The Project Charter PDF

2 THE PROJECT CHARTER In waterfall project management, projects go through a sequential process beginning with the initiation stage. The creation of a project charter, or better still, the chartering of a project is the objective of the initiation stage. But what is a project charter? The word chart...

2 THE PROJECT CHARTER In waterfall project management, projects go through a sequential process beginning with the initiation stage. The creation of a project charter, or better still, the chartering of a project is the objective of the initiation stage. But what is a project charter? The word charter means authorized, licensed, approved, certified or accredited. A chartered accountant is a certified accountant; a chartered institution is an accredited institution and a royal charter grants power, approval or license to an individual or corporate body to perform certain actions. PMI defines the “Develop Project Charter” process as the process of developing a document that formally authorized the existence of a project and provides the project manager with the authority to apply organizational resources to project activities. What then is a project charter? Three things to remember: A project charter is a document that formally authorizes a project, defines the project and confers authority and power on the project manager to command and control resources. A project charter is a summary document encapsulating the client's vision and constraints. It serves as the project's compass, providing direction and setting boundaries. Without a charter, a project lacks clear objectives, leading to increased time, money, and resource wastage.  The Genesis of Projects  Every project starts as an idea: to create a new product, modify a service, solve a problem, or develop a strategy. The decision to pursue or abandon an idea depends on its alignment with strategic objectives. Many project ideas fail to progress, often mentioned casually and quickly forgotten. These discussions frequently occur within organizations but rarely advance. However, when an organization prepares a project charter, the idea gains a higher level of seriousness and a greater chance of success. 1|Page The project charter signifies a commitment, involving key stakeholders whose approval authenticates the decision. This process is analogous to a romantic relationship where many relationships end quickly, but a decision to marry elevates the commitment, increasing the relationship's chances of success. Both scenarios involve moving to a higher level of seriousness and aligning with long-term goals. Project ideas are not confined to the business environment; they can be conceived anywhere. Regardless of where the idea originates, we return to the business table to brainstorm the variables.  The Initiating Process  The initiating process involves various activities required to start a project, culminating in the creation of the project charter. Although the charter may seem like a simple document, it is powerful and incorporates inputs from multiple sources and efforts. Initiating a project is not just clerical tasks; it’s about facilitating relevant engagements, researching vital information and authorizing the project to move to the next stage.  The Business Need  A project charter references the business reason(s) for which a project is started and serves as the heartbeat of the project. A project may be started because there is a strong market demand for it, a new regulation, a strategic opportunity, competition or as a result of technological advancement. The team keeps validating this business need throughout the project life cycle.  Project Feasibility and Business Case  Establishing a project's feasibility is crucial to its success. A feasibility study is conducted to determine how realistic project assumptions are and the likelihood of achieving project goals. Technical feasibility assesses whether the project idea can be 2|Page realized, considering existing constraints, available resources, technology, and technical expertise. For instance, virtual reality concepts like the metaverse began as mere ideas. Technical feasibility explores the potential of such inventions by asking, "Can it be done?" Schedule feasibility explores if the project can be done in time enough to exploit the market opportunity. Some market opportunities, like the opportunity in Qatar as a result of the world cup, are time-bound. If the project can’t be completed early enough to tap into the opportunity, what is the essence? Business or economic feasibility explores the potential of the project from the profit-making standpoint. The business feasibility creates the business case which justifies the investment by establishing the returns on investment. The business case combines the business need with a cost-benefit analysis using a wide range of cost analysis tools and scoring models to make a case for the project.  Defining the Business Value & Business Objectives  The charter defines the business value to be derived from the project in a way that is measurable and quantifiable and determines its alignment to the organization’s strategic objectives. It gives stakeholders a clear sense of purpose, mission and direction. Clarity prevents wastage because every work effort is qualified into alignment of stated goals. Elements that fall outside the boundaries of the project charter or do not align with the stated business objectives are declared wastage and disqualified.  Defining the Project Statement of Work  The statement of work is a narrative description of the deliverable to be produced and serves as a reference point for the project’s further development as shown in this example: “This project is to create a mobile application that enables customers to connect to their bank account.” 