UNIT V

PERFORMANCE EVALUATION AND

CONTROL
SYLLABUS
Method of performance evaluation – Feedback – Industry practices.
Promotion, Demotion, Transfer and Separation – Implication of job change.
The control process –Importance – Methods – Requirement of effective
control systems.

PERFORMANCE EVALUATION SYSTEM

A performance evaluation system is a systematic way to examine how well an employee is
performing in his or her job. If you notice, the word systematic implies that the performance
Evaluation process should be a planned system that allows feedback to be given in a
formal—as opposed to informal—sense. Performance evaluations can also be called
performance appraisals, performance assessments, or employee appraisals.

PROCESS OF PERFORMANCE APPRAISAL:

▪ Establish Performance Standards:

The appraisal process begins with the establishment of performance standards. The
managers must determine what outputs, accomplishments and skills will be evaluated.
These standards should have evolved out of job analysis and job descriptions.
These performance standards should also be clear and objective to be understood and
measured. Standards should not be expressed in an articulated or vague manner such as
“a good job” or “a full day‟s work” as these vague phrases tells nothing.
▪ Communicate Performance Expectations to Employees:
Once the performance standards are established, this need to be communicated to the
respective employees so that they come to know what is expected of them. Past experience
indicates that not communicating standards to the employees compounds the appraisal
problem. Here, it must be noted that mere transference of information (relating to
performance standards, for example) from the manager to the employees is not
communication It becomes communication only when the transference of information has
taken place and has been received and understood by the employees‟.
The feedback from the employees on the standards communicated to them must be
obtained. If required, the standards may be modified or revised in the light of feedback
obtained from the employees. It is important to note that communication is a two-way
street.
▪ Measure Actual Performance:
This is the third step involved in the appraisal process. In this stage, the actual performance
of the employee is measured on the basis of information available from various sources
such as personal observation, statistical reports, oral reports, and written reports. Needless
to mention, the evaluator‟s feelings should not influence the performance measurement of
the employee. Measurement must be objective based on facts and findings. This is because
what we measure is more critical and important to the evaluation process than how we
measure.
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 ▪ Compare Actual Performance with Standards:
In this stage, the actual performance is compared with the predetermined standards. Such
a comparison may reveal the deviation between standard performance and actual
performance and will enable the evaluator to proceed to the fifth step in the process, i.e.,
the discussion of the appraisal with the concerned employees.
▪ Discuss the Appraisal with the Employee:
The fifth step in the appraisal process is to communicate to and discuss with the
employees the results of the appraisal. This is, in fact, one of the most challenging tasks
the manager‟s face to present an accurate appraisal to the employees and then make them
accept the appraisal in a constructive manner.
A discussion on appraisal enables employees to know their strengths and
weaknesses. This has, in turn, impact on their future performance. Yes, the impact may
be positive ornegative depending upon how the appraisal is presented and discussed
with the employees.
▪ Initiate Corrective Action:
The final step in the appraisal process is the initiation of corrective action when it is
necessary. The areas needing improvement are identified and then, the measures to
correct or improve the performance are identified and initiated.

IMPORTANCE OF PERFORMANCE APPRAISAL

Performance appraisal provides important and useful information for the assessment of
employee's skill, knowledge, ability and overall job performance. Performance Appraisal
is important for the organization for the following reasons:

▪ Performance appraisal helps supervisors to assess the work performance of their

subordinates.
▪ Performance appraisal helps to assess the training and development needs of
employees.
▪ Performance appraisal provides grounds for employees to correct their mistakes,
and it also provides proper guidance and criticism for employee's development.
▪ Performance appraisal provides reward for better performance.
▪ Performance appraisal helps to improve the communication system of the
organization
▪ Performance appraisal evaluates whether human resource programs being
implemented in the organization have been effective.
▪ Performance appraisal helps to prepare pay structure for each employee working
in the organization.
▪ Performance appraisal helps to review the potentiality of employees so that their
future capability is anticipated..

METHODS OF PERFORMANCE APPRAISAL

❖ RANKING - The ranking system requires the rater to rank his subordinates
on overall performance. This consists in simply putting a man in a rank order.
Under this method, the ranking of an employee in a work group is done against
that of another employee. The relative position of each employee is tested in
terms of his numerical rank. It may also be done by ranking a person on his
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 job performance against another member of the competitive group.

Advantages : (a) Employees are ranked according to their performance levels.

(b)It is easier to rank the best and the worst employee.
Disadvantages:(a) This method speaks only of the position where an employee
stands in his group. It does not test anything about how much
better or how much worse an employee is when compared to
another employee.
(b) There is no systematic procedure for ranking individuals in the
organization. The ranking system does not eliminate the possibility
of snap judgements.

