Project Charter Anatomy

Here, we are going to discuss about main body of the Project Charter, Introduction pages, Index etc are common components and need not be discussed here.

You’ll find many versions for Project Charter and none of these versions are wrong neither they are absolutely fit to be used as is in any Project. Reason! Whenever we are talking about any standard or a generic document, it is based on acceptable practices. However, your project is always unique and so are its requirements.

It is very easy to search a Project Charter Template and use it but more important is to understand whether it is applicable to your project or not.  Here we’ll discuss about the various components of Project Charter so that you can take an informed decision and develop your own Project Charter template for your project.

EXECUTIVE SUMMARY

Every project has a reason behind its selection.  It is supposed to develop some product or service, fulfill some requirement or solve a problem.

Executive summary in the Project Charter provides high level information of the cause for which the project is selected, basic background, expectations and justification.

PROJECT JUSTIFICATION

This is one of the major purposes of the Project Charter.  Here we get the details of Project Justification.  It may include below subsections:

                

Business Case: 

It clarifies the need of the Project and intended effect.  Sometimes, the business case itself may be a large and may be developed as a separate document.

Business Objectives: 

Here the project is aligned with the Organizational goals/Objectives.  Sometimes, Business objective is included in Business case. In such cases, Business Objective section may not be required.

PROJECT DESCRIPTION

This section provides high level information about the project.  May include-

• Name of the Project.
• How it will be done.
• High level criteria of Project completion.

It may have below subsections: 

OBJECTIVE AND SUCCESS CRITERIA: 

This is very important section as without clear objective and success criteria, a project cannot be completed to the satisfaction.  As in any other case, the objective or Goal should be SMART:

S: Specific (no vague requirement like “A good Solution”)

M: Measurable (Rather than writing a tall pillar, one should clearly write 5 mtr tall pillar)

A: Achievable (Running a project to clean a river in 1 day may not be an achievable target)

R: Realistic ( The Project target should not be an unrealistic target like getting 105 marks out of 100 marks exam)

T: Time-Bound (Time target is very important else the project will keep running and loose its value at the end.) 

REQUIREMENTS: 

Mentions all High level Project Requirements. Remember, this is not a Scope document.  High level requirements come up from high level stakeholders like Project Sponsor, Prme Customer etc.

CONSTRAINTS: 

Scope, Time, Cost, Quality and Human Resources are five major constraints.  Constraints related to each must be clearly documented here.

ASSUMPTIONS:   

Every Project to run, we take some assumption.  These should be documented here.  Ex-

1.  Resources assigned to the Project shall be available till end of the Project.
2.  Organizational support is available for the project. Etc… 

RISKS:

Every project has some risks and opportunities.  Initial High level risks and their responses must be mentioned here.  Further, it’ll be documented in Risk Register.

PROJECT DELIVERABLE: 

List of Deliverable are documented here. 

SUMMARY MILESTONE SCHEDULE:

Detailed Project Plan is not expected here because planning starts once Charter is signed.  Here we document only milestone schedule. Like-

• Project Start Date
• Planning completion and execution Kick-off date.
• UAT completion date.
• Final Implementation
• Closure deadline 

SUMMARY BUDGET:

This section of the Project Charter should provide brief information about budget.  Project Budget/ Cost is majorly divided into below parts-

•  Fixed cost or Capital Cost
•  Taxes
•  Variable Cost or Labor cost
•  Others
•  Gross Margin (in Projects Run for Client) 

APPROVALS:

Authorized approvers for sign-off of deliverables and Project completion are defined and assigned here. 

PROJECT MANAGER:

This is another very important section of Project Charter.  This section documents Name, responsibility and authority levels of the project manager.  This is the section that authorizes the Project Manager to work on the project.  Expectations from Project Manager are also defined here.

Change Management

Don’t blame anyone or your planning if you encounter a change during your project.  It is bound to happen and that is why Change Management Plan is an integral part of your Project management Plan.

Changes may come-up at any level and from anywhere-

• You may receive a change request from client for making some changes in deliverable. Or
• Your quality department may come up with some observation and ask for a change. Or
• Analysis of work performance information may reveal the need of change or
• You may come to know that some of the process which is already defined but team is not following that and you need some corrective action and so on…

 The important thing is to have clear plan for handling these changes.  Whenever a change comes, it is definitely going to have some impact on your constraints. For example-

If a bug is identified at the later stage of the project, it may lead to more cost to fix that.  It may also lead to time overrun.

What if you are halfway done and there is a scope change?  These are very crucial and lack of proper planning and process for handling changes may derail the entire project.

Some way or other, change requests arise when you or other stakeholders are monitoring of the Project work.

