“You don’t have to bother me unless something goes wrong.”
This statement embodies the philosophy behind management by exception, a hands-off management strategy that encourages employees to take charge of day-to-day operations.
In this model, team members only need to contact management if something unusual occurs, referred to as exceptions, deviations, and variances.
But you only have to knock on your manager’s door if there’s an exception to an existing rule or standard.
For example, imagine an assembly line consisting of workers and their supervisor. If the equipment works and everyone completes their tasks, they have no reason to contact their supervisor.
If a crucial piece of equipment fails and halts the entire operation, then it’s time to notify the manager.
Once the higher-ups fix the issue, the assembly line returns to normal, and the workers resume the status quo.
Management by exception is a popular model because it saves time, improves efficiency, and encourages autonomy among regular employees.
It’s a popular choice for project management and financial projects, but some managers use it as their go-to management style.
In this article, I’ll explore the advantages and potential downsides of management by exception, so stay tuned to determine if it’s the suitable model for you.
How management by exception works
Management by exception (MBE) is more hands-off among the countless management models available.
Lower-level managers, senior managers, and executives are only contacted by their employees if there’s a disruption to the status quo.
Outside of these deviations from the norm, employees are left to their own devices to complete their tasks and monitor their performance.
As a result, management by exception is a model that places high trust in employees. Your employees are expected to know precisely how to carry out your day-to-day operations, so management intervention is only necessary if something unexpected occurs.
It’s also a model that elicits high levels of productivity.
How is that?
It’s because employees aren’t forced away from their tasks to do things like:
Attend regular meetings
Ask for permission to complete specific tasks
Send ‘daily recap’ emails to supervisors
Engage in regular 1:1 performance meetings
This frees up a lot of time for employees, allowing them to get more done. Similarly, managers will no longer have to ‘babysit’ their staff, freeing up their time. In MBE companies, managers focus most of their time on growing and developing the company instead of managing staff.
Here’s a look at the primary management by exception principles.
Principle #1: Setting clear standards for employees to follow
MBE establishes transparent business processes, employee decision-making, problem-solving, and performance standards.
In other words, you’re establishing a status quo for your staff. Your standards will be the benchmark your employees will use to grade their performances.
Your employees should know:
What tasks need to get done when
How to address customer complaints and other small issues
Their schedule
How to resolve minor disputes among coworkers
Priority levels for different types of tasks
The more detailed you can get with your standards, the easier it will be for your employees to keep things running smoothly.
Your employees should know who to contact when significant deviations to your workflows exist.
For this reason, it’s essential to establish a leadership hierarchy for whom employees should contact in case of a deviation or variance.
An example would look like this:
Minor issues: Employees should contact their direct supervisor to help get to the root cause of the issue.
Mildly severe issues: Employees should contact senior-level managers for assistance with these deviations.
Extremely severe issues: Employees should contact the executive team for major operational problems.
This will ensure that employees don’t waste senior management’s time with minor issues that their direct supervisor could easily handle.
Principle #2: Measure actual performance metrics to ensure standards are met
While MBE involves far less analysis than other management styles (you’re letting your employees run the show), you still need to ensure that your team’s performance is up to par.
This means setting up key performance metrics to measure, such as:
Number of units completed/sold
Defect rate
Customer feedback
Response rate
Attendance rate
The exact metrics you use will vary depending on the type of business you manage, but the idea is to keep an eye on your KPIs to ensure everything is running how you want it to.
Another advantage of measuring performance this way is that it will help you spot variances without your staff having to notify you of them, which is a plus.
Principle #3: Variance Analysis
Management by exception means it’s entirely up to the leadership team to deal with and solve significant issues.
The first step is to conduct a brief analysis.
In particular, your goal should be to determine if A) a deviation took place and B) if there’s anything you should do about it.
The deviation could be a one-time occurrence, meaning there’s no need to implement a solution.
Or the employee could have been mistaken, and no variance took place. In these scenarios, managers would ignore the deviations and return to work as usual.
However, corrective action must be taken if a significant issue disrupts the status quo.
Whenever a serious issue is identified, the manager must determine whether to attempt to resolve it or to pass it on to someone higher up the chain.
Establishing a leadership hierarchy can help here, as lower-level managers will know if they need to contact someone from the executive team for specific issues.
Active vs. passive management by exception
Most of the time, MBE takes a passive approach, but this is only sometimes the case.
Active management by exception (MBEA) adds an exciting twist to the model by making managers more active in the organization’s day-to-day operations.
