The document discusses management by exception in cooperatives. It explains that management by exception involves managers only intervening when actual results differ from planned results, allowing them to focus on more important strategic issues. In cooperatives, day-to-day management is delegated to hired managers while boards of directors and members evaluate performance and intervene when needed. Management by exception is well-suited for cooperatives as it allows owners to focus on expansion rather than routine tasks, delegating daily operations but monitoring for deviations from plans.

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Management by Exception in
Cooperative
Seminar Paper
For the attainment of academic degree of post graduate program in
Cooperative development and leadership, Advanced Cooperative
Law and Management
Thursday, June 18, 2015
Presented by:
Eyob Muhdin
Coopw/027/05

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The presentation has the following part
Introduction1
Literature review2
Conclusion3
Bibliography4

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 In cooperative, Management has greatly improved as cooperatives have
become larger, more diversified, and integrated to match similar advances
in the marketplace, on the farm etc.
 In the early years, cooperative managers not only supervised operations but
also maintained accounting records, waited on customers, and swept floors
etc.
 Boards of directors knew little about off-farm businesses of the detail, and
hence, many cooperatives failed because of incompatible operating
management in relation to cooperative nature and organizational structure.
 As a result, cooperatives have increasingly adapted scientific Management
techniques known as “Management by Exception” which were the
philosophy of many scholars like Taylor.
Introduction…

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 The idea of management by exception in human machine systems
was born out of the supervisory control paradigm in the mid-1970s
(Edwards and Lees 1974; Sheridan 1976; Umbers 1979).
 Wiener (1988, p. 456), in his book described the concept: As “as long
as things are going well or according to plan, leave the managers
alone. Don't clutter their world with reports, warnings, and messages
of normal conditions.”
 Taylor (Frederick Winslow Taylor - March 20, 1856 - March 21, 1915),
an American mechanical engineer who originally sought to improve
industrial efficiency, and, sometimes called "the father of scientific
management." explain the concept as follow under his well know
book:
Introduction…

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Introduction
“The manager should receive only condensed, summarized, and invariably
comparative reports covering,…leaving him free to consider the broader lines
of policy. (Taylor 1911, p. 86)”

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Management style and Techniques
Before talking about Management by exception let us just have some
understanding on Management styles and techniques:
Management style is the way in which a manager directs the staff
under his authority.
Management technique is the type of obligatory personnel
management laid down by the company for its managers.
Management techniques are the basic conduct and procedures
adopted within a company when performing management tasks.
Literature review…

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Management style and Techniques[pictorial description]
Literature review…
Employee
Management by
delegation
Management by
exception
Task-Oriented
Management style
Management Styles
Person-Oriented
management
style
Cooperative
management
style
Managemnet
by by objectives
Management Techniques

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Management style can be catagorized in to:
With the task-oriented management style, the manager is primarily
interested in the high quantity and quality of the work of staff.
In the person-oriented management style, the manager pays
considerable attention to the needs and expectations of staff.
In the cooperative management style, staff is included in decision-
making processes.
Literature review…

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Management Techniques can be catagorized
In Management by exception, the employee can make autonomous
decisions concerning certain operations based on his or her own
expectations and experience.
Management by delegation means that certain areas of authority and
responsibility are transferred from the manager to the employee.
 In Management by objectives, personnel management is based on
working towards objectives, which, as a rule, are agreed between the
manager and the member of staff (Batcos, N.A).
Literature review…

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What is Management by Exception
A "policy by which management devotes its time to investigating only
those situations in which actual results differ significantly from
planned results.
The idea is that management should spend its valuable time
concentrating on the more important items (such as shaping the
company's future strategic course).
Managing by Exception can be broadly summed up as creating the
right conditions in the first place then only intervening when things aren’t
going according to plan (hut, 2009).
Literature review…

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Types Management by Exception
Under his highly influential book entitled Leadership and Performance
beyond Expectations in 1985, Bass(Joseph & Boyett, 2006) categorizes
Management by Exception in to two ways:
1. Active Management by Exception
2. Passive Management by Exception
Literature review…

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Active management by Exception
When leaders engage in active management by exception, they
monitor the performance of their followers in order to detect poor
performance or deviations from standards so they can take corrective
action.
Literature review…

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Passive management by Exception
Leaders who engage in passive management by exception wait to
intervene until serious mistakes are made and called to their attention.
Literature review…

