18 Apr 2015

Managing by Exception

Posted by Paul Atkin

Managing by Exception

Management by Exception is  a key concept in the way that a project is controlled using the PRINCE2 methodology.

Part of PRINCE2’s Progress Theme, there are 3 parts to Management by Exception (MBE):

  1.  Tolerance
  2. Exception Process
  3. Regular reporting

The easy way to think of MBE is: “no news, is good news.”  In practical terms, if you are the Project Manager;  you will assign a work package to your Team Manager, agree their boundaries and then let them get on with it.

Let’s look at the 3 parts of MBE using the example of a 3 week work package with an agreed cost of $10,000.


The one thing you are certain of on Day 1 is that the work package will NOT take exactly 3 weeks and it will NOT cost exactly $10,000.  If it takes a day longer and costs, say, $50 more, you are probably OK with that.  However, it if takes 6 weeks longer and costs $5,000 more you are probably not going to be happy with your Team Manager!

So where do you draw the line and how do you keep control of your Team Managers work?

Where you draw the line in PRINCE2 is called Tolerance. The technical definition is “permissible deviation from plan.” In layman’s terms it answers the question: “how much authority do I want to give away and at what point do I want to be notified, so I can step in?”   When you hand over the work package you will agree tolerances with the Team Manager.  For example; you might agree 3 weeks plus or minus 3 days on time, and $10,000 plus or minus 5% on cost.

Time and cost are the normal tolerance elements but you also have tolerance on scope, risk, quality and benefit

Exception process

So the Team Manager starts work, knowing how far they can go, before they have to escalate it to you. An important point to note is that the Team Manager must bring deviations to your notice when they _forecast_ that they will exceed tolerance, not when it happens.  Again, in layman’s terms: “don’t wait for it to happen, if you can see problems coming up, tell the boss immediately.”

When Tolerance is forecast to be exceeded, PRINCE2 calls this an Exception and there are activities which explain how to escalate the problem upwards (in the Managing Product Delivery and Controlling a Stage processes)

So that’s how you set boundaries (Tolerance) and deal with the breaches (Exceptions)

Regular reports

The last question is how do you keep in touch while the work is going on?  PRINCE2 says you don’t need status meetings. Instead you have status reports which are sent at agreed intervals.  Still with our Project and Team Manager example, these are called Checkpoint Reports. From the Project Manager to the Project Board, they are called Highlight Reports.  The purpose is the same; they are regular status updates allowing the next level of authority to confirm how things are going.

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