Project Initiation

The following are the important themes from the PMI Perspective that you need to remember about the Project Initiation Phase.

1. Project Initiation is the first logical step in Project Management process
2. Initiation formally authorizes a project to begin or to continue to the next phase.
3. Initiation formally links a project to the work to the strategic objectives of the organization.
4. Someone external to the project team and higher up in the organization must issue the project charter. (Usually the Sponsor)
5. The project charter gives the project manager authority to “get the job done.” Yes, you read it right. The Charter is the document that officially gives us the right to do our jobs to manage the Project.
6. The project charter establishes the targets for the project.
7. A signed contract can serve as an input or predecessor to a project charter. Sometimes for small projects, the contract itself can be considered the Charter.
8. The two types of project selection methods are benefit measurement methods and constrained optimization methods.
9. Management by Objectives (MBO) supports project initiation by linking projects to corporate objectives.
10. MBO supports project management through its use of goal-setting and periodic reviews.
11. Many project management activities during initiation are further elaborated during planning.
12. Identifying Stakeholders is one the most important activities in the life of a project. Many a project has been known to fail after months of hard work because the manager failed to identify a critical stakeholder and that stakeholder prevented the sign-off at the end of the Project

Other PMI Themes:

General PMI Themes
Project Framework
Project Planning
Project Execution
Project Monitoring & Controlling
Project Closure
Ethics & Professional Responsibility

Chapter 6: Project Integration Management as part of Project Initiation

Aim: To understand the Processes those are part of Project Integration Management in the Project Initiation Phase. i.e., “Develop Project Charter”

After a decision is made to initiate a project, the collection of input information begins. This is where the project boundaries can be a little unclear, but it is generally accepted that activities starting with the collection of inputs for initiating are part of the project. Remember that the project has not yet been authorized, so all resources required for the initiating processes must be funded explicitly by the project initiator. In other words, someone has to pay for the time spent by the people required to produce the project charter.
It is entirely possible that the organization decides not to pursue a project after it sees the project charter. The project charter might show that the project will not be worth the resource expenditures. In such a case, the resources already expended to produce the project charter have actually saved the organization from wasting many more resources. Therein lies part of the value of the initiating processes.

Exam Watch:
A project charter doesn't always result in a successful project initiation. Let us say, you are working for a Car Manufacturer and are assigned with a project to create a low cost, highly fuel efficient luxury car. The company has set a budget for each car and has also set a profit margin expected from each unit sold. Armed with this information, you perform the due diligence and figure out the fact that, you cannot manufacture such a luxury car under the set budgets & profit margins. Once you provide with your senior management with this information, they could do either of the below actions:
1. Drop the project as, this new car will not be profitable under the set circumstances. This effectively means that your project is scrapped and wont continue.
2. Assign extra budget for each car and adjust the profit margin accordingly. This effectively means that the project will continue.

The specific project management process that results in the project charter is the Develop Project Charter process.

The Inputs, Tools & Techniques and Output for this process are as follows:

Develop Project Charter
Inputs	Tools & Techniques	Outputs
Project statement of work Business Case Contract Enterprise environmental factors Organizational process assets	Expert Judgment	Project Charter

As you study for the PMP exam, don’t just memorize each of the inputs, tools and techniques, and outputs for each process. Really think about why PMI put them where they are. In the case of the develop project charter process, ask yourself what you need before you start. Each piece of information you need to start the process of creating the project charter is represented in the input section. You need some sort of document that specifies the need for the project (contract or statement of work). You also need to understand the policies and procedures governing projects for your organization. Once you have all the necessary information to start, you can start the process of developing the project charter.

During the project charter development, you use your own expert judgment as well as the expert judgment of subject matter experts in various areas to create the output or deliverable. Expert judgment involves using all of the project selection techniques in your project manager bag of tricks.
In the case of the project charter, the only output is the project charter itself. The main point to listing each of the inputs, tools and techniques, and outputs for each process is to understand each component of each process.

Because the development of the project charter is the first project activity, much of the work to produce the input for this process occurs either before the project initiation or within the scope of another project. Most of the input for this process serves to define the project and the environment in which it exists.

After the input information has been collected, the project initiator compiles and issues the project charter. The initiator must be someone who holds the authority to fund the project. Although it is desirable to assign a project manager early in the process, the project manager is not absolutely necessary to issue the project charter. It is important that the stakeholders have a material role in the creation of the project charter. The project manager, if one has been assigned at this point, can be the one to actually do the work of compiling the stakeholders’ needs, but the actual input for the project charter and the authority to issue it comes from the project initiator. The main reason so much emphasis is put on the project charter is that it provides the first and best opportunity for the stakeholders to really think through a project before the work begins, and it gives everyone a chance to consider the project before committing to it.

