How To Write A Good Project Charter: Templates and Examples

April 15, 2024 · 7 min read

A project charter is an essential document in project management, providing a clear framework for a project's execution. This article aims to offer a comprehensive understanding of what a project charter entails, importance of project charter, and how to effectively craft one. Plus, you will find a project charter example to implement it in your projects.

The Soccer Game Metaphor

Imagine you're a middle school student eagerly waiting to play soccer after school. The bell rings, and you and your friends rush to the schoolyard. You have a ball and form teams, but there's a problem: you don't have goalposts. You use backpacks instead, and the game begins. However, the ball frequently flies into the neighboring yard, causing interruptions, and some players stand by the goalpost, making the game frustrating.

In this scenario, setting clear rules beforehand would have made the game more enjoyable. Similarly, in project management, a project charter summarizes all the "rules of the game," ensuring everyone knows their roles and responsibilities, preventing disruptions, and facilitating smooth project execution.

What is a Project Charter?

A project charter is not just a filled-in template but a strategic document that defines the project's objectives, scope, and guidelines. The purpose of project charter is to ensure that all stakeholders have a shared understanding and agreement on what the project entails. 

project-charter-content

What does a project charter include?

Here are the key project charter elements:

  • Project Purpose: Clearly defines the project's objectives and the problem it aims to solve.
  • Scope and Deliverables: Outlines what is included in the project scope and the expected deliverables.
  • Roles and Responsibilities: Specifies the roles of everyone involved in the project, from team members to sponsors.
  • Budget and Resources: Details the budget, including financial limits and available resources.
  • Timeline: Provides a high-level timeline or milestones for the project.
  • Risk Management: Identifies potential risks and strategies for mitigating them.

▶️Download Project Charter Template for Free

How to Describe Goals in a Project Charter

The Title of a Project Charter

A project charter begins with a title that should be informative and easily understandable because it's something you'll live with for the duration of the project. It has to resonate with you and the project's essence.

Defining Project Goals

Setting project goals is essential for ensuring that the project serves a purpose beyond mere activity. To measure success, we need to assess whether the system is efficient, effective, and meets the needs it was designed to address. It's crucial that the project goal is not just a restatement of the project's activities but rather a clear, purposeful objective.

goals  

The “5 Whys” Rule

Verifying the goal is the next critical step. Once a goal is formulated, apply the "5 Whys" rule. This involves starting with the initial requirement and asking "Why?" five times to drill down to the core reason for the project. This iterative questioning helps ensure that the goal is well-considered and addresses the root cause.

the 5 whys

For example, if a client states, “We need to implement an electronic document management system,” the next step is to ask why. The response might be, “It will speed up the document flow within the company.” Continue asking why until you reach the fifth answer. This method helps differentiate genuine goals from superficial ones.

However, there is an exception: if any of the "Whys" ends with "money," you've reached a fundamental objective and can stop there. This rule effectively identifies genuine goals and ensures that project objectives are meaningful and well-founded.

Setting Deadlines in the Project Charter

The most critical aspect of a project charter is establishing boundaries. By signing the charter, you and the sponsor agree on certain parameters, then the sponsor steps back to await results. When defining these parameters, consider what you've committed to and ensure it includes realistic deadlines. 

The charter outlines major milestones rather than a detailed schedule. Include only the most critical, project-defining deadlines to avoid cluttering your charter with unnecessary milestones.

project-charter-document

Estimating Timelines

The most common question when making an agile project charter is how to assess timelines at this stage. Often, project initiation provides a rough timeline of the milestone schedule in the project charter. At this stage, involving team experts is crucial for a realistic assessment.

The initiation phase itself usually lasts very short, maybe 2–3 days, sometimes even hours. That's why here we have quick expert assessments. We simply won't have time to create a schedule. 