Below is the normal flow for handling a change request-

As soon as a change requirement is identified, a change request is raised.  The change request clearly mentions what change is exactly required.

At second step, this change is sent to Change Control board (CCB).  CCB analyzes the change requirement on the basis of multiple criteria like-

• Cost of implementing the change
• Cost and benefit analysis
• Time and resources needed for the change and their availability.
• Business impact etc..

There may be many other factors on basis of which, CCB takes the decision on the change.  After discussion in CCB, the change may get approved or rejected.  In case of approval, stakeholders are informed and change is sent for implementation.  If change is rejected, stakeholders are informed.  You might have observed, informing stakeholders is important whether the change is approved or rejected.

Preventive Action and Corrective Action : 

There are two very important terms called as corrective action and preventive action collectively called CAPA understanding which is very important.

1. When you identify a problem and implement changes to resolve that problem, it is a corrective action.
2. If identify a problem that may occur in future and take action (change) to ensure that the problem doesn’t occur, it is preventive action.

10 Steps of Project Initiation

PMI calls it Initiating Process Group and includes two processes called as Develop Project Charter and Identify stakeholder.  This you can say as the base of project and remember that a tiny mistake here is going to have much bigger impact on the project in future.

In practice, a Project initiation starts much before writing the Project Charter and we can conclude the entire process into 10 steps.  In my upcoming posts, I'll explain all Process Groups in similar detailed steps.

Step-1:

Life of a project starts with a Project Initiator or sponsor who comes up with a business case or an agreement and the Project Statement of Work.

Above statement includes two very critical terms i.e.. Project Sponsor, and Business Case and before we move ahead, it is important to understand these terms.

Project sponsor is the person who connects Project Team with the Organizations Management.  From the organization's perspective, the Project Sponsor aligns project with Organization's Goals and from Project Team's perspective, Project Sponsor helps Project Manager to get support from Organization.

A Business case is a very powerful document and it really decides whether the Project will be selected for execution or not. It necessarily includes (but not limited to this)-

1. Overview of the Project.
2. Why the Project required.
3. What are the benefits of this Project.
4. Risk Analysis

Step-2:

Apart from the initial information about project (as above) there are two more important and deciding factor which are-

Standard Processes, Proceedures, Information and learning from old projects, and Norms of the organization.  In PMBOK terms, this is called Organizational Process Assets (OPA) &
The External environment (it may be Geographical, Legal, Political, competitions) in which the organization is operating.  PMBOK calls it Enterprise Environmental Factor.

These two things are many a time a deciding factor for the project in an organization.  Not just for deciding the project selection OPA and EEF plays role in almost every decision in the life of project.

Step-3:

Based on the inputs from stage 1 and 2, project is selected for execution.  Project selection is done by a project selection committee or some other competent authority who evaluates all available project options and select a project which is best as per the "Project Selection Criteria".

Step-4:

Now that Project has been selected, next most important task is to assign "Project Manager" to the Project. Hence, your project as PM starts right from the beginning of the project.

Step-5:

As a project manager, you are ultimately responsible for the success of project and hence you should look at two broad things-

a. The organization's system, processes, procedures, information from historical projects to to gain knowledge about project has to be managed under specific circumstances.

b. Look at Project statement of work to decide whether project should be managed in single phase or it is large enough and can be managed more effectively by dividing into phases.  Whatever be the case, you should finalize the approach with strong justifications and take consensus from the sponsor.

Step-6:

Wow!!! so you have decided the approach and ready to dive deeper into the project.  Get deep understanding of the business case for which  project has been selected.  This is quite important step and mostly missed by inexperienced PMs.  The business case helps you to understand how project fits into the organizational / strategic goals of the organization.  While running the project, this information keeps you focused towards the organization's objective which in turns help to get support from senior management for the project.

Step-7:

After having understood the Business case, you'll look at project statement of work to come up with-

a. The initial requirements as per statement.
b. Initial assumptions and possible risks.
c. Major constraints.

Step-8:

At previous step we acquired the knowledge about what has to be delivered and under what constraints.

This is the high time to evaluate whether desired result under given circumstances is possible or not.  This is called feasibility analysis and is done at two levels-

a. The project feasibility analysis.
b. Product feasibility analysis.

Step-9:

With feasibility analysis done, you will have below information in hand-

a. Project Statement of Work.
b. Business Case.
c. Initial Requirements.
d. Major Constraints.
e. Risks and Assumptions.
f. Feasibility
g. Measurable Project Objectives (being measurable is must else you won't be able to tell when your Project Objectives are met).
h. The Project Manager

All above details shall be consolidated into one document called Project Charter which is signed by Sponsor.