❖ FORCED DISTRIBUTION - This is a ranking technique where raters are

required to allocate a certain percentage of rates to certain categories (eg:
superior, above average, average) or percentiles (eg: top 10 percent, bottom 20
percent etc). Both the number of categories and percentage of employees to be
allotted to each category are a function of performance appraisal design and
format. The workers of outstanding merit may be placed at top 10percent of
the scale, the rest may be placed as 20 % good, 40 % outstanding, 20 % fair
and 10 % fair.

Advantages: (a) This method tends to eliminate raters bias

(b)By forcing the distribution according to pre-determined
percentages, the problem of making use of different raters with
different scales is avoided

Disadvantages: The limitation of using this method in salary administration,

however, is that it may lead low morale, low productivity and high
absenteeism. Employees who feel that they are productive, but find
themselves in lower grade(than expected) feel frustrated and exhibit
over a period of time reluctance to work.

❖ CHECKLISTS AND WEIGHTED CHECKLISTS- In this system, a large

number of statements that describe a specific job are given. Each statement has
a weight or scale value attached to it. While rating an employee the supervisor
checks all those statements that most closely describe the behaviour of the
individual under assessment. The rating sheet is then scored by averaging the
weights of all the statements checked by the rater. A checklist is constructed
for each job by having persons who are quite familiar with the jobs. These
statements are then categorized by the judges and weights are assigned to the
statements in accordance with the value attached by the judges.

Advantages : (a)Most frequently used method in evaluation of the

employees performance.
Limitations : (a) This method is very expensive and time consuming
(b) Rater may be biased in distinguishing the positive and
negative questions.
(c) It becomes difficult for the manager to assemble, analyze
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 and weigh a number of statements about the employees
characteristics, contributions and behaviours.
❖ CRITICAL INCIDENT TECHNIQUES - Under this method, the manager
prepares lists of statements of very effective and ineffective behaviour of an
employee. These critical incidents or events represent the outstanding or poor
behaviour of employees or the job. The manager maintains logs of each employee,
whereby he periodically records critical incidents of the workers behaviour. At the
end of the rating period, these recorded critical incidents are used in the evaluation
of the worker‟s performance. Example of a good critical incident of a Customer
Relations Officer is : March 12 - The Officer patiently attended to a customers
complaint. He was very polite and prompt in attending thecustomers problem.

Advantages: (a) This method provides an objective basis for conducting a

thorough discussion of an employees performance.
(b) This method avoids recency bias
Limitations: (a) Negative incidents may be more noticeable than positive
incidents.
(b) The supervisors have a tendency to unload a series of complaints
about the incidents during an annual performance review sessions.
(c) It results in very close supervision which may not be liked by an
employee.
(d) The recording of incidents may be a chore for the manager
concerned, who may be too busy or may forget to do it.

❖ 360 DEGREE APPRAISAL - 360 Degree Feedback is a system or process in

which employees receive confidential, anonymous feedback from the people who
work around them. This typically includes the employee's manager, peers, and
direct reports. 360 degree feedback is also known as multi-rater feedback or
multi-dimensional feedback or multi-source feedback. It is a very good means
of improving an individual‟s effectiveness (as a leader and as a manager). It is a
system by which an individual gets a comprehensive/collective feedback from his
superiors, subordinates, peers/co-workers, customers and various other members
with whom he interacts.

The feedback form is in a questionnaire format, which contains questions that are
significant to both individual as well as organization from performance aspect. It
is filled by anonymous people. The number of people from whom feedback is taken
can range from 6 - 20. The individual‟s own feedback is also taken, i.e., he self-
rates himself and then his rating is compared with other individuals ratings. Self-
ratings compel the individual to sit down and think about his own strengths and
weaknesses.

360 degree feedback provides a comprehensive view of the skills and

competencies of the individual as a manager or as a leader. The individual
gets a feedback on how other people perceive and assess him as an employee. The
feedback must be confidential so as to ensure it‟s reliability and legitimacy. The
feedback must be accepted with positivity and an open-mind. The effectiveness of
the feedback must be evaluated and analyzed on a regular basis.
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❖ BARS (Behaviourally Anchored Rating Scales) - Behaviourally Anchored
Rating Scales (BARS) are designed to bring the benefits of both qualitative and
quantitative data to the employee appraisal process. BARS compare anindividual‟s
performance against specific examples of behaviour that are anchored to
numerical ratings. The behavioural examples used as anchor points are often
collected using Critical Incident Techniques (CIT), which areprocedures used for
documenting human behaviour that have significance in a particular area.