Why is that? Because initiation is a stage where no one is responsible for anything yet. The company is still not sure if it can take the project. So, it might end up leading to nothing. Hence, we cannot afford to spend many resources on assessment. It's too costly for us.

project-charter-resources
In industries where capital expenses are high (those that cannot be recouped), such as construction, manufacturing, film industry — initiation lasts longer and consists of several stages. And by initiation, there is already quite detailed assessment because the risks in these industries are colossal. Sometimes there's a concept of a pre-project — a project that aims to gather requirements, schedules, and plans for a future big project.

In IT projects, capital expenses are not significant; they are proportional to programmers' salaries. There's nothing like spending huge amounts at the beginning, and everything is only useful if we reach the end. It's more advantageous to start working faster than to think for a long time. 

The Role of Knowledge Base

Expert judgments form the basis of early-stage estimates, reflecting the team's subjective opinions and experiences. But also, there is one more thing that you can rely on when making estimations —  a knowledge base. 

It's crucially important. But unfortunately, it often doesn't work, becomes cluttered, or remains unused. But even if you're unlucky with the corporate knowledge base, nothing prevents you from creating your personal knowledge base, where you will reflect personal life experience, deposit successful project charters, risk registers. 

All these artifacts are tremendously reusable. For example, in the risk register, up to 90% can be reused if it's the same company or a similar customer. 70-80% of hierarchical structures can also be reused.

Understanding the Margin of Error

It's essential to understand that estimates at the initiation stage are rough estimates. 

According to PMI statistics, the error margin of such estimates is about 50%. It's good accuracy for the initiation stage. 

Later, you will make a more accurate plan, where accuracy is about 25%. And as the project progresses, the accuracy increases. To manage this uncertainty, project charters often include a contingency of plus 50% to the initial estimates when negotiating with sponsors.

How to Navigate Resources

From our previous articles, we remember that not all managers directly handle financial aspects across every project. Often, managers get human resources instead and sometimes don’t even know how salaries are distributed. Also, there is a hybrid scenario where both personnel and a budget are provided. What, then, should be documented in the charter? The straightforward answer is: everything.

project-charter

Budget-Only Projects

For projects with a budget as the primary resource, it’s quite simple. It's sufficient to state that the project's budget shall not exceed a certain amount. In larger corporate environments, it's equally vital to specify payment schedules to ensure timely fund disbursement and plan for the rhythm of cash flow.

Resource Requirements Beyond Finances

What if you get resources for your project? Let’s start with equipment and materials rather than personnel. In this case, it's important to list what is needed and by when, especially if timing is critical. 

When human resources are involved—say, the need for five developers and two testers—it's crucial to understand that a charter is a fixed plan. Listing individuals by name can backfire if changes in personnel occur, necessitating a project reboot. 

A more practical approach is to describe needed roles as clearly as possible. For example, specifying the need for five Java programmers, with at least two at a senior level and the rest at a middle level, helps in defining necessary skills without tying the project to specific individuals. 

There are exceptions, such as when a project is uniquely dependent on a specific individual's expertise, like an engineer who designed a system being upgraded. In such cases, the project's timeline and budget might be tailored to that individual's involvement, making their participation non-negotiable. Otherwise, it’ll be the other project with other timing and budget, as it’ll require reverse engineering and lots of time to get how the system functions. 

How to Define the Project Scope

Shifting focus to the project content statement, it's evident that this section is typically the most voluminous. Despite the charter's limited page count—often three to five pages—it's imperative not to conflate it with a more fluid document like a technical specification, which many managers opt to forego. A charter's essence lies in concisely and accurately detailing the project's core elements.

The content section should clarify two primary aspects: what will be done and what will not. 

Using the example of building a house, you may come up with endlessly detailing the construction nuances. However, the content's purpose is to safeguard project objectives and clarify initial expectations. It's about stating the construction of a brick house with ten floors, while explicitly excluding tasks like landscaping, interior decoration, and the building's handover process.

Keeping the description succinct yet comprehensive ensures that the charter remains focused and avoids dwelling on variables that should not constrain its scope.

