Setting Performance Standards in Controlling Management Process

Setting Performance Standards in Controlling Management Process

Setting Performance Standards

The first step in the controlling process is setting up of performance standards. Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organization strives to work.

Set Common Standards like:

  • Review the job description with the employee, and discuss what sort of measurable goals the employee should set.
  • Analyze any historical data available on the performance goals
  • Determine what kind of progress you would like to see the employee achieve, and then place a number on that progress.
  • Implement the performance standards and then schedule a meeting for the beginning of each month with the employee to discuss the standards.

Standards can be set in both quantitative as well as qualitative terms. For instance, standards set in terms of cost to be incurred, revenue to be earned, product units to be produced and sold, time to be spent in performing a task, all represents quantitative standards.

Sometimes standards may also be set in qualitative terms. Improving goodwill and motivation level of employees are examples of qualitative standards. The table in the next page gives a glimpse of standards used in different functional areas of business to gauge performance.

For instance, for improving customer satisfaction in a fast food chain having self-service, standards can be set in terms of time taken by a customer to wait for a table, time taken by him to place the order and time taken to collect the order.

It is important that standards should be flexible enough to be modified whenever required. Due to changes taking place in the internal and external business environment, standards may need some modification to be realistic in the changed business environment.

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