How Do I Create Employee Performance Standards?

Setting employee performance standards, and then monitoring employee progress, are
important to the development of your staff, according to the University of California at
Berkeley Human Resources Department. A manager should work with the employee to
develop a set of standards that both parties understand and can commit to. When
employees participate in creating their own performance standards, they have an increased
feeling of responsibility for reaching, and even exceeding, those standards.
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1. Review the job description with the employee, and discuss what sort of measurable goals
the employee should set. A standard needs to be measurable so you have something to
compare the performance to from year to year. It also enables you to compare one
employee's performance with another employee's performance in the same position.
Measurable goals could be an increase in revenue in the case of salespeople; inbound or
outbound accounting activity in the case of accounts payable and receivable staff; or per
unit productivity in the case of a manufacturing or production job.

2. Analyze any historical data available on the performance goals you have set, and then
begin creating performance goals based on the historical data. Use monthly averages to
help create the numbers you will begin with.

3. Determine what kind of progress you would like to see the employee achieve, and then
place a number on that progress. For example, you may want a salesperson to have a 10
percent increase in revenue for the coming year, or you may want to see a production
employee raise his per unit number by 20 percent.

4. Apply your increase to the average numbers, and then develop a per month schedule of
standards based on your data. Remember your numbers will more than likely be cyclical.
That means certain months are historically more productive than others. Use that historical
cycle when creating a performance standards criteria.

5. Implement the performance standards and then schedule a meeting for the beginning of
each month with the employee to discuss the standards. Offer advice on how to improve
performance, and keep a record of each meeting to be used at the annual performance
review.
Performance
ManagementPERFORMANCE
MANAGEMENT CYCLE
Developing Performance Standards

While performance elements tell employees what they have to do, the standards tell them how well they have to do it.

The first article in this series defined and reviewed the characteristics of critical, non-critical, and additional

performance elements. This article reviews the principles of writing good standards that can be used effectively to

appraise employee performance of those elements.

Definition

A performance standard is a management-approved expression of the performance threshold(s), requirement(s), or

expectation(s) that must be met to be appraised at a particular level of performance. A Fully Successful (or

equivalent) standard must be established for each critical element and included in the employee performance plan. If

other levels of performance are used by the appraisal program, writing standards for those levels and including tem in

the performance plan is not required by is encouraged so that employees will know what they have to do to meet

standards higher than Fully Successful.

General Measures

Performance standards should be objective, measurable, realistic, and stated clearly in writing (or otherwise

recorded). The standards should be written in terms of specific measures that will be used to appraise performance.

In order to develop specific measurers, you first must determine the general measure(s) that are important for each

element. General measurers used to measure employee performance include the following:

Quality address how well the work is performed and/or how accurate or how effective the final product is.

Quality refers to accuracy, appearance, usefulness, or effectiveness.

 Quantity addresses how much work is produced. A quantity measure can be expressed as an error rate,

such as number or percentage of errors allowable per unit of work, or as a general result to be achieved.

When a quality or quantity standard is set, the Fully Successful standard should be high enough to be

challenging but not so high that it is not really achievable.

Timeliness addresses how quickly, when or by what date the work is produced. The most common error

made in setting timeliness standards is to allow no margin for error. As with other standards, timeliness

standards should be set realistically in view of other performance requirements and needs of the

organization.

Cost-Effectiveness addresses dollar savings to the Government or working within a budget. Standards that

address cost-effectiveness should be based on specific resource levels (money, personnel, or time) that

generally can be documented and measured in agencies' annual fiscal year budgets. Cost-effectiveness

standards may include such aspects of performance as maintaining or reducing unit costs, reducing the time

it takes to produce a product or service, or reducing waste.

For each element, decide which of these general measurers are important to the performance of the element by

asking the following questions:

Is quality important? Does the stakeholder or customer care how well the work is done?

Is quantity important? Does the stakeholder or customer care how many are produced?

Is it important that the element be accomplished by a certain time or date?

Is it important that the element be done within certain cost limits?

BACK TO TOP

Specific Measures

Once you've decided which general measures are important, you can develop specific measurers. It is these specific

measures that will be included in the standard. To develop specific measure(s) for each element, you must determine

how you would measure the quantity, quality, timeliness, and/or cost-effectiveness of the element. If it can be
measured with numbers, clearly define those numbers. If performance only can be described (i.e., observed and

verified), clarify who would be the best judge to appraise the work and what factors they would look for. (The first-line

supervisor is often the best person to judge performance, but there may be situations, depending on what is being

measured, when a peer or the customer receiving the product or service would be the best judge.)

