9 important purpose of management by exception
The purposes of management by exception are as follows:-
1. To economise the time spent by busy managers in looking after day to day problems.
2. To concentrate attention and effort on correcting weak links.
In the field of production, MBE can be applied for the following operations:-
1. Actual quantity of production shortfall from standard
2. Actual quality of production deviation from standard
3. Amount of scrap, wastage, defectives, etc excess over norms.
4. Capacity utilisation shortfall from targeted rate of utilisation.
5. Actual direct materials and labour costs incurred excess over budgeted amount for actual production.
6. Overhead and indirect expenses excess over budgeted amount.
7. Sequencing of operations deviations from planned sequences.
8. Labour turnover and absenteeism excess over norms.
9. Deviations in actual labour and material mixes from standard mixes.
In all the above examples higher management is reported on those shortfalls of excesses- that are beyond acceptable margin. A detailed analysis of causes, along with the identification of the person responsible for these exceptions, must accompany these reports for worthwhile control.
It must be appreciated that all causes for the exceptions may not be controllable by the individual identified in the report. So, exceptions that are 'non-controllable' by the person reported on must not be made his responsibility.
Also during periods of external economic changes, and internal. Technological changes, norms or standards established earlier must be constantly reviewed so that they do not become obsolete. To continue with such standards would show exceptions that are unreliable and misleading.
These standards are meant for comparisons with individuals, actual performances, the latter should have confidence and faith in the correctness and attainability of these standards. All control processes are basically human processes.
If the individuals do not accept the standards for showing, exceptions, they will not be motivated towards achieving control. Hence, so far as possible, regular communication of and participation in the process of preparing the standards should be initiated.