BARS was originally developed to counteract the perceived subjectivity in using

basic ratings scales to judge performance, although BARS is still subject to
criticism. It is often accused of being subject to unreliability and leniency error.

Step 1: The supervisors prepare a list of critical incidents.

Step 2: The supervisors then group critical incidents in to small clusters of
performance dimensions such as job knowledge, leadership etc. thus there are
number of performance dimensions (usually 5 to 10), each having a number of
critical incidents.
Step 3: In this step a group of experts are called. The experts are presented with the
critical incidents prepared in step one. Their task is to reassign or classify thecritical
incidents in to the same performance dimensions
Step 4: The experts then rate of the “surviving” critical incidents on a scale (of 7
to 9 points) as to how well they represent performance on the given dimension.
Those critical incidents for which there is high rater agreement are retained.
Those incidents for which
there is a lower rate of disagreement are discarded.
Step 5: The final form of BARS consists of critical incidents that are survived step
3 & 4. These incidents serve as behavioral anchors for the performance dimension
scales. Thus the BARS instrument consists of a series of scales (one for each
dimension) anchored by the critical incidents.
Advantages: (a) The ratings are likely to be accurate as it is done by experts.
(b) BARS are more reliable & valid as it is job specific & identifies
observable & measurable behavior.
(c) The use of critical incidents is useful in providing feedback to the
employee being rated.
Disadvantages : (a) The development of BARS is time-consuming.
(b) BARS are job specific. A different behaviorally anchored rating scale
has to be developed for every job.

❖ MANAGEMENT BY OBJECTIVES ( MBO) : Management by objectives

(MBO) is a management model that aims to improve performance of an
organization by clearly defining objectives that are agreed to by both management
and employees. According to the theory, having a say in goal setting and action

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 plans should ensure better participation and commitment among employees, as well
as alignment of objectives across the organization. Advantages: Major benefits of
MBO are that it improves employee motivation and commitment, and ensures
better communication between management and employees.
Disadvantages: An oft-cited weakness is that MBO unduly emphasizes the setting
of goals to attain objectives, rather than working on a systematic plan to do so.

❖ GRAPHIC RATING SCALE is a type of performance appraisal method. In this

method traits or behaviours that are important for effective performance are listed
out and each employee is rated against these traits. The rating helps employers to
quantify the behaviours displayed by its employees. Some of these behaviours
might be:
✓ Quality of work
✓ Teamwork
✓ Sense of responsibility
✓ Ethics etc.

Characteristics Of A Good Rating Scale:

✓ Performance evaluation measures against which an employee has to be rated must
be well defined.
✓ Scales should be behaviourally based.
✓ Ambiguous behaviours definitions, such as loyalty, honesty etc. should be
avoided
✓ Ratings should be relevant to the behaviour being measured. For example, to
measure “English Speaking Skill” rates should be fluent, hesitant, and laboured
instead of excellent, average and poor.

FEEDBACK

PERFORMANCE FEEDBACK:
Most employees want feedback about their performance. Performance feedback is the
ongoing
process between employee and the manager where information is exchanged concerning
the performance expected and the performance exhibited. Effective performance feedback
skills are
extremely important for managers. Employees need to be able to constructive feedback
regarding
both positive and negative aspects of their performance.

Features of Performance Feedback:

✓ It is specific rather than general.
✓ It is focused on behavior rather than on the person.

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 ✓ It takes into account the needs of the receiver of the feedback.
✓ It involves sharing of Information rather than giving advice.

Types of Performance Feedback:

✓ Formal feedback
✓ Informal Feedback
✓ Positive Feedback
✓ Negative Feedback

Process of Performance Feedback:

✓ Scheduling performance feedback
✓ Preparing for a feedback session
✓ Conducting the Feedback session

PITFALLS IN PERFORMANCE APPRAISAL

▪ Halo Effect
A manager or supervisor may allow a general favorable impression towards an employee
to influence his or her judgment on various dimensions in the performance appraisal
process.
▪ Recency Effect
A staff member‟s recent outstanding contribution or untimely mistake just prior to a
performance review colors the manager‟s perception of the employee‟s performance for
the entire appraisal period. Unforgettable effect, occurs when an employee does
something so extraordinary, either positively or negatively, that its impressions last for a
long time, to the advantage or disadvantage of the employee.
▪ Manager Preference
Personal friends of managers get better ratings than their performance justifies.
Conversely, managers rate employees lower than they deserve when conflicts of manner,
style and personality exist.
▪ Effect of Past Record
The employee who has performed well in the distant past is assumed to be acceptable in
the recent past also. Previous good work tends to carry over into the new period being
appraised.