The following questions may help you determine specific measures. For each general measure, ask:

How could [quality, quantity, timeliness, and/or cost effectiveness] be measured?

Is there some number or percent that could be tracked?

If there is no number, and the element can only be judged, ask:

Who could judge that the element was done well? What factors would they look for?

Writing Standards

Once you've established the specific measures that apply to the elements, you can begin to write the standards.

Before writing the Fully Successful standard, you must know the number of levels that your appraisal program uses to

appraise elements. For example, if you are under an appraisal program that uses two levels to appraise elements,

the Fully Successful standard would describe a single point of performance, above which is Fully Successful, and

below which is Unacceptable. If, however, your appraisal program uses five levels to appraise elements, you would

describe the Fully Successful standard as a range, above which is higher than Fully Successful, and below which

would be Minimally Successful (or equivalent). How you write the Fully Successful standard depends on the number

of levels your program uses to appraise elements.

If a specific measure for an element is numeric, for example, you would list the units to be tracked and determine the

range of numbers (or the single number in a program that appraises elements at two levels) that represents Fully

Successful performance. If the specific measure is descriptive, you would identify the judge, list the factors that the

judge would look for, and determine what he or she would see or report that verifies that Fully Successful

performance for that element had been met.

Examples

Included below are examples of elements and standards. The specific measures are in italics; the performance (or

range of performance) that actually establishes the level of the standard are in boldface type.

BACK TO TOP

Element: Guidance and Technical Assistance

Fully Successful Standard in an appraisal program that appraises elements at five levels (to meet this standard, all of

the bullets listed must be present or occur):

No more than 3-8% errors per quarter, as determined by the supervisor.

At least 60-80% of customers agree that the employee is willing to assist and that the information they

receive is helpful.

Employee initially responds to customer requests for assistance within at least 1-8 working hours from

receipt of request.

(If this standard had been written for an appraisal program that appraised elements at only two levels, the standard

would have been "no more than 8% errors per quarter, "at least 60% of customers agree," and "up to 8 working hours

from receipt of request.")

Element: Team Participation

Fully Successful Standard in an appraisal program that appraises elements at five levels (to meet this standard, all of

the bullets listed must be present or occur):

The supervisor and team members are satisfied that the incumbent:

Usually assumes an appropriate amount of work/responsibility for group projects;

Typically demonstrates a willingness to assume other responsibilities as needed; and

Generally shares knowledge of office procedures/equipment with other members of the team.
Element: Analytical Results and Specifications

Fully Successful Standard in an appraisal program that appraises elements at five levels (to meet this standard, all of

the bullets listed must be present or occur):

The Research Manager is routinely satisfied that:

The method measures that appropriate variable.

The results are relevant.

The method is scientifically sound.

There is a well-written protocol.

The method is accurate, precise, reproducible, fast, and cost-effective.

Controlling as a management function involves following steps:

1. Establishment of standards- Standards are the plans or the targets which have to be achieved
in the course of business function. They can also be called as the criterions for judging the
performance. Standards generally are classified into two-

a. Measurable or tangible - Those standards which can be measured and expressed are
called as measurable standards. They can be in form of cost, output, expenditure, time,
profit, etc.

b. Non-measurable or intangible- There are standards which cannot be measured

monetarily. For example- performance of a manager, deviation of workers, their attitudes
towards a concern. These are called as intangible standards.

Controlling becomes easy through establishment of these standards because controlling is

exercised on the basis of these standards.

2. Measurement of performance- The second major step in controlling is to measure the

performance. Finding out deviations becomes easy through measuring the actual performance.
Performance levels are sometimes easy to measure and sometimes difficult. Measurement of
tangible standards is easy as it can be expressed in units, cost, money terms, etc. Quantitative
 measurement becomes difficult when performance of manager has to be measured. Performance
of a manager cannot be measured in quantities. It can be measured only by-

a. Attitude of the workers,

b. Their morale to work,

c. The development in the attitudes regarding the physical environment, and

d. Their communication with the superiors.

It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.

