Explain “Management by exception” with respect to Analyzing deviations, a step in the process of controlling. Give a suitable example.

Question 3:Explain “Management by exception” with respect to Analyzing deviations, a step in the process of controlling. Give a suitable example.

The correct answer is – Management by exception is a technique used in the process of controlling to focus on significant deviations that require management’s attention and intervention. It involves setting up standards or benchmarks for performance, monitoring actual performance against these standards, and intervening only when there are significant deviations.

Under management by exception, managers do not intervene in routine operations unless there is a significant deviation from the expected standards. The focus is on identifying and analyzing the significant deviations and taking corrective actions to bring performance back to the expected standards.

For example, let’s consider a retail store that has set a standard of maintaining a certain level of inventory for its products. If the actual inventory level falls below this standard, it can impact the store’s sales and customer satisfaction.

Under management by exception, the store manager sets up an inventory monitoring system that alerts them when the inventory falls below the expected level. The manager then analyzes the deviation and takes corrective actions, such as ordering more inventory, to bring the inventory level back to the expected standard.

In this example, management by exception helps the store manager to focus their attention and resources on the significant deviation in inventory levels that require intervention. By intervening only when there is a significant deviation, the manager can ensure that their time and resources are used effectively, and the store’s performance is maintained at the expected standards.