3|Page   Project Phases and Milestones  A project may be divided into phases, with work performed for each phase. The completion of each phase results in a major deliverable. PMI defines a project phase as a collection of logically related project activities that culminates in the completion of one or more deliverables.1 Breaking down work into different granular sizes, such as phases, work packages, activities, and tasks, is a common practice in project management. This approach facilitates ease of management and control and addresses the technical need to isolate and group certain tasks together. Project phases are typically considered during the initial stages from various perspectives. For example, a feasibility study might be classified as a preliminary phase, followed by phases like design, prototyping, and development. A deliverable can also be divided into multiple phases with work pursued on parallel or sequential tracks. Several reasons account for dividing projects into phases. The most common reason is its size and complexity. When a project is too large or complex to execute in a single phase, dividing it into phases allows for better management and control, and minimizes the occurrence of defects. When the client wants to realize business value quickly from initial milestone releases, phasing can be used to introduce the benefits of incremental delivery. Funding constraints can also lead to phasing, allowing available funds to be committed to completing one phase for deployment before the next phase is engaged. A project with multi-faceted components requiring separate skill-sets can result in phasing and the different skill-sets committed to each component of work. A project can be divided into phases in order to measure risk, gain early feedback and gather lessons on initial phases before committing to subsequent phases or undertaking necessary corrective or preventive actions. 1 Project Management Institute. 2017. A Guide to the Project Management Body of Knowledge (PMBOK Guide). 6th ed. Newton Square, PA: Project Management Institute. 4|Page The end of a phase may be referred to as a phase exit, milestone, decision gate, kill point, or phase gate. This point allows the team to assess their performance and make informed decisions for subsequent phases. Phases can be completed sequentially, overlap, or occur simultaneously in a concurrent or parallel relationship. Iterative phases are common in agile or iterative life cycles, where the same work is repeated across multiple phases until value is proven.  Determining Implementation/Procurement Strategy  As part of the chartering process, the entity must decide whether to undertake the project internally or outsource it. This decision depends on factors such as infrastructure, team, experience, technical know-how, licenses, time, and attention. If the project is outsourced, it falls under procurements. In some cases, a mix approach or joint venture may be used. When outsourcing, a contract document separate from the project charter is written to legally bind the requesting and performing organizations. Memorandums of Understanding (MoU) may be used for joint ventures. If the project is done internally, no contract is needed.  Defining the Project  Defining the project is a key aspect of project initiation. It communicates the intentions, expectations, and objectives of the initiating entity, providing a high-level description of the project. "High-level" means it offers a summary or overview, not detailed or conclusive. Elements in the project charter are based on assumptions and are subject to change. For instance, cost provisions reflect estimated project costs, which are assumptions. Assumptions are factors considered true without proof, but reality confirms or replaces them. The project charter also communicates the initiating entity's constraints. For example, if the charter states, "this project is to complete by x time to be used for x purpose," they are inherently communicating their schedule constraints. The project charter is built on assumptions and constraints. 5|Page Some entities use a terms of reference (TOR) document instead. Both TOR and project charters define the boundaries of an initiative from the outset. However, TOR has broader applications and can be used for projects, programs, government negotiations, public-private partnerships, joint ventures, or any similar endeavor involving collaboration towards a common goal. A project charter is a TOR specific to a project, establishing its fundamental bearing. It’s essential for a new project manager to familiarize herself with the charter to understand the project's core direction.  Performance Domains  To provide clarity, project objectives are defined based on managerial components that capture stakeholder expectations. Can you identify these components on your own? Consider the stages of a project life cycle: initiation, planning, execution, and closure. But which areas need to be managed throughout these stages? Let me illustrate with a familiar example. Pay attention to the words in brackets. The festive occasion is almost due. You (stakeholder) pick up your fabric material (resources) and head for the tailor (stakeholder, procurement) to sew your dress (scope). You start talking (communication) about the style (scope). You show him a sample (scope). You tell him when you need it completed (schedule) and ask for how much it will cost you (cost). He mentions that there are other materials (resources) that need to be purchased (procurements) to complete the work (scope). About the complementary fabric, he recommends you go for Type C which does not fade (quality) and explains to you the differences in pricing (cost). He assures you that if there are no erratic power supply (risk) and the usual delay (risk) from the guys who do the embroidery on the other side of the road (stakeholder, procurement) he will be able to put everything together (integration) and deliver your work on time (schedule). 6|Page  Stakeholders Communications Scope Schedule Cost Quality Resources Procurements Risk Integration  Defining the project often begins with a high-level scope description, which provides a summary description of the deliverable to be produced with a mention of key deliverables to be achieved. Consider the following: This project is to put up a 6-bedroom facility, a swimming pool and a garden. This project is to create an 80,000-capacity stadium, 1,000 washrooms and 50 ticketing offices. This project is to create a mobile application that enables customers to connect to their bank accounts. This is a movie project that communicates the adverse effect of child marriage. 