Q 443. Project Charter is considered as the single most important document of the project? Why is it so important? What are the risks if we do not have one for a project? (preference would be given to the answer highlighting the maximum number of valid risks)

 

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Project Charter also known as Project Initiation Document  is a high level document created at the starting phase of the project and referred throughout the project life cycle. This document is the foundation of the project basis which the project is selected prioritized and evolves as it gives information on all aspects of the Project starting from simple information such as the Project Title , the Purpose , Main objectives, Vision for this project to  detailed information on the Cost Benefit Analysis of the Project. The PC provides all important aspects of the Project in a crisp format that can be easily understood, reviewed and approved by the stakeholders. Thus, a strong Project Charter will help business and management stakeholders take faster and positive decisions. It also supports planning and goal setting realistic to be achieved by Team Members to complete the Project successfully.
 

1. Helps in On time decision-making or Reduce Risk of delayed decision making : Many times, with multiple projects in pipeline, securing management and sponsor commitment and sign off projects becomes difficult.  PO defines clarity on Project sponsor and campion to signoff the project and savings, without a PO the team ends up with risk of no one to champion for the project and responsibility gets passed around

 

2. Challenge in Expectation Setting and Management. Without mutual agreement on charter, there may be frequent disagreements and disruptions from stakeholders on project object goal etc and with multiple stakeholders or change in management etc there could be differing intentions, opinions and understanding of the project's outcomes.

 

3. Failure Risk. Without signoff statement of a project's goals, team lacks objective to peruse and hence more prone to fail. The project charter includes the business case and other additions, which serves as a constant reminder of the project's vision, mission and critical success factors.

 

4. Lack of authority. The project manager will be stuck with problems from lack of authority to spend the budget, the ability to acquire and assign resources, and a authority needed to make day-to-day decisions and actions. This will also make it harder for him to attract good suppliers, vendors, and resources to work on the project. 

5. Lack of Vision leading to Team demotivation. Without signoff PC there is lack of clarity of objective, vision and sponsorship and this can create a culture of dissatisfaction and apathy within the existing project team due to confusion and change in plan by creating a collective vision 

 

6. Subject to scrutiny, delay and bureaucracy. The project may end up with many changes, deviations, which increase the risk of not delivering and reaching the projects goal and eventually become a financial burden to the organization.

7. Risk of diminished value and importance of a project, if its purpose and strategic benefit are not documented, agreed and formally recognize

The project chart creation therefor is a best practice that gives the team clarity on the objective of the project being executed and clear vision on execution and helps eliminate many problems and issues down the line, it saves the team from multiple risks in project execution.

Project Charter is considered as very important document for every project managers because of the following reasons

1. It Gives management the Business value of the proposal and can check the project objectives are aligned with the strategy of the organization

2. It Helps project manager to discuss with management for utilizing resources to accomplish the objectives. So It accelerates the project execution 

3. It can help to understand the scope of the tasks to be completed. So helps to reduce/eliminate the NVA so that project can be completed within agreed time frame

4. Its makes easier to track the project status as the timelines are clearly mentioned in the Charter

5. It will be more useful for the organization for future reference in case if the same project needs to be replicated in other Business units. So Time can be saved since all the framework already defined

 

Lets see what will be the risks of not having one in the project

1. Risk of project failure will be very high because of not having a clear vision

2. Difficult to convince the management because of not projecting the objectives/Scope in a proper Way

3. May leads to More NVA in the project execution which might lead to non completion by deadline

4. Difficult for the team members itself to understand the progress of the project as no goals are defined initially. Morale of team members will go down and leads to reduced interest and contribution

5. Sometimes leads to select a project different than organizational strategy which creates loss of trust from management on six sigma initiatives

 

Hence, Project charter is the most important document in Define phase of the project. As it gives clear strategy, vision and outcomes for the selected project.

 

Project charter is a formal agreement which summarizes the project objective and authorization of it marks as the first step towards project execution. It is a structured document stating defined problem statement, business benefits with specific measurable metrics with targets, team members, sponsors along with detailed plan of the different phases of implementation. The charter helps in defining the scope of the project with identified linkages and stakeholders alignment which are critical for the success of the project.

 

The absence of a project charter can lead to many risks such as

• no clear quantified business value and identified scope leading to organization lose money, time and ineffective resource utilization
• lack of commitment and planning can occur if no defined project implementation phase are stated and identified to be executed. This could lead to realization of ineffective project execution or outcome at the end of project or unnecessary delay
• bottleneck in implementation unless stakeholder's are identified and confirmed buy-in at beginning of the project; and further
• identification and definition of right quantifiable metrics is critical to assess the real impact upon implementation as otherwise could lead to realization of not-so-significant outcome on business value/need causing wastage of resources and money

The success of the project can be indicated by how well defined project charter is. A clear business goal stated with precise success indicators & boundaries and stakeholders alliance can provide clarity on exact business value of the project and business worth; and help to assess challenges, resources, support required for the successful delivery of the project.

Why Project Charter is Important?