3. Comparison of actual and standard performance- Comparison of actual performance with the
planned targets is very important. Deviation can be defined as the gap between actual performance and
the planned targets. The manager has to find out two things here- extent of deviation and cause of
deviation. Extent of deviation means that the manager has to find out whether the deviation is positive or
negative or whether the actual performance is in conformity with the planned performance. The managers
have to exercise control by exception. He has to find out those deviations which are critical and important
for business. Minor deviations have to be ignored. Major deviations like replacement of machinery,
appointment of workers, quality of raw material, rate of profits, etc. should be looked upon consciously.
Therefore it is said, If a manager controls everything, he ends up controlling nothing. For example, if
stationery charges increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand,
if monthly production decreases continuously, it is called as major deviation.

Once the deviation is identified, a manager has to think about various cause which has led to
deviation. The causes can be-

a. Erroneous planning,

b. Co-ordination loosens,

c. Implementation of plans is defective, and

d. Supervision and communication is ineffective, etc.

4. Taking remedial actions- Once the causes and extent of deviations are known, the manager has to
detect those errors and take remedial measures for it. There are two alternatives here-

e. Taking corrective measures for deviations which have occurred; and

f. After taking the corrective measures, if the actual performance is not in conformity with
plans, the manager can revise the targets. It is here the controlling process comes to an
end. Follow up is an important step because it is only through taking corrective
measures, a manager can exercise controlling.
Controlling Process in Business
Management (5 Steps)
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Some of the essential steps of controlling process as studied under

Business Management are : 1. Setting Performance Standards 2.
Measurement of Actual Performance 3. Comparing Actual
Performance with Standards 4. Analysing Deviations 5. Taking
Corrective Action.

Controlling Process consists of following systematic steps:

1. Setting Performance Standards:

The first step in the process of controlling is concerned with setting

performance standards. These standards are the basis for measuring
the actual performance.

Thus, standards act as a lighthouse that warns & guides the ships at
sea. Standards are the benchmarks towards which efforts of entire
organisation are directed.

These standards can be expressed both in quantitative and qualitative

terms.

Examples of Quantitative Standards:

(a) Revenue to be earned.

(b) Units to be produced and sold.

(c) Cost to be incurred.

(d) Time to be spent in performing a task.

(e) Amount of inventories to be maintained etc.

Examples of Qualitative Standards:

(a) Improving motivation level of employees.

(b) Improving labour relations.

(c) Improving quality of products.

(d) Improving goodwill etc.

In order to facilitate easy comparison of actual performance with the

standards, a manager should try to set these standards in quantitative
terms as far as possible. However, in case of qualitative standards,
effort should be made to define these standards in such a way that
comparison becomes easily understandable.

For example, for improving customer satisfaction in a restaurant

having self service, standard can be set in terms of time taken to get a
table, place the order and collect the order. Moreover, the standards
set should be flexible enough so that necessary changes can be made
according to varying situations.

2. Measurement of Actual Performance:

Once the standards have been determined, the next step is to measure
the actual performance. The various techniques for measuring are
sample checking, performance reports, personal observation etc.
However, in order to facilitate easy comparison, the performance
should be measured on same basis that the standards have.

Following are some of the ways for measuring performance:

(a) Superior prepares a report regarding the performance of an

employee.
(b) Various ratios like gross profit ratio, debtor turnover ratio, return
on investment, current ratio etc. are calculated at periodic intervals to
measure companys performance.

(c) Progress made in areas like marketing can be measured by

considering the number of units, increase in market share etc.

(d) In small organisations, each unit produced can be checked

personally to ensure the quality standards.

(e) In large organisation, the technique of sample checking is used.

Under this technique, some pieces are checked at random for quality
specifications.

3. Comparing Actual Performance with Standards:

This step involves comparing the actual performance with standards

laid down in order to find the deviations. For example, performance of
a salesman in terms of unit sold in a week can be easily measured
against the standard output for the week.

4. Analysing Deviations:

Some deviations are possible in all the activities. However, the

deviation in the important areas of business needs to be corrected
more urgently as compared to deviation in insignificant areas.
Management should use critical point control and management by
exception in such areas.