7|Page As you can see, none of these definitions delve into details. This is because the initiating stage is not meant for elaboration; it focuses on high-level concepts. The objective is to establish the idea and determine the project boundaries. Details come later – during the planning stage.  The high-level schedule objective will also be communicated. This project is expected to be completed by May 2025.  The high-level cost allocation will also be stated. 80 million USD has been allocated for the completion of this project. Other high-level elements that may also be stated include but not limited to:  Quality expectations. Communicating the project's internal and external quality standards provides a benchmark for the project team to develop an effective quality management system. This ensures alignment with quality policies and results in deliverables that meet customer or end-user expectations.  Resources available for project work and associated constraints. Projects typically use a mix of organizational and external resources to achieve objectives. Available organizational resources, such as personnel, machinery, equipment, and materials, are clarified in the project charter, including their availability and conditions of use. This helps the project team identify and secure any necessary external resources to fill resource gaps.  Channels of communication. In due time, the team will create a communications management plan using available organizational assets, existing communication channels, and policies to manage stakeholder interactions. The project charter will reference the organization's preferred communication methods, channels, resources, and infrastructure. It will also outline how the project manager should communicate with project owners, sponsors, and key stakeholders. 8|Page  High-level risks. It is common for project initiators to identify risks in the early stages that could disrupt the team’s pursuit of project objectives. These concerns should be documented under overall project risks in the project charter, giving the implementation team a head start in risk planning. Initial risk assessments are particularly crucial for a new project, particularly those that are novel, complex, or require the use of new technologies, and should be included in the project charter. Assumptions and constraints, which introduce various risks, should also be documented. Additionally, project initiators should proactively conduct a high-level risk analysis to anticipate potential industry, organizational, portfolio, program, or project-level threats. This analysis helps measure overall project risk against the anticipated reward.  Procurements requirements. Organizations typically have procurement policies that need to be communicated to the project team. In some cases, a procurement department handles the project's procurement needs, a structure known as centralized contracting. Additionally, some project components may need to be outsourced to third parties. These requirements and constraints should be documented in the project charter.  Identification of key stakeholders The project charter also references key stakeholders on the project. This is the reason we say the Stakeholder Register starts its life as an offshoot of the project charter. Some key stakeholders include: - The customer/requesting entity (who is asking for the deliverable) - The end-user - The sponsor (who is funding or leading fundraising efforts) - The performing entity (who will implement the work) - The project manager (who will lead project efforts to create the deliverable) - Who will inspect or sign off (could be an external consultant) - Regulatory authorities - Contractors and sub-contractors. 9|Page   Determining Non-negotiables; Establishing Locked-in Constraints & Trade-off Analysis  Trade-off analysis is a vital component of impact analysis that is performed to settle conflicting demands or disagreements among project constraints. It is conducted when two or more objectives cannot happen together as initially expected. In trade-off analysis, one objective may be sacrificed entirely for another, one may be reduced or adjusted to allow another to have full effect, or both may be compromised to some extent to achieve a balance. The implementation team typically performs trade-off analysis when they encounter realities that prevent certain elements from occurring as expected in the charter. A crucial factor that underlies the performance of trade-off analysis is knowledge of what the client allows to be changed or adjusted and what can’t be changed or touched at all, also called non-negotiables or locked-in constraints. These non-negotiables must be communicated through the charter. This helps the team know their flexibilities when changes are needed. Let’s take a look at an example that calls for trade-off analysis. The client wants a 6-bedroom house at the cost of $120,000 USD in 4-months. After detailed planning by the implementation team, only the following is feasible: A. 6-bedroom house at the cost of $170,000 in 4-months B. 6-bedroom house at the cost of $150,000 in 7-months C. 4-bedroom house at the cost of $130,000 in 4-months D. 4-bedroom house at the cost of $120,000 in 6-months In Option A, the scope and time objectives could be met but an upward adjustment in cost will have to be accepted. In Option B, only the scope objective could be met but different degrees of adjustment to cost and time will have to be accepted. In Option C, only the time objective could be met but adjustment to the scope and cost will have to be accepted. In Option D, only the cost objective could be met but adjustment to the scope and time will have to be accepted. Now, let’s see what happens in trade-off analysis. 