The organizational appraisal is the analysis of the internal business climate is crucial for the formulation of the most appropriate strategy. The strategic decision-makers conduct internal research to gain a clear perspective of the business profile. It gives an accurate analysis of the firm’s strengths and weaknesses.
Internal analysis, also known as corporate appraisal, is typically conducted to solve an issue within the company or to handle any emergency, e.g., improper maintenance of machinery used in production that results in defects in the finished product. A manager can solve this problem by ensuring the care and service of the equipment. Many companies conduct internal appraisals to reduce costs and increase revenue.
Factors Influencing Organizational Appraisal
The company must consider the following aspects when conducting the internal review or organizational appraisal:
1. Trends of Results
The business should look at the results and past patterns before examining the environment. There are a variety of trends, such as sales costs of acquisition, net income, marketing costs and so on. These indicators will reveal how well the company’s plan will yield the expected results.
2. Sources of Profit
Analyzing the internal context requires examining why the business is earning profits. Marketing strategies determine these sources. It is one the main factors influencing organizational appraisal.
While analyzing the external environmental factors that affect your business, it is essential to be aware of the risks that could arise due to external or internal elements. Numerous factors that can cause trouble include a smaller client base, dependence on one supplier, the lack of alternative markets for the product, technological risks, etc.
4. Production Activity
Firms must consider factors such as cost reduction in the production process, efficient and effective utilization of machinery and plants and the proper use of labour, raw material use, modern technology, etc.
5. Streamlining of Resources
Strategists must be aware of the internal resources and reduce their operations if needed. A few of the sources required to be streamlined include distribution depots, the relocation of facilities, buildings, and plants, as well as others.
6. Organization and Structure of Management
Any company must study its organizational structure and the skills of its leaders. It must invest in effective and productive labor relations—a good relationship with the trade unions, learning and encouraging employees, etc.
7. Finance Resources
An organization should analyze its cash flow situation, reserves, and liquidity to make better strategic decisions. It is an important factors influencing organizational appraisal.
8. Corporation Capability
Businesses should strive to understand and develop synergies between the capabilities of all their divisions and functions.
An organization must analyze all formal and informal methods of communication as well as the staff and employees involved in the system to ensure that A manager can assess the communication effectiveness within the company.
10. Utilization of Resources
The business must achieve the most efficient and effective use of its resources within several competing products. It includes tangible resources such as money, buildings, plants, machinery, etc. And intangible and scarce resources such as the management’s quality, talent and capability, technical expertise, etc. Utilization of resources is the important factors of organizational appraisal.
11. Technology and Trained Staff
The organization should ensure that the most up-to-date and effective technology is in place, along with qualified staff, to ensure the correct use and implementation of technology.
12. Organizational Climate and Culture
When assessing the environment inside and culture, it is important to consider whether the environment and culture that is adopted are most suitable to the organization and its processes or not. The organization’s culture is an important aspect that can determine the success or failure of every strategy. Therefore, the company must establish a pleasant and productive culture. It is the important factors of the organizational appraisal.
13. Change in Leadership in the organization
Change or shift in leadership within an unchanging organizational culture causes tensions and a loss of effectiveness in the system. It requires significant re-orientation as well as efforts from the company.
The Procedure of Organizational Appraisal
Internal analysis, also known as corporate analysis, follows a certain method:
1. Recognition of Strategic Factors
It starts by identifying all the factors that are crucial to the success necessary for a company to succeed. These factors can connect to various aspects of the company and its activities. The company must determine the key success factors essential to accomplishing its goals. These success factors may derive from various functional areas, such as finance, marketing, research and development, and so on.
2. Finding out the Strategic significance of the Factors
After identifying the most important success factors relevant to the business, strategizes must prioritize them in order of importance to the company’s goals. It is helpful after evaluating each factor’s role in the business’s goals. The basis for assessing elements is the organizational goals to achieve, which efforts are put into an organization.
3. Analyzing the Strengths and Weaknesses of the Most Important Success Factors
After determining the significance of the main success factors and then ranking them according to their importance, the organization must assess its strengths and weaknesses regarding these crucial success factors being discovered. Managers must determine the elements that determine whether the company is extremely strong, moderately strong or weak. It is important to understand the role of each of these factors in achieving corporate goals and evaluating past performance. It must compare similar characteristics to companies that are competing.
4. Preparing a Strategic Advantage Profiling
After the company has identified the strengths as well as weaknesses of its organization, strategists will then create an outline of the strategic advantage of organizational appraisal. The profile identifies the different areas where the organization is good. It ranks the various aspects of strength and weakness using a scale of moderate to strong. By doing this, an advantage-based strategic profile of the business is created.
5. Linking Strategic Advantages and Opportunities
The main purpose for assessing the organization’s capabilities is to align the capacities and capabilities of the business to opportunities within the world and develop viable alternatives for the company. Organizational appraisal also assists the organization in concentrating on the activities that the organizational capabilities can effectively carry out. Other measures are also helpful to address weaknesses in the organization to make the most effective use of opportunities. The company can devise a sustainable strategy that allows it to reap the advantage of opportunities within the outside environment while recognizing its strategic strengths.
Why Organizational Appraisal is Done?
An organizational appraisal assesses the organization’s performance and identifies areas where employees can improve. It can also help to identify any potential risks to the organization and to develop strategies for dealing with these risks.
What are the Factors that affect Organizational Appraisal in Strategic Management?
Numerous factors can affect the appraisal of an organization in strategic management. Some of the more common ones include the company’s size, the complexity of its operations, the clarity of its strategic goals, the strength of its management team, the quality of its financial statement information, and the overall economic conditions.
What are the 3 Importance of Performance Appraisal?
The three importance of performance appraisal is:
1. It provides a mechanism for feedback 2. It can help identify areas for improvement 3. It can help motivate employees