The control process consists of the following steps:
(i) Setting Performance Standards: All functions in the organization begin with plans which specify the objectives and goals to be achieved. Based on this, standards are established which are criteria against which actual results are measured. For setting standards for control purpose it is necessary to identify clearly and precisely the results which are to be attained. After setting the standards it is also necessary to decide about the level of performance.
(ii) Measuring Actual Performance: The next stage in the control process is the measurement of actual performance against the standards already set. This involves measuring the performance in respect of work in terms of control standards. The measurement of performance against its standards would be on a continuous basis so that deviations may be ascertained in advance of their actual performance and avoided by appropriate actions. Measurement of actual performance becomes an easy task if the standards are properly determined and the methods of measuring performance can be expressed explicitly.
(iii) Comparison of Actual Performance against Standards: This stage involves measuring actual key variable performance, comparing results against standards, and informing the appropriate people so that deviations can be detected and corrections made or reinforcement is given. Financial or management accounting systems are usually relied on for measuring actual performance. However, many other measurement methods are also available, including product sampling, various predictions, an observation by managers, meetings, and conferences. Whatever measurement methods are selected, they should be timely, accurate, and cost-effective. The need to inform people of measurement results necessitates a system of reporting.
(iv) Analysing Variance: Analysis of variance involves finding out the extent of variations and identifying the causes of such variations. When adequate standards are developed and actual performance is measured correctly the variations, if any, can be clearly identified. In case the standards are achieved no further managerial action is necessary and the control process is complete. However, in many cases the actual performance achieved may vary from the standards fixed and variations may differ from case to case. When the variation between standard and actual performance is exceeded the prescribed level, an evaluation is made to find out the causes of such variations.
(v) Re-enforcement of Corrective Action: This step in the control process requires that action should be taken to maintain the decided degree of control into a system or operation. The following actions are taken to maintain the control system:
(a) Improvement in the performance by taking suitable measures if the result is not up to the desired level.
(b) Resetting the standard of performance, if the standards are too high and unrealistic.
(c) Change the strategies, objectives, and plans, if they are not suitable.
Detection of negative deviations from standards usually leads to an analysis of problems, decisions about how to correct them and adjust to operations. Sometimes a control report will precipitate starting a new strategic management cycle. This new cycle may lead to the reformulation of goals or action plans or both. Usually, however, strategies remain intact while operations are adjusted. The control process should be continuous so that control information is constantly fed back to the goal and action plan formulation stage. Deviations, therefore, should prompt immediate analysis so that a timely decision can be made about whether to change goals or action plans or operational management. It is also important to note that the performance which exceeds standards be reinforced. Too often management focuses attention only on negative deviations from expectations.