You can learn more about the “Develop Project Charter” Process by Clicking Here

Project Selection Methods

PMI encourages organizations to employ formal methods to select projects. Formal methods make it possible to compare multiple projects and select the one(s) that will produce the most benefit for an organization without being persuaded by emotional ties to certain projects. Additionally, organizations can set specific standards potential projects must meet to be accepted. There are two main selection method categories you need to know for the PMP exam. It is not important that you have an in-depth knowledge of these methods, but you need to be able to identify each type of method and understand their basic differences.

1. Benefit Measurement Methods
Benefit measurement methods document the relative benefits of completing each project. This approach enables organizations to compare projects by comparing their impact. Each specific method uses different measurements and results in different types of output. You don’t need to understand how to assess the relative measurements for the exam. Just know that these methods produce relative output an organization can use to compare projects.
2. Mathematical Models
Mathematical models analyze project description data to result in a more standardized set of output values. Simply put, a mathematical model can rate a project on a scale from 1 to 100. The organization then decides how desirable a single project is based on its rating. Usually projects with higher numbers are chosen over the ones with lower numbers. For ex: If your company is to produce two cars that have comparable production costs, the car that has the higher profit margin would be chosen for production.

Project Management Methodology

The organization’s standard practices when conducting project activities, along with the project management standards, make up the project management methodology. Any standards, guidelines, procedures, or common practices work together to form the general way of managing projects within any organization. The particular methodology you use depends on the culture of your organization, and all these factors affect the content of the project charter.

Project Management Information System

The project management information system (PMIS) is the collection of computerized tools used to collect, store, analyze, and interpret project information. Although most project managers use software to schedule projects, the PMIS often consists of far more than just project management software. When managing a project, learn which tools are available and use them to support the project throughout its life cycle.

Expert Judgment

The primary tool and technique referenced in creating the project charter is tapping into the expert judgment of others. Expert judgment of the project manager is included here if the project manager has been assigned. Some technical or procedural details might require input from an expert in a specific area. Such experts can be stakeholders or customers of the project, or they can be totally unrelated to the project. PMI encourages using any available source for project information input. When considering input sources for the project charter, or any needed expert input, consider any of these alternatives:
• Internal organization assets with specific expertise
• External consultants
• Stakeholders, including customers
• Professional or trade associations
• Industry or user groups

Prev: Chapter 5

Next: Chapter 7

Summary - Project Initiation

Let us now summarize whatever we have learnt over the course of the previous few chapters reg. the Project Initiation Phase.

• Organizations start projects for different reasons, such as to meet a business or legal requirement, to take on a business opportunity, or to develop a solution for a problem.
• However, the underlying motivation is always to meet some business objectives in the strategic plan of the organization.
• Three categories of methods are available to select from the proposed projects.
• The first method is the benefit measurement method, which evaluates the benefits from the project.
• Constrained optimization methods focus on the probability of completing the project successfully, and
• Expert judgment relies on expert advice.
• As a project manager, you need to identify each stakeholder: an individual or an organization that is going to gain or lose from the successful completion of your project.
• The initiating project stage is constituted by two processes: Develop Project Charter and Identify Stakeholders.
• The two documents generated by the initiating stage are the project charter, which names and authorizes the project manager, and the stakeholder register, which identifies the project stakeholders and relevant information about them.
• Based on this information, you develop the stakeholder management strategy.
• The project charter also includes project justification based on the business needs and a high-level description of the product or service that the project will offer to meet those business needs.
• Issuing an approved project charter moves the project from the initiation stage into the planning stage, which is composed of a number of processes collectively called the planning process group.
• These processes will be covered in the subsequent chapters.

Previous: Stakeholder Management Strategy

Next: Important Terms & Definitions

Chapter 20: Developing a Project Charter

In the previous chapter we saw how projects are selected for execution by organizations. As the first step towards starting a project for execution, a Project Charter needs to be prepared. In this chapter, we are going to take a look at how to create a Project charter.

So, lets get started!!!

What is the Project Charter?

The project charter is a document that states the initial requirements to satisfy the stakeholders needs and expectations. It is the document that formally authorizes the project.

Trivia:
The project charter is the document that formally authorizes a project, which includes naming the project manager and determining the authority level of the project manager.

Developing a Project Charter

Obviously a Project charter has to be developed/created by someone. Let us see how it is created.