▪ Leniency Effect
A manager tends to rate everyone high. This error is usually committed when managers
feel uncomfortable about communicating negative feedback or do not want to hurt the
employee‟s feelings. A related problem, the Central Tendency, occurs when a manager
rates all employees as average by choosing the middle rating. The Central Tendency is
perhaps the most serious error of all; it closes the door to an employee‟s growth and
improvement on a job, because no strengths or weaknesses are identified.
▪ Carelessness
Managers make quick guesses based on first impressions of an employee‟s performance.
▪ Irrelevant (and Illegal) Standards

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Evaluations are dependent on the rater‟s personal preferences, prejudices and biases. The
rater who has a biased or prejudiced attitude toward certain groups of people looks for
behavior in these groups that confirms his or her prejudices.

HUMAN RESOURCE MOBILITY

Human Resource Mobility can be categorized as Internal Mobility and External Mobility
❖ Internal Mobility refers to the existing employee mobility from one role to another
role, one job to another job, or from one place to another place. This involves
decisions to move existing employees between employmentopportunities within
the organization. These movements include promotion (movement to higher
hierarchical levels) , transfer(movement to similar hierarchical levels), demotion
(movement to lower hierarchical levels) etc.
❖ External Mobility of human resources refers to the separation of employees from
the organization. Such a separation may be initiated by the organization in the form
of layoff, retrenchment, dismissal or voluntary retirement or by the employees
themselves in the form of resignation known as employee turnover.

PROMOTION

According to Scott and Clothier,”A promotion is the transfer of an employee to a job which
pays more money or one that carries some preferred status.”
According to Prof Mamoria, “Promotion is a term which covers a change and calls for
greater responsibilities, and usually involves higher pay and better terms and conditions
of service and, therefore, a higher status or rank.”
According to Arun Monappa and Saiyadain, ―Promotion is the upward reassignment of
an individual in an organization„s hierarchy, accompanied by increased responsibilities,
enhanced status, and usually with increased income, though not always so.
From the above definitions, it can therefore be implied that promotion usually implies
several things to the person concerned—higher status, both at work and in the community
outside, more pay and fringe benefits, perhaps greater job security and a more senior
position from which a person renders better service to his organization. Employeesexpect
to be informed about ladders of promotion, how they can prepare themselves for
advancement and what will be expected of them from the higher rated jobs.

TYPES OF PROMOTION

(a) Limited Promotion

Limited promotion is also known as upgrading. It is the movement of an employee to a
more responsible job within the same occupational unit and with a corresponding increase
in pay. Thus, upgrading means an increase of pay on the same job or moving toa higher
scale without changing the job.

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(b) Dry Promotion
Dry promotion is a promotion as a result of which there is no increase in the employee„s
pay. Dry promotions are those which are given in lieu of increases in compensation. It is
usually made decorative by giving a new and longer title to the employee.
(c) Multiple Chain Promotion
Multiple chain promotion provide for a systematic linking of each position to several other
positions. Such promotions identify multi-promotional opportunities through clearly
defined avenues of approach to and exist from each position in the organization.
(d) Up and Out Promotion
Up and Out Promotion often leads to termination of services. In this type of promotion, a
person must either earn a promotion or seek employment elsewhere.

BASIS OF PROMOTION

(a) Promotion Based on Seniority

(b) Promotion Based on Merit
(c) Merit cum seniority promotion
(d) Promotion by Selection
(e) Time Bound Promotion
(f) Temporary Promotion

DEMOTION

Demotion is a process by which the employee is downgraded and sent to a lower position
from the one he is holding at present. When an employee is moved to a job with less
responsibility, status or compensation he is said to be demoted. Demotion is the reverse
of promotion. It is more a punishment for inefficiency or incompetence. According to
D.S Beach, Demotion is ―the assignment of an individual to a job of lower rank and pay
usually involving lower level of difficulty and responsibility. It is a downward assignment
in the organization„s hierarchy to a lower level job which has less responsibility, pay and
status. Because of this hierarchical repositioning it has a negative connotation and may lead
to employee dissatisfaction‖. Demotions, being a serious penalty, must be handled tactfully.
The usefulness of demotion as a punitive measure is questioned on many grounds. A
demoted employee will be disgruntled and his dissatisfaction may spread to co-workers
which will adversely affect morale, productivityand discipline of the workforce.

CAUSES OF DEMOTION

✓ Demotion may be used as a disciplinary weapon.

✓ Demotion may be resorted to when employees, because of ill health or personal
reasons,
cannot do their job properly.
✓ If a company curtails some of its activities, employees are often required to accept
lower-level position until normally is restored.
✓ If an employee finds it difficult to meet job requirement standards, following his
promotion he may be reverted to his old position.

