This article throws light upon the five main steps involved in the process of control. The steps are: 1. Determining the Areas of Control 2. Setting Standards 3. Measurement of Performance 4. Comparison of Performance against Standards 5. Correction of Deviations.
Step # 1. Determining the Areas of Control:
It is not possible for managers to control every activity and employees also do not like that every activity is controlled by higher levels. Managers determine the key areas where controls should be developed. These areas best reflect the organisational performance.
Step # 2. Setting Standards:
Standards are the basis for evaluating performance and relate to goals of the enterprise. They are the specific criteria to be fulfilled as actual performance is measured against them. “A standard is a desired outcome or expected event with which managers can compare subsequent activities, performance or change.”
Standards are useful because:
(a) They enable employees to know the limitations of work and expectations of managers.
(b) They enable employees to know their abilities to perform according to standards. If they feel they cannot achieve the standard performance, training can increase their potential.
(c) They coordinate individual goals with organisational goals. Standards should clearly identify the desired results as they affect the performance of individuals. People are held responsible for their results and, thus, work should be tuned to standards which are achievable.
Standards should have the following features:
(a) They should be understandable and achievable.
(b) They should be objective, that is, based on scientific analysis and not guesswork.
(c) They should be flexible. If circumstances want, they should be subject to change.
(d) They should be framed in consultation with employees. Standards framed with participation are better accepted and achieved by employees.
(e) They should be reviewed periodically and altered from time to time. Standards may be quantitative or qualitative. Quantitative standards are set in monetary terms which can be measured and qualitative standards are set in non-monetary or intangible terms which cannot be measured precisely.
A company may set the following standards:
(i) Time standards:
They specify the time that employees should take to complete the work.
(ii) Production standards:
Production standards specify the units that should be produced within the specific time standards. For example, company can set production standard that an employee should produce 10 units of product A in one hour.
(iii) Cost standards:
The products should be cost effective to maximise profits. Cost standards specify per unit cost of products. For example, cost standards can specify: Cost of product A should not exceed Rs. 5 per unit. They specify the limits of costs within which goods should be produced.
(iv) Quality standards:
Quality standards maintain the quality of goods. Goods should be cost effective and qualitative in nature.
(v) Revenue standards:
They specify the revenue/profits to be earned out of sales.
(vi) Behavioural standards:
They specify how employees should behave with peer group, superiors and people outside the organisation, such as customers. Employees should be courteous and polite with work groups internal and external to the organisation. These standards increase employees’ morale and job satisfaction.
Step # 3. Measurement of Performance:
After setting the standards, performance of employees is measured from time to time. Quantitative performance can be better monitored than qualitative performance. Whether or not employees are polite or courteous cannot be easily measured.
Personal observation, performance reports, sample checking etc. are some of the ways which measure qualitative performance. Quantitative performance like production units, sales volume etc. can be measured accurately. As deviations in performance form the basis for future planning, standards should be framed with through planning.
Step # 4. Comparison of Performance against Standards:
After measuring actual performance, it is compared with standard performance.
Two possible situations may arise on comparison:
(a) Actual performance is equal to or more than standard performance.
(b) Actual performance is less than standard performance, that is, standards have not been met.
In the first situation, though no corrective action is required, managers should recognise workers’ positive performance and offer them rewards; financial (bonus, increase in pay) or non-financial (recognition and prestige). The nature of rewards varies with the needs of employees.
In the second situation, when there are deviations in the performance, these deviations may be significant or insignificant. If the deviation is not significant (deviation which is in the range of acceptance), it may be ignored but if it is significant, it should be brought to the notice of top managers in keeping with the principle of management by exception.
The principle states that since managers are occupied with many important organisational matters, every matter should not be reported to them. Only exceptional matters where performance significantly deviates from the standards should be brought to their notice so that action can be taken to correct the deviations.
“Management by exception is a control principle which suggests that managers should be informed of a situation only if control data show a significant deviation from standards”. After taking note of deviations, a report containing information regarding control should be sent to the person whose performance is being measured so that he can improve his future performance.
Step # 5. Correction of Deviations:
After detecting the deviations, managers ensure that deviations do not occur again. The problem may lie in workers’ initiative to work or standards may have to be revised because they are sub-optimal or over-optimal.
The corrective action can be:
Managers correct the deviations immediately to avoid major problems. In the production process, for example, if deviations occur at the transformation stage, they are corrected immediately; otherwise the final output will not sell in the market.
Immediate corrective action may involve:
(1) Hiring additional staff,
(2) Removing existing staff,
(3) Training the staff,
(4) Change in leadership style, or
(5) Change in motivators.
Permanent actions remove the cause of deviations so that deviations do not occur in future. The fault may not always lie with execution of standards. The standards and the measures of performance can also be faulty. Managers may, therefore, have to revise or reframe the plans.
A new selection policy, for example, for reshuffling the employees may be helpful rather than hiring and firing employees according to existing employment standards. Change in organisation structure or techniques of operation (delegation policies, leadership styles, communication system, direction policies) may be required depending upon the need for corrective action.