Wouldn’t that make it a different business management style than MBE?
Not necessarily, because the principles are the same. While managers may be more active in assisting their employees, they remain primarily hands-off until something pressing pops up.
AMBE is a hybrid approach. You enjoy MBE’s boosted efficiency and employee trust but still conduct 1:1 check-ins and performance reviews.
This can help staff feel more engaged and connected to their managers, which can have positive effects (more on the advantages and drawbacks of MBE in a bit).
Passive management by exception (MBEP), as the name implies, involves being as lax as possible with your employees.
Unless a deviation occurs, your staff will never contact you and follow their SOP (standard operating procedures) to keep your business running.
MBEP works best when managing individual projects.
The project will manage itself as long as everyone knows your SOP and their deadlines. This will save both employees and managers lots of time.
However, MBEP tends to have more negative effects when applied to an entire organization.
Your staff may need more direction. Even worse, they may take the lack of supervision as an opportunity to neglect their responsibilities or engage in nefarious activities like theft.
What are the advantages of management by exception?
When implemented carefully, MBE can benefit the organization, managers, and employees significantly.
Here’s a look at the top advantages of using MBE.
High levels of efficiency
Arguably, the best benefit of MBE is its efficiency. Employees maintain daily operations while managers focus exclusively on growth and development.
This model wastes very little time and leads to high levels of efficiency and productivity.
However, to enjoy this benefit, your SOP must be airtight to ensure your staff can successfully run your business without supervision. You should also train your managers to excel at variance analysis and finding resolutions.
With these pieces in place, your organization can thrive using MBE.
It’s worth looking into MBE if your organization needs more focus or wastes time on repetitive meetings, employee hand-holding, and micromanagement.
Strong employee trust and autonomy
This benefit primarily affects employees, but it’s still worth mentioning. MBE trusts employees, and they enjoy much freedom.
Instead of constantly asking a manager for permission to write checks or authorize actions, MBE employees can perform these tasks themselves.
Many employees enjoy this level of autonomy, especially those who do not appreciate micromanaging.
Also, since the employees run the show, MBE organizations provide opportunities for continued education and advancement. Employees may learn tasks they wouldn’t have otherwise to ensure smooth sailing for daily operations, which will expand their skill sets.
MBE sets clear priorities for employees
Another benefit is how MBE teaches employees your priorities for specific tasks. After setting up a detailed SOP document, your employees will know which tasks take priority and which can wait.
This is excellent news for your productivity and efficiency, as your staff won’t have to knock on your door whenever they have a question about your priorities.
Instead, they’ll handle everything independently, freeing you to focus on more important matters, like forecasting future growth.
What are the potential drawbacks of management by exception?
The process of management by exception has its challenges.
Some steer away from the model altogether due to its potential downsides.
Here’s a look at the ways MBE can negatively impact your organization.
MBE can cause employees to bury issues
One of the most significant drawbacks of MBE is that it limits your interaction with your team and only addresses negative issues.
This means that if an employee contacts you, it’s to tell you something negative, which may cause them to bury issues to avoid bringing them up. Also, only interacting with staff when problems occur can cause them to feel like their jobs are in jeopardy whenever they reach out to you.
That’ll heighten the chances that your employees will try to bury or ignore issues instead of notifying you about them, defeating MBE’s whole purpose.
MBE can be demotivating to employees
Another potential drawback is waning levels of employee engagement.
With MBE, your employees only get the chance to interact with their supervisors or senior-level managers if something goes wrong.
This means it’s next to impossible to form a sense of connection with your staff, which isn’t suitable for your employee engagement.
Connected employees perform better and stay longer at companies, and there’s research to back this up.
A report by Gallup found that connected employees are 68% less likely to experience burnout at work, so you have an incentive to connect with your staff.
My suggestion?
Use an active management by exception model.
This will ensure that you connect and engage with your staff outside of addressing issues, making it easier for them to trust you.
Concluding thoughts: management by exception
To summarize, management by exception is a hands-off management model where you only interact with staff to address deviations from your standard operating procedures.
The model is most effective for managing individual projects, but some organizations adopt it as their management model of choice.
There are active and passive management by exception models, with the latter being incredibly lax.
With an active management by exception model, you’ll enjoy MBE’s benefits while addressing some potential drawbacks.
More Resources:
Good mentor tips to level up your mentoring game today
Match game: How to build and get the most out of a mentorship program
Your first 30 days as a new manager — starting on the right foot
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