Financial Management and Strategic Management · Strategy Implementation and Evaluation

Strategic Evaluation and Balanced Scorecard

Updated 4 October 2026 · Fact-checked

Strategic evaluation checks whether a strategy is achieving the organisation's objectives. You set criteria, measure performance, compare it with targets, find gaps and take corrective action. The balanced scorecard measures performance through four perspectives: financial, customer, internal business process, and learning and growth. Benchmarking compares you with the best.

Understand Strategic Evaluation and Balanced Scorecard

A strategy is only useful if it works. Strategic evaluation is the last stage of the strategic management process. It asks one question: are we moving towards our objectives, and if not, what do we change? It covers both the strategy itself and how well it is being carried out.

Evaluation matters because the environment keeps changing. Today's internal strengths can become weaknesses, and external opportunities can become threats. Managers must therefore review the basis of the strategy regularly: internal factors, external factors and actual performance against targets.

Evaluation uses two kinds of criteria. Quantitative criteria are numbers, such as return on investment, profit, market share, sales growth and earnings per share. Qualitative criteria are judgement based. A standard set is Rumelt's four criteria: consistency (the strategy does not contain mutually inconsistent goals and policies), consonance (it fits the external environment and its changes), feasibility (it can be carried out with the available resources without overtaxing them or creating unsolvable problems) and advantage (it creates or maintains a competitive advantage). Good evaluation uses both kinds, because numbers alone can hide problems like falling morale or weak customer loyalty.

The balanced scorecard, developed by Kaplan and Norton, fixes the weakness of purely financial measures. It looks at four perspectives. Financial: how do we look to shareholders? Customer: how do customers see us? Internal business process: what must we excel at? Learning and growth: can we keep improving and creating value? Financial results are lagging indicators. The other three perspectives are leading indicators of future results.

Benchmarking is a related technique. You compare your products, processes and performance with the best in the industry or with best practice elsewhere, find the gap and then work to close it. Other tools include comparing performance with past periods, with competitors and with set targets. Evaluation can meet barriers such as resistance from managers, fear of exposing weak results, short-term focus and poor measures.

Key rules to remember

Strategic evaluation process: Set criteria → Measure performance → Compare with targets → Analyse variances → Take corrective action; Use this sequence as the skeleton of any process answer.
Balanced scorecard perspectives: Financial + Customer + Internal Business Process + Learning and Growth; Each perspective needs its own objectives, measures, targets and initiatives.
Criteria types: Quantitative (ROI, profit, market share, EPS) and Qualitative (Rumelt's criteria: consistency, consonance, feasibility, advantage); Name examples of both whenever criteria are asked. Consistency means no conflicting goals or policies; consonance means fit with the environment; feasibility means doable with available resources; advantage means a competitive edge.
Benchmarking steps: Select area → Choose best-in-class partner → Collect data → Find gap → Set targets → Implement and monitor; Wording of steps varies; the logic of finding and closing the gap stays fixed.

How to solve Strategic Evaluation and Balanced Scorecard questions

Most questions ask you to explain a concept, list steps, or apply the balanced scorecard to a given organisation. This method covers all three.

1Read the question and mark the command word: explain, discuss, list, or apply to a case.
2Define the term in one sentence, for example strategic evaluation as measuring performance against objectives and taking corrective action.
3If it is a process question, write the steps in order and add one line of meaning for each.
4If it is a balanced scorecard question, name all four perspectives and give one or two measures for each, linked to the business in the case.
5Where a case is given, use its facts, such as the industry, products and problem, instead of generic points.
6Mention the link to the strategic management process, such as feedback into strategy formulation or corrective action.
7Close with a one-line conclusion on why the technique helps, for example balancing short-term and long-term measures.

Quickest way: Four-perspective checklist

When to use it: Use it when you have little time and the question is about the balanced scorecard, evaluation criteria or barriers.

MCQs: if the option talks only about financial results, it is not the balanced scorecard. The scorecard is always four perspectives.
MCQs: match the measure to the perspective. Profit and ROI are financial. Customer satisfaction is customer. Cycle time and defect rate are internal process. Employee training and innovation are learning and growth.
Written: use the format Definition, Points or steps with short headings, Example, Conclusion.
Write one bold heading per perspective and one line of measures under each so the examiner can award marks quickly.
Keep numbered points. Each correct point earns marks, so five clear points beat one long paragraph.

