The approval of a charter is the birth of the Project. In this article from the Master in Project Management Blog we explain the why, who and how to create a project charter.
Table of contents
- 1 What is the project charter?
- 2 Structure to make a project charter
- 2.1 Name of the Project
- 2.2 Business Need, Purpose and Justification of the Project
- 2.3 High level requirements
- 2.4 The high-level description and its limits, assumptions and restrictions of the project
- 2.5 High-Level Project Risks
- 2.6 Project Milestone Schedule Summary
- 2.7 Project Budget Summary
- 2.8 Measurable project objectives and associated success criteria
- 2.9 List of Project Stakeholders
- 2.10 Project Approval Requirements
- 2.11 Assigned Project Manager
- 2.12 Name and level of authority of the sponsor and those authorizing the project charter
- 2.13 Distribution list of the project’s charter
- 2.14 Project Executive Summary
- 2.15 Annexes
- 3 Conclusions on the project charter
What is the project charter?
The project charter is the document issued by the project sponsor authorizing the existence of the project. The document provides the project manager with the necessary authority to initiate the project
A preliminary consideration: directing a project is something progressive. As the Project progresses, everything becomes more nuanced, polished and refined in greater detail. This concept is fundamental to be able to correctly attack the Project’s charter.
We’re not looking for the detail here: The Project Charter is the first document to be generated, it is preliminary and high level. We will have time to define everything in detail, but that is not the intention now. Project Management consists of doing what is valuable at all times.
What the project charter is intended to achieve: First of all, it is intended to avoid misunderstandings. What is not written down, what is not recorded in the project’s charter, leads to misunderstandings throughout the life cycle of the project.
We seek clarity and transparency: The project charter is based on a concept of clarity, transparency and planning among all those involved in the project.
This act covers the need to have a formal document that:
- Authorize the start of the Project.
- Give the Project Director the authority to manage it.
- Grant the authority to have adequate resources to direct and execute the Project.
The project charter is a document that is NOT made with the project perspective. It is done with the perspective of the level of management of the company.
Who creates the charter of the Project: It is created by the company executing the project. The project manager may or may not intervene, but is advised to do so.
There are times when the Project Manager does not know how to launch a project. We see it very often in our daily work as Project Manager trainers.
The company’s senior managers often do not know anything about projects. They are only concerned about the outcome of these projects. It also happens that project manager does not understand the needs of the board, does not understand what is the high level. He or she focuses only on his or her project, does not realize that there are very important things for companies that are above this project.
The project charter helps to bring the company’s director and the company’s high level closer together. In other words, the act is the link between these two worlds.
The Project Charter is a bridge document that links the directive level with the project level. Be careful here because we have detected very technical reports in some students of the Master in Project Management. It is a common mistake that at the beginning the students of the master’s degree reflect very technical subjects in the charter of the Project. These details are of no interest to senior management. Hence we insist, the charter are a high-level document.
The executive level must understand that in order for the project manager to achieve the objectives pursued, the order he receives must be:
- Must be accurate.
- A limited scope.
- With a limited time frame.
- With defined resources.
- A good understanding of the environment surrounding the project and the company.
Who chooses the Project Manager. The assignment of the SOW, the business case and the agreement comes to the Project Manager through the Project Sponsor. The company chooses the Project Sponsor and the Sponsor chooses the Project Manager.
A bad launch of the Project charter can be the beginning of a disastrous Project. Can create stress between the project contractor and the project manager. There is no starting point for the Project to adjust its progress. When this happens there is no project and the work is chaotic. There will be a waste of resources. Naturally, trust between the organizational levels of the project fades.
If we understand the project management processes and the appropriate methodology we will not care about the type of project or the sector. We will be able to function as project managers in different markets, in different areas. With more experience we will no longer have any problems in making project management manuals, getting involved in project management offices (PMO), etc. Work hard and lose your fear.
Structure to make a project charter
In this section we present the structure that you must develop when you make a project charter. In the following points we will develop in detail each element.
At the beginning of the Project we identify the needs of the Project and the requirements necessary to execute it. A correct start of the Project is essential for us to be able to execute a proper launch.