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TRANSFER

A transfer is a change in job assignment. It does not involve a change in responsibility

and status. A movement of an employee between equivalent positions at periodicalintervals
is called transfer. A transfer therefore does not involve a change of responsibility or
compensation. Transfers are normally made to place employees inpositions where they are
likely to be more effective or where they are likely to get greaterjob satisfaction. Transfers
may be either organization-initiated or employee- initiated. An organization may initiate a
transfer to place employees in positions where they are likely to be more effective or where
they are better able to meet work schedules of the organization. Employee initiated
transfers also known as personnel transfers‖ may be initiated for several reasons. These
could range from wanting a change of boss or a change of location or to avoid interpersonal
conflicts with their present colleagues or to join their friends and relatives.

TYPES OF TRANSFERS

There are different types of transfers depending on the purpose for which the transfers are
made.
Judging from the view-point of purpose, there are nine type of transfers.
▪ General - General transfers are normally affected during a particular period of the
year wherein all employees having completed a given period of service in a post
or at a place are involved. Definite rules and regulations are to be followed in
affecting such transfers. Such transfers are followed in big organizations, quasi-
governmental organizations and government departments.
▪ Production- Production transfers are normally made from one department to
another where the need for the employee is more. This type of transfer is made to
avoid lay-off of efficient and trained employees by providing them with alternative
positions in the same organization. These changes help to stabilise employment in
an organization and therefore require centralised control.Although it is called
production transfer, similar situations can exist in non- manufacturing
enterprises or divisions too where an employee is transferred from one department
to another for similar reasons
▪ Replacement -These are transfers of long-service employees to similar jobs in
other departments where they replace employees with shorter service. Replacement
transfers are affected to replace persons leaving the organization, due to
resignations, retirements, dismissal or death. Quite often such transfers are affected
to change a new employee who has proved to be ineffective in the organization.
Even though the objective of these transfers is to retain the efficient and trained
employees in this process some short-service employees may losetheir jobs.
▪ Shift- Shift transfers are transfers of workers from one shift to another on the
same type of work. Workers generally dislike second or third shift as it affects
their participation in community life. To minimise this, shift transfers are effected.
Shift transfers also help workers to be out of routine fatigue.

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 ▪ Remedial -Remedial transfers are transfers made to remedy some situation
primarily concerned with employee on the job. Remedial transfers provide
management with a procedure whereby an unsatisfactory placement can be
corrected. Initial placement might be faulty or the type of job might not suit his
health in such cases the worker would benefit by transfer to a different kind of work.
▪ Versatility- The objective of these transfers is to increase the versatility of the
employee by shifting him from one job to another. In this way, the employee is
provided a varied and broad job experience. This transfer is like a rotation transfers.
Versatility transfers, besides resulting in greater satisfaction of the workers through
job enlargement, also creates a work force which can be c be conveniently shifted
to other jobs in time of necessity.
▪ Punishment or Penal -This transfer is made as punishments to erring employees.
Quite often the employees are transferred from one place be another so that they
are made to work in a situation of risks and hazards. Employees are posted to such
places as a matter of punishment for the errors and omissions they have committed.
Sometimes, transfer is used as a concealed penalty. A trouble-maker may be
transferred to a remote branch where he cannot continue his activities.
▪ Request Transfers -This type of transfer is done on the request of the employee.
It is normally done on humanitarian grounds to help the employee to look after his
family and personal problems.
▪ Mutual Transfers - When transfers turn out to be mutual between two employees
they are referred to as mutualtransfers. Usually the organization concedes torequest
of employees for transfer if another employee is willing to go to the other place.

SEPARATION
Separation means cessation of service of agreement with the organization. Separation can
be the result of:
▪ Resignation -A resignation is a voluntary separation. When a termination is
initiated by the employee himself, itis termed a resignation. Resignations may be
put in voluntarily by the employees on grounds of marriage especially in case of
young girls, health, physical disability, better opportunities elsewhere, or
maladjustment with company policy and affairs. The personnel department should
investigate the real reasons behind such resignations. A study of exit interviews
over a period of time may disclose a fiscal pattern suggesting improvements in the
personnel management functions. Resignation may also be compulsory when an
employee is asked to put in his papers if he wants to avoid termination of services
on the ground of gross negligence of duty or some seriouscharge against him.
▪ Discharge - A discharge involves permanent separation of an employee from the
organization because of poor performance, violation of rules or poor code of
conduct. A discharge becomes necessary when
✓ The business volume is reduced thereby reducing the employment
opportunities in the organization