The Project Charter is a written document signed off with the project team and the project sponsor. It is also called the project scope statement or the sponsor document and includes the justification (opportunity statement, pain points, problem areas), the business case (financial benefits), the goal statement (success criteria, deliverables based on SMART objectives) the scope (in scope and out of scope), the team and the project plan.

It is the basis on which future decisions are made. It is a document based on which the project team, can communicate with stakeholders to take the project forward. It authorizes the project team to use the organizational resources to take on the Project. It basically transfers the project from the champion to the project team.

The project charter is not pulled out of thin air or without much thought. Considerable time is spent on its creation. This would include the conduct of a feasibility analysis to determine if it is a valid project, examine the project metrices, the financial benefits, propose a realistic budget, the Work Breakdown Structures, a feasible project schedule, Gantt charts, network diagrams, deadlines, check availability of internally available resources, determine ways on how to measure the success of the project and monitor satisfaction with the project progress.

The Project Charter is also called the sponsor document. It is like a contract between the project sponsors (higher management) and the project team, wherein the expectations from the project sponsors and the project team are elucidated so that there is uniformity in understanding the project.

It is a key document which gives the scope and purpose of the project at a high level.

Risks of not having a Project Charter are

No clarity of what is expected of the team

No focus of the team

Team will not be aligned as per the priorities

No commitment of resources

Without a project charter, the business case would not exist. The business case describes the big Y, the very reason for taking up the project.

Without a project charter, the team will not know the nature of the problem, where it is appearing or its size.

The team will not know the goal, what is to be accomplished by the end of the project, a measurable target, of a completion date.

Without a goal statement, the team will not know what the goal is going to look like.

Without the project charter, the team will not know the boundaries of the project and the key parameters that are included in the project

The Project Plan lays down the milestones, of each phase. It lays down the who, what, when, where, how, and how much of the resources in terms of people, money, etc that will be needed.

The Project charter gives the details of the team members available. Hence without knowing who is on the project team, their skills, capabilities, the project will be difficult to manage

Taking on a project without a project charter is like randomly shooting an arrow and then drawing the target around it.

It is like a pilot without a flight plan

References

https://blog.masterofproject.com/six-sigma-project-charter/#:~:text=The%20Six%20Sigma%20project%20charter%20essentially%20is%20a,defines%20the%20scope%20and%20purpose%20of%20any%20project.

Project Charter is the launchpad of a project and a typical project doesn’t move ahead without it. It’s the first artifact that needs to be drafted so that projects can be prioritized and establish resource loading. It is living document, as the project matures typically 10-15% of the elements are further defined or refined.

The importance lies in its key elements which covers the below:

• Business Case: explains why something needs to be done “now”
• Opportunity Statement or Problem Statement: explains the opportunity or the defect that need to be addressed and benefits associated with such improvement
• Goal Statement: defines the quantified objective of the project and by when
• Project Scope: defines the project boundaries
• Project Plan: phase wise timeline for the project to be completed
• Team Selection: Selected team members are assigned responsibilities

 

Now if this charter is not created for a project and a project is initiated by a Project Lead, there would be several risks as outlined below:

1. There would be risk of management focus on the objectives and outcomes if charter is not created and signed off.
2. Rationale for the project would be questionable eventually
3. Strategic sense to address the problem may not tie up and loose traction
4. There can be risk of the project becoming counter-productive if relevant business issue is not selected and the charter is absent
5. Significance of the problem may itself be low and without a charter there would be risk of agreement of the project need
6. Cost of project may be higher than targeted benefits and questioned later if a charter is absent
7. Risk of absence of Charter with defined timelines may result in low traction and prolong overall timelines
8. Project scope creep may arise, what’s included and what’s excluded should be clear and present on the charter
9. Resources may be unavailable or inadequately available if right resourcing is not done and mentioned in the Charter. The resource load should be clearly communicated with Stakeholder and Champion for sign off.
10. We may also run a risk of “inappropriate” resource for the project which may impact all deliverables
11. We would also run a risk in delayed decisions of solution implementation due to absence of charter
12. There can be a potential regulatory issue if a project is headed in a direction the charter for which is not agreed by the management and the business priority happens to be regulatory issues
13. There can be delays which may occur due to absence of an agreed charter, the consequences can lead to penalties/legal actions. Management may single out project lead for not documenting and obtaining sign-off of a Project Charter
14. The absence of charter may lead of unavailability of information when needed, thus impacting not just the timelines but accuracy of analysis
15. There can be serious data privacy issues if a signed off Charter is absent; there can be instances of use of data sets that are confidential and unauthorized access/use may lead to contractual breaches in case of client-vendor business model
16. There can be a risk of project duplication if a charter is not created and signed off.
17. Further to the above, if project is run without Charter, there is a risk of “no- recognition” for the project itself and team, despite following the right rigor and analysis

 

While all answers beautifully explain the merits of a project charter and risks of not having one, the preference was given to the answer which highlights the maximum number of risks. Hence, the answer from Sanchita Roy has been marked as the winning answer.