Final answer:
The statement about management by exception focusing only on small favourable variances is false. This management strategy is concerned with significant deviations from expected outcomes, both favourable and unfavourable, for efficient resource allocation and focuses on strategic objectives.
Step-by-step explanation:
The statement that management by exception only looks at the small favourable variances is false. Management by exception is a management style wherein managers intervene only when there are significant deviations from planned outcomes, whether these deviations are favourable or unfavourable. The focus is typically on significant rather than small variances and on both favourable and unfavourable outcomes.
Under management by exception, a manager would be more concerned with large variances that indicate a substantial departure from expectations. These could be either significant favourable variances that suggest unexpectedly high performance or unfavourable variances that highlight areas requiring immediate attention and corrective actions. By concentrating on these significant discrepancies, managers can more efficiently allocate their time and resources to areas with the greatest potential for improvement or with the highest risks.
Favourable variances, even if small, might not always warrant managerial attention unless they are consistent and indicative of a larger trend or potential. This management approach allows for better focus on strategic goals and objectives, leaving day-to-day operations to continue without unnecessary interference unless there's a compelling reason for management to intervene.