How to Identify Stakeholders

This section typically identifies two primary stakeholders: the sponsor and the manager. It's essential to clearly understand who initiates the project and who implements it, noting that their roles are complementary rather than contradictory. 

But what happens if there's a change in management or sponsorship? Such changes are viewed as significant disruptions, necessitating a project restart.

project-charter-sections
Typically, the manager drafts the charter, while the sponsor, often the director providing resources for the project, signs it. The charter is critically important for the manager, as it outlines their responsibility to ensure the project's success and alignment with strategic goals.

Should the customer be included in the charter? Engaging customers can be beneficial. However, there are clear situations where the charter should not be shared with them. For example, revealing the budget details in the charter can lead to complications, especially as the project budget usually does not match the customer's payment. Similarly, disclosing the team's composition might raise concerns if the customer feels the investment does not align with the team's size.

How to Determine Risk Section

The charter should specify "terminal non-mitigable risks" — those that could spell the end of the project if they materialize, such as natural disasters or regulatory changes.

This distinction helps sponsors understand situations beyond the project team's control. Conversely, issues like key team members leaving are not considered terminal risks, as managing such scenarios falls within the manager's purview, particularly in strong matrix organizational structures.

How to Understand Delivery Outcomes

Besides the mandatory sections, the charter can include segments that refine the project's goals and scope. A common addition is the "Delivery Outcomes and Key KPIs" section. 

Let's assume we have a project for creating and implementing an Electronic Document Management System (EDMS) at a company. The content outlines the key tasks we will undertake, and what we will not. Following this, we need to decide how we will verify that the system has been created and implemented. This is where these two points come in.

In the delivery outcomes, it is specified what constitutes the system's creation physically. This is usually a flash drive or another data storage device. But what does it mean for the system to be implemented? It means that it has been installed at workstations, tested, and official documents, such as training logs, have been created. Essentially, these are artifacts for legal or accounting purposes.

How to Set Key KPIs

When will we truly consider the system to be created and accepted? For creation, we can develop some test programs. But what does it mean for the system to be implemented? Can installing it on a single workstation be considered as an implementation? Does training two people count? 

Usually, digital criteria are used to assess implementation. For example: the system is installed on no fewer than 100 workstations, at least 200 users have been trained, and these users have entered no less than 10,000 documents into the system.

Documenting the Charter: How to Write a Project Charter

The format of the charter is crucial. Since it is immutable, it is best maintained as an uneditable electronic document or printed on paper. Bringing a paper document to a sponsor/director for signature, it is generally the most reliable way to ensure they have actually read it. 

project-charter-stakeholders
Putting a seal on it is absolutely unnecessary. The charter is not a legal document. And if you were not given the resources, you wouldn't go to court anyway. It's simply an internal agreement.

Afterwards, the charter can be scanned and uploaded as an electronic document. Importantly: the entire team sees the charter. Because it contains goals, constraints, everyone understands whether the system has been implemented or not, what the KPIs are, what we are doing, and what not.

Project Plan vs Project Charter

As the final step, let’s make sure you see a clear difference between a project plan and a project charter. While they are both essential documents, they serve distinct purposes and are utilized at different stages of a project.

A project charter is the foundational document that formally authorizes the existence of a project. It is created early in the project initiation phase and serves as an official statement of the project's scope, objectives, and stakeholders. The charter outlines the project's purpose, the business need it addresses, and the expected outcomes. 

The project charter is essential for gaining approval and securing the necessary resources to move forward. It provides a high-level framework and sets the stage for detailed planning.