Project Charter is first authoritative formal document which describes project objectives and authorize Project Manager to use organization's resources to run the project.

Step-10:

The next important task or the very first task after being an authorized Project Manager is to identify people you may be concerned or impacted (Positively or Negatively) with the project.  We call them stakeholders.  The stakeholders which are positively concerned with the project can be a good support for the project and those who are negatively concerned can be a threat to the project.  In either case, knowing your stakeholders and their interest (positive or negative) and their ability to influence the project is beneficial.  Once you have these information, you can plan a strategy to handle them.

This strategy we call Stakeholder Management Strategy.  The stakeholders details, their interest, ability to influence the project and plan to handle them is documented in "Stakeholder Register".

Although developing stakeholder management strategy is a planning task, it is included into "Initiating Process Group" of PMBOK.

With this we are done with initiation of the project.  Before we start with planning let's look once again what all major tasks we did in project initiation.

A. Pre-Initiation:

Develop Project Statement of Work and Business Case, evaluation of project and final selection, selection of project manager, deciding to run project in single phase or multiple phases, acquire knowledge of organizational processes and constraints, know measurable objectives,

B. Initiation:

Develop & sign-off Project Charter, Know your stakeholders and plan how to manage them.

Earned Value Management

I have seen many PMP aspirants and practising Project Managers struggling with Earned Value Management or Earned Value Analysis.  In this blog, I’ll discuss all aspects of Earned Value Management to make you comfortable on this topic.

Consider you are travelling from Delhi to Mumbai by your own car with a rented driver.  It’s a long journey and you must be having an idea how long it is going to take, what route you will take, how much fuel you are going to burn (resource) etc. So once you have a fair idea and basic plan about your journey and you have taken required resources with you, you are good to start your journey.

After spending some time on the road, wouldn't you like to know-

•        How much you have travelled till now and how long it took?
•        Is it exactly what you had planned (e.g. 90 KM in first 2 hours) or there is some deviation?
•        How much fuel you have burnt and how much was expected?
•        How much other resources like water, snacks etc has been used and if resources are being used more quickly or it is as per plan etc…

Knowing above is crucial so that you can take corrective actions (like increasing your speed, or running in economy mode) prior to the overall delay of you task.  If you don’t monitor these crucial parameters, you may still complete your journey but may end up burning more fuel (and hence more cost) or reach late to your destination. You should also understand that each parameter has a dependency and effect on other constraints. For example, if you are running slower than what you had planned and decides to run on full throttle, your are going to burn more fuel and add more risk (by increasing speed) hence those things should also be considered which planning corrective action.

For simple tasks like above, calculating these parameters is quite easier but in complex projects, knowing your projects status, keeping track taking corrective action and monitoring performances are lot more crucial for the success of a project and takes huge effort as well as planning.

The three most crucial constraints of a project are Scope, Time and Cost. Earned Value Management provides methodology to integrate the management of these constraints. With EVM, you can check if your project is running behind schedule or is over budgeted.  You can find where the actual problem is, how critical the problem is and what are the alternatives available to take the project back on track.

So, with above discussion, we can conclude that EVM is of importance in Planning processes, Integration of management of Scope, time and cost, Monitoring and Controlling functions of Project Management.

The overall practice actually makes a close loop similar to PDCA (plan-do-check-act) for improvement.

 

Scope, Time and Cost are three different parameters, each having its own unit which each has dependency and impact on others. Hence for effective measurement and control, these three should be converted to single unit of measurement.  EVM takes the same concept and coverts everything into money.

Performance Measurement

There are three important terms of EVM called as Planned Value, Earned Value and Actual cost.

Let’s take the example of our Delhi to Mumbai journey again.  Let’s assume the distance between 2 cities around 1500 KM. Mileage of our car around 20 KMPL and Price of diesel around 40 Rs/L.  Drivers charges Rs.  200 per hour. With average speed of 50 Kmph, if we plan to reach Mumbai in 30 Hours, the total cost of run would be sum of cost of fuel and cost of driver.  This comes around Rs 9000.

Let’s check our status after running for 6 hours on road.  Suppose we have completed a distance of 290 KM and burnt 16 L of Fuel.

Total running time was planned to be 30 hour costing Rs 9000. Hence per hour cost will be Rs. 300.  Similarly, 1500 KM distance has to be covered in Rs 9000 hence per KM cost is Rs.6.

Hence after running for 6 hours, we should have completed 300 KM (as per schedule) which would cost Rs300x6 i.e. Rs 1800.  We call it Planned Value.

In actual, we have completed a distance of 290 KM which amount to Rs. 1740 (290 (km)x6 (rs/km)).  We call it Earned Value.

