed in detail. PERT networks are developed around two key concepts: activities and events. An activity represents a task or subproject that uses time or resources. It is represented by an arrow. An event is an indication of the beginning and /or ending of activities in the network. It is denoted by a circle, which contains a number that helps identify its location. In constructing a PERT network, manager must first develop a list of the major activities that are involved in the project and then determine which activities must precede others. The next step is
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constructing a network diagram, a graphic depiction of the interrelationship among activities. Developing the diagram may also include providing initial time estimates for the duration of each activity. Providing activity time estimates is not always an easy task. For this reason, the developers of PERT employed a probability distribution based on three time estimates for each activity: optimistic time (a), most likely time (m), and pessimistic time (b). A PERT network of eight events is depicted in Figure 7-1. The expected or average time for each activity is then calculated using the following formula: t=a+4m+b\6

To compute the dispersion and variance of this expected time estimate, we use the formula: variance=b-a/6

Computers software is increasingly being used to facilitate tasks. There are several good commercial software packages available that perform PERT analysis (e.g., Harvard Total Project Manager - HTPM). PERT is especially useful for planning and controlling large projects, particularly if there are uncertainties about activity durations and/ or trade-offs between resource usage and projects completion times.

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Benefits of strategic evaluation and control

What are the main benefits of strategic evaluation and control? There are three: They provide direction. They enable management to make sure that the organization is heading in the right direction and that corrective action is taken where needed. They provide guidance to everybody. Everyone within the organization, both managers and workers alike, learn what is happening, how their performance compares with what is expected, and what needs to be done to keep up the good work or improve performance. They inspire confidence. Information about good performance inspires confidence in everybody. Those within the organization are likely to be more motivated to maintain and achieve better performance in order to keep up their track record. Those outside customers, government authorities, and shareholders are likely to be impressed with the good performance.

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CONCLUSION
Evaluation and control play a central role in the strategic management process to assess how well things are going at every phase of the process and to take whatever action is necessary to improve performance. We evaluate to know how good our strategic plans are and how well they are implemented. The information we get from evaluation enables us to exercise better control over the strategic management process. We evaluate and control for three good reasons: to ensure that the organization is headed in the right direction, to provide guidance on how good performance can be achieved, and to inspire confidence in the organizations ability to produce desired results. How the evaluation and control process works is quite straightforward: set performance objectives, compare actual performance against objectives, and take whatever action is necessary to improve performance. By setting performance objectives the organization is forced to constantly re-examine its targets (usually the strategic goals and objectives) and ensure they have measurable, realistic outcomes. Performance objectives should be set in those areas most critical to success, and the level of performance set should constantly be examined to ensure that it remains realistic and in tune with present and anticipated conditions. Evaluation and control do not merely look at the implementation process; they should also be used to assess the validity of the strategic plan itself. Strategies fail because not enough attention is paid to important things. While proper evaluation and control may not altogether save an organization from ruin, it can help the organization.

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BIBLIOGRAPHY
www.wikipedia.com www.investopedia.com Strategic management by Michael Vaz

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