(i) Setting Standards
Setting up of standards involves developing the benchmarks against which the actual performance is to be measured. The standards can be set in qualitative as well as quantitative terms. Qualitative benchmarks can be in the form of improving coordination in work, higher goodwill or increased motivation level of employees, etc. For example, to improve the motivation level among employees, standard can be set in terms of number of initiatives taken. Quantitative benchmarks can be in the form of sales targets, units to be produced or time to be spent on a particular action, etc. For example, in a shirt factory completing 10 pieces a day is a quantitative target. The standards that are set should be such that they facilitate easy comparison.
(ii) Measuring Actual Performance
Once the standards are set, the next step is to measure the actual performance of the activities. This may be done through various techniques such as personal observation, checking the sample, performance reports, etc. The checking should be done in an exact and reliable manner so that correct measurement is taken for comparison. Measurement can be done after the completion of an activity as well as while it is in progress. For example, while assembling small parts of a bigger machine, the parts can be checked before assembling. This would ensure the continuous monitoring of the small parts as well as the final machine.
(iii) Comparing the Performances
Performances once measured are then compared with the set standards. Such a comparison helps in assessing the deviations in the work. Thereby, it guides the managers in taking the necessary steps so as to improve the performances. These comparisons are easier when they are in quantitative terms. For example, efficiency in work in terms of cost incurred can be measured against the standard cost.
(iv) Analysing Deviation
Every organisation faces deviations when comparing the actual performance with the pre-developed standards. Thus, it is important to find the deviations that are in the permissible range. It is said that deviations in key areas should be attended first. For analysing the deviations the managers generally use 'Critical Point Control' and 'Management by Exception'. .
• Critical Point Control: An organisation cannot keep a check on all the activities of the management. Thus, this technique of controlling aims at focussing on only the key result areas (KRAs) that affect the entire organisation. For example, rise in input cost would be more important than rise in stationary cost.
• Management by Exception: This technique of management is based on the belief that 'an attempt to control everything results in controlling nothing'. According to this, only the essential and significant deviations that are beyond the acceptable limit should be controlled. For example, if there is a 6 per cent rise in labour cost whereas the permissible limit is just 3 per cent, then, this should be immediately brought into the notice of the management. On the other hand a 2 percent rise in the cost can be ignored.
Once the deviations are recognised, it is necessary to acknowledge the cause for it. There can be a number of elements causing deviations in work such as infeasible standards, deficiencies in process, under utilisation of resources, changes in business environment, etc. Thus, it becomes important for the management to take into regard the causes for the concerned deviations.
(v) Corrective Measures
When deviations go beyond the admissible limits, there arises a need for the management to take corrective actions. This is the last step of controlling which aims at correcting the deficiencies of the organisation so that the errors do not occur again. For example, if the production target was not met duly, appropriate corrective actions such as training the workers or updating the machinery for working, etc. can be taken.