Exception handling: the few cases that drive most cost

Key takeaways

Exception handling in business processes is how a team deals with items that do not fit the standard route. Exceptions are a minority of volume and a majority of effort. In our example, 15% of cases take 59% of the time. Designing a clear route for them, and removing the causes of the commonest, lowers cost faster than speeding up routine work.

• Exceptions are a small share of items and a large share of time.
• 15% of cases take 59% of the time in our example.
• Log every exception with a reason code.
• Remove the cause of the top reason before adding staff.

What is a process exception?

A process exception is any item that cannot be completed by following the standard steps. It might have missing information, an unusual request, a mismatch between two records, or a rule that does not cover it. Someone has to stop, investigate and decide what to do.

• How BPO can help businesses reduce operational costs
• Straight-through processing: cut the touches per task

Why do exceptions cost so much?

Exceptions cost so much because they need investigation and usually a more senior person. A routine item follows a script. An exception needs someone to find out what happened, contact a customer or colleague, wait for an answer and then decide. The handling time is many times longer and the item often changes hands.

Take an illustrative 1,000 cases a month where a routine case takes 5 minutes and an exception takes 40. With 150 exceptions, routine work uses about 71 hours and exceptions use 100. Fifteen per cent of the cases consume 59% of the time.

• 850 routine cases at 5 minutes: about 71 hours.
• 150 exceptions at 40 minutes: 100 hours.
• Exceptions: 15% of volume, 59% of time.

• Cost drivers: what really moves your operating costs
• Process handoffs: why every extra handover adds cost

How do you measure exceptions?

Measure exceptions by logging each one with a reason code, the time it took and who resolved it. A simple shared sheet is enough. After a month, the reasons will cluster. Three or four causes typically account for most of the list, and each points to a fix upstream.

• 1. Define what counts as an exception.
• 2. Agree six to ten reason codes.
• 3. Log every exception for a month.
• 4. Rank reasons by total time, not count.
• 5. Trace the top reason to its source.

• Cost baseline: measure today's cost before you change it
• Cost reduction KPIs: the numbers that prove savings are real

How do you reduce exceptions?

Reduce exceptions by fixing what creates them. Missing information is solved at the form or the brief. Mismatched records are solved by connecting systems. Unusual requests are solved by a clearer offer or a price for the non-standard option. An exception that keeps recurring should become a rule.

• The cost of complexity: when variety eats your margin
• Double data entry: what rekeying costs and how to stop it
• Process standardisation: one best way, lower cost per task

How do you handle the ones that remain?

Handle the remainder with a separate, deliberate route. Take exceptions out of the main flow so they do not block routine items. Give the handler authority to decide within set limits. Write a short playbook for each common type, and set a time limit after which the case is escalated.

• A separate queue so routine work keeps moving.
• Clear authority limits for the handler.
• A one-page playbook per common exception.
• An escalation rule with a time limit.

• The tiered support model: send each query to the right cost
• A simple BPO governance model

Can an outsourced team handle exceptions?

An outsourced team can handle exceptions that have a playbook and clear limits, and should escalate the rest. Trying to hand over every exception on day one usually fails, because the knowledge to resolve them has never been written down. Start with routine volume, log exceptions together, and move each type across as its playbook is written.

• A BPO transition plan for the first 90 days
• Quality assurance for outsourced teams

What does this look like in practice?

A pattern we see in finance and order admin: the most experienced person spends most of the week on problem cases, and is seen as indispensable because only they know how to resolve them. Logging those cases for a month shows a handful of recurring types. Once each has a written route, the knowledge is no longer in one head.

• See client work
• BPO Solutions for UK businesses

Exception handling checklist

Use this to bring exceptions under control.

• Exceptions are defined and logged.
• Each has a reason code and a time.
• The top three reasons have an upstream owner.
• Exceptions run in a separate queue.
• Handlers have written authority limits.
• Common types have a playbook.
• The exception rate is reported monthly.

• Right first time rate: the quality number that cuts cost
• Operational cost reduction checklist: 20 checks

Next step

Tell us which process generates the most problem cases. We will help you set up a simple exception log and work out what the top causes are costing.