In my last article on fundamentals of project management I had mentioned that project charter is the important document at the end of project Initiating Phase. This document is very critical for the successful, within budget and timely completion of your project. In other words, we can say this is just like a foundation of large building. If foundation is not strong your building can collapse. So, in this article we will go into the details of a typical Project Charter. We will see how to prepare a perfect project charter and what are the various information which we need to cover in it.
Table of Contents
What is a Project Charter?
So, in simple words we can say a Project Charter is a written document and which is an agreement between management and project team, about the project scope of work and goal. This project can be a new plant project, existing plant de-bottlenecking, process improvement initiative, plant maintenance work, new product development or plant digital transformation campaign, etc. Below are the objectives of any project charter, whether it is a big or small project.
- This clarifies clearly what and by when is expected from the project team. Describes clear-cut roles and responsibilities to avoid any confusions.
- Project charter keeps the team focused as everything is clearly written and not a verbal statement.
- In an organization there can be many projects and various teams at any point of time. So, project charter helps the various teams aligned with organizational priorities. Which can be of their strategic importance also.
Various Sections of a Typical Project Charter
Let us take a sample project charter as below for our discussion. Now we will discuss each section of this charter one by one.
Title Section
In this we can mention the name of project, for example like “Project Charter for Reducing Steam Norm”. We can mention various other details like, location of the project, name of the business unit and project number for documentation purpose.
Project Description & Scope
This section we use to elaborate the project details which includes the name of your project and other details. Some of examples can be like, “New Plant Project for 100 TPD Distillery”, “Steam Norm Reduction Project for Solvent Recovery Column”, “ERP Implementation Project”, etc. In other words, here we are writing the name of our project which will clearly tells us that this project charter is for which project. And also, we explain scope of work clearly, which refers to the boundaries of the project.
Project scope outlines the area of team’s activity. You should answer to write down the project scope effectively:
- What are the boundaries of the process we are going to improve?
- List of key process which team will focus upon?
- List of resources available and required?
- Various constraints under which team will work?
- Expected time commitment of team members?
Business Case
Here we describe the strategic reasons to take up this project. You need to explain why this project is important strategically for the organization. Business case tell us about the product or service quality, cost or delivery with financial justification.
So, you should answer below questions in the project charter when you are writing a business case for your project:
- Why is this project worth doing for your organization?
- Why organization should take up this project now?
- What are the possible consequences, if your organization is not going for this project?
- How this project strategically fits for business goals?
For your understanding we can write a business case for an example of, “Steam Norm Reduction for Solvent Recovery Column” as below:
“There is a stiff competition in the market. Customers are looking for good quality product at lower price.
This we can achieve by implementing out of the box improvements to our processes. As steam is the major contributor in variable cost of the product. Therefore, a reduction in steam consumption norm in solvent recovery plant will bring down the utility norm and subsequently reduce the manufacturing cost of the product. This variable cost reduction will enable the business to be more cost competitive in current market scenario. Also, organization can acquire larger market share.”
Please note here we have not mentioned any numbers, business case only explains qualitative strategic reasoning.
Problem Statement
A problem statement tells us about the current business scenario, what is wrong with the business. Moreover, what are the opportunity losses in term of the market share. We describe for how long we are facing this problem and telling actual losses incurred till date. In other words, we are explaining here gravity of the problem and answering the question, “How big this problem is?”.
This section will explain the issue that team wants to improve, like capacity enhancement, variable cost reduction, batch cycle time reduction, etc. You should make a note, in problem statement our focus is on problem only and we are not concluding anything here.
So, we can write a problem statement for above example, which we considered in business case example:
“In solvent recovery plant after analysing last 12 months data we found average steam consumption norm is very high at 3.55 MT/MT. While benchmarking norm is 2.50 MT/MT, therefore @ 20000TPA production capacity and @1600 Rs/Ton steam cost, organization incurred loss of (1.05*20000*1600) around Rs. 336.0 lacs in last 12 months.”
So, seeing business case as a business head can decide whether he will sponsor or approve the project or not. Making an impactful business case will help you to get approval for your project quickly.
