Management by exceptions

Management by exceptions
See also
Internal benchmarking Feature-driven development Organizational culture and project management Management by objectives steps Analysis of the content of the work Planning negotiations Planning Plan Scrum of scrums

Management by exceptions refers to a group of management techniques used to improve performance of employees. The main feature of this method is to concentrate managers attention mainly on deviation from the planned state.

Management by exception can be understood, as a recommendation to intervene only in case of deviations and intervene only in selected areas of activity of the company.

It is not necessary that the manager had a detailed understanding of a whole range of issues subject to controlled task. Besides, not all issues are of equal importance: some are less and the other more important and therefore do not require the same attention from management.

Implementation stages of management by exception

The procedure for the design and implementation of management by exception involves three basic steps:

• The first step is selection of the intermediate objectives of the organization (unit, employee), which fundamentally determine the achievement of the final goal.
• The second step is the determination by management of the degree of acceptable deviation (failure to achieve the target) for each of the selected intermediate objectives and define a set of possible actions which should by taken in case of exceeding the tolerance limit.
• The third step comes down to the implementation, in which managers monitors the process and appropriately intervene in the event of variations from objectives (exceptions).

Advantages and disadvantages

Advantages of management by exceptions:

• saves time, especially on senior management levels, mainly because it is informed about the problems on lower level of organizations only in really exceptional situations, clearly defined and exceeding the competence and capabilities of the lower level management.
• The ability to focus on the strategic development problems and resolve only those exceptions that can not be solved at lower levels of management.
• The ability to separate the important issues from matters of secondary importance.

Disadvantages of management by exceptions:

• Difficulties in unambiguous and stable division of tasks between managers and subordinates.
• Impatience of managers who try to intervene in the routine activities of their subordinates.
• Greater tendency of managers to identify only the negative exceptions, leading to the blindness for emerging positive opportunities and chances to grow company.

Management by exception brings the best results in the sectors of trade, finance, manufacturing, in which the most common are repeatable, standard situations and highly structured activities.

Examples of Management by exceptions

1. Performance Evaluation: Performance evaluation is a system that allows the manager to identify and address employees who are not meeting their goals and objectives. It consists of setting performance standards and then measuring employee performance against those standards. The manager can then address employees who are performing below the standard and provide coaching or rewards as appropriate.
2. Quality Control: Quality control is a system that allows the manager to identify and address any areas in which the quality of product or service is not meeting established standards. The manager can then address the areas of concern and make changes to processes or personnel as necessary.
3. Budgeting: Budgeting is a system that allows the manager to identify and address any areas in which the organization is not meeting its financial goals. The manager can then address the areas of concern and adjust the budget as necessary.
4. Risk Management: Risk management is a system that allows the manager to identify and address any areas in which the organization may be exposed to potential risk. The manager can then address the areas of concern and take steps to mitigate any potential risks.

Other approaches related to Management by exceptions

Management by exceptions is closely related to other approaches such as:

• Goal-setting theory: This involves setting specific, measurable, attainable, relevant, and timely goals for employees and then providing regular feedback and encouragement to ensure they are being met.
• Performance-based management: This approach focuses on setting expectations, tracking results, and providing feedback to employees.
• Total Quality Management: This is an organizational strategy that emphasizes continuous improvement, customer satisfaction, and employee involvement.
• Employee empowerment: This technique encourages employees to take an active role in the decision-making process, which can lead to better performance.

In conclusion, Management by Exceptions is closely related to other approaches that focus on setting goals and expectations, tracking results, and providing feedback to employees. These techniques help to ensure that employees are motivated, productive, and accountable.

References

• Dellarocas, C., & Klein, M. (2000). A knowledge-based approach for handling exceptions in business processes. Information Technology and Management, 1(3), 155-169.
• Álvarez, E., & Díaz, F. (2011). A web-based approach for exceptions management in the supply chain. Robotics and Computer-Integrated Manufacturing, 27(4), 681-686.
• Nguyen, T. N. (2014). A different approach to information management by exceptions (toward the prevention of another Enron). Information & Management, 51(1), 165-176.