Project management by exception allows managers to focus on intervening only when necessary to fix issues and mitigate risks. Otherwise, you should assume the project is running smoothly. Project management by exception is a key concept for a robust project risk management strategy.
Is project management by exception even possible?
Yes, it is. Not only is it possible, but it is also necessary to move your organization to the next level of effectiveness and efficiency and to remain competitive.
Here are the six areas you need to be able to manage your projects by exception successfully.
1. Project Management by Exception Metrics
First, you need to know what to watch. You need a set of project management KPIs that look at your projects comprehensively and provide critical information.
This means you need to watch both operational and financial metrics simultaneously. You need to see when delays are happening or when activities are backing up, but you also need to understand current cost metrics and estimated profitability.
You need to watch everything closely to make project management by exception work, so you know when and where you need to step in.
When is the last time you completed a project exactly on budget and exactly on time? Not everything is black and white. There is a natural variation that occurs in projects. You need to be able to account for this variation when you attempt to manage by exception.
That means you need to set thresholds. Create ranges for metrics from good to acceptable to not acceptable. Then, when a metric goes outside that normal range, you need to know.
For example, you likely build in slack into your schedule. With that, it may be okay if a purchase order for materials is delayed a day or two. However, once purchase order delays reach a certain point that threatens the on-time delivery of the project, you need to know about it immediately.
3. Constant Unbiased Monitoring
For project management by exception to work, you need to watch every part of every project at all times, looking for those deviations. Once those deviations occur, it’s critical to alert the right party with unbiased information.
Unfortunately, this is not something humans do well. If you have people constantly consolidating data, running reports, and looking for these issues, you are almost guaranteed to miss something. Manual monitoring of your projects is:
- Delayed – People cannot watch every part of every single project 24/7. There will be delays, especially if you are trying to consolidate data from multiple systems.
- Error-prone – People make mistakes when crunching the numbers. Sometimes, those mistakes are big.
- Biased – People naturally don’t want to deliver bad news, even if it is not their fault. The tendency is to hide issues, intentionally or not, essentially skirting the whole project management by exception method.
4. Project Organization Structure
You need to be able to alert the right people to different problems. If you are a decent sized organization running sizeable projects, it is likely you have lots of people working on a project. That may include a project manager, controller, resource manager, procurement officer, production coordinator, and many others.
- The project manager needs to know about schedule delays.
- The controller needs to know about eroding margins.
- The resource manager needs to know about resource conflicts.
- The procurement officer needs to know about delayed purchase orders.
- The production coordinator needs to know about material constraints.
If there is an issue, someone or something needs to tell the person who can fix the problem. You could rely on a person to do this manually, but then you are relying on a person to just relay information. A better approach is to use an automated project controls monitoring system.
Also, you don’t want to alert everyone to every issue. That is information overload. People would have trouble filtering out what is relevant to them. You need to tell the right person.
The way to manage this is with a Project Organization Structure (POS). The POS sets up the structure of the company and the stakeholders on each project. It creates a clear hierarchy of responsibility in each project. The POS enables you to alert the right people about issues relevant to them, in order to manage your projects by exception.
Download the Project Autopilot feature brief to lean more and discover project management by exception in reality.
5. Real-time Notifications
Once you have the metrics, thresholds, monitoring, and a POS in place, you need a way to notify people of deviations. Whether that is an email, phone call, dashboard, or a tap on the shoulder, you need to have some way to alert them to the situation.
We prefer a dashboard, because it gives you one place to look, a simple way to organize all the alerts, and a jumping off point to fixing the problem.
Whatever the method, it needs to be real time. You don’t want to wait around and let these issues fester. You need to let people know immediately about an issue they can help fix.
Some problems are worse than others. You need to be able to escalate issues to different levels of management based on the severity of the deviation.
For example, if you have a slight resource conflict on a task, a resource manager may be able to resolve it by shifting resources around. However, if the conflicts grow in number to a point where there are too many to resolve with existing resources, the COO may need to know about that to approve new hires or subcontracts to fill those gaps.
Therefore, with project management by exception, you need to be able to escalate issues when required. Sometimes, people with more authority need to intervene to solve the problem. The POS should give you the hierarchy to be able to do this.
Systemizing Project Management by Exception
Theoretically, you may be able to cover most of these six areas with just people and loads of spreadsheets. But if you can systemize it, you can automate it and achieve real management by exception. That means that your people aren’t wasting their time managing data and trying to find the problem. They are kept busy actually solving problems. People are best at thinking creatively to fix problems vs. just data mining to find them. A machine/system, on the other hand, can watch and alert very well.
To systemize and automate project management by exception, there is a lot that needs to happen of course. I won’t get into all of it here in this post. But I will give you the fundamental approach. The primary thing you need to do is integrate all your business processes and critical data into one system. This is typically handled in your ERP.
Most project businesses simply cannot accomplish this in their current set up. You may be using lots of different systems, applications, and spreadsheets to support all your business processes and generate the information you need. That is exactly what Project Business Automation (PBA) solves for you. PBA provides the integrated foundation that makes project management by exception attainable.
Download the Project Business Automation Blueprint to learn more about everything that a comprehensive system should cover for your business and how to manage your projects by exception.