Manage by exception

Manage by exception is a term that people new to PRINCE2 may not be familiar with. It’s important to understand, so I will explain briefly before providing the official PRINCE2 definition. When it comes to factors like time, cost, and scope, the project manager has some flexibility—referred to as tolerance—before they need to inform the project board about potential issues. For example, if costs increase by 2%, within a 10% tolerance, the project manager can address the issue without alerting the project board, saving their time. More details of this process are explored in the progress practice.

Levels of management

Manage by exception is a concept used by each level in the project hierarchy to manage the level below it. If an issue that exceeds the tolerance arises, the lower level must notify the level above. PRINCE2 refers to these significant issues as exceptions, which occur when the situation exceeds the predefined tolerance.

Let’s say you’re on the project board. If everything is progressing well, the project manager will only report through regular updates or stage-end reports, unless there is an exception. When an exception happens, the project manager submits an exception report to the project board.

Tolerances

PRINCE2 allows for six tolerances, one for each project variable:

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

Here are examples for quality, scope, risk, and benefit (time and cost are generally easier to understand):

• Tolerance for cost: If we forecast the project to be over-budget for up to 5%, the project manager can decide how to fix the problem, and otherwise, they have to inform the project board.
• Tolerance for time: If we forecast to finish the project for up to 1 month later, the project manager can decide how to bring it back on track, and otherwise, they have to escalate it to the board. If we forecast to finish it up to 2 month earlier, the project manager can decide how to use this opportunity, and if it’s more than 2 month, they have to escalate it to the project board to find the best use of this opportunity.

Summary

Manage by exception allows higher management levels to control the lower levels without being bogged down by every minor issue. Only when the issue exceeds the predefined tolerance is it escalated, ensuring that the project board is only alerted to significant problems.

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Written by Frank Turley.

If you have questions or doubts after using this wiki, you can ask for help on the Facebook or LinkedIn study groups.