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 ✓ The employee fails to work according to the requirements of the job, or
✓ The employee forfeits his right to a job.
Discharges are generally made in accordance with the standing orders. Theaction
taken should be bonafide and nor a punitive measure or a case of victimisation.
▪ Dismissal - When the termination is initiated by the organization, it is termed as
dismissal. A dismissal is the termination of the services of an employee by way of
punishment for some misconduct, or for prolonged absence from duty. A dismissal
is a drastic step. Therefore, it must be supported with a just andsufficient cause. It
is generally done as a last resort after all attempts at reconciliation have failed.
Dismissals can be on the ground of unsatisfactory performance, misconduct, or
want of qualifications for the job, or excessiveabsenteeism.
▪ Retrenchment - Retrenchment is termination of service due to redundancy. It is a
permanent termination of the services of an employee for economic reasons in a
going concern. The term retrenchment is applied to continuing operations where
a part of the workforce is found to be superfluous. The principle in the procedure
of retrenchment is that the last person employed in each category must be the first
person to be retrenched. For this purpose, the employer prepares a list of all the
workers in the category where retrenchment is contemplated, arranged according
to the seniority of service of the employees in that category. When vacancies arise
after retrenchment, the organization gives an opportunity to the retrenched workers
to offer themselves for re-employment; and they are given preference.
▪ Layoff - A lay off refers to an indefinite separation of the employee from the pay
roll due to factors beyond the control of the employer. The employee is expected
to be called back in the forseeable future. The laid-off employee is not a discharged
employee and is still carried on the roll as an employee. Lay- off is resorted to by
the employer for factors beyond his control.
Such factors could be:
✓ Fluctuations in the market resulting in loss of sales.
✓ Shortage of raw materials or power.
✓ Accumulation of stock.
✓ Breakdown of machinery.
✓ Production delays.
▪ Golden Handshake - It is a method of retrenchment wherein the employees with
a certain minimum service can opt for voluntary retirement and get a fat lumpsum
in return. Golden handshake is usually offered by the Government to reduce the
size of the bureaucracy and close down chronically loss-making public sector
enterprises.
▪ Retirement - In India, the retirement age is 58 or 60 years. Some employers may
extend the age upward or downward from this base. For those employees who
retire, it is a significant milestone. Regardless of the age at which retirement occurs,
workers may need preparation through counselling. They should be informed about
pension choices and insurance benefits after retirement. Employees at retiring age
often feel they could continue to work effectively and

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 there is a strong resistance from many to give up employment. For an organization,
in times of staff shortage, retired employees are of great help.

IMPLICATION OF JOB CHANGE

❖ Effects of Promotion:
✓ A Promotion results in an employee taking on responsibility for managing or
overseeing the work of other employees.
✓ A Promotion is viewed as desirable by employees because of the impact a
promotion has on pay, authority, responsibility, and the ability to influence
broader organizational decision making. It is a form of recognition for
employees who make significant and effective work contributions.
✓ An individual who receives a promotion normally receives additional financial
rewards and the ego boost associated with achievement and accomplishment.
✓ A promotion is a powerful communication tool about what is valued within an
organization.
❖ Effects of Demotion:
✓ Demotion sends a strong signal to the employee that his behavior is not acceptable
to the organization.
✓ It can also have a demoralizing effect on other employees who happen to work
with the
demoted employee.
✓ Demotion will have a serious impact on need fulfillment.
✓ If demotion is chosen over termination, efforts must be made to preserve the self
esteem
of the individual. A positive image of the worker„s value to the company should
be projected

DEFINITION OF CONTROL PROCESS

Controlling is the process of assessing and modifying performance to ensure that the
company's objectives and plans for achieving them are met.

Control is the final role of management. The controlling function will become obsolete if other
management functions are properly carried out. If there are any problems in the planning or
actual performance, control will be required.

Controlling ensures that the proper actions are taken at the appropriate times. Control can be
thought of as a process through which management ensures that the actual operations follow the
plans.

The company's managers check the progress and compare it to the intended system through
managing. If the planned and real processes do not follow the same path, the necessary
corrective action can be implemented.

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 The control process is the careful collection of information about a system, process,
person, or group of people which is required to make necessary decisions about each of the
departments in the process. Managers in the company set up the control systems which consist
of the four prior key steps which we will discuss in the later section.

The performance of the management control function is important for the success of an
organization. Management is required to execute a series of steps to ensure that the plans are
carried out accordingly. The steps that are executed in the control process can be followed for
almost any application, also for improving the product quality, reduction of wastage, and
increasing sales.

