Management by exception is a style of business management that focuses
on identifying and handling cases that deviate from the norm,
recommended as best practice by PRINCE2.
Management by exception has both a general business application and a
business intelligence application. General business exceptions are
cases that deviate from the normal behavior in a business process
and need to be cared for in a unique manner, typically by human
intervention. Their cause might include: process deviation,
infrastructure or connectivity issues, external deviation, poor quality business rules,
malformed data, etc. Management by exception here is the practice of
investigating, resolving and handling such occurrences by using skilled
staff and software tools. Good management can contribute to efficiency
of business processes. Often in these cases the process will be called
exception management, as exceptional cases are not the sole focus of the
managerial policy, and exception management (as opposed to management
by exception) denotes a more moderate application of the process.
Management by exception (MBE), when applied to business
is a style of management that gives employees the responsibility to
take decisions and to fulfill their work or projects by themselves.
It consists of focus and analysis of statistically relevant anomalies
in the data. If an unusual situation or deviation in the recorded data
appears, which could cause difficulties for the business and can’t be
managed by the employee at his level, the employee should pass the
decision on to the next higher level. For example, if all products are selling at their expected volumes for
the quarter, except one particular product which is underperforming or
overperforming at a statistically relevant margin, only the data for
that product will be presented to the managers for further investigation
and discovery of the root cause.
Management by exception can bring
forward business errors and oversights, ineffective strategies that need to be improved, changes in competition
and business opportunities. Management by exception is intended to
reduce the managerial load and enable managers to spend their time more
effectively in areas where it will have the most impact.
