Strategic Project Auditing

Contextualising The Strategy Audit (Sa)

The notion of strategy audit (SA) refers to a mechanism of strategic control that covers key-aspects of the strategic management process in multiple steps of action and places them within the decision-making framework (Wheelen and Hunger, 1987). It contains several stages of intervention upon the internal environment and external environment ranging from selection, implementation, evaluation and control. Acquainted with this general notion of SA, one may wonder…

With regard to a business environment analysis project (BEAP), the macro external environment analysis is something that constitutes likewise part of the Strategy Audit of the firm. Whether the scrutiny surrounds a whole business unit, or exclusively a program or project, the BEA is a piece of the whole puzzle. The SA provides a general outlook of fitness between environments (internal and external) and performance (environment-performance). Furthermore, between environment and strategic alignment (structure &strategy-performance) in a given moment in time (as discussed in chapter 2 – section 2.2. Organization´s Strategic Fit). Therefore, one could well say, the SA is the larger picture in which the analysis function intertwines its various typologies and the BEA is embedded in it, as a business process within a system (and that´s correct!).

Hence, a strategy audit is realized for assessing strategic business units (SBUs) but also its micro-enterprises (of the project´s realm) of a corporate division, as each project assumes a micro-structure and ventures qualifying for an identical auditing scrutiny.

Commonly associated to the general public as being part of the corporate finance lexicon, as an in-depth analytical endeavor of the accountant, financial auditor and reviser, the expression “strategy audit” (SA) is though not a financial audit at all (even incorporating some principles of it). More than a catchword and larger than the prior, SA gathers a multiplicity of analytical efforts from multiple systems, involving several functional areas of a firm. Just in case SA is a concept totally new for you, let me tell you that several scholars have for decades quarried into it and explored the scope of the strategy audit and nowadays its boundaries are fairly clear to SM theorists. The 1980s was rather prolific in this field with scholars as David Hunger, Milton Lauenstein, Thomas Wheelen, Mike Wahl and others giving had a considerable impulse to this phenomenon.

Auditing is without any doubt, an apparatus of “control” fundamentally applied in organizations with a typical purpose of “looking at own belly” and with a medical gaze diagnose own ailments. This means to control critical sub-systems as Corporate Finance or Quality Assurance. This explains the growth in popularity of them. However, a larger audit of the strategic design of an entire SBU or a project holds also a tremendous utility, regardless size and dispersion of its operations. First, it follows the intelligence cycle as inputs (i.e. data), separately taken or cross-observed, empowering managers for more rational decisions for the economic maximization of value. Second, potential knowledge-gained from an SA has the virtue to open horizons to the anticipation, on a timely manner, of unseen problems or opportunities (e.g. a bottlenecking task or, underperforming result; or untapped activity).

The strategy audit comes though with a fundamental difference in scope from the two other forms of auditing above-mentioned, even though, they share a common denominator, auditing is a process-based approach. Thus, in essence, is heuristic, accounts the past practice and experience-gained and involves a high degree of complexity and depth. Until here, nothing is new; all forms of auditing assume such contours. Nonetheless, with a wider breadth than the scope of others forms of auditing, SA balances heuristics and holism, which makes it unique. Strategy auditing focusses, simultaneously, on multiple strategy-related domains while keeping a composite depth nature, as the analysis function entails an immersion into all these domains. The figure below exemplifies such singularity of the SA.