Management by Exception

 

Pareto's principle of 80:20 is applicable to the management of enterprise. Several terms have been coined on this principle such as management by objectives, management by results, and management of strategic areas. At the roof of the management methodology is the management by exception. When the management operates under time constraint, each manager has to allocate specific time for the several demands made on his time. It is, therefore, necessary for him to attend the situation where his attention is necessary. Such attention would lead to an action, a decision or a wait-and-see approach.

 

If all the situations are considered in a routine manner, it consumes time and tends to be neglected over a period of time.  An efficient manager tries for selective attention to manager within the available time resource. The principle evolved, therefore, is of the management by exception. The exception is decided on the impact a situation would make on the performance, the process and the standards set in the management control system.

 

The exception is defined as a significant deviation from the performance, or the process and the standard. The deviation could be abnormal on a positive or on a negative side of the standard.  The deviation could be abnormal on a positive or on a negative side of the standard. The deviation could be predictive or could be arising out of random causes in the business operations. It is, therefore, necessary to assess whether the deviation is sporadic or consistently coming in, calling for managerial attention. The manager is interested in knowing the significant deviation by the yardsticks of consistency and not our of random causes. The significant deviations are exceptional in nature and require to be attended to immediately. A manager is further interested in knowing the reasons behind the exceptional nature of the situation.  It is possible to trace the reasons of deviation, and it is possible to take a corrective action.