(a) Critical Point Control:

Since it is neither easy nor economical to check each and every activity
in an organisation, the control should focus on Key Result Areas
(KRAs) which act as the critical points. The KRAs are very essential for
the success of an organisation. Therefore, the entire organisation has
to suffer if anything goes wrong at these points. For example, in a
manufacturing organisation, an increase of 7% in labour cost is more
troublesome than an 18% increase in stationary expenses.
(b) Management by Exception:

Management by exception or control by exception is an important

principle of management control. According to this principle, an
attempt to control everything results in controlling nothing. Thus only
the important deviations which exceed the prescribed limit should be
brought to the notice of management. Thus, if plans provide for 3%
increase in labour cost, deviations beyond 3% alone should be brought
to the notice of the management.

Advantages of Critical Point Control and Management by

Exception are as follows:

(i) Since managers deal only with important deviations, it results in

saving time and efforts.

(ii) It helps in identifying important deviations which need timely

action to keep the organisation at the correct path.

(iii) By handing over the routine problems to the subordinates,

management by exception facilitates delegation of authority and helps
in increasing morale of employees.

(iv) It ensures better utilization of managerial expertise by focusing

managerial attention only on important areas.

After identifying the deviations, various causes for these deviations are
analyzed. The main causes can be structural drawbacks, shortage of
resources, environmental factors beyond organisational control,
unrealistic standards, defective process etc. Exact cause or causes of
deviation must be identified correctly in order to take effective
corrective measures.

5. Taking Corrective Action:

The last step in the process of controlling involves taking corrective

action. If the deviations are within acceptable limits, no corrective
measure is required. However, if the deviations exceed acceptable
limits, they should be immediately brought to the notice of the
management for taking corrective measures, especially in the
important areas.

Following are some of the examples of corrective action:

Causes of Deviation Corrective action to be taken

(i) Obsolete Machinery Technological Upgradation of

machinery

(ii) Defective Process Change the specification standards

manufacturing process. for the

(iii) Defective Material Change the quality standards for

used. material

(iv) Defective physical Improvement in physical

conditions of work. conditions of work.

(v) Defective machinery. Repair the existing machine or

purchase new machine if it cannot
be repaired.

4 main steps in control process in management are:

Control as a management function involves the following steps:

1. Establishing Standards:

Standards are criteria against which results are measured. They are norms to achieve the goals.
Standards are usually measured in terms of output. They can also be measured in non-monetary
terms like loyalty, customer attraction, goodwill etc. Some of the standards are as.

a. Time standards:

The goal will be set on the basis of time lapse in performing a task.

b. Cost standards:

These indicate the financial expenditures involved per unit, e.g. material cost per unit, cost per
person, etc.

c. Income standards:

These relate to financial rewards received due to a particular activity like sales volume per month,
year etc.

d. Market share:

This relates to the share of the company's product in the market.

e. Productivity:

Productivity can be measured on the basis of units produced per man hour etc.

f. Profitability:

These goals will be set with the consideration of cost per unit, market share, etc.

2. Measuring Performance

Measurement involves comparison between what is accomplished and what was intended to be
accomplished. The measurement of actual performance must be in the units similar to those of
predetermined criterion. The unit or the yardstick thus chosen be clear, well-defined and easily
identified, and should be uniform and homogenous throughout the measurement process.

The performance can be measured by the following steps:

(a) Strategic control points:

It is not possible to check everything that is being done. So it is necessary to pick strategic control
points for measurement. Some of these points are:

(i) Income:
It is a significant control point and must be as much per unit of time as was expected. If the income is
significantly off form the expectation then the reasons should be investigated and a corrective action
taken.

(ii) Expenses:

Total and operational cost per unit must be computed and must be adhered to. Key expense data
must be reviewed periodically.

(iii) Inventory:

Some minimum inventory of both the finished product as well as raw materials must be kept in stock
as a buffer. Any change in inventory level would determine whether the production is to be increased
or decreased.

(iv) Quality of the product:

Standards of established quality must be maintained especially in food processing, drug

manufacturing, automobiles, etc. The process should be continuously observed for any deviations.

(v) Absenteeism:

Excessive absenteeism of personnel is a serious reflection on the environment and working

conditions. Absenteeism in excess of chance expectations must be seriously investigated.

(b) Meclzanised measuring devices:

This involves a wide variant of technical instruments used for measurement of machine operations,
product "quality for size and ingredients and production processes. These instruments may be
mechanical, electronic or chemical in nature.

(c) Ratio analysis:

Ratio analysis is one of the most important management tools. It describes the relationship of one
business variable to another.

