Exceptions in PMI® and PRINCE2®

Exceptions in PMI® and PRINCE2®
In the realm of project management, there is no shortage of frameworks and methodologies designed to maintain control over a project’s schedule, budget, and quality. Two of the most widely recognized are PMI and PRINCE2. Although both aim to deliver successful project outcomes, they handle certain project challenges differently. A prime example is their treatment of “exceptions.”
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What is an exception in PRINCE2?
In PRINCE2, an exception is directly tied to the concept of tolerances. Tolerances represent the acceptable deviation from the approved plan in the following areas:
1.    Time
2.    Cost
3.    Quality
4.    Risk
5.    Scope
6.    Benefits
For instance, a project plan may state that the project should last 24 months but allows a tolerance of plus or minus two months. In practical terms, the project is still considered “on track” if it finishes anytime between 22 and 26 months.
However, an exception occurs if there is a clear forecast that the project will exceed these tolerances—either finishing sooner than 22 months or later than 26 months. This projected deviation outside the agreed-upon bounds triggers a set of actions designed to bring the project back under control or to re-authorize it under new parameters.
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Why is the word “forecast” important?
Forecasting is a critical element in PRINCE2 because it enables proactive decision-making. Imagine you’re only halfway through a project but have already spent 90% of your budget. Even though the budget might still be operational at that moment, it’s clear you’re on track to exceed (or breach) the permissible tolerance before project completion. At this juncture:
1.    It is forecasted that the budget tolerance will not hold.
2.    Consequently, the project manager must escalate the issue to the project board rather than waiting for the actual budget overspend to happen.
This use of forecasts ensures corrective action is planned early, avoiding last-minute crisis management. The concept underscores a key PRINCE2 principle: continued business justification—every stage of the project is reviewed for viability to ensure resources are spent on projects that still offer value.
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Escalation and “Managing by Exception” in PRINCE2
Escalation is intimately linked to the PRINCE2 principle of managing by exception. The idea is that a project manager is given clear limits or tolerances (for cost, time, quality, etc.) for a specific management stage. As long as the project remains within these tolerances, the project manager is free to operate without higher-level intervention, thus avoiding micromanagement.
How it works:
1.    Management Stages: PRINCE2 breaks the project into stages. At the beginning of each stage, the project board authorizes the project manager to spend a certain budget within a certain timeframe, adhering to specified tolerances.
2.    Monitoring: The project manager continuously tracks progress, cost usage, risks, and other performance indicators.
3.    Forecasting: If, during monitoring, it appears the current stage’s tolerances will be breached, the project manager raises an exception report to the project board.
4.    Decision: The project board may decide to amend the tolerances, adjust the plan, inject additional resources, or even terminate the project if business justification is no longer valid.
This approach liberates the project board from day-to-day decision-making and focuses their attention on high-level strategy and oversight. Managing by exception streamlines governance and clarifies when the project manager must seek direction from the board.
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Giving Tolerances: The Antidote to Micromanagement
By establishing clear tolerances, PRINCE2 averts the constant need for approval from the project board. Small overruns in costs or minor schedule slippages can be addressed directly by the project manager as they fall within the pre-agreed limits. The project board becomes involved only when these limits are at risk of being surpassed.
This arrangement offers three key benefits:
1.    Efficiency: Reduces unnecessary meetings and approvals.
2.    Empowerment: Enhances the project manager’s autonomy and accountability.
3.    Timely Control: Provides early warning signals that permit corrective actions before the situation becomes irreparable.
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What differs in PMI?
Unlike PRINCE2, PMI does not formally endorse the “managing by exception” principle. In many PMBOK® Guide-aligned environments:
1.    The project manager often has oversight of the entire project budget and timeline.
2.    If a forecast suggests costs or time will exceed the planned baseline, the project manager typically negotiates with the project sponsor (or key stakeholders) for additional resources or time.
3.    The degree of escalation varies widely depending on organizational policy, but there is no built-in, mandatory tolerance threshold concept as seen in PRINCE2.
This difference means that within a PMI framework, the sponsor or senior stakeholders could be involved more frequently because there are no predefined exception thresholds. While this can allow for a greater degree of flexibility and continuous adjustment, it may also mean more frequent check-ins, approvals, or negotiations—potentially leading to a risk of micromanagement if not well-managed.
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Summary: Choosing What Works for You
Both PRINCE2 and PMI aim to keep projects on track, but they employ different philosophies when it comes to handling significant deviations from plan:
•    PRINCE2 leverages defined tolerances and the principle of managing by exception to give the project manager autonomy until a forecast indicates those tolerances will be breached.
•    PMI typically relies on the project manager to manage the entire project baseline, consulting with the project sponsor when significant variations are detected and additional approvals or resources are needed.
The choice between the two often hinges on organizational culture, industry norms, and personal preferences. Projects in highly regulated or tightly controlled environments may benefit more from the structured “manage by exception” model of PRINCE2. Conversely, organizations with more fluid structures may prefer the flexibility of PMI’s approach.
Regardless of framework, effective risk management, consistent forecasting, and clear communication remain essential for any project’s success.

Image credit: Credit: JiaqiLi