Develop project charter

Key Idea

Project charter (or PID)

A project charter, or project initiation document (PID), states, at a high level, what the project is and the rationale for doing it. A project charter can also be used to give formal authorization to the project. It is a short document, and can be changed later as the tasks within the project become better understood.


A project charter:

  • is a short document, in the style of an executive summary,

  • summarizes what the project is,

  • explains why the project is necessary or desirable,

  • describes how the project will work,

  • is the first deliverable in a project,

  • is also known as a project initiation document or PID,

  • is the 'plan for the plan',

  • formally authorizes the project,

  • can be a stage-gate,

  • can be used to set the tone of the project with stakeholders,

  • can set the context and approach to benefits realization.

PMI says

Project charter

'Project Charter (Output/Input). A document issued by the project initiator or sponsor that formally authorizes the existence of a project, and provides the project manager with the authority to apply organizational resources to project activities.' PMBOK Guide (p.368)


Here we give one possible layout and description of a project charter, and an example of a completed charter (Tadley). Many organizations have their own templates for project charters. Another widely used format for a charter is the PRINCE2 template for a project initiation document, which is the same thing as a charter.

Project charter template

Author, date and version

What?

Aim

  • State the aim. The aim of this project is to do what?

What is the project?

  • Describe the project briefly. (Use the 'grandmother test'. Would your grandmother understand what you have written? If not, simplify and clarify until both your grandmother and the average 12-year-old can understand it.)

  • What is the overall market size problem or the product market space addressed by the project?

  • What is the end point? How will we know when the project is finished?

What are the deliverables?

  • Say whether any work needs to be done to define the deliverables.

Cost

  • Rough order of magnitude (ROM) estimate of number of man-days effort and of costs.

Why?

Why We Are Doing It?

  • Give the simplest, clearest possible reason. Most projects are done for one of five reasons: (1) legal or regulatory; (2) to 'keep the lights on' or stay in business; (3) to reduce risk; (4) to improve profit; or (5) to generate capability to serve new markets. State which of these applies.

What is the business need?

  • If there is a business need, as opposed to regulatory/legal, explain it briefly.

  • What business need does the project meet or what customer problem does it solve? What is the financial case?

  • What is the risk reduction case?

  • What is the case in terms of increasing capability?

  • What is the regulatory case?

  • What options will be created?

What is the burning issue?

  • If there is a burning issue, state it in one sentence.

Estimated value of the project (and basis)

  • Internal

  • External

Who?

  • Who is to be involved, in what roles, with what responsibilities?

  • Who is critical in delivering this programme the team, partners, suppliers?

  • Who is the relevant regulator?

  • Who are the business partners for this project? Are they involved yet? On what basis?

  • Who are potential trial customers?

  • Who is the competition?

Where?

  • Where does this programme fit within our strategy?

How?

Overall approach

  • What will be the overall approach for how the project will get done? List the:

    - methodologies,

    - previous similar work,

    - key milestones,

    - tools and techniques.

  • How will the deliverables of the programme be implemented? (i.e. designed, delivered, sold or supported?)

Milestones

  • What are the milestones in this project?

  • Which are potential quick-wins?

How will we plan and assure quality?

  • How will we know what the customer wants? How will we know all their requirements?

  • How will we prevent errors?

  • Do we already have the full set of capabilities to ensure a reasonably good probability of right-first-time, or are we likely to need to acquire new resources or capabilities to do this?

  • What measurements should we make, especially for continuous improvement?

When?

  • When will the project be completed? (Give a date)

  • When will the first customer sign up or when will the first users go live?

  • When will cash flow or cost reduction or efficiency gains or risk reductions crystallize? That is, when will our firm begin to realize the benefit of this project?


Project charter example: Tadley revenue project

Tadley Project Charter (Part 1)

11 October 2007, prepared by I. Kant, project sponsor, and R. Descartes, project manager, Tabula Rasa Technologies, Inc.

What is the project aiming to achieve?

  • To define and document the Corporation's approach to creating a new product and service offerings for performance management in the public healthcare sector.

  • To identify the work required to set up the collateral required to launch the offering, and to identify fully the costs and benefits of doing so.

Why is it important to achieve it?

