Management by exception is a technique that is often touted to reduce the time burden on senior management within an organisation who are often members of project, programme and portfolio boards but rarely adopted. Specifically, it is a technique by which variances from a portfolio, program, project or team plan that exceed a pre-set control limit (e.g. +/- 10%) are escalated to the next highest governance level for decision making.
As such, the integrated portfolio, programme and project boards should be clearly defined and operate with distinct accountabilities and demarcation for directing, managing and delivering the portfolio at each management level. We do this by establishing and communicating controls so that if set tolerances for the performance criteria of cost, time, quality (criteria), scope, risk and benefits are forecast to exceed, the potential risk threat (using an issue report) is referred up to the next management layer for a decision on how best to proceed next.
It’s about giving those accountable at a portfolio, programme and project board layer an opportunity to re-assess continued business justification of the initiative’s ability to deliver agreed strategic objectives against the performance criteria. A crucial part is the business need to establish a robust change control and assurance mechanism so that each management layer can be confident that the process is effective in terms of informed and timely decision making.
Autonomy, control and responsibility nexus
It’s important to recognise that there are two parts to implementing the management of exception technique. The first is the practice of the board meeting by exception which many people will find difficult to implement. That is, people will need to rethink the autonomy, control and responsibility nexus that is central to good governance. The second is reporting by exception and focusing only on those programmes, projects and other work that require a decision.
However, this presumes that a culture of transparency, trust and single source of reporting occurs where no ‘watermelon’ projects exist i.e. seemingly green on the outside but red or yellow on the inside. The management by exception technique can provide for very efficient use of senior management time as it reduces their time burden without relinquishing their control (scrutiny and oversight) by ensuring decisions are made at the right level in the organisation. It’s fundamentally about having the right people in the right place with the right experience (capabilities and attitudes) in the right roles, in the right numbers and at the right time.
Delegated decision making
This only occurs when the portfolio, programme or project owner delegates authority (but not the overall accountability for the delivery outcomes) from one management level of the plan (from the portfolio, programme, project and team) to the next by setting and communicating clear tolerances for the respective level of the plan for cost, time, quality (criteria), risk, scope and benefits. Notwithstanding, it’s somewhat ubiquitous in many organisations for a portfolio, programme or project board to meet regularly on a monthly basis. This is despite potentially not needing to convene to respond to a potential risk threat and make an informed decision on an exception and how best to proceed. This is typically a symptom that appropriate tolerances are either not in place and/or not being followed. As such, why do these integrated boards, composed typically of senior management (who have little time to spend on the day-to-day management on any initiative) consciously decide to invest more time and control?
For example, a highlight report should act as a single source of truth that provides the project board and other governance authorities within the organisation with the required information to monitor and scrutinise performance and progress. It's an opportunity for the project manager to “highlight” to the project board any potential risk threats to the stage or project plan where a decision on how to proceed is required. Where a stage plan is forecast to exceed agreed tolerances, then the project manager produces an exception report. It's prepared to not only inform the project board of the risk context but also to offer viable options and recommendations for a viable way forward to proceed. When the chosen option to resolve an issue is likely to cause an exception, the issue report and exception report is escalated to the next highest governance board for decision making.
In summation, management by exception technique is effectively about empowering people to self-organise and stay in control. It requires clear and realistic tolerances to exist so the project manager role can effectively focus on the day-to-day management of a project without the constant need to seek project board decisions on how to proceed.
Senior management who are time burdened will only achieve absolute control by relinquishing the day-to-day management of the portfolio, programme or project by setting clear and realistic tolerances at each level to enable the management by exception technique. In its absence, boards will continue to occur on a monthly basis where discussion is had but no decision on how to proceed from a variation is required.
- AXELOS Global Best Practice (2009). Managing Successful Projects with PRINCE2. The Stationery Office, United Kingdom.
- Nedelsky, J. (2012). Law's Relations: A Relational Theory of Self, Autonomy, and Law. Oxford Scholarship Online. (Available at https://oxford.universitypressscholarship.com/view/10.1093/acprof:oso/9780195147964.001.0001/acprof-9780195147964-chapter-8)
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