When you’ve got a lot on, and you want to avoid information overload, you need a good way of communicating project status without overwhelming stakeholders. Management by exception could be the technique you are looking for.
What is management by exception?
Management by exception is a way of focusing on making progress on a project and only using control and escalation actions when they are needed.
In other words, the project team gets on with the business of running the project, and as long as all is going according to the agreed plan, there’s no need to bog down customers or management with frequent information dumps.
They trust that if there is something that requires their input, you will bring it to their attention.
EVM and management by exception
Earned value management (EVM) is a tool that helps organizations do exactly that. It’s a way of getting objective data on project performance, which removes any ‘gut feel’ or emotion that the project team might consciously or unconsciously be projecting onto status reports.
If you already use EVM for your projects, you have a head start on implementing this approach to streamlining project controls. EVM allows you to set acceptable performance levels for the project and each of the tasks. The performance measures, like variances and indices, provide a framework for project performance tracking. The EVM metrics, along with the work breakdown structure for the project, give the team everything they need to create an environment for effective project controls. You’ll need to have an EVM expert on the team to help run the system.
How it works
Set your variances and appropriate thresholds. These are normally set at the control account level, as that’s the place where tasks are planned and controlled using EVM. Make sure the variances and thresholds are clear and understood by all. It should be obvious when a threshold is exceeded so there needs to be no ambiguity in how performance is tracked and measured against the baseline and tolerances.
Then do the work of the project.
If the threshold is breached, invoke the appropriate control actions and take the necessary steps to bring the project back into control.
However, it’s worth saying that good project management practice is to act on trends as soon as you see them – another advantage of using EVM is that you’ll get regular, reliable data to help you identify trending performance. You should not wait until a threshold is breached before doing anything about it. The only difference here is that you do not need to report every small change in project performance, because that would get overwhelming for stakeholders and could easily be something you can correct within the project team itself.
Variance analysis training will help your team understand how to set everything up so that the whole process works smoothly.
Do you need to report at all?
You might be asking: if my project is going according to plan, do I need to report at all? An extreme interpretation of management by exception would say that you do not. You only have to flag something to management that falls outside of the expected parameters for progress. But in our experience, even managers who are very busy and who understand the concept of management by exception prefer to receive some kind of status report on a monthly basis as a minimum. This doesn’t have to be long, and in fact it would be advantageous to include a brief executive summary at the top stating that everything is progressing as expected, along with the EVM measures as evidence.
The rest of the detail is good practice to document, but does not need to be read in detail by the busy stakeholder if they are happy with the headlines.
Reporting variances
A variance analysis report can be used to spotlight any issues where project performance has deviated from what was expected. To create a report, you’re going to have to track the variances on an ongoing basis. Use your earned value systems for that, and automate the report production to save you more time. You’ll also need to fully understand how to interpret your EVM data so you can make the decision to invoke control actions and report by exception as necessary.
A variance report for stakeholders is a way of deep-diving into planned value, earned value and actual cost, along with cost variance and schedule variance. It’s a document that lays out all the figures so the indices are clear.
Any report should also include some narrative about why there are variances. Talk about the problem and what caused it. Explain what the impact of this performance issue is on the control account and the project overall: some work packages may have an impact on the critical path; others might not result in a substantive impact when all things are considered. Some issues might impact resources, or project risk levels, or something else. Include this in your report and if an area isn’t affected by this variance, then say that too.
Finally, include some information about the expected return to performing within an acceptable level. This is your corrective action plan and should include a date for when the project will be ‘recovered’. For more on this, read our guide to writing a good variance analysis.
You might have to work through those steps twice: once for your schedule variance and once for your cost variance. It’s common for both variances to be out of step at the same time because often issues that create schedule delays have an impact on project finances as well, and vice versa.
Management by exception is a good general approach to take for projects using earned value as a way of tracking project performance. It reduces the overall burden of communication and frees up the team to focus on the value-added work of delivering the project. It provides sensible, agreed boundaries that create a framework for control on the project. Your stakeholders can be confident that the team is doing the work and that the project is making progress. They also can trust the framework that ensures they get relevant information in a timely fashion when they need it.
EVM works when it’s set up effectively to support the project team, and management by exception relies on that. If you need a hand ensuring your earned value systems are working as efficiently as possible, we can help with that.