Common mistakes in Strategic Evaluation and Balanced Scorecard

Treating the balanced scorecard as a financial tool only.
Students link scorecards with profit and ratios.
Fix: State that financial is just one of four perspectives, and the other three are leading indicators of future results.
Writing the four perspectives in a mixed-up way, such as calling it the process or people perspective.
Students memorise loosely.
Fix: Learn the standard names: Financial, Customer, Internal Business Process, Learning and Growth.
Giving only quantitative criteria for evaluation.
Numbers feel more exam-worthy.
Fix: Always give both quantitative and qualitative criteria with an example of each.
Confusing strategic evaluation with strategic control.
Both check performance and follow each other in the syllabus.
Fix: Evaluation judges whether the strategy is working against objectives. Control is the ongoing system of monitoring and corrective action. Link them but keep the definitions separate.
Writing generic points in a case question.
Students rush to recall the theory.
Fix: Pick measures from the business in the case, for example on-time delivery for a logistics firm.

Worked examples

Example 1

A retail chain measures success only by quarterly profit. Suggest how the balanced scorecard can give a fuller picture of its performance.

Show the solution

Define: the balanced scorecard measures performance through four perspectives instead of financial results alone.
Financial: profit growth, return on capital employed and revenue per store.
Customer: customer satisfaction score, repeat purchase rate and market share in key cities.
Internal business process: stock availability, billing time at counters and wastage in the supply chain.
Learning and growth: staff training hours, employee turnover and number of new ideas adopted.
Conclusion: profit is a lagging result. The other three perspectives show whether future profit is being built.

Answer: The chain should track measures under all four perspectives: Financial, Customer, Internal Business Process, and Learning and Growth. This shows both current results and the drivers of future performance, so the chain does not give up long-term health for quarterly profit.

Example 2

Explain the process of strategic evaluation and any two barriers to effective evaluation.

Show the solution

Define: strategic evaluation checks whether the strategy is achieving objectives and recommends corrective action.
Step 1: Fix the criteria, quantitative such as ROI and market share, and qualitative such as consistency, consonance, feasibility and advantage.
Step 2: Measure actual performance using reports, data and observation.
Step 3: Compare actual performance with the targets and standards.
Step 4: Analyse the gaps to find causes, whether internal or external.
Step 5: Take corrective action, such as changing the strategy, resources or targets, and feed the lessons back into the process.
Barrier 1: Resistance from managers who fear that poor results will reflect on them.
Barrier 2: Short-term focus, where only easily measured financial numbers are used and long-term factors are ignored.

Answer: Strategic evaluation runs through setting criteria, measuring performance, comparing with targets, analysing variances and taking corrective action. Barriers include managerial resistance and an excessive short-term, purely financial focus.

Exam tips

Expect both MCQs and short theory. MCQs often ask you to match a measure to a balanced scorecard perspective.
In a case question, build the answer around the four perspectives and pick measures from the case itself.
Always give a mix of quantitative and qualitative examples when criteria are asked.
Use numbered points with bold headings. Step marks are given per correct point.
Revise this topic with Strategic Control and Operational Control, since questions often link the two.

Practice questions from Strategy Implementation and Evaluation

Strategic Evaluation and Balanced Scorecard in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Strategic Evaluation and Balanced Scorecard: frequently asked questions

What are the four perspectives of the balanced scorecard?

They are Financial, Customer, Internal Business Process, and Learning and Growth. Each has its own objectives, measures, targets and initiatives. Together they link current results with the drivers of future performance.

What is the difference between quantitative and qualitative criteria for strategy evaluation?

Quantitative criteria are measurable numbers such as ROI, profit, market share and EPS. Qualitative criteria are judgement based, such as Rumelt's consistency, consonance, feasibility and advantage. A sound evaluation uses both.

What is benchmarking in strategic management?

It is the practice of comparing your processes, products and performance with the best in the industry or elsewhere. You then identify the gap and work to close it. It helps set realistic targets and spot improvement areas.

How should I write a balanced scorecard answer in the exam?

Define it briefly, then give one heading for each of the four perspectives with one or two measures linked to the case. Close with a line on why the scorecard gives a balanced view. Neat points help the examiner award marks.