WHAT IS CONTROLLING?
The Controlling process assures the management that the performance rate does not deviate
from its standards.
The controlling Process consists of five steps:
1. Setting the standards.
2. Measuring the performance.
3. Comparing the performance to the set standards
4. Determining the reasons for any such deviations which is required to be paid heed to.
5. Take corrective action as required. Correction can be made in regards to changing the
standards by setting them higher or lower or identifying new or additional standards in
the department.

ELEMENTS AND STEPS OF CONTROL PROCESS

Establishing Performance Measuring Standards and Methods

Standards are, by definition, nothing more than performance criteria. They are the
predetermined moments in a planning program where performance is measured so that
managers may receive indications about how things are doing and so avoid having to monitor
every stage of the plan's execution.

This simply means setting up the target which needs to be achieved to meet the organizational
goals. These standards set the criteria for checking performance. The control standards are
required in this case.

Standard elements are especially useful for control since they help develop properly defined,
measurable objectives.

Measuring the Performance

Performance against standards should be measured on a forward-looking basis so that
deviations can be discovered and avoided before they happen. Appraising actual or predicted
performance is relatively simple if criteria are properly drawn and methods for determining
exactly what subordinates are doing are available.

The actual performance of the employee is then measured against the set standards. With the
increase in levels of management, the measurement of performance becomes quite difficult.

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Determining if the Performance is up to par with the Standard
In the control process, determining if performance meets the standard is a simple but crucial
step. It entails comparing the measured results to previously established norms. Managers may
assume that "all is under control" if performance meets the benchmark.

Comparing the degree of difference between the actual performance and the set standard.

Developing and Implementing a Corrective Action Plan

This phase becomes essential if performance falls short of expectations and the analysis reveals
that corrective action is required. The remedial measure could include a change in one or more
of the organization's functions.

This is being initiated by the manager who corrects any sorts of defects in the actual
performance.

TYPES OF CONTROL
There are five different types of control:
Feedback Control: This process involves collecting the information on which the task is being
finished, then assessing that information and improvising the same tasks in the future.

Concurrent control (also known as real-time control): It investigates and corrects any
problems before any losses arising. An example is a control chart.

This is the real-time control, which checks any problem and examines the same to take action
before any loss has been caused.

Predictive/ feedforward control: This type of control assists in the early detection of
problems. As a result, proactive efforts can be done to avoid a situation like this in the future.
Predictive control foresees the problem ahead of its occurrence.

Behavioral control: This is a direct assessment of managerial and staff decision-making rather
than the consequences of those decisions. Behavioral control, for example, sets incentives for a
wide range of criteria in a balanced scorecard.

Financial and non-financial controls: Financial controls refer to how a firm manages its costs
and spending to stay within budgetary limits. Non-financial controls refer to how a company
manages its costs and expenses to stay within budgetary constraints.

FEATURES OF CONTROLLING
The features of controlling are discussed point-wise to give a clear insight into the
concept. The features are as follows:
❖ Controlling helps in achieving organizational goals.
❖ The process facilitates optimum use of resources.
❖ Controlling judges, the accuracy of the standard.
❖ The process also sets discipline and order.
❖ The controlling process motivates the employees and boosts the employee morale,
eventually, they strive and work hard in the organization.
❖ Controlling ensures future planning by revising the set standards.

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 ❖ This improves the overall performance of an organization.
❖ Controlling minimizes the commission of errors.

ADVANTAGES OF CONTROLLING
The organization inculcates the process of controlling due to its undying advantages.
The advantages of control are as follows:
o The Controlling Process saves time and energy.
o This allows the managers to concentrate on important tasks, and also allows better
utilization of the managerial resource.
o Assures timely and corrective action to be taken by the manager.
o In contrast to this, controlling suffers from the disadvantage that the organization has no
control over the external factors that also affect the organization. The controlling
Process becomes a costly affair, especially for small companies.

