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Everything You Need to Know About a Project Charter

Everything You Need to Know About a Project Charter

By Ling Wong

What if there’s a magic document that could…

  • Help you, as a project manager
  • Get everyone involved on the same page
  • Minimize miscommunication
  • And reign in scope creep before it happens?

Sound like a dream?

Well, we can’t wave a magic wand but a project charter comes pretty close.

Of course, a document is only as good as what goes into it and how it’s used to facilitate the planning and execution of a project.

In this article, we’ll look at how you can leverage a project charter to help you successfully manage a project, the essential components you need to include, and the best way to go about creating one. Let’s go.

What’s a Project Charter?

A project charter, also known as a business case, project definition or project statement, is a brief document indicating the scope, objectives, and participants in a project.

It’s created to communicate the essence of a project and provide team members, key stakeholders, and project sponsors with a shared understanding of the project.

Why A Project Charter Is Different Than A Project Plan

The document could cover the entire project, or in the case of a large multi-phase project, a charter can be created for each of the phases.

A project charter is a central document that defines the fundamental information of a project and clearly outlines its goals and objectives. It’s created early in a project’s lifecycle with the intention of informing staffing decisions and timeline.

It’s intended to be signed off by project sponsors before the project kicks off.

Since this document is drafted before the planning begins, it’s not meant to detail the execution of the project.

So it’s not the same a project plan. It doesn’t have all the individual tasks and whose doing what.

While the formatting and presentation of a project charter may vary – from a few paragraphs to as long as 50 pages, it’s often recommended to keep it short (less than 5 pages.)

The intention is to provide just enough information about the project in an easily digestible way to ensure that every team member and stakeholder reads through and understands the document.

The Purpose of a Project Charter

A project charter is created with the purpose of introducing everyone involved to the project. It’s drafted before the actual project planning takes place and serves to provide a solid foundation to ensure the success of a project.

A project charter can…

  • Help sponsors and stakeholders reach an agreement
  • Get alignment on all aspects of the project
  • Help obtaining approval so the project manager can proceed with planning out the project in details.
  • Ensures clear communication about the basic information of the project
  • Can be a reference for team members moving forward

A project charter keeps everyone on the same page regarding the goals of the project, the measurements of success, and other benchmarks to make sure the project is heading the right direction.

The 9 Components Of A Project Charter

Ultimately, the structure and presentation of a project charter depends on the main purpose of the document and the nature of the project.

Here are some essential components of a typical project charter:

1. Project Background

Why do this project? Is it triggered by a new market trend or a strategic direction? Is it initiated as a response to a change in organizational structure? Is it to support a marketing initiative?

This section provides an overview of the project and may include the business case or contract that drives the project, or it could simply indicate why this project is important by listing out the benefits.

2. Project Goals and Objectives

Here, you’d define what’ll constitute success for this project. The goals need to be specific and measurable so you can evaluate progress and make adjustments along the way, if necessary.

For example, let’s say a project is designed to increase customer loyalty. A goal that says “significantly increase customer loyalty” is not specific because the definition of “customer loyalty” could be quite subjective. Instead, set measurable metrics that are reflections of customer loyalty – e.g. “increase customer retention rate by 10%” or “increase customer referral or affiliate program participation by 20%.”

3. Scope

What are the high-level attributes of the end product of this project (deliverables)? What actions do the team need to take to deliver this end product? What activities your team will NOT be involved in during the process?

The scope of a project defines the boundaries of the project. It helps you clearly delineate responsibilities to avoid confusion during production and implementation.

It also helps you make the right decision on staffing and resource allocation.

4. Governance

This refers to the key stakeholders involved in the project – e.g. project manager, project sponsor, client, and team members – their responsibilities, and reporting relationships.

In smaller projects, you may list out every individual team member. In larger projects, you may only list out the team leads to help streamline communication. If a role is not yet assigned to a resource, you can simply include the title of the required position and the associated department.

5. Key Dates or Milestones

This section serves to communicate a general understanding of the timeline. Since the project charter is created before the planning phrase, it should be made clear that these key dates are “educated guesses”. They’re still targets to be validated.

Include these key dates:

  • Start date
  • End date
  • Invoicing dates

Make sure to note any deadline that’s non-negotiable – let’s say you’re producing a website to support a spot on the Super Bowl —  then having the website go live before the event is not a negotiable part of the project.

6. Project Budget, or Cost

This section lists out the estimated costs for labor and material involved in the execution of the project. It should include all costs and expenses, categorized by fiscal year, one-time costs or recurring costs.

Again, since this is done before a detailed project plan is established, make it clear that the information is a rough estimation.

7. Assumptions, Constraints, Risks, and Dependencies

This section lists out the various factors that could affect the success of the project.

