Management by Exception

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Management by Exception

By Cihan Cobanoglu - 08/10/2008
While visiting industry trade shows and conferences over the past several years, I've noticed a growing number of business intelligence offerings that incorporate exception-based reporting tools into their solution. One simple reason for this trend is the large amount of data that is collected and maintained by hospitality organizations. Not only do hotels and restaurants store guest data, but also data related to their employees and other stakeholders, such as suppliers and vendors, blogs and bloggers, and review websites.

For a long time, the challenge was to combine this data in a central location, mine it, and use it to predict the future. Data was often stored without any plans for further use, or it was used in isolation. Business intelligence tools have since emerged as a way to leverage this data to create a competitive advantage.

Exception-based approach
A traditional approach to data mining, and one that has had extreme success in bringing laser-focused insight to operations, is an enterprise-level, exception-based management and reporting solution. Exception-based reporting consolidates data from multiple end-points and systems across an enterprise and performs a rules-based analysis to provide exception reports to various stakeholders in the organization.

A key challenge in implementing a business intelligence and management-by-exception system is the integration of different systems. Following that is the importance of managing the rules that will create the exceptions. When too many non-critical exceptions are reported to management, their value will diminish and over time those exceptions will not be taken seriously.

Solution evolution
First-generation solutions focused on exceptions after the fact (i.e. next business day). In most high-volume transaction-oriented environments like hospitality, managers receive exception-based information after the window of opportunity to affect an issue has already closed. In this scenario, the best that a manager can hope for is to view the exception report as a scorecard rather than a call-to-action.

Second-generation solutions focus on customized and real-time reporting. Mirus ( offers a tool that allows users to create custom business rules based on data collected from the POS. Another option, RealTime from Real Time Intelligence (, gathers information in the form of events and queries from property and store-level systems, including the POS/PMS, access control, CCTV, and facilities management, to processes this information constantly in real-time against a sophisticated business rules engine at the unit level.

The results of the analysis (the exceptions) are delivered to the appropriate person in real time. This intelligence enables management to affect a resolution before the issue becomes a statistic on tomorrow's report.  Delivery may take the form of an SMS message to a cell phone, an email to a PDA or standard inbox, telemetry displayed on a custom dashboard, or even a page or a phone call.

Practical returns
Application of this technology delivers high returns in areas like labor management, compliance, loss prevention, service reparation, and IT support. One simple advisory sent to a supervisor when any one of their employees is 15 minutes away from entering overtime, coupled with metrics related to current and projected sales volume, check-ins/outs, or other similar information, can drastically reduce overtime and empower a manager to make an informed decision. This concept of targeted intelligence holds the promise of elevating the effectiveness of management by giving each manager, regardless of experience, the ability to perform with the experience of a seasoned colleague.

Implementing real-time exception-based reporting across the enterprise system is not easy or cheap. However, in an industry where profit margins are getting slimmer every year, an exception-based reporting system may pay for itself very quickly and help the company achieve a competitive advantage.