The content of the project charter is not always the same. This structure may vary depending on the typology of the Project, the Project Sponsor, APOs and a number of other factors that would be lengthy to list.
The recommended structure of the project charter is:
- Name of the project.
- Business need, purpose and justification of the project.
- Project background.
- Business need.
- Project objectives and justification.
- High level requirements.
- The high-level description and its limits, assumptions and restrictions of the project.
- High-level risks.
- Summary of the project milestone schedule.
- Budget summary.
- Measurable project objectives and associated success criteria.
- List of stakeholders.
- Project approval requirements.
- Assigned project manager, his/her responsibility and level of authority.
- Name and level of authority of the sponsor and of those who authorize the project’s charter.
- Distribution list of the articles of incorporation.
- Executive summary of the project.
Name of the Project
The Project has a purpose, a specific name and a specific location.
A specific purpose. The name of the project is the first element of the project charter and should not be trivial.
The project charter should reflect the type of project from a management point of view.
It is not enough to say that our project is the Taj Mahal or the Eiffel Tower. Since these names say nothing from the point of view of project management.
Our name will be:
“The design of the Taj Mahak in Aghra, India” will either be “The design, procurement and construction of the Taj Mahal in Aghra, India”, or perhaps “The data collection, design and implementation of a Taj Mahal maintenance programme in Aghra, India”.
Location in area and country. It is necessary to serve a global market so its location in the area and country is very convenient. We will make your reading and understanding easier and bring more visibility and interest to the project.
Business Need, Purpose and Justification of the Project
We expose the background of the project. In the charter we must describe where the project comes from and what gave rise to it.
For example, “due to a low supply of housing and high demand in the area, we are going to build a housing estate”.
It’s okay to close it with:
- Executing company:
- Type of project: internal or external
The Project must be justified from a commercial point of view. So we must understand the term commercial. In project management it means:
- The project must have a good reason for being.
- That should serve the strategic interests of the company.
- It must be in line with the company’s mission and vision.
Project Objectives. We have to be very clear about what these objectives are.
It is clear that the economic benefit will appear in most of the projects that are not internal or social projects. In Projects whose objective is the positioning or opening of new markets it will be clear that it will not be at any cost.
Added value. Projects should not miss the opportunity to provide additional added value. Such as the training of personnel to assume positions of greater responsibility and more effectively in future projects.
Strategic vision. The objective of our Projects is not only to reach the deliverables, but also to leave a legacy for the continuity of our companies.
Project objectives and justification
A detailed justification must be made at a high level.
When undertaking a Project it is critical to ensure that the scope management of the Project has been accurately defined. In addition, to determine whether we have met that scope we must establish a measurable value.
What we are looking for is an understanding of the scope of the project. Moreover, for a better understanding of the scope we can put a table explaining all the deliverables of the project.
In the case of a tender or, if it is considered relevant, you can enter the data of the contract or tender, so you have the information in the charter for possible changes.
The project justification should include the date on which those justifications for the project were approved, so that if there are modifications we can relate them to those dates.
High level requirements
This list estimates and prioritizes the high level requirements of the Project.
Important, it has nothing to do with the technical aspects of the development of the Project. These are just the things that matter at the highest level.
These high level requirements are defined by the stakeholders in the Project.
They include product requirements such as technical specifications. It includes the requirements of the Project associated to the way of doing the work, the methodology used in the Project, the culture of the company where the Project is carried out, etc.
It is very important that all information is coded for better monitoring and control.
Project Managers must learn to compile Project requirements, with a sufficient degree of professionalism, to ensure an accurate understanding of the Project’s needs, based on the expectations of the Project’s stakeholders and client.
The high-level description and its limits, assumptions and restrictions of the project
We indicate what is the scope of the Project, if desired, you can divide and specify the Project in each of its phases.
If any regulations are to be respected (e.g. health regulations), they must be specified, as well as internal regulations for the project executing entity, the client, project management methodologies, etc.
It shows the deadline set for the execution of the Project, with its start and end dates.
You can also define the calculated benefit of the Project in economic terms.