The project plan, on the other hand, is a comprehensive document that guides the execution and control of the project. It is developed during the project planning phase after the charter has been approved. The project plan dives into the specifics of how the project will be executed, monitored, and controlled. Key components of a project plan include:

  • Detailed Scope Statement: Expands on the high-level scope defined in the charter, providing more granular detail.
  • Work Breakdown Structure (WBS): A hierarchical decomposition of the total scope of work to accomplish the project objectives.
  • Schedule and Timeline: Detailed timeline with phases, tasks, durations, dependencies, and milestones.
  • Resource Plan: Identification and allocation of resources, including personnel, equipment, and materials.
  • Budget and Cost Management: Detailed budget estimates and cost management plans.
  • Risk Management Plan: Identification, analysis, and mitigation strategies for potential risks.
  • Quality Management Plan: Standards and processes to ensure project deliverables meet quality requirements.
  • Communication Plan: How information will be disseminated to stakeholders.
  • Change Management Plan: Procedures for managing changes to the project scope, schedule, and budget.
  • Procurement Plan: Strategies for acquiring necessary products and services from external vendors.

The project plan serves as the roadmap for the project team, providing detailed instructions and guidelines for managing the project from start to finish. It is a living document, often updated as the project progresses and new information becomes available.

Business Case vs Project Charter

Now let’s see the difference between the business case and the project charter 

While both are critical documents, they serve distinct purposes and are used at different stages of the project lifecycle. 

The primary purpose of a business case is to justify the investment in a project. It provides a comprehensive analysis of the business need, potential benefits, costs, risks, and alignment with organizational objectives whereas the project charter authorizes the project and sets the foundation for detailed planning and execution. 

 Let’s explore the key differences:

Timing:

  • Business Case: Developed during the initiation phase before the project is formally approved.
  • Project Charter: Created after the business case is approved and the project is authorized.

Focus:

  • Business Case: Focuses on the 'why' of the project, providing a rationale for investment.
  • Project Charter: Focuses on the 'what' and 'how,' outlining the project's objectives, scope, and high-level plan.

Content:

  • Business Case: Includes detailed analysis, such as cost-benefit, risk assessment, and alternatives.
  • Project Charter: Includes high-level project scope, objectives, milestones, and roles.

Approval:

  • Business Case: Used to gain initial project approval and funding.
  • Project Charter: Used to formally start the project and assign resources

Six Sigma Project Charter

What is Six Sigma?

Six Sigma is a set of techniques and tools for process improvement, developed by Motorola in 1986. It aims to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes. The Six Sigma methodology follows two project methodologies inspired by Deming's Plan-Do-Study-Act Cycle:

  • DMAIC (Define, Measure, Analyze, Improve, Control) - used for improving existing business processes.
  • DMADV (Define, Measure, Analyze, Design, Verify) - used for creating new process designs or products.

What is a Six Sigma Project Charter?

A Six Sigma Project Charter is a formal document that outlines a Six Sigma project. It serves as a roadmap for the project, defining its objectives, scope, and participants. The charter ensures that all stakeholders have a clear understanding of what the project aims to achieve and how it will be conducted. Key elements of a Six Sigma Project Charter include:

  • Project Title: A concise name that identifies the project.
  • Problem Statement: A clear description of the problem that the project aims to address.
  • Business Case: Justification for why the project is important, including the potential financial and strategic benefits.
  • Goal Statement: Specific, measurable objectives that the project aims to achieve.
  • Scope: Boundaries of the project, specifying what is included and what is not included.
  • Timeline: Key milestones and deadlines for the project.
  • Team Members: Names and roles of the project team members, including the project leader and any other key stakeholders.
  • Resources: Resources required for the project, including budget, equipment, and personnel.
  • Stakeholders: List of individuals or groups with an interest in the project and its outcomes.
  • Assumptions and Constraints: Any assumptions or constraints that might affect the project.
  • Metrics: Specific metrics that will be used to measure the success of the project.

Conclusion

Crafting a project charter is a critical step in ensuring the success of project management. With all elements of a project charter and project charter assumptions, it serves as a foundational document that aligns all stakeholders, defines clear objectives, and sets the parameters for execution. By establishing a shared understanding through the project charter, teams can minimize disruptions and maintain focus on their goals.

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