Now that we have burnt 15 Ltr. which amount to fuel cost Rs. 640 and took 6 hours which amount to drivers cost of Rs. 1200. Hence total expenditure is Rs. 1840.  We call this amount as Actual Cost.

Hence: Planned value is the cost of task which was planned to be completed when at the check-point also called as Budgeted Cost of Work Scheduled (BCWS).

Earned Value is the cost of task actually completed as per planned amounts also called as Budget Cost of Work Performed (BCWP).

And Actual cost is actual cost incurred also known as Actual Cost of Work Performed (ACWP).

Now let us see what the significance of above calculations is.

Once we have calculated the measurement factors, we are ready to answer few very important questions-

•      Where are we w.r.t. Cost and Schedule? Are we running ahead or Behind?  Answer is calculation of variances called as Cost Variance and Schedule Variance.
•       How efficient are we in terms of Cost and Schedule?  This we calculate in term of Performance index known as Cost Performance Index and Schedule Performance Index.
•       What is going to be the final status of project considering current performance? When actually the task will complete (Time Estimate at Completion). How much the project will actually cost (Estimate at completion). How efficiently the remaining resource needs to be used (TCPI) and so on…

Calculation of Variances

Schedule Variance: Schedule Variance tells us if we are ahead of time or behind time.

SV= EV-PV

In our example

SV=1740-1800=-60

ð  We are running behind Schedule.

Cost variance: CV tell us if project is running over budget or under budget.

CV= EV-AC

In our example

CV= 1740-1840=-100

ð  We are running over budget

Calculation of Performance Index

Now as we know that we are running behind schedule and are over budgeted, we need to know how efficient we are so that we can understand how critical these variances are.

Schedule Performance Index:

SPI= EV/PV

In our example

SPI=1740/1800= 0.97

Although we are running behind schedule, we are very close to one and hence the issue is not that critical.

Cost Performance Index:

CPI=EV/AC

In our example

CPI=1740/1840= 0.94

Hence Cost factor seems critical than Schedule issues and needs more focus in terms of corrective action.

Let us assume that we took some corrective action by adjusting our cars speed and taking smoother road re assessed performance after 10 Hours.

Below is the data at 10^th Hour:

Total Distance completed: 510 KM

Fuel consumed: 31 Ltr.  Let us calculate the performance now:

EV= 510x6= 3060

PV=10x300=3000

AC= (10x200)+ 31x40= 2000+1240= 3240

SV= 3060-3000= + 60

ð  Running ahead of Schedule

CV= 3060-3240= -180

ð  Still Over budgeted.

SPI= 3060/3000 = 1.02

CPI= 3060/3240= .94

ð  By corrective actions, we have been able to improve Schedule performance but cost performance still remains same.

Basis on above information, we can dig down the cause of cost performance issue. The cost depends upon the cost of driver and fuel efficiency of car.  Cost of Driver is fixed cost and you cannot change.  Fuel efficiency can be varied by varying driving style and road conditions but in our case this has not helped much. Hence we should re look at our plan and forecast how much it is actually going to cost, How long it is going to take and what performance is needed if we want to complete as per plan.

Forecasting

Time Estimate at completion EAC(t) :  It tell us When the project actually complete as per current performance.

EAC(t)= (BAC/SPI)/(BAC/Time Units) = time units/SPI=30/1.02=29.4 Hours

ð  We are expecting to complete journey in 29.4 Hours.

To Complete Performance Index (TCPI)

It gives the required performance to complete the project within budget.

TCPI= (BAC-EV)/(BAC-AC)

ð  TCPI= (9000-3060)/(9000-3240)=5940/5760= 1.03

•  We need a performance improvement from CPI 0.94 to CPI 1.03

Estimate at Completion (EAC)

It tell us how much the project will cost if current trend continues

EAC= BAC/CPI=9000/.94= 9574.5

Variance at Completion

VAC= BAC-EAC= -574.5 (over budget)

Estimate to Complete (ETC)

ETC= EAC-AC=9574.5-3240= 6334.5

Performance Table

Below table will help you to immediately tell the status of project based on SV, CV, SPI and CVI.

	SV>0 SPI>1	SV=0 SPI=1	SV<0 SPI<1
CV>0 CPI>1	Ahead of Schedule Under Budget	On Schedule Under Budget	Behind Schedule Under Budget
CV=0 CPI=1	Ahead of Schedule On Budget	On Schedule On Budget	Behind Schedule On Budget
CV<0 CPI<1	Ahead of Schedule Over Budget	On Schedule Over Budget	Behind Schedule Over Budget