It is interesting to put an epigraph with what is not included in the Project, what is left out of the project, is quite useful to avoid complications later on.
The complexity of the Project scope: usually a Project results in a single product and/or service, but that result can be a complex system with many components. Each component has its own separate scope and is interdependent with the scope of the overall Project system. Once again we see the complexity and the reason why Project Management has become a profession.
High-Level Project Risks
Risks affect our Projects from every place imaginable. High level risks as they are known at the beginning of the Project should be specified.
Root cause of the risk. For each risk identified for the Project it is important to define the root cause of the risk and its possible impact on the Project.
How to establish risk. This impact of Project risks is established in terms of Project scope, Project time, Project cost or Project quality. Subsequently, the study will be carried out in greater depth during the Project planning processes, detailing their appearance, impact and action plans to manage them.
Project Milestone Schedule Summary
It is important to start by indicating the start date, the final, partial and final delivery dates, milestones, etc. of the Project.
It represents the initial expectation of the Project sponsor and Project stakeholders as to the dates for achieving certain Project deliverables or milestones. Its feasibility will be defined at the planning stage of the Project.
Then we should indicate, preferably in a table the dates of the main milestones associated with the project. If the project has phases, divide it into phases and indicate the milestones of each phase.
A Gant Diagram can be included if desired. It is a graph of the phases and their milestones for a better understanding of the schedule.
Then, much later in the project, we will develop the Project Schedule Management Plan. It is a component of the project management plan that establishes the criteria and activities to be carried out to develop, monitor and control the schedule, whether formal or informal, detailed or more general, including appropriate control thresholds.
Project Budget Summary
General funds allocated to the project and cost expectations. We must specify in which currency we are working.
If the Project comes from a contract (e.g. a tender) you can indicate these costs to compare them with the target budget (the actual costs) of the Project execution.
The direct costs of each of the phases and of the project as a whole are indicated:
- Direct costs, if possible, indicate this for each phase (with its total)
- Cost of project management
- Cost of the project management team (not included in the cost of production), so it is appropriate to detail it separately
- Contingency reserve
The sum of all the above will give us the estimated target cost of implementing the project.
The logical thing is that they are all round numbers, something else doesn’t make sense. It would be hard to believe because we really do not have an analysis at the moment that supports a more precise definition of quantities.
It is better to use simple numbers that allow better monitoring unless the company has fixed criteria to quantify. For example, each project is allocated 20% of the contract for something specific, or a specific formula is applied. Otherwise, it is counterproductive to claim an excessive level of detail when drawing up the project charter. Remember, in the charter we reflect those things that are of interest to the high level of the organization.
Then we will indicate the management reservation.
We don’t have to worry if the numbers don’t add up. When we do the planning we can arrange the charter and balance the numbers.
You can indicate the payment method chosen by the customer. For example, every 90 days for delivery, whatever.
Measurable project objectives and associated success criteria
These objectives must be specific, measurable and aligned with the company’s main objectives. We indicate the criteria for success and achievement of the objectives. Surveys, tests, forms and so on are useful to indicate customer satisfaction.
Project performance variables. The objectives are defined in terms of Project performance variables. Project scope objectives, Project time, Project cost and Project quality, among others.
Indicators of success. An indicator of success should be defined for each objective of the Project. For example, to complete the Project in a number of months, under a given budget, with a specific maximum number of quality defects, etc.
Reasonable definition of the scope of the project. In the project charter there must be a reasonable definition of the scope of the project. This will be accurate but cannot contain details, which we will analyse in the Project Management Plan.
Avoid stiffness. An excessive attempt to define the project will lead to more rigidity in the subsequent analysis and less room for improvement. We are only at an early stage of the project.
List of Project Stakeholders
We must identify and define all the stakeholders of the project perfectly. When preparing the project charter, we must draw up a list of stakeholders we know at the time.
We specify their roles and responsibilities for the Project. It is good to distinguish between internal and external stakeholders.
Stakeholder risk. The omission of an interested party from the Project may result in the product, service or result not being accepted, making the Project a failure. A thorough analysis will be conducted later to identify all stakeholders in the Project.