10 | P a g e  SCOPE SCHEDULE COST RESOURCES PROCUREMENTS QUALITY In the diagram above, only scope has been established as a locked-in constraint or non-negotiable. This means that in any situation of conflict where scope is involved, scope cannot change; trade-off can only happen on other constraints with whom scope is involved. It also means that the customer is open to change on the other constraints. Going back to our scenario, only options A and B are workable because options C and D will change the scope. As we can see from the diagram, cost and schedule are open which means that the customer is open for adjustment on the initially-proposed $120,000, 4-months and other project objectives that are open. In another scenario where scope and cost are both locked-in, it would mean that the objective of scope (6- bedroom) and of time ($120,000) cannot be touched and trade-offs could only happen on other constraints such as schedule, quality, resources or procurements. Do you get it? Now, answer the question below: Q. If Cost is the only locked-in constraint, which option will be feasible to the client? A, B, C or D? Trade-off analyses are conducted across several scenarios in order to determine the best way forward in situations of conflict. The results from these impact analyses allow decision-makers to do so with the necessary facts and a wide range of options. There are no easy decisions in situations that call for these analyses simply because each portion holds some benefits to the project. 11 | P a g e   Assigning a Project Manager  The most important aspect of a project charter to a project manager, perhaps, is the fact that her legitimacy as project lead is established by the charter. Every project requires that leadership in the person of a project manager who leads the team to create the project objectives. The project manager is assigned during the initiation stage. Initially, full authority resides with the initiating entity, but once the charter is signed and transferred to the performing entity, power is effectively transferred to the project manager, more like a power of attorney,2 allowing her to lead the project. However, the project manager operates within defined tolerance levels. The authority granted to a project manager is crucial for effective leadership and decision-making. Some project managers I have encountered grumble about their authorities being stifled in a situation of not being in control at all – appearing more like a decoy. It happens. A project manager is ultimately responsible and accountable for the success of the project. That demand on her is connected to her ability to make decisions. How do you demand accountability from a fellow who is not in charge?  Establishing Project Governance  For every project, a Change Control Board (also known as the Project Steering Committee) is established by the initiating entity or sponsor to oversee the project's affairs and manage issues beyond the project manager's authority. The project manager operates within defined tolerance levels, and any issue exceeding these limits must be escalated to this board for resolution. We will explore the structure and functions of this board in detail under change management. For now, it is sufficient to note that this board may be constituted at this stage. 2A power of attorney is a legal authorization for a designated person to represent or act on behalf of another to make decisions and to direct affairs. 12 | P a g e   Obtaining Key Signatures  A project needs support, commitment, or buy-in from the entity’s senior members, whose signatures on the charter authenticate the project. The chartering process ensures that the project is bona fide, formal, and widely supported. The extent to which the project is connected to business value significantly influences the level of commitment these key stakeholders invest in the project.  Authorizing the Project  Once all the elements are compiled into the project charter, the project is ready for final authorization. Typically, the sponsor issues and authorizes the project.  Who performs project initiation; who prepares the project charter?  The question of who prepares the project charter often arises. It's important to understand that the creation of a project charter is not the responsibility of a single individual due to the extensive effort involved—from feasibility studies and business case creation to agreement documents that bring on the performing organization. However, the project charter is ultimately the work of the initiating entity, not the project manager. It typically starts before the performing entity is engaged, where the project manager emanates from. The initiating entity (the customer, requesting organization, or sponsor) prepares the charter and hands it over to the project manager and the performing organization, who then carry the project into the planning stage. The project charter serves as the business or customer communicating their intentions to the project manager and the 13 | P a g e performing organization. As an implementer, you only learn about the project once you are informed through the charter. In practice, however, some entities may find the creation of a project charter daunting and might involve the performing organization and their project manager early to assist with its creation. This approach benefits the project manager by making them an active participant in the project's initiation, attending all ideation stage meetings. This involvement helps the project manager gain early insights into the project's purpose and the motivations driving key stakeholder support. Although a project manager may lead efforts to prepare the project charter, it still requires the sponsor's signature to authorize the project.  Assumption Log  A secondary document that is created alongside a project charter is the assumption log. An assumption is an untested or unproven factor upon which high-level plans are made. Project management allows for a frontload of assumptions during project initiation to serve as a starting point in order to facilitate progress. For example, during initiation, project management allows us to “assume” how much the project will cost based on broad parameters without having to verify every single factor that contributes to project cost. As we progress through the stages, these assumptions are proven and validated, the margins of error are reduced, and project documents are updated (progressive elaboration) to reflect changes made. The assumption log is started in initiation to log all assumptions throughout the project. This helps the team regularly review and track the validation of assumptions. Unverified or incorrect assumptions pose risks to the project, so the assumption log feeds into risk management. 14 | P a g e