Constraints are the internal and external factors that limit the project in a particular way. They could pertain to technical limitations, available human resources or budget etc.

Assumptions are factors that you assume to be true in order for the project to progress as planned. E.g., a technical update will be completed on a third-party platform by a certain date.

Risks are anything that may hinder your team from delivering on the project’s objectives. E.g., a tight timeline that doesn’t allow any wiggle room in case there’s any unforeseeable circumstance.

Dependencies are essential parts of the project that need to happen before the objectives can be achieved, typically not under your team’s control. E.g., client-driven copy for a website.

8. Project Manager Authority Levels

The authority levels indicates what a project manager can make decisions on without getting further sign off from senior management or project sponsors.

For example, “PM has a 10% tolerance on budget and a 5% tolerance on schedule.”

The tolerance level is how far the project manager can stretch.

This can also extend to cover the project manager’s authority to hire or fire staff from the project team.

9. Communication Plan

This section indicates how project manager would communicate with project owners, stakeholders, team members, and other participants during the project.

Besides channels of communication, this can also include the expectation on response time – e.g., 24-hour turnaround time on emails.

Why Is a Project Charter Important?

A project charter helps you set a solid foundation for your project and communicate essential information to everyone involved. It also helps avoid misunderstanding that could derail the project.

Project charters also provide a “big picture” view of the project to all key stakeholders. 

It communicates a common vision of basic parameters and structure to ensure all subsequent decisions are made to contribute to meeting the project’s objectives.

Project managers can use the project charter as a focal point during team meetings to guide discussions and as a baseline to assist with change control and scope management.

They prevent drifting off course. 

A project charter prevents a project from “drifting” off course, leading to scope creep, budget over-run, misalignment with organizational objectives, and missing deadlines and milestones.

The document gathers all the crucial information about a project in one central location. Anytime you have new hires joining the team, they can get up to speed quickly.

It can be a sales document to management. 

A project charter can serve as a “sales document” for the project and be used to facilitate decision-making and authorization by offering overviews of critical information in comparable formats for executives to rank and prioritize.

After a project charter has been signed off, it becomes a demonstration of management support for the project and the project manager.

Get buy-in from the team.

In addition, the process of creating a project charter also helps ensure you get everyone’s buy-in so the final approval process for the project plan will go much smoother.

How To Create A Project Charter

While a project manager or project initiator is typically responsible for creating a project charter, it doesn’t mean you’re going to lock yourself in a room and write this document all on your own.

 Have an Interactive Project Charter Session

The best way to start the process is to gather everyone involved and conduct a project charter session. Participants can include project sponsors, client representatives, team leads or team members.

During the meeting…

  • Allow everyone to voice their opinions and ask probing questions, covering the main sections of the document.
  • Take into account input and factors you’ll need to work with, such as statements of work, previous engagements and agreements with the client, enterprise or industry standards, regulations, and organizational processes.
  • Record the key points of the discussion on a whiteboard to help everyone see the interdependencies of all the moving pieces and get a better sense of how everything comes together.
  • You may realize that different stakeholders have very different perspectives on the planning and execution of the project – and that’s a great thing!
  • This is the time to manage expectations. Brainstorm, problem solve and resolve any conflicts. Whip out your facilitation techniques such as brainstorming, problem-solving, conflict resolution, and expectation management.
  • Use this an opportunity to align everyone’s thinking to minimize the likelihood of miscommunication further down the line. Try to reach a consensus on the fundamentals during this session so everyone enters the project with the same perspective.

Now Review and Approve

After the project charter session, the PM would typically write up the document following a predetermined format.

The next step is to send out the draft to all parties involved to review and comment. Make sure you establish effective communication strategies with your team to gather constructive feedback.

After you’ve gathered everyone’s feedback, update the document accordingly. Pay attention to discrepancies among the comments and make sure all stakeholders complete this process with the same understanding of the scope and objectives of the work ahead.

After you’ve finalized the document, you’d present it to the project sponsors for sign off so you can proceed with the planning and execution of the project.

Don’t forget to keep this document in a central location where everyone involved can access at all times.

Why Project Charter Is A Critical Component In Project Management

As you can see, a project charter is more than a document that just gets signed off and never sees the light of the day again.

As a project manager, your role is more than cracking the whip and pushing paper. Your team and your client depend on you to ensure the successful completion of a project – which means creating the desirable outcomes and measurable results that initiated the project in the first place.

A project charter is therefore a useful reference that project managers should go back to from time to time during the course of a project to validate timeline, assumptions, dependencies, and most importantly, ensure that the project is heading in the right direction to create deliverables that will help achieve the goals and objectives set forth in the document.