PROCESS OF CONTROLLING IN MANAGEMENT

The process of controlling in management consists of four steps. All of these steps are
necessary to be followed in order to control effectively.
1) Formation of standards
The first step of the controlling process is the formation of standards. The manager first
prepares a report stating the standards and expected performance from the project given to
employees.
The standards are not decided by randomly picking a figure, but it is decided on the basis of the
past performance of employees and comparing actual performance of last season and the
condition of the market. Before revealing the expected standards with employees and giving
them the target, the standards are approved from the senior management.
After getting tangible standards and the approval of the management, these standards are
discussed with the team members, and the target is given to each team member. A preformed
standard gives a common goal to employees to work towards.
2) Measurement of actual performance
Once the task is completed, it is the job of the manager to measure the performance of the
employees. The manager will analyze the performance of each employee and ask them to
submit their report of work.
3) Comparison of actual performance with the standard performance
After the measurement of the actual report, a comparison of measuring performance is made
between the actual performance and the pre-decided standard performance and the difference is
calculated between both the performances and a report is generated after the analysis of the
performance of all employees.
4) Taking corrective actions if required
After comparing the standard performance with the actual performance of employees. The
difference is calculated.
Then the performance of each employee is analyzed, and the difference between the target
given to them and the percentage of target achieved by them is observed, and the required
actions are taken as per the policy of the company and the past performance of the employee.
For example, no actions would be taken against the employee whose performance has been
good in the past few months. Taking corrective actions is important; otherwise, employees
would start taking their job lightly, and there are chances that you might lose business in the
future.
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IMPORTANCE OF CONTROLLING
1) Controlling Motivates Employees
Controlling doesn’t mean just giving orders to the employees. It means that the manager guides
his employees throughout the process and provide help to them where they need.
He also makes sure that each employee is doing his work with proper dedication and also scolds
them if they are not putting 100% efforts.
In addition to this, when a target is given to employees, it gives them a goal to work. The target
motivates them to go to work and work hard to achieve the target. A motivated employee ends
up performing much more than his actual capacity.
2) Controlling Makes the efficient use of resources
Controlling in management helps in the proper use of resources available in the organization.
Under controlled environment, employees make the proper use of resources and are careful
while using them. With a management control system, decision-makers can make sure that the
employees get maximum output out of the available resources to them.
3) Controlling creates discipline in the organization
Another importance of controlling in the management process is the discipline in the
organization. Discipline is necessary to attain the goal in the desired time and with available
resources. People tend to become careless if their actions are not controlled, and if they know
that there is nobody to questions them.
By controlling management not only control the actions of employees but also makes sure that
they do that maximum output can be obtained.
4) Controlling ensures coordination of action
In a large organization, there are hundreds of employees who work together. Different work is
going on different departments at the same time. If there is no coordination between the
employees of the organization, then they might end up losing a lot of resources which may
cause loss to the organization then causing profit.
Therefore, it is the role of the management to coordinate the actions of employees who work in
a different department, and there is little communication between them.
Management acts as a common thread between them and ensures that the actions of all the
employees working in different departments are directed towards one common direction that is
the direction towards achieving the common goal of the organization.
5) Controlling helps in deciding the right judgment about the standards
Standards cannot be decided over a hunch. It is management that makes sure that standards are
decided with proper analyses of the performance of past projects, the market condition, the
available human resources in the company, and the capacity of the organization.
This can all be possible if control the work in the organization, and with their expertise and
skills can make the right judgment of standards.
6) Controlling aids in the accomplishment of organizational goals
And last but not least important of controlling in business management is the accomplishment
of a goal. The owner of the business or top management has put their money in the business
with the intentions to make more money out of it.
Therefore, their primary goal in every project is to make more profit, and a manager at a low
level is answerable for the performance of his team’s performance.
Therefore, a manager always controls the actions of people working on his team by making the
effective use of the process of controlling.

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Examples of control in the management
From the above reading, it is clear that how much controlling is important for the organization.
In this section, you will learn about the examples of work that require control of management.
1) Performance measurement
It is the role of management to assign a task to employees and then measure their performance.
By measuring the performance of each employee management can know-how about the efforts
and actions of each employee and using this information, they can take important decisions to
give promotion or salary hike or bonus, etc.
2) Strategy planning
Management plays an important role in strategic and operational planning, and deciding the
goal for the organization, and they also plan how these goals can be achieved within available
resources.
3) Managing Finances
Management is responsible for managing the finances of the organization. They take important
decisions like how much funds should be allocated to a particular project, etc. They also make
sure that whether the project was profitable for the organization or not and take corrective
actions accordingly.
4) Supervising people
The role of management is to supervise the work of employees, increase productivity, and
measure performance and efficiency of their employees. A manager makes sure that all his
employees work at their optimum capacity, and they work to achieve the objective of the
organization.
5) Controlling risk
Management identifies and analyze the risks involved at an early stage and take precautionary
steps to avoid them or to minimize their impact.
6) Improving performance
Controlling in management is necessarily required to improve the performance of the whole
team continuously. The manager can analyze the performance of each employee and help or
give them instructions to improve their performance in order to attain the organizational goal.
7) Inventory Management
The management is responsible for controlling the inventory so that there is never a shortage or
surplus of supply, and everything works without trouble.
8) Ensuring Quality
The control process is important to ensure quality. Some organizations are known for their
quality, and they might face a blow to their business if they don’t take care of the quality.
Therefore, in such organizations, the manager does everything to keep up with the quality
standards.

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