A Project Charter is a written description of a problem or opportunity, its value to the business, and a broad improvement goal expected from a team assigned to the project.
There are 14 key elements to a good project charter:
- Name: Identity for the project
- Timeline: Start and end date of the project
- Team: Key players in the project
- Target Process: Clear high level definition of the process under review
- Business Case: The justification to carry out the project
- Problem Statement: A clearly defined description of the problem or opportunity
- Financial Savings: Likely benefits translated into financial value
- Outcome: Description of the performance outcome in specific & measurable terms
- Scope: Scope of work and the boundaries
- Milestones: Key steps and dates to achieve goal
- Roles: Roles and responsibilities of key players
- Resource requirements: Manpower and budget requirements
- Potential Barriers and Risk: Likely barriers to success and risks
- Communication Plan: A plan or strategy to keep all stakeholders informed
A Business Case describes the value and need for a project. It should clearly articulate the benefits that will result from successful completion of the project. Benefits could be in terms of financial gains (revenue increase, cost reduction, cost avoidance), value to the customer (meeting customer expectations in a timely and accurate manner) or to support strategic initiatives like gaining market share or development of a new product. A good business case should address these questions:
- Why is this project worth doing?
- Why is it important to do now?
- What are the consequences of not doing this project?
- How does it fit with business initiatives and targets?
The scope describes the boundaries of the project. Boundaries can be the start and end points of a process, the range of products under review, the geographical locations involved or the type of system changes permissible. A clearly defined project scope helps the team remain focused on the tasks without drifting to areas that should not concern them. A good practice is to define clearly both the things that are ‘In-scope’ and ‘Out-scope’ for a project to remove any ambiguity. Scoping a project can sometimes be tricky. A scope that is too broadly defined can lead a team to propose solutions that are outside its influence or resource capability to implement. On the other hand, a scope that is too narrow may not result in significant benefits. A good project scope should address these questions:
- What is within scope and what is out of scope?
- What process will the team focus on?
- What are the start and end points of the target process?
- What resources are available to the team?
- What are the constraints must the team work under?
- What is the time commitment expected of team members?
- What will happen to our “regular jobs” while we are doing the project?
The problem statement is the key element in the project charter. A good problem statement must describe, not only what the problem (in the process, product or service) is, but provide some context of how it impacts the business and its customers. Some initial data collection may be required to estimate the magnitude of the problem. A good problem statement should contain five major elements
- A description of the issue, problem or opportunity. The problem described should be a known, verifiable or measurable fact, not a guess or an assumption
- Background on when and where the problem happens or is observed
- One or more measures indicating the magnitude or extent of the problem
- A description of the impact, consequences or threat presented by the problem
- An estimate on the magnitude of the problem
Poor Example: We have a very high incidence of delayed loan repayments
Good Example: In the last 12 months (when) 25% of our clients were late, over 60 days paying their loan installments. The current rate of late payments is up from 15% in 1999 and represents 28% of our outstanding receivables. This negatively affects our operating capital (impact or consequence).
The performance outcome articulates the project objective(s) in a specific and measurable manner. The objective could be in the form of process improvement, product development or implementation of a system. A good outcome should consist of 3 components, the metric (measurement), the baseline (current performance) and goal (target performance).
Bad Example: Poor To reduce cycle time
Good Example: To reduce the cycle time of application approval (from application date to offer), from 21 days to 7 days by March 08.
Milestones are accomplishments, results, deliverables or key events of a project. They are major checkpoints of the project and have planned dates of completion in a project plan. It is used to measure the project progress and intermediary milestones indicate whether a project is on track to finish as planned. The milestones in the project charter are mainly for the purpose of communication and commitment to the stakeholders on timely delivery of the project. A detailed plan of the project should be established using proper project management tools like the Gantt chart or PERT chart.
Project Team Structure
The structure of a project team must be designed to support and promote project success. While it is important to have a team that possesses the necessary skills and knowledge for the project, the relationship among the key players are equally important. At a higher level, there are three groups of people involved in a project, the sponsor, the agent and the targets. Their relationship must be carefully managed to ensure smooth project progress.