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Purpose of Management by exception:
To only bother management with the most important
variances from the planned direction or results of the business.
Which means,the concept can be fine-tuned, so that smaller
variances are brought to the attention of lower-level managers,
while a massive variance is reported straight to senior
management.
Literature review…

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Advantages of Management by Exception
 It saves the time and energy of senior executives and enables them to
concentrate on more important problems and issues.
 It facilitates the engagement of specialized staff for high-routine jobs.
 It reduces the frequency of decision making.
 It leads to the identification of critical problem areas.
 It stimulates communication.
 This method allows employees to follow their own approaches to achieving
the results mandated in the company's budget. Management will only step in
if exception conditions exist.
Literature review…

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Disadvantages of Management by Exception
 Small issues may be overlooked and these can turn into more serious
problems later down the line
 Staff may not feel valued if their concerns are not addressed or even looked
into
 Staff may feel completely isolated from the management due to no real
interaction
 Management may lose touch with everyday matters of the business.
Literature review…

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Management is the decision making element of the cooperative.
 Broadly speaking, its role entails formulating and executing
operating policies, providing good service, maintaining financial
soundness, and implementing operating efficiencies to successfully
meet its objects.
But, what makes different in managing a cooperative from any other
type of business?
How the technique of management by exception work and be helpful
in cooperative?
 The followings are my review for the above critical issues:
Literature review…
Management by exception In Cooperatives

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“Decision making techniques are identical, but the cooperative’s
objectives are different; therefore, the manager’s conclusions will be
different.”
In addition, cooperative principles and objectives present a distinctly
different managerial foundation.
Literature review…

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Literature review…
 In this regard, the management of cooperatives is user oriented, member
oriented, development oriented with concern for community and mostly
cooperatives recommended to use cooperative management style
under which Management by exception technique to complement with
its constituency and unique feature.
 This is because, the management of cooperatives is unique because of
the value base and principles upon which the organization of the
cooperatives is built and members and Board of director not spend
most of their time in day to day operation rather leave the detail to
hired manager by its nature.
 This can be justified by the following organizational structure:

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Literature review…
 Board of directors represent members within the framework of an official
board of directors. All corporate powers of the cooperative, other than
those specifically conferred upon members, are vested in its directors.
 The board of directors, in turn, delegates much of its overall management
responsibility of the daily operations to a full-time manager or chief
executive officer.
 The manager, in turn, is empowered to employ and discharge key
employees such as department heads, who together with the manager
comprise the hired top management staff or team.

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Literature review…
 In general, in cooperative, day to day management is given to the hired
general manager and overall management is evaluated even if the
process is not formally planned.
 Member-owners continually evaluate their hired management in terms of
how well the cooperative is serving members.
 Regardless of cooperative size, supervisory personnel are evaluated on
the basis of how they perform day-to-day.
 As it can be seen above, the owner i.e. the member and /or the board
which is representative of cooperative member delegate all the daily base
activities to the hired employees and intervene when there is a deviation
from the plan through different evaluation techniques. As a result, most
of the time the owner spend most of their time for expansion issue etc.
than routine issues.
That is what management by exception in cooperative.
 Management by Exception in Cooperative.docx

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 Management by Exception (MBE) is a management philosophy and
practice where manager intervention is primarily focused on the areas
of organizational performance that need attention.
 we can conclude that management by exception is effective
technique for organization like Cooperative enterprises as we can we
see from the above having the following condition.
 If the people employed are responsible enough to move forward, and
work toward organization’s/cooperative’s goal without constant
prodding and supervision, than this is an excellent choice of
management technique.
Conclusion

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1. Boyett, J. H. (2006). The Science of leadership. Transformational
Leadership: the hignly effective leader/Follower relationship , p. 2.
2. Batcos. (N.A). Management style and Management techiques.
3. BBI. (na). What is managment by exception? Business-Building
information, (pp. 9-12).
4. Cognition, T. (1999). To intervene or not to interven: The Dilemma of
Managment by exception. In T. Cognition. London: #1999 Springer-
Verlag London Limited Cognition.
5. CPE. (2011). what is managment by exception? In CPE guiding
book (pp. 1-3).
6. Gibson, T. (2010, October 13). what is Management by Exception.
Ask an Automotive Professional (223), pp. 1-6.
7. hut, P. (2009). Management By Exception. In J. infonet, # 27 in th
Hut introduction to Project Management (pp. 2-3).
Bibliography

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