The following are some of the important ratios:

i) Net sales to working capital:

The working capital must be utilised adequately. If the inventory turnover is rapid then the same
working capital can be used again and again. Hence for perishable goods, this ratio is high. Any
change in ratio will signal a deviation from the norm.

ii) Net sales to inventory:

The greater the turnover of inventory, generally, the higher the profit on investment.

iii) Current ratio:

This is the ratio of current asset (cash, receivables etc.) to current liabilities, and is used to determine
a firm's ability to pay the short term debts.

iv) Net profits to net sale:

This ratio measures the short-run profitability of a business.

v) Net profits to tangible net worth:

Net worth is the difference between tangible assets (not good will, etc) and total liabilities. This ratio
of net worth is used to measure profitability over a long period.

vi) Net profits to net working capital:

The net-working capital is the operating capital at hand. This would determine the ability of the
business to finance day-to-day operations.

vii) Collection period on credit sales:

The collection period should be as short as possible. Any deviation from established collection period
should be promptly investigated.

viii) Inventory to net working capital:

This ratio is to determine the extent of working capital tied up in inventory. Generally, this ratio
should be less than 80 per cent, ix) Total debt to tangible net worth: This ratio would determine the
financial soundness of the business. This ratio should remain as low as possible.

(d) Comparative statistical analysis:

The operations of one company can be usefully compared with similar operations of another
company or with industry averages. It is a very useful performance measuring device.

(e) Personal observation:

Personal observation both formal and informal can be used in certain situation as a measuring
device for performances, specially, the performance of the personnel. The informal observation is
generally a day-to-day routine type. A manager may walk through a store to have a general idea
about how people are working.

3. Comparing the Actual Performance with Expected Performance

This is the active principle of the process. The previous two, setting the goals and the measurement
format are the preparatory parts of the process. It is the responsibility of the management to
compare the actual performance against the standards established.
This comparison is less complicate if the measurement units for the standards set and the
performance measured are the same and quantified. The comparison becomes more difficult when
these require subjective evaluations

Ralph C. Davis identifies four phases in the comparison.

1. Receiving the raw data.

2. Accumulation, classification and recording of this information.

3. Periodic evaluation of completed action to date.

4. Reporting the status of accomplishment to higher line authority.

At the third phase, deviations if any are noted between standards and performance. If clear cut
deviations are there, then management must study the:-

(i) Causes for deviation

(ii) Effect of deviation

(iii) Size of deviation

(iv) Positive or negative deviation.

4. Correcting Deviations:

The final element in the process is the taking corrective action. Measuring and comparing
performance, detecting shortcomings, failures or deviations, from plans will be of no avail if it does
point to the needed corrective action.

Thus controlling to be effective, should involve not only the detection of lapses but also probe into
the failure spots, fixation of responsibility for the failures at the right quarters, recommendation of
the best possible steps to correct them. These corrective actions must be applied when the work is in
progress. The primary objective should be avoidance of such failures in future.

The required corrective action can be determined from the qualified data as per the standards laid
out and the performance evaluation already done. This step should be taken promptly, otherwise
losses may be cumulative and remedial action will be all the more difficult to take.

Corrective action must be well balanced, avoiding over controlling and at the same time letting not
things to drift.

4 main steps in control process in management are:

Control as a management function involves the following steps:

1. Establishing Standards:

Standards are criteria against which results are measured. They are norms to achieve the goals.
Standards are usually measured in terms of output. They can also be measured in non-monetary
terms like loyalty, customer attraction, goodwill etc. Some of the standards are as.

a. Time standards:

The goal will be set on the basis of time lapse in performing a task.

b. Cost standards:

These indicate the financial expenditures involved per unit, e.g. material cost per unit, cost per
person, etc.

c. Income standards:

These relate to financial rewards received due to a particular activity like sales volume per month,
year etc.

d. Market share:

This relates to the share of the company's product in the market.

e. Productivity:

Productivity can be measured on the basis of units produced per man hour etc.

f. Profitability:

These goals will be set with the consideration of cost per unit, market share, etc.

2. Measuring Performance

Measurement involves comparison between what is accomplished and what was intended to be
accomplished. The measurement of actual performance must be in the units similar to those of
predetermined criterion. The unit or the yardstick thus chosen be clear, well-defined and easily
identified, and should be uniform and homogenous throughout the measurement process.

