The controlling process is a vital aspect of management that ensures organizational goals are achieved effectively and efficiently. It involves setting performance standards, measuring actual performance, comparing it to the standards, and taking corrective actions if necessary. By implementing a systematic approach, companies can monitor and regulate their operations to ensure their success.
The first step in the controlling process is establishing performance standards, which serve as benchmarks for evaluating performance. These standards should be specific, measurable, attainable, relevant, and time-bound (SMART). Once the standards are set, the next step is measuring actual performance. This involves collecting data and information on various performance indicators to determine how well the organization is meeting its goals. After measuring performance, the third step is comparing it to the established standards. This step helps identify any deviations or gaps between the desired and actual performance. Finally, if deviations are found, corrective actions must be taken to close the performance gaps and bring the organization back on track. By following these steps, businesses can effectively control their operations and ensure they are on the path to success.
💡 Features of a Good Control System: ● Suitable: A good control system should be suitable for the needs and nature of the organisation. ● Simple: A good controlling system should be easy to operate and understand. ● Economical: The cost of setting, implementing, and maintaining a control system should not be more than the benefits gained from it. ● Flexible: A good control system should have the ability to adjust according to the changing business environment and internal conditions. ● Forward Looking: A good control system should move in a forward direction so that the managers can easily determine the deviations before they actually happen in the organisation. ● Objective: The standards of the organisation, its measurement of performance, and corrective actions should be impersonal and objective. ● Management by exception: A good control system should focus its attention on the significant deviations which are crucial for the organisation, instead of looking for the deviation which does not have much impact on the business.
Table of Contents
Steps in the Controlling Process
Setting Performance Standards
The first step in the controlling process is establishing performance standards. These standards serve as benchmarks for evaluating performance and provide a clear picture of what the organization aims to achieve. Performance standards should be specific, measurable, attainable, relevant, and time-bound – commonly known as SMART goals. By setting these standards, companies can define the desired level of performance and ensure that everyone within the organization is aligned with the same objectives. This step is crucial as it forms the foundation for measuring actual performance.
Measuring Actual Performance
Once performance standards have been established, the next step is to measure actual performance. This involves collecting data and information on various performance indicators to determine how well the organization is meeting its goals. The data collected can include financial figures, production output, customer satisfaction ratings, employee performance metrics, and more. By systematically collecting and analyzing this data, companies can gain valuable insights into their performance levels and identify areas that require improvement. Measuring actual performance allows organizations to track progress, identify trends, and make informed decisions based on accurate data.
Comparing Actual Performance to Standards
After measuring performance, the third step in the controlling process is to compare actual performance to the established standards. This step helps identify any deviations or gaps between the desired and actual performance. By comparing the data collected to the performance standards, organizations can identify areas where they are performing well and areas that require attention. This comparison enables management to assess whether the organization is on track or if adjustments need to be made. It provides a clear picture of how well the organization is aligning with its goals and objectives.
When comparing actual performance to standards, it is essential to analyze any variances that may exist. Variances can be positive or negative and can indicate areas of strength or weakness within the organization. Analyzing variances helps management understand the reasons behind the deviations and provides insights into what actions need to be taken. For example, if actual performance exceeds the standards, it may indicate that the goals were set too low, and the organization can aim higher. On the other hand, if actual performance falls short of the standards, it may signal the need for corrective action to address the performance gaps.
Taking Corrective Action
Once deviations are identified and analyzed, the next step in the controlling process is to take corrective action. Corrective actions aim to close the performance gaps and bring the organization back on track. Depending on the nature of the deviations, corrective actions can range from making minor adjustments to implementing significant changes in processes, strategies, or resource allocation. It is crucial for management to develop a plan of action and communicate it effectively to all stakeholders involved. Taking prompt and appropriate corrective action ensures that the organization can address any performance issues and work towards achieving its goals effectively.
Monitoring and Adjusting the Controlling Process
The controlling process is not a one-time event but an ongoing cycle that requires continuous monitoring and adjustment. As the business environment evolves, organizations must adapt their controlling processes to ensure their effectiveness. By monitoring the results of the controlling process, companies can identify areas for improvement and make necessary adjustments. This may involve fine-tuning performance standards, revising measurement methods, or updating corrective action plans. Regular evaluation and adjustment help organizations stay aligned with their goals and ensure that the controlling process remains relevant and efficient.
Examples of the Controlling Process in Action
To illustrate how the controlling process works in practice, let’s consider a retail company seeking to increase its customer satisfaction levels. The first step would be to set performance standards, such as achieving a customer satisfaction rating of at least 90% within six months. The company would then measure its actual performance by collecting customer feedback and ratings. By comparing the actual ratings to the established standard, the company can identify any gaps and analyze the variances. If the actual ratings fall below the desired level, the company can take corrective action, such as improving customer service training or streamlining processes. By monitoring the results and adjusting the controlling process if necessary, the company can continuously work towards improving customer satisfaction.
The controlling process is an essential aspect of management that enables organizations to monitor and regulate their operations effectively. By following the steps in the controlling process, companies can set performance standards, measure actual performance, compare it to the standards, analyze variances, and take corrective action if necessary. This systematic approach ensures that organizations can stay on track towards achieving their goals and objectives. By continuously monitoring and adjusting the controlling process, businesses can adapt to changes in the environment and maintain their competitive edge. The controlling process serves as a valuable tool for management, providing insights and guidance to drive success.