Manage by Exception

Manage by Exception Principle in PRINCE2: A Comprehensive Guide

What is the Manage by Exception Principle?

The Manage by Exception principle is one of the seven fundamental principles in PRINCE2 methodology. It establishes a framework where project management layers have defined tolerances (time, cost, quality, scope, risk, and benefit) within which they can operate autonomously. Only when these tolerances are forecast to be exceeded does decision-making escalate to the next management layer.

Why is the Manage by Exception Principle Important?

This principle is crucial because it:
- Enables efficient use of senior management time
- Empowers team members with appropriate authority
- Maintains control while minimizing micromanagement
- Creates clear escalation paths when issues arise
- Focuses management attention on areas truly needing intervention
- Supports effective delegation throughout the project hierarchy

How the Manage by Exception Principle Works

1. Establishing Tolerances
Each management level sets tolerances for the level below regarding:
- Time: Acceptable schedule variations
- Cost: Permissible budget deviations
- Quality: Acceptable quality parameters
- Scope: Allowed changes to product requirements
- Risk: Risk exposure thresholds
- Benefits: Minimum acceptable benefits

2. Delegation Mechanism
The principle functions through a clear chain of delegation:
- Corporate/Programme Management sets tolerances for the Project Board
- Project Board sets tolerances for the Project Manager
- Project Manager sets tolerances for Team Managers

3. Exception Reporting
When a tolerance is forecast to be exceeded, an exception report is created and escalated to the next management tier for decision-making.

4. Exception Planning
Following an exception, a recovery plan (Exception Plan) is typically created to address the issue.

Real-World Implementation Example

The Project Board approves a work package with a budget of £50,000 and a ±10% cost tolerance. The Project Manager can therefore manage costs between £45,000 and £55,000. If projections show costs will reach £56,000, the Project Manager must escalate this as an exception to the Project Board for a decision.

Exam Tips: Answering Questions on Manage by Exception

1. Recognize Key Terminology
Look for terms like "tolerances," "escalation," "exception report," and "management layers" in questions about this principle.

2. Understand the Hierarchy
Questions often test your understanding of which management level sets tolerances for which other level. Remember the chain: Corporate/Programme → Project Board → Project Manager → Team Manager.

3. Know the Six Tolerance Types
Be prepared to identify all six types of tolerances (time, cost, quality, scope, risk, benefits) and give examples of each.

4. Connect to Other PRINCE2 Elements
Be able to explain how Manage by Exception relates to:
- The Organization theme (management levels)
- Progress theme (monitoring and reporting)
- Plans theme (creating baselines for measurement)
- Business Case theme (benefit tolerances)

5. Practical Application Questions
Expect scenario-based questions asking you to determine:
- Whether an exception should be raised
- Who should be notified of an exception
- What actions follow an exception

6. Common Exam Traps
Watch for questions that:
- Confuse tolerances with specifications
- Suggest micromanagement as a benefit
- Imply all issues need senior management attention
- Propose reporting routinely instead of by exception

Remember that Manage by Exception is about enabling decision-making at the right level while maintaining appropriate control through clearly defined parameters.