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What is a Project Charter?

A Project Charter is a formal document that authorizes the project team to execute project activities and provides the project manager, the ability to apply organizational resources to project activities. The PMP exam could include six to ten questions on project charter. An understanding of the components of project charter, effective use of each component and its application during the course of the project is essential to appropriately answer the questions during your PMP exam.

Developing a project charter involves assessing the project feasibility basis the given constraints and planning the project at a high level. We do not create a detailed project plan while developing the project charter as it is generally done after official sign-off from the project sponsor. An official sign-off allows allocation of money and resources and thus supplements the development of detailed project plan. During project initiation, you define high-level objectives, scope, risks, assumptions, constraints and requirements with a view of checking the feasibility of the project by meeting the important stakeholders.

Developing a project charter requires a few activities as follows:

  • Identification of stakeholders / customers:

A project manager needs to identify all the stakeholders and the customers at the start of the project.

  • Identification of project scope:

Scoping is a critical activity to create a boundary of what work to be done and what not to be done. We will cover project scope in detail in the Scope Management chapter.

  • Identification of project risks:

Identifying risks is an on-going activity of the project manager. This activity starts from the onset of the project and continues throughout the life-cycle of the project.

  • Identification of project assumptions:

 There are multiple activities which are done based on organizational and project environmental factors. These activities are executed either because of process policies or certain assumptions. Thus, it is important to uncover all the assumptions. This is usually done by the project manager in discussion with other stakeholders.

  • Identification high-level project requirements and objectives:

Detailed level requirements and objectives are not possible at this stage of the project. Hence, the project manager should focus high-level project requirements and objectives.

  • Identification of project success criteria:

Project manager should also identify the success criteria of the project. This is used as a baseline and compared with actual project performance.

Documentation of identified elements:

All the identified elements need to be documented to help standardize the project work by the project manager and this cannot be done by an individual project manager. This requires meeting with important stakeholders, subject matter experts and related process people. An important point to observe is that creation of project charter encompasses all the project areas including, scope, risk, time, cost, quality, human resources, communications, and procurement). Thus, making Develop Project Charter an integration process.

Develop a Project Charter- Business Case

The project charter includes the following:

Business Case:

A business case identifies the business need of doing a project. It effectively describes the linkage of the project with high-level strategic goals of the organization. It also explains the reason for project identification and selection. It is important to identify how a project is selected amongst so many projects in your organization.

In large companies, a project selection committee is established to gather information and data required for developing a business case. A project manager is not a part of project selection committee. A project manager is aligned to the project after it is selected for execution. However, to develop an appropriate business case and to effectively achieve the desired results, the project manager needs to have an understanding of the reason of project selection. Different functions / departments of the organization present their ideas for several different initiatives in front of the project selection committee. Based on the themes identified by the organization for project execution, the selection committee selects the project.

Let's look at an example of how a business case can affect the way the project is managed:

A company has identified and selected a particular project because the project will add to its strategic plan of consolidating its vendors. The project manager has a project management plan that includes an approved schedule and resources. He finds that the approved schedule is a constraint that could delay the process of vendor consolidation. He asks for additional expert resources, rather than continuing with the project with approved resources as per the project management plan. If the project manager did not ask for the increase, the company may have been delayed in the exercise of vendor consolidation and that would have resulted in losses and/or there may also be a situation where the contracts would have been renewed.

Thus, it's imperative for project managers to know why the project was selected and how does it link with the higher organization objectives. The business case created should justify the existence of the project.

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