  • Healthcare clients, unlike our traditional financial services clients, do not understand what the corporation does, so this project will remedy this understanding gap for performance management deliverables.

  • There is clear evidence from existing healthcare clients that a performance management offering is desirable and therefore that a wider market demand is likely.

  • There is an opportunity to transfer knowledge into the Corporation to augment current offerings and to use that combined knowledge to further enter the public healthcare space.

Where will it be developed?

  • This is a project to be developed by the Corporation staff working jointly with external analysts and consultants, ahead of any product offering to the market.

Who is going to be involved in managing the project and what are their responsibilities?

  • Project Manager R. Descartes

  • Project Sponsor I. Kant

  • Project Office Anna X. Zimander

How and when is it all going to happen?

  • Project initiated Monday 1 October. All documentation to be produced by R. Descartes for interim and final review by the project steering group.

Final deliverables

  1. Performance Management Product Offering overview.

  2. Go to market plan including high-level costs and targets.

Timescale

  • Project to produce draft final deliverables 25 October.

  • Final sign-off to commence Part 2 by 6 November.


The charter defines what success will look like and may indicate how this will be measured by detailing with the higher-level requirements of the project. The charter thus sets the scene for benefits realization.

We have just explained why the format or template for a project charter and for other project documentation may need to be adapted to the particular type of project. A project management template designed for one kind of project may not be ideal for another. So if your organization's template for a project charter seems to be too complex or not aligned to the needs of your project, perhaps it has been designed for a different kind of project. For example, in POTCOM (not its real name), a large old-fashioned telecoms company in which most projects had been large engineering or national marketing projects, the project templates were written for big projects. One day POTCOM decided to stop being a traditional telecommunications company, and to do many exciting new small projects around web services. Management initially felt that POTCOM needed a new project management methodology, when in fact all it needed was to adjust the templates to reflect the change in size and complexity of the new kind of initiatives. This saved a great amount of money, risk and upheaval.

Another factor to consider in the design of project documentation, including the charter, is the kind of internal processes it is to be used for. Increasingly organizations are adopting a stage gate approach (see key ideas box) to control projects. A project charter can be used in the Initial Stage Gate or Gate 0 approval decision. If your charter is to be used this way, then make sure that it contains the information required by the process (as opposed to you as the project manager and sponsor being the arbiters of what should be included). Here we give an example of a charter (Whitby) for a different kind of project from the Tadley project earlier. The latter is a project to create a new product and service offering, that is, it is designed to generate new revenue, whereas the Whitby project whose charter is given here is a back-office or purely internal project. Different kinds of project and different circumstances require different kinds of charter. One of the biggest differences is between projects aiming at revenue generation, or other client-facing projects, on the one hand, and those aiming at back-office or administrative concerns on the other.

Key Ideas

Stage gate and stage gate review

A stage gate is a set of conditions that must be met before further work can be done. These conditions include completing certain work packages, and may include obtaining certain approvals or meeting certain quality standards. The stage gate is the project management equivalent of telling a small child 'you can't have any ice cream until you have eaten up all your vegetables'. Stage gates are a way to control cost and effort expended and to enforce good work and management discipline in projects. (Stage gates are not explicitly part of the PMI PMBOK Guide, but are often useful in large, complex projects. The concept is implicit in PMBOK Guide.)

A stage gate review will assess activities and deliverables to date and decide whether to approve the project proceeding to the next stage.

The UK's Ministry of Defence adopted the stage gate approach to projects in response to a series of high-profile cost overruns and performance problems in major projects. The results so far seem to show an improvement on the previous state of affairs.


Project charter example: Whitby internal project

Whitby Project Charter

15 September 2005, prepared by John McTaggart, Company Secretary, Time Research Ltd.

Project description

ISO 9000 is a quality certification that requires accredited companies to establish clear processes, follow them, and verify compliance through a formal audit process.

To extract the maximum benefit from undergoing ISO 9000 accreditation, the Company aims to use the audit to identify their business processes that have the greatest impact on the business and to prioritize them. Levantine Quality Assurance Register (LQAR) have been contracted to act as ISO 9000 assessors.

Project authority

  • The Project Sponsor is John McTaggart.

  • The Project Manager will be George Berkeley.

