Management by Exception: What is Your Data Telling You?
With the enormous amount of data used to manage large (and even small) projects, it can be difficult to see what is truly driving performance. Most of us are data rich yet knowledge poor much of the time.
So today we’re talking about Management by Exception and Key Performance Indicators (KPIs) – and the influence they have over the success or failure of your project.
What is Management by Exception?
Management by Exception is the practice of investigating, resolving, and handling occurrences using skilled people, processes software tools. When you get down to the nitty gritty, Management by Exception means focusing only on significant deviations, or things that will have a major impact on your project’s performance. The practice of Management by Exception requires the use of variance analysis to understand when you’ve “tripped” certain thresholds as well as to better understand what is truly important to your project.
One of the main advantages of Management by Exception is that issues are identified rapidly. This frees up project managers to use their time and energy more efficiently on matters that are truly important. In today’s demanding environment, project managers need to work less on generating broad statistics and reviewing minute data that’s not important, and instead focus on critical decision-making and delegating that decision making down to project team members. The end result is project managers that make fewer decisions, and subordinates that have more responsibility – effectively increasing overall team motivation.
Establishing Key Performance Indicators
Effective project management requires the accurate monitoring of several key data points and types throughout the lifecycle of a particular project or program, otherwise known as Key Performance Indicators (KPIs). KPIs need to be observed and presented in a fashion that makes their interpretation easy to discern. In addition to the project manager, project team members, stakeholders and the project sponsor all need to be able to get a sense of project progress in a simple and straightforward fashion. Inundating them with complex jargon or difficult to read data sets will lead to confusion. As such, the best strategy for Management by Exception to identify and leverage a few pertinent KPIs that will properly convey information in a simple yet effective manner to anyone wishing to interpret current project status and progress.
KPIs provide a window not only into the current status of the project or its past performance, but also serve as a means to detect future problems (i.e. looking through the windshield as well as the rear view mirror). This ability to spot a potential problem manifesting – whether that be a schedule slippage, a cost overrun, or something else – allows project teams to address the situation ahead of time and take steps to mitigate it accordingly. Different KPIs can yield different insights into the project as a whole, allowing for several views for the project manager as well as the team.
Implementing Management by Exception
Generating KPIs and delivering that data to the right employee for regular exception review has been challenging in the past. Most business practices require employees to be proactive, using standard Business Intelligence (BI) tools in the analysis of data. If employees aren’t proactive, then data isn’t reviewed.
Ideally, KPI generation is automatic, and information is delivered on a set schedule, repetitively, to support a Management by Exception strategy. Additionally, purpose-built tools need to exist for deeper analysis of anomalies. These purpose-built tools need to deliver the expected results quickly and without the need for extensive domain or technology expertise. It doesn’t matter what industry you are in. You can be in Manufacturing, Pharmaceutical, Oil and Gas, or Aerospace and Defense and the answer is the same – automated report generation, report delivery, and long-term report management is the best solution for implementing a Management by Exception strategy.
Management by Exception in Practice
During a recent webcast, Deltek’s director of product marketing for Project & Portfolio Management went into much greater detail about the theory behind Management by Exception and the tools you need to support it. To view the full presentation, click here.
Are you using Management by Exception at your organization?
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