The project manager has only two choices – to hear the bad news from customer or from the internal team. It’s always better to hear the bad news internally rather than from customers. Too often, associates are reluctant to raise bad news(risks, issues, constraints etc) for various reasons – due to a perception that it may poorly reflect on them, it may offend someone, personal reluctance to share bad news and cultural issues among others. But, if your team is not raising these issues upfront you will NOT have a chance to proactively address them. If you hear the bad news from the customer first, what this means is you are NOT on top of things, the team is not transparent and not working as a cohesive unit. This indicates the breakdown of the governance. And if this happens couple of times repeatedly the customer will read it as a trend and will naturally doubt the capability of the project manager, the team and the organization’s governance maturity.
As a project manager, have you created a conducive team culture wherein people are forthcoming with bad news?. Are you regularly discussing, updating and tracking the risks/issues with your team? Is your team trained and expected to proactively raising the risks, issues and constraints upfront with you?
Always prefer internal escalations over external escalations. So, the next time your team raises a bad news please encourage them and discuss the same with them. May be buy them a drink or two.