Understanding Management by Exception
Management by Exception (MbE) is a strategic management principle focusing significantly on anomalies or deviations in business processes. Broadly speaking, this approach operates on two main fronts: operational and financial.
Operational Management by Exception
In its operational sense, MbE implies that routine decisions are delegated to subordinate levels, reserving higher management’s bandwidth for issues that are exceptional in nature. This not only expedites decision-making but also empowers lower-level managers, enhancing their decision-making skills along the way.
Financial Management by Exception
Financially, the principle shines in budgetary control scenarios where focus areas are defined by the degree of deviation from expected figures. Normal fluctuations within pre-set bounds do not call for higher-ups’ attention; it’s the red flags, the adverse variances, that summon the strategic insights of the upper echelons. This ensures that effort and resources are allocated efficiently, sharpening the company’s overall response to financial discrepancies.
Etymology and Advice
The term, akin to finding a needle in a haystack, directly implies that management should not be bogged down by the haystack but indeed focus on the needle. It’s practical wisdom: Don’t sweat the small stuff—wait for the big stuff to sweat you!
Related Terms
- Decentralization: Redistributing decision-making authority closer to the point of action.
- Variance Analysis: A quantitative approach to analyze the difference between planned and actual behavior.
- Strategic Planning: The process of defining strategy, or direction, and making decisions on allocating resources to pursue this strategy.
Recommended Reading
- “The Effective Executive” by Peter Drucker - A classic that touches on management essentials, including efficient decision-making principles akin to Management by Exception.
- “Budget Management for Dummies” by Mark P. Cussen - Simplifies financial strategies, including variance analysis and budgetary controls.
By advocating for the managerial quirk known as Management by Exception, organizations not only polish the lens through which big picture issues are viewed but also ensure the stage is set for operational theatre where every actor knows their cues. It’s about making sure that the spotlights only turn on when there’s a showstopper on stage!
