project charter

A project manager develops many project management documents; however, the project charter is the key project document developed by top management, and the project manager may not have any role in developing this document.

The project charter, business case, and benefits management plan comprise the project’s initial business documentation.

The Project Management Institute (PMI) insists on creating the project’s charter because it is the most crucial document.

What is a Project Charter?

Definition: According to the PMBOK Guide, “A project charter is a document issued by the project initiator or sponsor that formally authorizes the existence of a project and provides the project manager with authority to apply organizational resources to project activities.”

Simply said, a project charter establishes the project, names the project manager, and provides them with the power and funding necessary to carry out the project. High-level details are contained in the project charter.

The project charter must be signed by a person outside the project who is in charge and has access to the necessary funding. The person that signs documents may be a sponsor, senior management, the PMO, etc.

Although the project manager is not responsible for establishing the project charter, their expertise in project management may allow them to assist the project sponsor in doing so.

A project sponsor can be:

  • Top management of the performing organization
  • CEO/MD of the performing organization
  • Government or Institution.
  • Community leader
  • Individual Financier 

A project does not exist without the project charter, nor can a project manager be appointed or empowered.

In project management, the charter also applies to program and portfolio management with the same purpose – authorization. 

A project is an intended course of action and requires funding. Before starting the project, the sponsor conducts the feasibility study, cost-benefit analysis, and review benefits management plan.

The project charter defines the project and gives stakeholders guidance. Changes to the project charter are uncommon, and only the sponsor or top management may do so.

A project may unofficially start when the sponsor gets an idea about it. Afterward, they will conduct a cost-benefit analysis to see if it is profitable. If the project aligns with their business objectives, they will pursue it.

Then they will create a project charter to launch the project. 

Sometimes a project charter is also known as a “Project Initiation Document (PID)” or the “Project Definition Document.

Project Charter Template

A project charter template is shown below.

content of project charter template
Project Charter Template

A project charter has the following elements:

Core Team Members: This lists key team members, including the project manager.

Summary Project Status: This gives an overview of the project status, such as project start date, estimated completion date, and project benefit.

Milestones: The project milestone is a significant point or event in the project. This could be a kick-off meeting, mobilization to site, phase end, final report submission, completion of a deliverable, etc. The milestones are listed along with an approximate due date.

Opportunity: This is the problem-solution statement. What is this project intending to fulfill? What advantages is this project bringing to the sponsor?

Goal: Goals are vision and concrete deliverables that make the goal come alive.

Objective: While goals are vision, objectives are mission. These are measurable targets that the project aims to achieve. Objectives must be SMART (Specific, Measurable, Attainable, Realistic, and Time-bound).

Scope: This is the high-level scope of the project.

Business Case: This gives a justification for the project’s existence. It is usually developed after a feasibility study, or cost-benefit analysis has been carried out.

Constraints: These are limitations on the project objective, for example, time, budget, scope, quality, etc. As the project evolves, the constraints may change, especially for highly uncertain projects using the Agile approaches.

Assumptions: They are conditions taken as true or valid without proof. They are recorded in the assumption log. For illustration, you can anticipate that there will be 80 males for every 20 females. However, government laws can call for 50/50 gender equality when the project gets underway. The assumption will be revised as a result.

Deliverables: Project deliverables are the specific outcomes the project is expected to achieve. The project’s takeaways are these. “Register 1000 subscribers within 48 hours” could be a deliverable. The standard by which performance is measured is deliverables.

Stakeholders: This shows the entities that can impact or be impacted by the project. Investors, any government agency, etc., may be a part of it.

The sponsor’s name, signature, and date appear as the final item in a project charter.

The following are additional project charter components:

Title and description of the project, pre-assigned resources (people or resources who are assigned to the project before it formally begins), high-level project and product requirements, acceptance standards, high-level hazards, and anticipated project benefits.

Every project needs to be justified and have a start and finish date as well as a budget.

Let’s discuss the process used to create the project charter. 

How is the Project Charter Created?

A project charter development process is shown in the below image. 

creation of project charter
Development of Project Charter

Input Required to Develop Project Charter

The following is a basic description of the input elements:

Contracts or Agreements: If the project results from a contract or an agreement, you will need this document.

Business case: It outlines the project’s financial justification and cost-benefit analysis. The benefits that the project’s output brings to the client are described in the benefits management plan.

Other input factors include organizational policies, such as human resources policies (which can aid in the selection of project team members), health and safety policies (which can serve as a warning against approving projects that could seriously jeopardize the lives and health of project team members), security and confidentiality policies, and quality policies (could include the cost of quality). 

Tools and Techniques for Developing the Project Charter

Expert Judgment: It entails talking to specialists about the project charter. These are people or organizations with expertise in organizational strategy, risk identification, duration, budget estimation, benefits management, and project and industry-specific technicalities. Their suggestions will aid in creating a solid charter.

Focus Group/Brainstorming: It helps gather ideas or data such as project cost, duration, risks, milestones, stakeholders list, etc. Brainstorming meetings can help the charter team come up with ideas. This creates a setting that is open and promotes teamwork.