Goal Statement
Next section of your project section is Goal Statement. Here we mention what is the target value or performance we are trying to achieve in present business scenario. This can be like, plant capacity enhancement, raw material and utility norm reduction, reduction in poor quality, on time delivery service improvement, etc. The project team creates and agrees on the goal statement. In goal statement we specifically mention, from where to where we want to improve or change the value. Also, we mention what will be the time frame for project completion, including project start and end dates.
For our example, we can write goal statement as below:
“Reducing the steam consumption norm in solvent recovery plant from 3.55 MT/MT to 2.50 MT/MT by 30th Jan, 2022. Implementation of this project will bring around Rs. 336.0 Lakhs savings annually.”
When we talk about problem and goal statement it should be SMART, which we can elaborate as below:
S – Specific (it should be specific and not a generalized statement)
M – Measurable (we should be able to measure the goal, so that we can compare it before & after)
A – Attainable (our goal should be realistic, which we can achieve)
R – Relevant (goal should be aligned with business strategy, otherwise project is a wastage of company’s valuable resources)
T – Time Bound (we can not take up any project for endlessly, it must be finished within agreed time period. For long time projects we should break the goal in small – small milestones to keep track of our project)
So, you can use above guidelines for setting up your project goal.
Project Milestones
We need this to track the project progress and get commitment from team on the timelines. In project charter team agree upon major milestones start and end dates. However, afterwards project manager prepares a detailed activity schedule to achieve each project milestone. Generally, in our project charter we mention below five milestones. However, you can customize them as per your project requirements.
Initiating – Define the project goal, scope, time, cost and team members with clear cut roles and responsibilities. In this phase actually we are setting the project’s baseline for time, cost and quality.
Planning – Identify best possible plan for activities and resources (including Man, Machine and Materials) among available options. This you need to achieve the objective or goal of your project.
Execute – This phase includes integration activities of a project manager in which he interacts among team members to implement the project plan.
Commissioning – After mechanical completion in this phase we take up the activities which are related to run the process to achieve envisaged results. In this we perform first pre-commissioning activities which includes running the plant on air and water. During pre-commissioning we are ensure no leakage in system, control loop trials, pump & fans trials, system pressure testing, safety system test, etc. Subsequently, we take up the commissioning activities and run the plant with actual fluid and process parameters. We demonstrate the plant performance and handover the plant to production team.
Closing – This is the last phase of any project and project manager get the acceptance from stakeholders regarding the product or services. Here project manager submits a closing report including standard operating procedures, user manuals, performance certificates, training, etc.
Financial Details
This section is to show the financial feasibility of your project. Here you provide the estimated CAPEX value of the project and also mention net benefit/profit from this project. Based on this we can estimate payback period and ROI, which is information of interest to our project sponsors. For the low payback project, we will get approval immediately from the management.
Project Team Details
In a project charter, this section is very important, an excellent team can make your project successful. While, poor team combination can derail your project. So, depending on the type of your project you should choose the team members intelligently. When we take up a project, we will find three types of people in our organization (1) Supporters, (2) Opposers (3) Neutral. So, during making our team we should see how can we handle the “Opposers”, as they are the people who will always create hurdles in your project. Moreover, it is very good strategy to take the buy-in of “Neutral” people also.
In Project Team every team member should feel this project belongs to them and they are committed for the success of the project. Moreover, during formation of team, competencies of team members must be kept on top priority and biasness should be avoided. On project charter provide the name of each team member with their clear roles and responsibilities. And, take the sign-off form each team member as a token of acceptancy for all the information written in project charter.
In remarks section you can provide miscellaneous information which are important for the project.
Conclusion
Finally, we have gone through a typical project charter. Additionally, you can add detail documents for supporting the information written on project charter. These documents can be like, conceptual scheme showing present and proposed process. Details of tentative mass and energy balance for the scheme. You can attach the details of various effluent generation with quantity. Apart from this you should provide an annexure for the project cost break up and benefit/profit estimation with payback calculation. You can also provide a Level-1 project activity schedule with your project charter.
I am sure this article will give you sufficient information and guidance to prepare a good project charter. So, onwards when you start a new project prepare a project charter and get it signed-off from all the team members/stakeholders. This will make your life easy during entire project life cycle.
Thanks for reading….