Management by exception (MBE) is a style of
business management
Business administration, also known as business management, is the administration of a commercial enterprise. It includes all aspects of overseeing and supervising the business operations of an organization. From the point of view of manageme ...
that focuses on identifying and handling cases that deviate from the norm, recommended as best practice by the project management method.
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
A business process, business method or business function is a collection of related, structured activities or tasks by people or equipment in which a specific sequence produces a service or product (serves a particular business goal) for a parti ...
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 A business rule defines or constrains some aspect of business. It may be expressed to specify an action to be taken when certain conditions are true or may be phrased so it can only resolve to either true or false. Business rules are intended to ass ...
, 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 gives employees the responsibility to make decisions and 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.
This management concept is widely attributed to Frederick W. Taylor and was first discussed in his work, "''Shop management: A paper read b