Objectives

  • Project Whitby will prepare the Company for an ISO 9000 audit, maximizing the value obtained through the stages of process establishment, implementation and verification by audit.

  • The project will be completed by the first quarter of 2006.

Business case

  • Accurate knowledge of a firm's business processes is a vital input for assessing the current state of the company and planning its future direction. Effective application of the ISO 9000 audit will allow the Company to rank its processes in order of value and to establish those that have the greatest impact on the business. Conducting an internal audit will provide the Company with a 'live' project to practise and refine techniques for the survey and interpretation of business processes.

  • Attaining the ISO 9000 qualification will provide existing and potential clients with assurance of the quality of the Company's business processes.

Product description and deliverables

As a minimum Whitby will achieve the ISO 9000 qualification for the Company. The success of the project will be judged on the increase of our understanding of our business processes. At the highest level, the project deliverables are as follows:

  1. Complete the questionnaire this should allow us to check that our processes cover all the ISO 9000 areas.

  2. Decide on an assessment date and location. LQAR suggested that this was typically 6-10 weeks after completing the questionnaire. The Company should be able to achieve this within four weeks.

  3. Return the questionnaire and supporting documents to LQAR.

  4. Assessment meeting explore with LQAR how to release value from our processes, rather than just going through a checklist assessment.

  5. Arrange ongoing surveillance meetings, as necessary.

Effort/resources required

Two man-months spread across the Company in preparation for the assessment, two man-months for the assessment itself, and then a series of short review meetings to respond to any of their suggestions and to record progress.


The project charter as a control and approval device

As we have seen, the charter is a key document in project management because it gives a high-level description of the project and is the 'plan for the plan'. The project charter can also perform a control function. In many organizations, the sponsor and members of the project steering committee sign off the charter to give formal authorization to the project or to its next stage, the establishment of the project. When used as an authorization mechanism, the signing of the project charter by the project steering committee releases resources to the project and authorizes a budget for the project.

The project charter and interfacing

Interfacing means the connections between the project and the rest of the world, including:

  • other parts of the organization to which the project belongs,

  • any external customers for the project, and any regulatory bodies,

  • any external suppliers,

  • the means of communication with those other parties,

  • how those communications will work,

  • which specific individuals in the project will own each communication link, and who will be their counterpart,

  • how the project's processes will interact with processes in the rest of the organization (e.g. financial control and budgeting processes).

A critical success factor of the project is how it interfaces with the rest of the organization. Get interfacing wrong and your project becomes like the albatross in The Rime of the Ancient Mariner[4] everyone wants to avoid it because they think it will ruin their lives. Even if you do everything else perfectly in your project management, but get the interfacing wrong, the project will fail. Getting the right support and interaction, that is, interfacing, is above all about communication. The project charter is an excellent communication tool available right at the start of the project, so use it as such. Remember that you can use the charter in draft form even before the formal start of the project, on a strawman basis, to help you get early warning of likely interfacing problems.

The sponsor is responsible for issuing the project charter, but the work of writing and thinking through the details required to integrate the various aspects stated in the charter is the project manager's. The project manager drafts the charter and gets the information and questions that form its content, working closely with the sponsor. It is sent out to other stakeholders in the name of the sponsor and with their full authority. It is best to send the draft charter to a few close allies of the sponsor first and modify it if necessary in the light of their feedback before sending it out to the full set of stakeholders. When sending out the charter, it should be the sponsor's signature block and the sponsor's e-mail account and not the project manager's that are used.

Statement of work

In some organizations, one of the main inputs produced prior to formal approval of the project charter is the statement of work (SOW). The statement of work, together with the organizational structure, policies and the company's processes and procedures, are used in creating the project charter ideally. In other organizations the charter comes first, and then one of the next tasks is to produce the statement of work. The point is that the statement of work needs to be produced early on in the project, because it is the formal specification of work to be done. There may be more than one statement of work, especially in large projects.

Key Idea

Statement of work (SOW)

A statement of work (SOW) is a contractual (for external suppliers) or nearcontractual (for suppliers within the same organization as the project) statement of what work is to be done. For external suppliers, the SOW can be the contract. For internal suppliers, the SOW is often the mechanism by which a cost code is set up and project accounting is done. Internal SOWs may have other names.


