A corporate strategic audit is a review of the 'strategic', market, resource, operational, efficiency, systems, logistics and all other corporate decisions that contributed to its objectives. The intent is to ensure that the decisions are optimised.

The mistake organisations make in reviewing decision-making effectiveness is to confuse the order and purpose that decision are made and thus the relationships and interdependencies between those decisions.

A schematic of the hierarchy of decision-making can be seen at: http://www.jacobyconsulting.com.au/knowledge/tussling.htm

The hiearchy therefore stipulates the relationship between the different elements within all organisations. The fundamental characteristic of the hiearchy is the recognition that the initial stimulus of all corporations is the satisfaction of owner needs. On analysis, this has been equally true of public and private, and large and small corporations. Corporate objective therefore must support owner objectives.

From there, the owners (or the proxied corporation) choose the broad environment (market) in which to participate in order to extract the benefit sought by owners. This doesn’t imply that these choices are always correct. Sometimes decisions to embark into new markets or industries are disastrous. The fact remains however, that a choice is made as to how and where owner benefits will be harvested. The strategic audit tests these decisions.

Once the market environment has been resolved, a choice is made as to the tools needed to extract the benefit from the chosen operating environment - i.e. the products and services to be offered. How often do we experience companies developing new products then looking for a market to sell them into? The strategic audit tests these decisions.

The market and product/service decisions will then create a number of dissemination options. That is, how do we get the products and services into the market while still satisfying our core objectives? What channels of distribution, support levels and communications and promotional strategies are available to us in order to extract from the chosen market place the benefit from the products and services we have nominated to satisfy core objectives? The strategic audit tests these decisions.

The “higher level” decisions will significantly determine decisions on human resources, information technology and processes required “to make it happen”. A decision to manufacture versus a decision to retail will cause fundamental changes to H.R., I.T., organisational structure and process strategies. Therefore, the “higher-level” decisions determine the mechanistic needs of the organisation. How many of our organisations are structure led? Do these structures in fact enhance owner objectives or hinder them? The strategic audit tests these decisions.

Only when these “high-level” and mechanistic decisions have been considered, can a reasonable financial picture be developed of the corporation, and only then can an organisation determine whether it will satisfy owner objectives. If after progressing through the process one gets to the financial analysis only to find that the probable benefits/outcomes do not match desired benefits, then the process needs to question the validity of some of the assumptions and decisions made during the process and the plan needs to be reworked.

A decision to manufacturer versus a decision to subcontract for example may have significant “bottom-line” implications. It is common that decisions on the extent and character of organisational elements within most companies need to be “fine-tuned” in order to realise desired benefit. But unless the owner’s desired benefit is recognised as the ultimate justification for the corporation, then how difficult is it to find the appropriate path? The strategic audit tests these decisions.