project charter

Today, we will discuss the project charter – the most important document for a project.

A project has many documents developed by the project manager and the project team. However, the project manager has no role in developing the project charter.

At the initial stage, the project charter, along with the business case and benefits management plan, form the business documents.

What is a Project Charter?

A project charter is a formal document that authorizes the existence of the project, provides resources to complete the project, appoints project managers, and gives them authority to use resources and complete the project.

The project charter is signed by someone external to the project who has the authority and can provide resources. The signing authority can be a sponsor, top management, PMO, etc.

Though the project manager has no formal role in creating the project charter, they may help the sponsor create it as they are the ones experienced in managing projects.

A project sponsor can be:

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

Without the project charter, a project does not exist, and neither can a project manager be appointed or empowered. In the realm of 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 a lot of funding. Before starting the project, the sponsor goes through the feasibility study, cost-benefit analysis, and benefits management plan.

The project charter is the most important document for any project. It establishes the project and provides guidelines to stakeholders. The changes in the project charter are rare and only the sponsor or top management can do that.

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. This authorizes the existence of the project. It appoints a project manager and dictates when it will begin. Information in the project charter is high-level.

Many organizations call this the “Project Definition Document.”

Content of the Project Charter

An example of a project charter template is shown below.

content of project charter template

A project charter has the following elements:

Core Team Members: This lists key team members, including the project manager with their roles and responsibilities.

Summary Project Status: This gives an overview of the project information such as project start date, estimated completion date, potential financial impact (benefit).

Milestones: The project milestone is a significant point or event in the project. This could be a kick-off meeting, mobilization to site, 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 users or the performing organization?

Goal: These are measurable targets that the project aims to achieve. Goals must be SMART (Specific, Measurable, Attainable, Realistic, and Time-bound).

Objective: While goals are vision, objectives are mission. They are concrete deliverables that make the goal come alive.

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 imposed on the project objective, such as time and budget, scope, and quality. As the project evolves, the constraints may vary, especially for highly uncertain projects using the Agile approach.

Assumptions: They are conditions taken as true or valid without proof. They are recorded in the assumption log. For example, you could assume that the male/female ratio will be 80 to 20. However, as the project commences, Government regulations may demand gender equality of 50:50. Hence, the assumption will be updated.

Deliverables: These are the specific outcomes the project is expected to achieve. They are the project take-home. A deliverable may be “register 1000 subscribers within 48 hours.” Deliverables are the benchmark of performance measurement.

Stakeholders: This shows the entities that can impact or be impacted by the project. Critical project team members are mentioned. It may include investors, or any government department, etc.

Sponsor Approval and Date: The last item common in a project charter is the sponsor’s name, signature, and date signifying the authorization.

Some other elements of the project charter are:

Project title and description, pre-assigned resources (individuals or resources that are set out for the project before later enlisting of project members/resources; you secure these resources upfront through top management), high-level project and product requirements, acceptance criteria, high-level risks, and expected benefits of the project.

Every project must have a justification, start, and end date, budget, etc.

Let’s talk about how the project charter is developed. 

How is the Project Charter Created?

In project management, this process is known as Develop Project Charter. It involves tools/techniques used in developing the project charter.

creation of project charter

The above chart represents how a project charter is developed according to the Project Management Professional Guide.

The input elements are before the arrow and briefly described below:

Agreements or Contract: If the project is an outcome of an agreement or contract, you will need this document.

Business case: As mentioned before, it contains economic justification, cost-benefit analysis for the project.

The Benefits Management Plan contains a formal approach to ensuring the project’s benefits are assigned to responsible and accountable individuals/entities.

Other input elements are policies of the organization e.g. human resources policies (can help in the selection of project team members), health and safety policies (can guide against chartering projects that could badly impact personnel health and safety of lives), security and confidentiality policies, quality policies (could include the cost of quality). 

Next in the diagram are Tools and Techniques for developing the Charter.

Expert Judgment: Involves consulting subject matter experts regarding project charter. These are groups or persons with specialized knowledge, training in areas like risk identification, duration, and budget estimation, benefits management, technicalities of the industry and the project, organizational strategy. 

Their input will help develop a robust charter.

Focus Group/Brainstorming: It is used to gather ideas or data such as project cost, duration, risks, milestones, stakeholders list. The charter team can generate ideas using brainstorming sessions. This provides an open environment that encourages group participation to derive creative solutions.

Brainstorming creates a relaxed, informal approach to problem-solving with lateral thinking. Ideas generated should be noted though some may sound weird. The ideas are refined into generating creative solutions. Granted that the project charter is a formal document while brainstorming for its creation, the charter team should be as informal as possible for ideas to be generated.

On the other hand, a focus group takes a structured approach, usually involving subject matter experts, moderated by a facilitator in an interactive and formal manner to get opinions on a proposed subject. It is a discussion forum. The facilitator must possess elicitation skills: ask the right question, verify the answer, and generate new questions from the answer.

Meetings are a platform for deliberation, discussions, planning, etc. Meetings must comply with basic rules such as timeliness, agenda, decorum, etc., to be effective. Facilitation rather than directing approach may be used. A good meeting arrangement must consolidate investment in sourcing experts’ opinions.

Interpersonal skills: These are social skills that can help drive the above activities. It involves emotional intelligence, communication, conflict resolution, team building, etc. The people factor is the common denominator for all projects. They must innovate, influence, do the right things, focus on the horizon, ask what and why, develop, focus on vision, motivation, and inspiration, guide and collaborate using relational power rather than coercion.

And the final outputs are:

Project charter: The project charter is a key output of this process. Once the project manager receives the signed charter, he and the project management team can start the project.

Assumption Log: All assumptions and constraints identified and used as the basis for the development of the charter are recorded in the assumption log. The assumption log is updated throughout the project as assumptions change or become invalid.

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 template below, an assumption has been identified linked with climate conditions.

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.

Questions about the Project Charter 

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

Who signs the project charter?

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

Please note that the project charter appoints a project manager. Obviously, 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.

Can a project have multiple project charters?

Most projects have one project charter. However, big, multi-phased projects can have many charters, one for each phase. When the project scope is too huge to manage, it is always best practice to divide them into phases—for example, building a refinery.

Who keeps the project charter?

The project charter is an official document and must be controlled. The project coordinator or an administrator can keep this document like others. A copy could also be kept at the project management office for reference.

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 business and legally binding document; you can only change it when both parties agree to do so. MOA is a one or two-page long document.

On the other hand, a project charter is signed by one party. Here the project manager is assigned, and the project is issued to him. This is not a legally binding document, and the signing authority can amend it if required.

Conclusion

The project charter authorizes the project and helps secure executive support for projects. Projects are created to solve a problem, but if they are started poorly, it could result in failure and waste of resources. A good project charter helps your team and organization deliver projects successfully.

Have you ever taken part in developing a project charter? Please share your experience in the comments section.

This topic is important from a PMP exam point of view. Understand it well.