The performance can be measured by the following steps:

(a) Strategic control points:

It is not possible to check everything that is being done. So it is necessary to pick strategic control
points for measurement. Some of these points are:

(i) Income:
It is a significant control point and must be as much per unit of time as was expected. If the income is
significantly off form the expectation then the reasons should be investigated and a corrective action
taken.

(ii) Expenses:

Total and operational cost per unit must be computed and must be adhered to. Key expense data
must be reviewed periodically.

(iii) Inventory:

Some minimum inventory of both the finished product as well as raw materials must be kept in stock
as a buffer. Any change in inventory level would determine whether the production is to be increased
or decreased.

(iv) Quality of the product:

Standards of established quality must be maintained especially in food processing, drug

manufacturing, automobiles, etc. The process should be continuously observed for any deviations.

(v) Absenteeism:

Excessive absenteeism of personnel is a serious reflection on the environment and working

conditions. Absenteeism in excess of chance expectations must be seriously investigated.

(b) Meclzanised measuring devices:

This involves a wide variant of technical instruments used for measurement of machine operations,
product "quality for size and ingredients and production processes. These instruments may be
mechanical, electronic or chemical in nature.

(c) Ratio analysis:

Ratio analysis is one of the most important management tools. It describes the relationship of one
business variable to another.

The following are some of the important ratios:

i) Net sales to working capital:

The working capital must be utilised adequately. If the inventory turnover is rapid then the same
working capital can be used again and again. Hence for perishable goods, this ratio is high. Any
change in ratio will signal a deviation from the norm.

ii) Net sales to inventory:

The greater the turnover of inventory, generally, the higher the profit on investment.

iii) Current ratio:

This is the ratio of current asset (cash, receivables etc.) to current liabilities, and is used to determine
a firm's ability to pay the short term debts.

iv) Net profits to net sale:

This ratio measures the short-run profitability of a business.

v) Net profits to tangible net worth:

Net worth is the difference between tangible assets (not good will, etc) and total liabilities. This ratio
of net worth is used to measure profitability over a long period.

vi) Net profits to net working capital:

The net-working capital is the operating capital at hand. This would determine the ability of the
business to finance day-to-day operations.

vii) Collection period on credit sales:

The collection period should be as short as possible. Any deviation from established collection period
should be promptly investigated.

viii) Inventory to net working capital:

This ratio is to determine the extent of working capital tied up in inventory. Generally, this ratio
should be less than 80 per cent, ix) Total debt to tangible net worth: This ratio would determine the
financial soundness of the business. This ratio should remain as low as possible.

(d) Comparative statistical analysis:

The operations of one company can be usefully compared with similar operations of another
company or with industry averages. It is a very useful performance measuring device.

(e) Personal observation:

Personal observation both formal and informal can be used in certain situation as a measuring
device for performances, specially, the performance of the personnel. The informal observation is
generally a day-to-day routine type. A manager may walk through a store to have a general idea
about how people are working.

3. Comparing the Actual Performance with Expected Performance

This is the active principle of the process. The previous two, setting the goals and the measurement
format are the preparatory parts of the process. It is the responsibility of the management to
compare the actual performance against the standards established.
This comparison is less complicate if the measurement units for the standards set and the
performance measured are the same and quantified. The comparison becomes more difficult when
these require subjective evaluations

Ralph C. Davis identifies four phases in the comparison.

1. Receiving the raw data.

2. Accumulation, classification and recording of this information.

3. Periodic evaluation of completed action to date.

4. Reporting the status of accomplishment to higher line authority.

At the third phase, deviations if any are noted between standards and performance. If clear cut
deviations are there, then management must study the:-

(i) Causes for deviation

(ii) Effect of deviation

(iii) Size of deviation

(iv) Positive or negative deviation.

4. Correcting Deviations:

The final element in the process is the taking corrective action. Measuring and comparing
performance, detecting shortcomings, failures or deviations, from plans will be of no avail if it does
point to the needed corrective action.

Thus controlling to be effective, should involve not only the detection of lapses but also probe into
the failure spots, fixation of responsibility for the failures at the right quarters, recommendation of
the best possible steps to correct them. These corrective actions must be applied when the work is in
progress. The primary objective should be avoidance of such failures in future.

The required corrective action can be determined from the qualified data as per the standards laid
out and the performance evaluation already done. This step should be taken promptly, otherwise
losses may be cumulative and remedial action will be all the more difficult to take.

Corrective action must be well balanced, avoiding over controlling and at the same time letting not
things to drift.

