The controlling process

The controlling process has five steps:

• Setting performance standards: the targets against which performance is judged. They should be quantitative where possible (for example, cutting defects from 8 to 4 per 1,000 units); qualitative ones, like customer satisfaction, should be made measurable.
• Measuring actual performance: by personal observation, sample checking (checking some items at random), performance reports, or ratios. Measure in the same units as the standards.
• Comparing actual performance with the standards, to find the deviations (gaps).
• Analysing deviations: fix an acceptable range; a deviation within it needs no action. Focus on deviations in key areas, and find their causes.
• Taking corrective action: for example, training workers, adding workers or equipment, allowing overtime; or, if the standard was unrealistic, revising it.

Standards are set for every key area of a business: for example, liquidity is a standard in the area of finance.