What Is a Project Charter in Project Management?

Project Charter

Project management is a large domain which includes several segments for managing a project from its initiation to its close out phase, and project charter is an essential segment of the project initiation phase. Moreover, in project management, a project manager is regarded as an owner of the project as he or she is responsible for planning, controlling, monitoring, leading, and managing the entire project lifecycle. 

Project management is a fascinating field if you have a keen interest in managing and leading different organizational projects. There is so much more to project management than just managing projects from its start to close out phases. And this is where a project charter may sound like a compelling or the least talked about term. 

In this article, we have covered everything you need to know about a project charter in project management. Read on to know more.

What Is a Project Charter?

An essential document that lays down all the crucial aspects of a project in project management is termed as a project charter. Project charter documents the project purpose, objectives, risks, resources, stakeholders, etc. 

Before initiating the project, a project charter is said to be a contract between the sponsors of the project and the project manager. It shows the overall picture of the project and what are the expectations. 

To define the purpose of a project charter, it serves the following main functions:

  • Defining the project goals, objectives, and the purpose of project work or tasks. 
  • It creates a better understanding of the shared goals, objectives, and resources required for the project before a project manager further defines a project plan in depth. 
  • It allows the project manager to present all of the above to the stakeholders for investments, and get authorization for a go-ahead. 

However, a project charter is not just part of the initiation phase, a project manager can always refer to the project charter to realign the project with the project goals and objectives as set by the project sponsors or key stakeholders. 

How does the PMBOK Guide state the Project Charter?

The PMBOK Guide states that a project charter is a document created by the project sponsors or initiators to formally authorize the existence and execution of the project and authorizes the project owner to utilize the organizational resources for implementing them in the project activities. 

PMBOK also lists down specific details that a project charter must offer, they are as follows:

  • Business requirements
  • Business needs
  • Summary schedule 
  • Assumptions and constraints
  • Business case, which also includes ROI

The PMBOK Guide does not specify any document format for the project charter. But the charter often is created in the form of memos, e-mail, or free form. Moreover, a project charter is not always a single document. It can be multiple documents as one document may authorize the project goals and objectives and may include the references for the other documents that list down the resources, requirements, etc. A collection of documents that contains all the information regarding the project authorization and other related details can be termed as a project charter.

What’s Included In a Project Charter?

A project charter defines the objectives, plans, and stakeholders of the project. However, it does not delve deep into the details. To get a clear understanding of what’s included in a project charter, refer to the following:

Business Case

A business case is included in the project charter, which defines and answers the following questions:

  • Why is the team proposing the project?
  • How will the specific project help the business in terms of growth and help end-users?
  • What is the expected ROI from the proposed project?

Scope and Deliverables

The project charter includes the project scope and the deliverables that the project team is planning to deliver within the specified time. Setting and laying down clear boundaries help the team members understand and stay aligned to the project scope. 

Objectives

A project charter also lays down the project objectives, which are in the form of SMART: specific, measurable, achievable, realistic, and time-bound. 

Resource Requirements 

The project charter lists down the resources needed by the team for completing and executing all the project activities. Resources may refer to funds, materials, equipment, or other investments. 

Milestone Plan and Timeline

The project charter includes a project timeline with milestones for each deliverable. Usually, project managers use software or tools to keep a track of project deadlines and accountability. 

Cost Estimate

Cost estimation is an important component included in the project charter as it defines the total cost estimation for the proposed project. This cost estimation may fluctuate as the project progresses, but setting an initial budget helps stakeholders, the manager, and the project team stay aligned. 

Risks and Issues

Risks and issues that could arise while taking up a project are essential as they can help the project manager and the team to prepare in advance for the anticipated project risks. 

Dependencies

The project charter includes the project dependencies. It refers to certain project tasks that are dependent on the completion of others. Outlining a sequence of tasks helps the project team develop an effective and efficient project development plan.

Now, you must be wondering how to write a project charter? Then, in that case, a project charter is a straightforward document and does not involve a complex format. A project charter should be easy to read without any jargon or complicated terminology as it will allow everyone to interpret the project charter correctly to understand the aim of the project.

What are the Benefits of a Project Charter?

There are several benefits of creating a project charter as it lays out the business case for the proposed project. It means that the project sponsor conveys how the project is going to contribute to the company’s success and have an overall great impact on the business objectives. Here are a few benefits of the project charter:

Establishing Project Expectations

With the help of a project charter, it becomes easy to establish the project expectations and what the bigger picture of the project entails. Whenever there are certain doubts among the project team, one can circle back to the project charter for guidance and reference. 

Proposing the Project to Stakeholders

With the project charter in hand, it can serve as an internal marketing document for stakeholders, or other executives for justifying the cost estimation, securing resources, or investments.  

Defines the Project’s Purpose

Another important benefit of a project charter is that it lays down the initial purpose of proposing a particular project. How the project is going to impact the business and whether it is beneficial for the end-users.

How does a Project Charter support the Project Manager?

A project charter is considered an essential document for the success of the project. It transforms agreements and facts into a detailed document. A project charter supports a project manager in understanding his or her authority when it comes to project execution and taking crucial project decisions. 

Moreover, the project charter helps the project managers and the stakeholders understand the accomplishments of the respective project. The project charter helps the manager by defining the success of the project, offers timelines and strict deadlines, and also provides details regarding the anticipated project risks and the budgets allocated for the overall execution. 

Furthermore, a project manager may not need to write the charter, but in some cases, if the project sponsor does not provide a project charter, the responsibility of creating one falls back to the project manager. A charter has to be a simple formatted document, which is short and straightforward as it will ultimately help the project manager to give it a central role in the organizational project. 

You may also like our latest blog related to Principles of Project Management, click on the link, and explore other areas of PMP.

Conclusion

A good project charter helps in defining the project direction and can set a stage for the entire project lifecycle. It is important for the project sponsors or initiators to take their time to carefully draft the project charter along with the project management team as it will ultimately be used as a guiding document by the project manager and keeps the entire project management team aligned to the common project objective and vision. Furthermore, a good project charter will also enable stakeholders’ confidence in your project.

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