4 Steps in the Control Process in

Business Management
 The control process is the system that allows setting, measure, and

match any business activities such as production, packaging, delivery and

more.

Controlling is an essential part of management process.

In fact, without control process entire management is obsolete. Because you

will not be able to know the how your plan is working, is it fully
implemented. Also without control, you will not be able to actionable lead the
workforce.

The control process is the functional process for organizational control that
arises from the goals and strategic plans of the organization.

4 Steps of Control Process are;

1. Establishing standards and methods for measuring performance.

2. Measuring the performance.

3. Determining whether performance matches the standard.

4. Taking corrective action.

These Steps are described below;

1. Establishing Standards and Methods for

Measuring Performance
Standards are, by definition, simply the criteria of performance.
 They are the selected points in an entire planning program at which
performance is measured so that managers can receive signals about how
things are going and thus do not have to watch every step in the execution
of plans.

Standard elements form precisely worded, measurable objectives and are

especially important for control.

In an industrial enterprise, standards could include sales and production

targets, work attendance goals, safety records etc.

In service industries, on the other hand, standards might include a number

of time customers have to wait in the queue at a bank or the number of new
clients attracted by a revamped advertising campaign.

2. Measuring the Performance

The measurement of performance against standards should be done on a
forward-looking basis so that deviations may be detected in advance of
their occurrence and avoided by appropriate actions.

If standards are appropriately drawn and if means are available for

determining exactly what subordinates are doing, appraisal of actual or
expected performance is fairly easy.

But there are many activities for which it is difficult to develop accurate
standards, and there are many activities that are hard to measure.

It may be quite simple, for example, to establish labor-hour standards for

the production of a mass-produced item and it may be equally simple to
measure performance against these standards, but in the less technical
kinds of work.
 For example, controlling the work of the industrial relations manager is not
easy because definite standards cannot be easily developed.

The superior of this type of managers often relies on vague standards, such
as the attitude of labor unions, the enthusiasm, and loyalty of subordinates,
the index of labor turnover and/or industrial disputes etc. In such cases, the
superiors measurements are often equally vague.

3. Determining whether Performance Matches the

Standard
It is an easy but important step in the control process. It involves comparing
measured results with the standards already set.

If performance matches the standard, managers may assume that

everything is under control. In such a case the managers do not have to
intervene in the organizations operations.

4. Taking Corrective Action

This step becomes essential if performance falls short of standards and the
analysis indicates that corrective action is required. The corrective action
could involve a change in one or more activities of the organizations
operations.

For example, the branch manager of a bank might discover that more
counter clerks are needed to meet the five-minute customer-waiting
standard set earlier.

Control can also reveal inappropriate standards and in that case, the
corrective action could involve a change in the original standards rather
than a change in performance.
It needs to be mentioned that, unless managers see the control process
through to its conclusion, they are merely monitoring performance rather than
exercising control.

The emphasis should always be on devising constructive ways to bring

performance up to a standard rather than on merely identifying past failure.

These steps are discussed in detail:

1. Setting of Control Standards:

Every enterprise plans its activities in advance. On the basis of plans, the
objectives and goals of every department, branch, etc. are fixed. These, goals
are converted into quantity, value, man hour etc. These are to be/achieved in
future. There may also be qualitative goals. The achievement of various
targets is made the responsibility of specific persons. Some strategic points
should be selected as controls or yardsticks. Prof. Newman has
suggested four guidelines for selecting strategic points:

(i) The control points should be timely so that they may be able to reveal
significant deviation in time thereby saving further losses,

(ii) Control points should be such as to permit economical observation and

report.

(iii) Control points, especially for executives at higher levels should provide
comprehensive courage.
Whether a particular result is to be taken as satisfactory, average or poor
should be pre determined so that the persons responsible for that work should
be able to assess their performance.

(iv) Control points should be such as would promote balanced performance.

2. Measurement of Performance:

The second step in controlling process is the measurement of performance.

The actual performance is measured against the standards set. This will
enable management to determine whether the work is being done according
to plans or not. The measurement of quantitative objectives is easy since
figures of work done will be available. The qualitative performance such as
human relations, employee morale, etc. can only be measured through
psychological tests and surveys.

Measurement of performance is an important part of control process. If

measurement is such that deviation is detected at the earliest then it will
enable appropriate action well in time. If that is not possible then deviations
should be detected as early as possible.