Keep your projects on track and avoid common pitfalls by using a project charter.
For any new project, it's crucial to have a clear and concise project plan right from the start. If you’re a small and midsize business (SMB) leader who’s new to project planning and operations, you may find your projects drifting aimlessly because of improper or no planning. A project charter can come to your rescue in such cases.
A project charter is the foundation of every project. It’s a unifying, authoritative document that ties all project management processes and deliverables to the project's original intent. A well-written and standardized charter is what sets a great project manager apart from a good one.
In this comprehensive guide, we explain what a project charter is, why it is important, and what key elements to include in it to make your next project a big success. We’ve also included a free project charter template that you can simply download and start using.
Free download: Project Charter Template
What is a project charter?
A project charter is a formal document that outlines a project's goals, objectives, risks, and deliverables. It defines a new project and sets its direction for the project team. It’s created during the initiation (i.e., project planning) phase so everyone, from the very beginning, clearly understands what the project is about and what it needs to accomplish.
A project charter ensures everyone involved—project manager, project team members, stakeholders, and sponsors—works toward the same goal. Its main objectives include:
Setting the foundation for the entire project by providing a clear, concise plan for everyone to follow.
Ensuring you have the authority to make decisions and manage the project by getting the project sponsor's approval.
Avoiding scope creep by keeping the project focused on its goals and objectives.
Offering a reference point for all activities and deliverables to ensure they are aligned with the project's original goal.
/ Quick tip
Project management software can help you not only create a project charter but also track and monitor your project's progress against the charter throughout the project lifecycle.
What should you include in a project charter? 10 essential elements
When creating a project charter, you must include all the essential elements required to achieve a successful outcome. Let’s discuss ten crucial components all project charters must have.
1. Problem statement: Why the project is being undertaken
Explain the problem or opportunity the project is trying to address. This will help stakeholders understand your project’s purpose and how it will add value. Keep the description brief and as specific as possible so it’s easy for everyone to understand what the project is trying to accomplish and how to get there.
For example, your problem statement could be: "The current sales process isn’t efficient and is losing us potential customers.” Accordingly, your project’s target metric could be: “Create a new sales process to boost the conversion rate by X%.”
/ Tips to write the problem statement
Keep it short—no more than a few sentences.
Describe the business context, opportunities, and drawbacks of the situation to explain why the project is being undertaken.
Include measurable targets whenever possible so you can track and report on your project's progress.
Ensure the statement is aligned with your company's strategy so you get buy-in from every key stakeholder.
2. Project objective and scope: What the project will achieve and deliver
Your project’s objective or goal should be SMART—i.e., specific, measurable, achievable, relevant, and time-bound. The project scope, on the other hand, should include what the project will do to achieve the set objective.
For example, if your project goal is to improve customer satisfaction, your objective could be: "Increase customer satisfaction rate by X% in Y months" and your project scope could include developing and implementing a new customer feedback system.
/ Tips to write the project objective and scope
Make sure your project objective and scope are specific, realistic, and relevant to the problem statement.
Include measurable project goals so you can track progress.
Add a scope statement[1] clarifying what is included and excluded from the project.
Write deliverable-based objectives, and use those objectives to set the boundaries for your project scope.
3. High-level requirements: What the project needs to achieve its goals
High-level requirements specify and help stakeholders understand what needs to be done to achieve the project objective. These requirements can be functional, nonfunctional, or technical. Like the project objective, they should also be SMART.
For each requirement, include a brief project description, the reason the requirement is needed, any dependencies or constraints associated with the requirement, and the expected completion date.
/ Tips to ensure successful project outcomes with high-level requirements
Develop a clear plan of action to achieve the project objective.
Specify the criteria upfront to avoid scope creep and keep the project focused on its goals.
Have measurable project goals for each requirement so you can track progress.
Use requirements management software to capture, track, and manage high-level requirements effectively.
4. Expected benefits: What business value the project will bring
Define the qualitative and quantitative benefits to be derived from the project. Qualitative benefits can't be measured in monetary terms, but they impact organizational objectives such as improving customer satisfaction or employee morale. Quantitative benefits, on the other hand, can be measured (e.g., increased revenue, decreased costs).
To ensure your project delivers the expected benefits, map each benefit to a specific objective and requirement. Doing this will help you track progress on the delivery of the expected benefits.
Remember, some benefits may only be realized after the project is completed and the new process or system is in place for some time. In such cases, establish a plan for monitoring the expected benefits after project completion.
/ Tips to manage expected benefits
Leverage benefits realization management (BRM)[2] to ensure the expected benefits are realistic and achievable.
Work with subject matter experts to identify and quantify the benefits.
Get buy-in from each key stakeholder on the expected benefits.
5. Required resources: What you need to complete the project
In the charter, specify the types of resources required for the project, such as people, equipment, or software. Be sure to include the quantity needed and the expected duration of resource usage. If you’re unsure of the exact requirement, make your best estimate and update the project plan once you gain a better understanding.
