Managing by exception the PRINCE2 way

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In the third blog of this series, I discussed the roles and responsibilities of the project management team, team members, and project managers. PRINCE2 goes further than simply defining management roles and responsibilities: it actually gives a process that defines how to manage a project. This process is called ‘managing by exception’. It’s likely that you’ve never heard this term before, so in this article I’m going to explain what it means and how it’s put into practice.

Managing by exception – establishing the art of delegation

Managing by exception is a principle that establishes how management is delegated down the line of a PRINCE2 project. It delegates authority for decision-making (the project board), managing (the project manager), and delivering (project team members).

You only need to know what you need to know

If the project board were to become involved in every decision, it would distract their time and effort from other projects and their day-to-day work. Managing by exception is a supervisory principle which is used everywhere to avoid such a situation. Consider a simple project at home, such as decorating a child’s bedroom:

The mum (the project board) decides what colours will be used on the walls and the doors, and sets the budget. She gives Dad the money, and tells him to spend up to that amount, and no more. If the paint is more expensive, then he’s to let her know and she’ll make the decision whether to increase the budget and proceed, or to make changes so as to stick within the budget.

Dad buys the paint, and enlists the help of their son – after all, it is his bedroom that is being decorated.

In the bedroom, Dad becomes the supervisor. He instructs his son as to what he wants done, how he wants it done, and when he wants it done by. “Give me a shout if anything goes wrong, or you have a problem.”

If the boy runs into an issue – for example, he can’t get the radiator off the wall to paint behind it – he’ll tell his dad and his dad will make the decision as to how to proceed. If it means getting a plumber in to do some extra work, and the cost of doing so is outside the budgeted amount for the job, then Dad might have to speak to Mum to get clearance for the extra work.

Along the way, Dad (the project manager) will be providing regular reports to Mum (the project board) on project progress. The important thing is this: moving up the line, notification is only made if there is a big issue outside the set allowable tolerance. It’s like ‘no news is good news’.

What Mum wants, of course, is to set the project and have it completed with no fuss in a week or two.

In the context of a PRINCE2 project, the project board won’t hear from the project manager (except for the pre-agreed regular updates) unless there is a big issue that requires its attention.

How to manage by exception

In order to manage by exception, each level of project management must be confident in the ability of the level below it to play its part. However, there also has to be limits to provide guidance and protect the integrity of the project. These limits are set by reference to six tolerances.

The 6 tolerances of PRINCE2

The delegated authority at each level is set by establishing a tolerance against:

  • Time
  • Cost
  • Quality
  • Scope
  • Risk
  • Benefit

Time tolerance

These are limits on the amount of time by which delivery can exceed expectation − for example, no more than two days beyond the agreed delivery date.

Cost tolerance

The amount of deviance to budgeted costs. An example may be no more than 4% above budget without scaling.

Quality tolerance

An example would be for a project to produce a new car body that remains rust free for seven years, with a tolerance of ±7%.

Scope tolerance

There will be both mandatory and ‘nice-to-have’ requirements. The mandatory requirements have to be included, whereas the team can decide which ‘nice-to-haves’ are included. In the example of decorating the bedroom, the mandatory might be that every wall is painted, while the nice-to-have is that the radiator is painted in a matching colour.

Risk tolerance

There will be a risk tolerance set on the project. Something above this level has to be discussed with the project board − for example, if a supplier cannot provide a necessary component within the required timeframe.

Benefit tolerance

A project benefit is a measurable improvement created on the completion of the project (or a project milestone). These benefits are those received by the project’s stakeholders. A question that is asked throughout the project is: “Is the project on track to realise its projected and expected benefits?”

In summary

Management by exception provides a framework for delegation and project management that allows each management layer to manage the layer below without the need for constant supervision and interruption. It helps to keep the project on track, within the set constraints of budget, time, cost, etc. while giving each member of the team pre-defined scopes of autonomy.

Management by authority reduces the need for meetings, reporting, monitoring and measuring. It saves hours (even days) of bureaucracy that in itself can hamper project delivery.

In my next article, I’ll look at the focus on quality.

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