What is the first step in the control process?

The first step in the control process is establishing standards. Standards are the benchmarks or targets against which actual performance is measured. They serve as the goals that an organization wants to achieve.

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Why are standards important in the control process?

Standards are important for several reasons:

They provide direction – Standards give employees and departments a clear understanding of what is expected of them. This enables them to focus their efforts on meeting the set targets.
They enable evaluation – Without standards, organizations would have no way to determine if performance is on track. Standards provide a basis for comparing actual results against expected results.
They promote consistency – Establishing standards helps ensure that quality, efficiency, and other goals are consistent across the organization. Different units and individuals have a common benchmark to work towards.

They facilitate improvement – Standards do not remain static. As performance improves, standards can be raised higher. This stimulates continuous improvement as new targets are put in place once old ones are met.

In summary, standards create a reference point for planning operations, guiding employees, assessing progress, and driving improvement. An organization without standards would operate blindly with no defined goals to work towards.

What are the characteristics of effective standards?

For standards to be effective in the control process, they should possess the following characteristics:

Specific – The standard should provide precise, quantitative targets and metrics to remove any ambiguity.
Measurable – Data and information related to the standard should be measurable so actual performance can be quantified and assessed.
Achievable – Standards should be realistic and within the capacity of operations to attain. Unattainable standards are demotivating.

Relevant – Standards should be aligned with organizational objectives and strategies.
Time-bound – Standards should specify the time frames within which they are to be achieved.

Vague, ambiguous and generic standards are difficult to implement and assess. Well-defined standards exhibit the SMART criteria – Specific, Measurable, Achievable, Relevant, and Time-bound.

How are standards established in the control process?

There are several techniques used to establish standards in the control process:

Historical performance – Using past performance as a benchmark for setting future standards. For example, labor efficiency standards can be set based on historical labor hour data.
Industry standards – Leveraging standards developed and accepted by an industry to establish comparable standards. Useful where in-house data is lacking.

Best practices – Emulating standards set by industry leaders or competitors known for outstanding performance.
Engineering studies – In-depth analysis of workflows, methods and time requirements to scientifically devise standards.
Expert assessment – Relying on knowledgeable, experienced managers to propose suitable standards.

Group consensus – Using cross-functional teams to agree upon common standards for related processes.

The technique chosen depends on availability of historical data, knowledge of industry norms, complexity of processes, and management philosophy. A combination of techniques may yield the best standards.

What are some common performance standards used?

Some examples of commonly used standards in business organizations include:

Quality standards – Defect rates, failure rates, accuracy rates, etc. for measuring product/service quality.
Customer service standards – Complaint resolution rate, query response time, waiting time, etc.
Safety standards – Fatality rates, lost time incident rates, equipment inspection frequency, etc.

Production standards – Units produced per hour, cycle time per operation, machine efficiency rates, etc.
Cost standards – Standard costs per unit, cost as % of sales, labor cost per task, etc.
Financial standards – Revenue growth %, ROI, current ratio, debt-equity ratio, etc.

The specific standards used are tailored to the organization’s operations, industry, strategies and objectives.

How are standards communicated in the control process?

For standards to influence performance, they need to be communicated to employees and departments effectively. Some key ways to communicate standards include:

Policies and procedures – Documenting standards in policy manuals, operating procedures, work instructions, etc. and ensuring personnel are trained on them.

Performance contracts – Incorporating expected standards into performance agreements signed by employees.
Scorecards – Developing scorecards that track performance metrics related to key standards.
Dashboards – Displaying visual dashboards that show performance against standards.

Reporting – Including standard vs. actual data in management reports and reviews.
Meetings – Discussing standards in team meetings and providing updates on progress.

Effective communication of standards enables alignment across the organization on performance expectations.

How are standards enforced and monitored?

Once standards are set and communicated, the next step is to monitor performance and enforce adherence to standards. This is critical to the control process. Some key ways to enforce standards include:

Automation – Leveraging automation, alerts and system controls to flag and prevent deviations from standards.
Supervision – Managers conducting observations, inspections and audits to verify compliance with standards.

Reporting – Monitoring performance through periodic reports comparing standards against actual results.
Rewards – Linking rewards and incentives to achievement of standards.
Discipline – Enforcing disciplinary action if employees fail to meet standards without valid reason.

Constant monitoring and decisive action ensures standards do not become mere recommendations that are overlooked.

What steps follow after standards are set?

The steps in the control process after establishing standards are:

Measure actual performance

Compare actual performance to standards
Take corrective action if deviations exist
Provide feedback to employees on performance

Review and update standards periodically

Measuring actuals, identifying gaps from standards, and taking timely corrective action creates a closed loop control system. Providing performance feedback reinforces compliance. Updating standards prevents them from becoming obsolete.

What tools and techniques are used for measuring actual performance?

Key tools and techniques used for measuring actual performance against standards include:

Statistical process control (SPC) – SPC charts to visually track key metrics and identify variations.
Balanced scorecard – Scorecards that provide comprehensive measures across financial, customer, process and learning perspectives.
Analytics – Business intelligence and data analytics to generate insights from performance data.

Audits and inspections – Verification of compliance and performance through audits and inspections.
Surveys – Gathering feedback from customers and employees through surveys.
Reporting – Reports indicating metrics trends across periods to showcase progress.

Leveraging the right measurement techniques provides reliable data to compare against standards during control.

What are some best practices for effective control standards?

Some best practices for effective standards include:

Involve those being measured in setting standards to obtain buy-in.

Set organization level standards, not just individual standards, to encourage teamwork.
Limit the number of standards to focus on key priorities and avoid confusion.
Align standards across interconnected departments to enable integration.

Use both leading and lagging indicators as standards to obtain a balanced view.
Allow some flexibility in standards when factors are beyond an employee’s control.
Review standards periodically and adjust them as conditions change.

Effective standards strike a balance between achievability and stretch goals. They are deployed organization-wide, focused on strategic metrics, cascaded down levels, and periodically reviewed.

Conclusion

Setting appropriate standards is the crucial first step in the control process in management. Standards create alignment on performance expectations while enabling measurement, evaluation and improvement. For standards to be effective, they need to be specific, quantified, achievable, relevant and time-bound. Communication, monitoring, enforcement and periodic revision of standards are essential for the control process to yield results. With proper standards and control systems in place, organizations can deliver consistent, predictable and improving performance.