Also, identify who’ll be responsible for each task and when they’ll be available to work on the project. This information is critical for developing the project schedule. Project sponsors, project directors, project managers, business analysts, subject matter experts, developers, and testers are some of the prominent roles required for a successful project outcome.
/ Tips to identify the right resources for your project
Consult with subject matter experts and stakeholders familiar with the project to get their input on what's needed.
Conduct a resource analysis to understand which resources are available and needed.
Work with your human resources (HR) department to identify and procure necessary personnel.
Check with your IT department to understand what software and equipment are available and what's needed.
Use resource management software to identify, track, and manage your project resources.
6. Project approvals: What needs to be approved and by whom
To move forward with the project, you’ll need approval from specific individuals or groups. This could be approval for the project itself, acceptance of the budget, consent of individual project deliverables, etc.
In the project charter, specify who needs to approve the project and what type of approval is required for each process. To avoid delays, get necessary approvals at each project stage.
For example, you may need to get the project charter approved before you can develop the project plan. Likewise, you may need approval for the project schedule before working on individual tasks.
/ Tips to get the best out of the approval process
Communicate the project requirements and expectations to stakeholders who need to approve the project.
Prepare all the necessary documentation for the approval process.
Work with the project sponsor to get the needed approvals.
Follow up with decision-makers to ensure they understand their decisions’ implications.
Adopt workflow management software to streamline the approval process and track all the approvals required.
7. Funding and cost estimates: How much the project will cost and how you will finance it
Include an estimate of all the costs associated with the project, such as personnel costs, equipment costs, and software costs. Be sure to also include a justification for the costs. Plus, clearly mention how the project will be financed. For instance, will the project be funded by the company or external investors?
Consult stakeholders familiar with the project, such as the project sponsor, project manager, and financial analyst, to get an accurate estimate of the costs. Once you do that, get approval from decision-makers for the proposed budget and then include it in the project charter.
/ Tips to nail the funding and cost estimation process
Work with the project sponsor to understand the budget.
Consult with subject matter experts and stakeholders to get accurate cost estimates.
Ensure decision-makers approve the funding plan.
List the vendor name, rate, quantity, and amount to make better cost estimates.
Leverage financial management software to develop a plan and manage project finances.
8. Key assumptions and risks: What could go wrong, and how you’ll deal with it
No matter how well you plan a project, there's always the possibility that something could go wrong. This is why you need to identify the key risks associated with the project and include them in the charter. You should also have a well-measured plan to deal with those risks.
Your plan could include creating contingency plans, insurance policies, or risk mitigation strategies. This step is crucial as it not only helps avoid nasty last-minute surprises but also minimizes the impact of the risk and keeps your project on track.
/ Tips to identify potential risks early on
Make a list of all potential risks, and identify the ones that are most likely to occur.
Categorize the risks and prioritize them based on “most” to “least” likely to occur.
Develop a risk management plan to address each risk, and communicate the plan to all project stakeholders.
Monitor the risks throughout the project and take action if necessary.
9. Schedules, timelines, and milestones: When and how the project will be completed
The project schedule outlines by when various tasks need to be completed and which milestones need to be met. Without a schedule, it would be difficult to know if your project is on track.
Divide your project schedule into three distinct levels to make it easier to manage:
Level one: A high-level schedule that provides an overview of the entire project. It includes the major milestones and deliverables.
Level two: A detailed schedule that breaks down the high-level schedule into smaller tasks. It includes the start and end dates of each task, the individuals responsible for each task, and the resources required.
Level three: A micro-schedule that provides the most detailed view of the project. It includes the start and end dates of each task, the individuals responsible for each task, the resources required, and the dependencies between different tasks.
/ Tips to ensure your project schedule is on point
List all your key milestones along with their start and finish dates.
Emphasize the resources (people, equipment, software, etc.) required for each task.
Check the dependency between tasks (e.g., task Y can't start until task X is completed).
Take project constraints such as budget, timeline, and scope into account.
Keep a check on the project risks (e.g., delays or scope changes).
Review and update the project schedule regularly to ensure it reflects your project’s current status.
10. Measurable success criteria: How to know if the project is successful
You won't be able to determine if a project is successful unless you define what success looks like. Therefore, you must include measurable success criteria in the charter. The criteria should be based on the project objectives and must be quantifiable.
For example, if your objective is to increase customer satisfaction by 10%, your project success criterion could be a 10% increase in customer satisfaction within six months.
/ Tips to ensure you have the right success criteria
Involve all key stakeholders while establishing the project objectives.
Develop success criteria for each project objective.
Document the project objectives and success criteria clearly and concisely.
Review and update the objectives and success criteria regularly.
Improve project lifecycle management with our free project charter template
A well-structured and thorough charter is crucial to your project’s success. Having all the information in one place helps ensure all stakeholders are on the same page. Plus, by documenting all project details upfront, you can avoid many of the issues that could arise later.
Our comprehensive project charter template includes all the essential elements discussed above. You can simply download the template, customize it to fit your project, and start using it immediately.