Steps involved in the controlling process:
(i) Establishment of standards:
(a) The first step in the controlling process is setting up of performance standards.
(b) Standards are the criteria against which the actual performance would be measured. Thus, standards serve as benchmarks towards which an organisation strives to work.
(c) Standards can be set in both quantitative and qualitative terms.
(ii) Measurement of actual performances:
(a) Once performance standards are set, the next step is measurement of actual performance.
(b) Performance should be measured in an objective and reliable manner.
(c) There are several techniques for measurement of performance. These include personal observation, sample checking, performance reports, etc.
(d) As far as possible, performance should be measured in the same units in which standards are set as this would make their comparison easier.
(iii) Comparing actual performance with standards:
(a) This step involves comparison of actual performance with the standards. Such comparison will reveal the deviation between actual and desired results.
(b) Comparison becomes easier when standards are set in quantitative terms.
(iv) Analysing deviation:
(a) Some deviation in performance can be expected in all activities. It is therefore important to determine the acceptable range of deviations.
(b) Also, deviation in key areas of business need to be attended more urgently as compared to deviations in certain insignificant areas. Critical point control and management by exception should be used by manager in this regard.
Critical point control: It is not easy and economical to keep check on each and every activity, so control should focus on key result areas (KRAs) which are critical to the success of an organisation. These KRAs are set as the critical points, if anything goes wrong at the critical points, the entire organisation suffers.
Management by exception: Management by exception, which is often referred to as control by exception, is an important principle of management control, based on the belief that an attempt to control everything results in controlling nothing.
(v) Taking corrective action:
(a) The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within acceptable limits.
(b) When deviations go beyond the acceptable range, especially in the important areas, it demands immediate managerial attention so that deviations do not occur again and standards are accomplished.
(c) Corrective actions might involve training of employees if the production target could not be met.