As a company grows, it can become difficult to keep track of everything that needs monitoring. Part of any effective business strategy is knowing how to review your workers, processes, and collective skill set. The purpose of these reviews is to arrange your workforce, business procedures, and the environment in a way that’s optimally productive. This is closely connected to the employee reviews, system reviews, and similar assessment tools that comprise what’s known as a ‘strategic audit.’
What is A Strategic Audit?
A good strategic audit entails a comprehensive look at the multitude of factors that determine the productivity levels of a particular business. This includes, but is not limited to:
Business opportunities on which to capitalize
Current and potential threats to your business
Current response policies to these threats and/or opportunities
Skill evaluation of employees
The efficiency of resource use
As you can already see, a well-executed strategic audit is a multi-stage process that requires equal amounts of skill, vigilance, and patience. Hopefully, it will become apparent that a strategic audit is more than worth the effort.
Stage #1: Auditing Your Company Resources
The first step in a strategic audit is to find out what resources you have at your disposal. A thorough inventory of your resources should include things like physical pieces of equipment, trademarks, patents, and real estate holdings. In addition, you should also factor in resources that are available through partnerships with suppliers, joint ventures, or other companies willing to team up with you. All of these qualify as available resources. Once you’ve made a full inventory, you’ll be able to allocate these resources much more effectively.
Stage #2: Assessing the Strength of Your Procedures
Usually referred to as a ‘value chain analysis,’ this is when you examine your various business procedures to discover how much (or how little) they contribute to the overall strength of your business. These procedures are divided into two distinct categories: primary activities and support activities.
Primary activities are the procedures that are directly tied to the products or services you sell, i.e. ‘the deliverables.’ Secondary, or support, activities are not directly involved in delivering your products or services, but they can increase your efficiency, optimize your processes, or set up employees for success in whatever role they play in your business.
Very few businesses take care of these activities all by themselves. A thorough analysis of your processes can help you determine what should stay in-house and what needs to be outsourced.
Stage #3: Examining Your Core Competencies
Every company has its strengths and weaknesses. In addition to identifying what yours are, it’s important to understand what skills, capabilities, and competencies will produce an actual competitive advantage versus those that won’t. Of course, these will vary from industry to industry, but management must identify the areas that need the most strength in order to stay competitive. The goal of the core competency stage is to assess the strength of these areas. Once this is accomplished, management can work to supply these areas with the best resources, workers, and managers.
Stage #4: The Performance Stage of Your Strategic Audit
The analyses carried out during the first three stages should give you a clear picture of your overall performance. Once this picture materializes, it’s time to start asking (and answering) some tough questions:
Is the company deploying all their resources in an effective manner?
How have available resources changed over time?
Does the company have highly skilled workers in the most crucial strategic positions?
Are managers getting the best performance possible out of their teams?
How does the business honestly compare to other businesses in the industry?
Where can vast improvements be made?
What standards are currently not being met and how can that be changed?
How do the finances/changes compare to others in the same industry?
These are just some of the crucial questions to measure performance properly.
Stage #5: Assessing the Portfolio?
This is looking at both the overall balance sheet and its individual pieces. Do you have heavy material resources that are no longer useful and could be more valuable being sold to produce more operating capital? Do you have too many workers in a dying sector, but not enough in an emerging one? Did once-promising markets fade, and have you established a presence in markets experiencing long-term growth?
There are multiple models that can be used to look at these types of questions. But no matter what method you use, this is the ideal time to see where your company stands relative to both the competition and prevailing market conditions.
Stage #6: The Final Analysis
The SWOT Analysis represents the final stage of your strategic audit. SWOT is short for Strengths, Weaknesses, Opportunities, Threats. The SWOT Analysis is an in-depth summary of everything you discovered over the course of your strategic audit. Because it places this information all in one place, this summary gives you an overview of your findings and helps you take decisive action.
Any business that embraces the stages of a strategic audit will not only understand their business, their competition, and their industry better, but they’ll also be in a position to take the necessary actions to improve their situation.
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