It is good practice to introduce a chart to see at a glance which are the most significant and relevant stakeholders in the project. Even you can enter the influence/power matrix of stakeholders. But if we want to make a simple and readable charter, it makes sense to do so later on. We remind you that we are at an early stage of the project.
Project Approval Requirements
How we can determine whether the Project has been a success? Clearly reflecting the requirements for project approval. It must be a specific approval based on measurable and perfectly specified characteristics.
In an unambiguous way, It is necessary to indicate which are the people in charge of the approval of the deliverables and the final product.
It should also reflect the criteria for approval, for each of the phases, of all the deliverables and of the final product resulting from the execution of the project.
If there is a specific template used for approvals in the organization or by the customer, the template must be indicated and related to the deliverable it affects.
We are at the beginning of the project, however, as we can see, we are already thinking about its completion. Project closure shows how to close the Project to the full satisfaction of the client. In order to get the maximum benefit from the experience and to ensure that the Project does not consume more resources in the future (guarantee).
Assigned Project Manager
Our assignment as Project Directors and our level of authority.
Project Manager. It specifies the name and surname of the assigned Project Manager, position, management to which it belongs and executive branch to which it belongs.
Level of authority. Describes the level of authority of the project manager. For example, whether you have the authority to assign or remove staff to the Project, whether you have authority over the Project’s budget, your role in conflict resolution, levels of escalation, limitations to your authority that need to be mentioned, etc.
The project sponsor must endorse the charter
The project sponsor authorizes the start of the project and authorizes the Project Manager to initiate the project.
Distribution list of the project’s charter
Who receives the charter. It is an internal list of distribution of the articles of incorporation to those interested who should be aware of it.
Project Executive Summary
We make a clear and concise summary of the Project and its alignment with the company. In the first place we indicate the objectives of the project and mention the promoter. Also we explain the alignment of the project with the strategic objectives of the company. That is to say, in two pages we summarize our charter.
Photos, images, in general things that we consider can complement the charter. For example an image showing the location of the Project, photographs, plans, diagrams, etc.
Conclusions on the project charter
The Project Charter gives the Project Director the authority to manage the Project and to have the appropriate resources for the project. It is based on the concepts of clarity, transparency and planning
High-level issues are what interest the company. The company’s senior staff does not care whether the project manager will have to control technical aspects of the project, make a procurement process for materials and subcontractors or perform project management tasks. All this is presupposed to the project manager, for this reason we work according to a methodology with which non-compliance with it cannot even be considered. In such a case, it is best to appoint a better trained project manager.
Relevant matters. The company that is going to invest in the project is interested in issues such as whether it will have the financial capacity to undertake the project, the repercussions of delays in the deliverables, the final result, the risk of non-payment, the improvements that the project will bring to the organisation, how the project will affect the resources available to it, whether or not it has internal resources for the proper management of the project, etc.
Project Limits. When making a project charter it is important to define limits for the project, which are included and which are not. This point is particularly important as it will greatly affect our management as project managers. During the planning of the project this is a critical point which, in case of doubt, should be clarified with the sponsor of our project. There are recurrent doubts in this regard, let us not assume, without at least escalating what may offer doubts.
We must not forget. The ultimate responsibility for the project charter rests with the company as a whole. It is the administrative level that gives the approval for the minutes of constitution of the project. In the creation of the project charter, it is ideal to involve both the executive and the project manager at certain times.
My company carries out projects without a charter!!! Keep in mind that if our company is not very mature does not mean that we, as Project Manager, should not make a charter of the Project.
Why? Because that way we’ll realize where we’re going, we’ll understand the project. This means having control over the project and its intended scope. In this way we can even propose improvements and help to make everything better, that is to say, everything is for the benefit of all. The more mature the management system, the better things will work and the better the results will be.
Here we do not discuss whether project management is good or bad. Here we discuss how this works, how the projects we do work. Learning to work with our Project Charter and getting people involved. It takes work? yes, it takes a lot of time to explain things to someone several times because they don’t understand. But in the end people end up understanding when they see the results, when they see that everything works better, when the Project Director takes over the Project and does things right.
Based on the excellent article by Roberto Sanz, one of our faculty members.