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Definition: Management by Exception is an employee empowerment and management style, policy or philosophy wherein managers intervene only when their employees fail to meet their performance standards or when things go wrong. If the personnel are performing as expected, the manager will take no action. Time and effort should not be wasted focusing on employees or parts of the organization where things are going smoothly.
MBE normally involves substantial delegation by the manager to his team.
The idea behind management by exception is that managers should only spend their limited and valuable time to important, more tactical or even strategic activities.