Brainstorming is a relaxed, informal approach to problem-solving with lateral thinking. Though some of the ideas may sound strange, they should be noted. Given that the project charter is a formal document, the charter team should be as informal as possible when coming up with ideas for it.

A focus group takes a structured approach, usually involving subject matter experts, moderated by a facilitator interactively and formally to get opinions on a proposed subject. The facilitator must have the ability to elicit information by asking the proper questions, checking the responses, and developing new questions based on the responses. It is a place for conversation.

Meetings provide a forum for discussion, planning, and other activities. To be productive, meetings must adhere to fundamental guidelines, including timeliness, agenda, decorum, etc. A strategy that is more facilitative than directive may be adopted. A successful meeting plan must unify efforts to gather expert perspectives.

Interpersonal Skills: These skills help drive the above activities. It covers communication, conflict resolution, team building, emotional intelligence, etc. All projects have one thing in common: their workforce. They must lead with relational power rather than force, innovate, influence, act morally, look to the future, question what and why, develop, and concentrate on vision, inspiration, and motivation.

Output

Project Charter: The project charter is a key output of this process. After the project charter is approved, the project manager can start the project activities.

Assumption Log: Assumptions and constraints used in developing the project charter are recorded in the assumption log. The assumption log is updated throughout the project as assumptions change or become invalid.

Tips for Creating a Project Charter

The following tips are helpful in developing a project charter:

  • Keep it Short and Clear: The project charter provides high-level information, so keep it short and precise. Keep the number of sections minimum, organize the information well for easy referencing, and label each section.
  • Make it a Collaborative Effort: Involve experienced professionals and key stakeholders in developing the project charter. It will make the project charter robust.
  • Use a Template: Every organization has a project charter template. This is standard and acceptable. Using it will save time and get quick stakeholder buy-in.

Project Charter Example

Let’s see an example of the project charter.

An expert for HAZOP (Hazard and Operability) and HAZID (Hazard Identification) can offer high-level advice on chemical-related projects. 

In the sample project charter example below, an assumption has been identified linked with climate conditions.

project charter example
Project Charter Example

Benefits of the Project Charter

The following are benefits of the project charter:

  • It gives the project manager the authority to complete the project.
  • It explains the project’s existence.
  • It shows management’s support for the project.
  • It defines the outcome.
  • It aligns the project with the organization’s objectives.
  • It gives team members a transparent reporting system.
  • It saves you from scope creep and gold plating.
  • It helps you avoid disputes during the project.

A project charter builds a solid foundation for your project. It gives a common understanding of the objectives.

Project Charter Vs Business Case

A business case provides reasons to proceed with the project. This document created the project charter and based on the business case; the project sponsor decided whether to proceed with the project. 

This document provides the project’s benefits, risks, constraints, cost-benefit analysis, etc.

Project Charter Vs Memorandum of Agreement

The Memorandum of Agreement (MOA) is an agreement between the two parties. When a contractor gets a contract from a client, they both sign a Memorandum of Agreement. This is a commercial and legally binding document; changes may only be made with the consent of both parties. An MOA is often a one- or two-page document.

On the other hand, a project charter is only signed by one side. Here, the project manager is chosen and given the responsibility for it. The signing authority may change this document as necessary; it is not a legally binding document.

Project Charter Vs Project Plan

A project charter is a brief document of one or two pages in length. It starts the project and gives project managers the power to finish it. It is the project’s initial document.

After the project charter is signed, project plans are created. The scope management plan, quality management plan, risk management plan, procurement management plan, and stakeholder engagement plan are just a few of the many subsidiary plans that make up a project plan.

A project plan may be hundreds or thousands of pages long. It offers all information necessary for managing and finishing the project.

Project Charter Vs Project Brief

A project brief is created after the project charter is signed, the project is started, and project management plans are developed.

A project brief provides a shorter version of the project plans so stakeholders can review it briefly and grasp the planning processes.

FAQs on the Project Charter 

Now, let’s discuss some FAQs about the project charter.

#1. Who Signs the Project Charter?

PMP aspirants often get confused and think the project manager signs the project charter. 

Note that the project charter appoints a project manager. A person cannot appoint himself.

The sponsor, or someone from top management, signs the project charter. They are external stakeholders and have the authority to provide resources and support.

#2. Can a Project Have Multiple Project Charters?

One project charter is the norm for projects. Large, multi-phased projects, however, may have project charters for every stage. It is preferable to break a project into phases when the scope is too large to manage—for instance, when building a refinery.

#3. Who Keeps the Project Charter?

The project charter is an official controlled document. This document can be kept by the project administrator or coordinator. Additionally, a copy could be stored for reference at the project management office.

Conclusion

The project charter gives project managers the support they need to finish the project and authorizes the project. The goal of a project is to solve a problem, but if it is launched incorrectly, it could fail and waste resources. A strong project charter aids in the successful completion of projects. Throughout the course of the project, this document hardly ever changes.

Have you ever helped create a project charter? Your experience is welcome in the comments section.

From the perspective of the PMP test, this subject is crucial. Therefore, fully comprehend it.

Fahad Usmani, PMP

I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.