Management by exception is an approach to management which focuses on understanding, managing and acting upon exceptions to the normal procedure, recommended as appropriate practice by your project management system. By default management by exception is an information collection management strategy and is concerned with the collection, recording, summarising and interpreting exceptions to the normal course of action. The strategy takes the form of an exception management plan or instruction set out specifically with reference to your circumstances. It is aimed at improving management effectiveness through the identification, recording, summarising and controlling of exceptions to standard practice.
Management by exception means that you have a more flexible approach to change, which gives you more choices in pursuing your objectives than with traditional management systems where there are clearly defined limits to what can be done. The principles of management by exception are simple. Firstly there are no rules, so everything is up for renewal or review at any time; second, you are not required to manage the risk of deviation, it is instead managed by people who have been brought into the role to manage it.
In this approach there are two key areas of concern. The first key area concerns management of variance. Here we deal specifically with the management of variances caused by changes in circumstances. The second key area concerns management by exception for specific project variances. Here we deal specifically with issues such as change management requirements and project risk management.
If the aim is to achieve good performance by exception then there are some approaches that should be adopted. The first of these is to develop an exception report template, which will provide managers with a document to use as a guide. The template should contain a concise description of the variance, its status, and any measures that have been applied to it in the past. It should also contain information about how the variance was arrived at, for example, using historical performance data, the impact of unannounced changes on the situation, and what measures were applied to the situation to minimise risk.
There are many situations where management by exception can be applied. One of the key things managers should remember is that the aim is not just to catch the exceptions, but to get as much data as possible to assess the exceptions so that they can be managed effectively. This is where the use of templates comes into play. By developing templates, managers can ensure that all their staff are well aware of the standards that apply and how to assess the variances in a way that meets the requirements of the legislation.
Another key area is the management of deviation where the aim is to manage the deviation to the set standard. To do this, managers need to consider each case very carefully and decide what measures would be appropriate in each case and the extent to which they would go to meet the objectives set out in the standard. Once the key areas of exception management have been identified, managers can then set themselves the tasks of ensuring that the policies, procedures and training continue to be effective and that the practice of exception management continues to provide value.
In terms of the second question posed in the previous paragraph, what managers need to remember is that any policy or procedure may end up being ineffective if it is not properly administered. For example, if a company wants to set up a standard of quality assurance for all employees, it will have to ensure that all employees are trained on how to meet those standards, whether they have been trained or not. Likewise, if a company wants to know how much a particular employee is costing them, they will have to take a look at the costs of the various procedures that are used to control the deviation. Without controlled processes, there is the potential for the company to suffer a loss due to the excessive costs of the deviation. It is therefore important that any deviation is properly managed and, if the management by exception approach is being used, the best person to talk to is the individual concerned.
There are many benefits of management by exception. Most managers appreciate the fact that their company does not have a uniform approach to disciplinary action and that different managers have differing ideas about what constitutes an acceptable deviation from the norms. In addition, managers have a responsibility to manage by exception or to provide for a uniform discipline approach to all employees. Another advantage is that it provides flexibility in policy and practice. It allows managers to control the level of deviation without having to establish an unwritten rule that all deviations must be dealt with. However, it can also lead to the watering down of standards and it may even result in the erosion of legal protection for workers.