steps involved in controlling.

1. Process of Control
Alfred George
P18170
Pgdm B

2. 1. Establish standards to measure performance
▪ Standards are the benchmarks towards which efforts of entire organisation are
directed
▪ Define goals and plans for organizational departments.
▪ These standards can be expressed both in quantitative and qualitative terms.
▪ Eg: Quantitative: Revenue to be earned, Units to be produced or sold, Cost to be
incurred.
▪ Qualitative-Improving motivation level of employees, improving labour relations.

3. 2. Measure actual performance.
▪ The various techniques for measuring are sample checking, performance reports,
personal observation etc.
▪ Performance should be measured on same basis that the standards have.
▪ Eg: Superior prepares a report regarding the performance of an employee
▪ Various ratios like gross profit ratio, debtor turnover ratio, return on investment,
current ratio etc. are calculated at periodic intervals

4. 3. Comparing Actual Performance with Standards:
▪ Purpose is to find deviations of actual performance with the standards.

5. 4. Analysing Deviations
▪ Some deviations are possible.
▪ Deviations in major areas should be checked.
A) Critical Point control
In an organisation, the control should focus on Key Result Areas.
For example, in a manufacturing organisation, an increase of 10% in labour cost is
more troublesome than an 20% increase in stationary expenses.
B) Management by exception
According to this principle, an attempt to control everything results in controlling nothing.
Important deviations which exceed the prescribed limit should be brought to the notice
of management.

6. 5. Taking corrective action
▪ The last step in the process of controlling involves taking corrective action.
▪ If deviations are in acceptable limit, no action is required.
▪ If it is beyond acceptable limit, quick action should be made.
Causes and corrective measures.
Obsolete machinery - Technological upgradation
Defective material used - Change the quality standards for materials