PMI says

Statement of work (SOW)

'Statement of Work (SOW). A narrative description of products, services, or results to be supplied.' PMBOK Guide (p.376)


Case study

Statement of work

The statement of work (SOW) is generated by the sponsor or customer and forms a key input into the project charter, prior to formal approval. The statement of work needs to be produced early, because it sets out the formal specification of work to be done. Following the Defence Strategic Review in 1997, the MOD adopted a more capability-driven procurement process and developed a revised approach to requirements setting than had been previously used. The new requirements process involved all stakeholders and used the User Requirements Document (URD) and System Requirements Document (SRD).

The URD is equivalent to a SOW and consists of a complete set of individual user requirements for the project. A URD is the means by which the customer is able to develop, communicate and maintain the user's requirement throughout the life of the system. The SRD is equivalent to the project scope statement and is a complete and consistent definition of the entire system to be provided in response to the sponsor's needs in the URD. The SRD also specifies the functionality and performance required. The system of best practice for the development of the SOW indicates the following:

  • The sponsor or customer takes the lead in the production, refinement and maintenance of the URD, drawing on the support of stakeholders as necessary.

  • The sponsor or customer ensures that verification criteria are identified against each user requirement, and that requirements are prioritized.

  • The sponsor or customer seeks endorsement of the URD from all the stakeholders, both against their specifically flagged requirements and as a complete integrated document.

  • Any change of operational need should be reflected in the URD.

Once the policy has been determined as to how the work will be completed, the SOW (URD) can be broken down into more detailed requirements, as defined in the scope statement (SRD), and put out to tender in single or multiple groupings. Each element of the contract will have a separate and discrete contract statement of work to deliver against. The linkage between individual requirements within the URD and the SRD is maintained to show the origin of every demand placed on the system, and how each requirement is met.

For an MOD contract, the SRD defines what the system must do to meet user needs, as stated in the URD. The two documents also provide the basis for advising industry of MOD's requirements for the project. The SRD is also updated to reflect any trade-off decisions and approved system enhancements in response to changes in the URD. The SOW is the key document to which the entire project requirements are traced back, because it states the sponsor's needs.


Example of a statement of work (SOW)

Parties ABC Ltd, Strand, London WC2
  XYZ Ltd, Newersgate Street, London EC2
Project name Phosphorous
Project dates 1 March 2008 to 31 December 2008
Project locations London, Frankfurt, New York, Singapore, Shanghai, Santiago
Services and materials XYZ will design and plan training in strategic sales coverage/ account planning and management. XYZ will provide project specialists, working under the ABC project manager.
  XYZ will supply the following materials:

  • Psychometric profiling

  • Senior management interview templates

  • Video cameras and editing facilities

  • DVD production, 50 DVDs per location.

    ABC will provide office facilities, print/photocopying and access to intranet.

    ABC will provide project support office resources and equipment.

Fee structure Quarterly in arrears, as per previous contract
Fee US$440,000 ex. taxes, travel and expenses per quarter
Accommodation To be booked through ABC intranet site only and approved by project office
Travel As above
Conditions of payment Payment dependent upon satisfactory completion of work in each location, to be decided by local management team (and in the event of a legal dispute then by binding arbitration in the London Court of Arbitration)



A case study and an example of the statement of work are given here. In some organizations the statement of work is produced by the key stakeholders in order to outline the business need and product scope. The document may also include information relating to the company's or customer's long-term plans. All of these strands are pulled together for consideration as part of the selection process. Certain experts can also be used to assist in this process. Key stakeholders or users can be involved during the selection process to help assess the series of projects being put forward for consideration. Early involvement and integration of all stakeholders associated with the project should improve the level of communication throughout the organization, as well as producing a more complete and definitive document. If a change to the charter is deemed necessary at a later stage of the project, the whole question of whether to continue with the project must be reviewed.

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Definitive Guide to Project Management. The Fast Track to Getting the Job Done on Time and on Budget
The Definitive Guide to Project Management: The fast track to getting the job done on time and on budget (2nd Edition)
ISBN: 0273710974
EAN: 2147483647
Year: 2007
Pages: 217
Authors: Sebastian Nokes
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