Manage by Exception
Manage by Exception is a PRINCE2 principle that establishes clear tolerances and boundaries for each project objective, enabling efficient escalation and decision-making processes. This principle is designed to ensure that management attention is focused where it's most needed, rather than requiring constant oversight of all project aspects. PRINCE2 defines tolerances for six aspects of performance: time, cost, quality, scope, risk, and benefits. For each level of management, tolerances are set that define the permissible deviation from plan before escalation to the next management level is required. This creates a governance framework that balances control with efficiency. Project managers have the autonomy to manage day-to-day activities within these agreed tolerances, without needing to constantly seek approval for minor decisions. This reduces the burden on senior management, who are only involved when exceptions occur—situations where tolerances are forecast to be exceeded. The principle supports efficient use of management time and clear accountability at each level of the project structure. When a level of management forecasts that control tolerances at their level will be exceeded, they must escalate this as an exception to the next higher authority for a decision. This enables timely intervention when projects deviate significantly from plans, while empowering team members to proceed with confidence when projects are running according to expectations. Manage by Exception represents a balanced approach that provides control without micromanagement, appropriate delegation with clear boundaries, and efficient use of management time and resources.
Manage by Exception in PRINCE2: Complete Guide
What is Manage by Exception?
Manage by Exception is one of the seven core principles of PRINCE2 methodology that establishes clear reporting lines and decision-making authorities at different levels of the project hierarchy. It creates a framework where management attention is focused only when deviations from the plan exceed predefined tolerance levels.
Why is Manage by Exception Important?
Manage by Exception is crucial because it:
• Enables efficient use of management time by focusing attention only on exceptional situations
• Creates clear delegation structures with defined tolerances
• Reduces micromanagement and excessive reporting
• Empowers team members to make decisions within their authority
• Provides early warning signs when projects begin to deviate from plans
• Streamlines decision-making processes
• Ensures appropriate escalation when needed
How Manage by Exception Works
The principle operates through several key mechanisms:
1. Tolerance Levels
Each management level establishes tolerance boundaries for six aspects:
• Time: Acceptable schedule deviations
• Cost: Permissible budget variations
• Quality: Acceptable quality criteria variations
• Scope: Allowable changes to product scope
• Risk: Acceptable risk exposure
• Benefits: Acceptable variation in expected benefits
2. Management Layers
Authority flows through four distinct layers:
• Corporate/Programme Management: Sets project tolerances
• Project Board: Sets stage tolerances
• Project Manager: Sets work package tolerances
• Team Manager: Works within work package tolerances
3. Exception Reporting
When a tolerance is forecast to be exceeded, an exception report is created and escalated to the next management level. This triggers an exception assessment and potentially an exception plan.
4. Exception Plans
When tolerances are exceeded, an exception plan replaces the current plan. This provides a recovery strategy to address the deviation.
Example in Practice
Imagine a software development project:
• Corporate sets project tolerance: ±10% on budget (£1M ± £100K)
• Project Board gives Project Manager stage tolerance: ±5% on stage budget
• Project Manager discovers development taking longer than expected
• If projected cost exceeds 5% tolerance but stays within 10%, Project Manager creates exception report
• Project Board reviews exception report and decides on action
• If exceeding project tolerance, Project Board escalates to Corporate
Exam Tips: Answering Questions on Manage by Exception
Key Concepts to Remember:
• Understand the six tolerance areas: time, cost, quality, scope, risk, benefits
• Know the four management layers and their responsibilities
• Recognize exception reporting and planning procedures
• Understand the difference between tolerance and specification
Common Question Types:
1. Scenario-based questions: Identifying whether an exception should be raised
Example: "A project is running 2 days behind schedule on a 30-day stage with a time tolerance of ±10%. Should the Project Manager raise an exception?"Answer approach: Calculate if 2 days exceeds 10% of 30 days (3 days). Since it's less than the tolerance, no exception is needed.
2. Management layer questions: Identifying appropriate actions at different management levels
Example: "Who sets stage tolerances?"Answer approach: Recall the management structure - Project Board sets stage tolerances.
3. Process questions: Understanding what happens when exceptions occur
Example: "What document should be created when a tolerance is forecast to be exceeded?"Answer approach: An exception report is the correct first document.
Exam Answer Strategies:
• Look for key terms like "tolerance", "exception", or "escalation" in questions
• When calculating tolerances, verify if it's a forecast or actual deviation
• Remember that exceptions are based on forecasts, not just current status
• Pay attention to which management level is responsible in the scenario
• Consider all six tolerance areas when analyzing a scenario
Tricky Areas:
• Distinguishing between stage and project tolerances
• Understanding when to create exception plans versus exception reports
• Recognizing the difference between management stages and technical stages
• Differentiating between tolerances and specifications
Remember that Manage by Exception supports effective governance while reducing unnecessary management overhead and reporting. The principle enables focused decision-making and creates an efficient escalation path when deviations occur.
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