What is Management by Exception in PRINCE2? 

 March 28, 2024

By  Dave Litten

Management by Exception

Have you ever asked yourself “What is Management by Exception in PRINCE2?”

If the answer is yes – this podcast episode is just for you:

Management by Exception is a fundamental principle within PRINCE2, a widely used project management methodology. Let’s delve into what it entails:

  1. Delegated Authority and Tolerances:
    • In PRINCE2, a project is divided into different levels of management: the Project Board, the Project Manager, and the Project Team.
    • Each level has specific responsibilities:
      • Project Board: Decision-making authority.
      • Project Manager: Management responsibility.
      • Project Team: Delivery of project work.
    • The concept of Manage by Exception revolves around delegating authority down the management hierarchy.
    • Tolerances are predefined limits for project objectives (such as time, cost, quality, scope, risk, and benefit). These tolerances establish the boundaries within which each level can operate without escalating issues.
  2. When Does Manage by Exception Apply?:
    • If everything is proceeding smoothly within the predefined tolerances, the Project Board won’t hear from the Project Manager unless it’s time for regular reports or stage completion.
    • However, when an issue arises that falls outside the agreed tolerances (an exception), the Project Manager promptly sends an Exception Report to the Project Board.
  3. Examples of Tolerances:
    • Let’s explore some examples of tolerances:
      • Quality Tolerance: Suppose you’re creating a new mobile phone (let’s call it a GSM). You want the keyboard to function for an average user for 7 years, with a tolerance of ±5%.
      • Scope Tolerance: The GSM project has mandatory requirements and additional “nice-to-have” features. The project can decide which “nice-to-have” requirements to include, but the mandatory ones must be part of the scope.
      • Benefit Tolerance: Benefits resulting from the project (e.g., increased market share) must align with predefined expectations.
      • Risk Tolerance: If a risk exceeds the set tolerance level (e.g., a critical component supplier cannot meet specifications), it becomes an exception.
  4. Communication Flow:
    • Manage by Exception ensures efficient communication:
      • Project Managers handle day-to-day issues within tolerances.
      • Exceptions prompt communication to the Project Board.
      • The term “Manage by Exception” reflects the idea that the Board only needs to intervene when exceptions occur.

Remember, in PRINCE2, managing by exception means focusing on what truly matters and escalating only when necessary

Dave Litten

Dave spent 25+ years as a senior project manager for UK and USA multinationals and has deep experience in project management. He now develops a wide range of Project Management Masterclasses, under the Projex Academy brand name. In addition, David runs project management training seminars across the world, and is a prolific writer on the many topics of project management.

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