Look at the image below:

The input to developing the project charter comes from the origin of the project and from within the organization that will perform the project. The possible input items for the process of developing a project charter are:

1. Business Case
2. Project Statement of Work
3. Enterprise Environmental Factors
4. Organizational Process Assets
5. Contract

Business case - The origins of the business case are pretty much the same as the origins of a project. The business case is built on the business need addressed by the project that justifies the project. This will determine whether the project is worth the effort and the investment (Money). The business case may contain the cost benefit analysis that compares the benefits that would be received by executing the project to the money invested in running this project. The business case is written by either the person or the group within the performing organization that is proposing the project or by an external organization or the customer who is requesting the project or the product that will be produced by the project.

If the organization that is requesting the project is a separate entity than the organization that is performing the project, both may have their own business cases. In this case, the business case that goes into the project is the business case of the performing organization. The business case of the requesting organization will make its way to the project through the contract or the statement of work.

Project statement of work (SOW) - The statement of work is a document that describes the products, services, or results that will be delivered by the project. For an internal project, the SOW is provided by the project initiator or the project sponsor, whereas for an external project, the SOW is received from the customer as part of a bid document, such as a request for proposal, a request for bid, or a request for information. Alternatively, it could come as part of the contract. The SOW includes or refers to the business need that this project will satisfy, the product scope, and the strategic plan of the organization supported by the project.
Enterprise Environmental Factors - During the development of the project charter, you must consider the performing organization’s environmental factors relevant to this task, that might affect the project execution and outcome.

You can refer to the chapter on Environmental Factors for more details on them.

Organizational Process Assets – As with the Enterprise Environmental Factors, the Organizational Process Assets too can have a profound impact on the project execution and outcome. You can refer to the chapter on Organizational Process Assets for more details on them.

Contract - A project for a customer who is external to the performing organization is usually done based on a contract. This contract will outline the terms and conditions and the monetary aspects involved in executing a project.

You take the available input and apply the relevant tools and techniques to develop the project charter. The most important tool used in developing the project charter is the expert judgment described in the previous chapter.

The output of the Develop Project Charter process is a formal document called the project charter. It is a high-level document that summarizes the business needs, the understanding of customer requirements and needs, and how the new product or service will satisfy these requirements.

Any Project Charter, that is prepared by an experienced Project Manager would contain the following:

1. The project justification, which includes the purpose of the project and the business case for the project, which in turn may include return on investment.
2. A high-level project description that includes the business needs that the project addresses and the high-level product requirements.
3. High-level project requirements based on the needs of the customer, the sponsor, and other stakeholders.
4. Project objectives and success criteria, which are derived from the purpose section. This section explains exactly what will be done by this project and what exactly will be the outcome of this project. The most important point is that the objectives must be measurable.
5. High-level risks, which will be identified during the project planning. However, some high-level risks may be apparent during the time of developing the project charter.
6. Milestone schedule, some kind of high-level schedule.
7. A budget summary, A high-level summary of the project cost estimate with some kind of timeline.
8. Project approval and acceptance requirements , which include the name and responsibility of the person or committee that will approve and accept the project when it’s finished.
9. An assigned project manager, a specified authority level for that project manager, and the influences that the stakeholders might have.
10. Project sponsor, the name and authority level of the project sponsor authorizing the project charter.

Apart from these, the charter might include other elements like the list of functional departments of the organization and their roles (Like the Technical Support Team that would be supporting the Network and Hardware that the project team will be working on). Also, other external assumptions and constraints are outlined in this document.

An assumption is a factor that you consider to be true without any proof or verification. For example, an obvious assumption that any Project Manager might make during this stage is the fact that, his company will have sufficient personnel with the requisite skillsets that he needs to execute this project.

It’s important to document such assumptions clearly and validate them at various stages of the project because assumptions carry a certain degree of uncertainty or risk with them, and these risks can always have a negative impact on the Project if left uncontrolled.

A constraint is a restriction (or a limitation) that can affect the performance of the project. For example, there could be a schedule constraint that the project must be completed by a predetermined date. Similarly, a cost constraint would limit the budget available for the project.

The project charter provides the project manager with the authority to use organizational resources to run the project. Remember that formally speaking, project charters are prepared external to project management by an individual or a committee in the organization. In other words, the actual project management starts from where the project charter ends. But practically speaking, the project manager who is going to manage this project might actually be involved in writing the project charter. The project approval and funding will still be external to the project management boundaries.

Once you have the project charter, you know the high-level product (or service) requirements that the project will satisfy. However, a high-level requirement written in a certain way might mean different things to different stakeholders. So, after you get the project charter, your first task is to develop a common understanding of the project among the project stakeholders. You as the project manager must ensure that each stakeholder knows what is going to happen and what he/she can expect out of this project at the various timelines.

Once the project charter is developed, the project manager has enough information to identify all the project stakeholders.

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Next: Identifying Project Stakeholders