What is Project Charter? Benefits, Importance, How to Create one?

Project managers need to have a detailed understanding and guidelines before a project begins. The goals, scope, and responsibilities of each team is to be defined and established. This is done in the project charter.

A project charter helps everyone involved to understand their role and clearly lays out the expected outcomes of the project. In this blog, we will look at what a project charter is, its importance, the various elements in one, and how to develop one. 

What is a Project Charter?

A Project Charter is a formal document that authorizes the existence of a project. It provides a preliminary delineation of roles and responsibilities, outlines the project’s key objectives, identifies the main stakeholders, and defines the authority of the project manager. Without a well-crafted Project Charter, chaos ensues in the project landscape. 

Understanding importance of the project charter is pivotal for steering your team through the complex landscape of project management. Project Charter is an inevitable for managing project and to learn more about project management from best Project Management courses. In essence, the absence of a Project Charter sets the stage for project failure, leaving the team adrift and the project's success hanging in the balance.

Importance of Project Charter

A project charter is a document that serves as an agreement between the project manager, sponsor, and key stakeholders. It is used to define the project's scope, objectives, and deliverables. The charter also outlines the roles and responsibilities of each team member. 

In some cases, a project charter's importance may include a high-level risk assessment or an overview of the project's budget. Without a charter, it would be difficult to hold team members accountable or track the project's progress.

Difference Between Project Charter and Project Plan 

Parameters	Project Charter	Project Plan
Purpose	A project charter formally authorizes the project and outlines all high-level goals and boundaries	A project plan details how the project will be executed, monitored, and closed
Timing	Created during the initiation phase	Developed after project charter approval, during the planning phase
Audience	Executives, sponsors, key stakeholders	Project team, managers, and stakeholders involved in execution
Content Focus	Vision, scope, objectives, stakeholders, authority	Schedule, budget, resources, risk management, and task-level details
Approval Requirement	Requires approval from project sponsor or initiating authority	May go through internal reviews but doesn’t initiate the project officially

What is the Purpose of Project Charter?

In business, every project is unique. And with each new project comes new risks and challenges. That is why a project charter is important to be clear and concise. A project charter delineates the roles and responsibilities of everyone involved. 

It ensures that all stakeholders are on the same page and provides a clear roadmap for the project from start to finish. Without a project charter, it would be very difficult to accomplish anything in a business setting.

Elements of Project Charter

The charter should be created at the beginning of the project planning process and approved by all stakeholders before work begins. The following are some of the key elements that contribute to the benefits of a project charter: 

Elements	Description
Project Name and Description	Every project has a name and a description. The name is typically chosen by the project sponsor, while the description provides more detail about what the project aims to achieve.
Goals and Objectives	All projects have specific goals and objectives that must be met to succeed. These should be clearly defined at the outset and communicated to all project stakeholders.
Scope	The scope of a project defines its boundaries. It includes everything that needs to be done to complete the project, and anything outside of scope is considered out of scope.
Stakeholders	These are individuals or groups with a vested interest in the success or failure of the project. They can be internal (e.g., employees of the organization undertaking the project) or external (e.g., suppliers, customers, regulators).
Roles and Responsibilities	Every project has several different roles that must be fulfilled for success. It is important that everyone involved knows what their role is and is clear about their responsibilities.
Timeline	A project timeline sets out the starting and ending dates for the project, as well as any milestones that need to be achieved along the way.
Budget	Every project has a budget that sets out the maximum amount of money that can be spent on the project. It is important to stick to the budget to avoid going over budget and jeopardizing the project's success.
Risk Management Plan	A risk management plan identifies and assesses the risks that could impact the project's success, and implement strategies to mitigate these risks.

Examples of a Project Charter 

Let us look at simplified versions of project charters across various industries to understand their purpose and content. 

1. Project Charter in Software Development: 

• Objective: Build a customer self-service portal within 5 months. 
• Scope: Design, develop, and deploy a web application that is integrated within the CRM. 
• Sponsor: Chief Technology Officer 
• Budget: ₹25 lakhs 
• Key Stakeholders: Product Manager, Engineering Lead, Customer Success Head 

2. Project Charter for a Marketing Campaign: 

• Objective: Launch a multi-channel campaign for a new product line. 
• Scope: Creative development, digital and print media buys, tracking the performance of the campaign. 
• Sponsor: VP of Marketing 
• Timeline: 12 weeks 
• Budget: ₹18 lakhs 

3. Project Charter for Upgrading Cloud Infrastructure: 

• Objective: Migrate on-premise servers to a cloud environment. 
• Scope: Planning, migration, testing, and user training. 
• Sponsor: IT Director 
• Timeline: 4 months 

Each example includes a clear objective, high-level scope, timeline, and sponsor involvement, which are the core elements of any effective charter. 

Steps to develop Project Charter

The project manager in consultation with the project team and other stakeholders, typically creates a project charter. Project charter importance is unquestionable, and the process of creating a project charter generally follows these steps:  

1. Initiate

The first step is to initiate the project by identifying the need for a new project and developing a high-level overview. This may be done through a Feasibility study or other information sources. 

2. Develop

Once the project has been initiated, the next step is to develop the project charter. This document will outline the project's scope, objectives, and goals in more detail. It should be created in consultation with the project team and other stakeholders. 

3. Get Agreement

Upon developing the project, it needs to be approved by the relevant authority. This ensures that all stakeholders agree with the project's objectives and goals. 

4. Sign-off by the Authority

Once the project charter has been approved, it is signed off by the relevant authority. This officially initiates the project and gives the project manager the go-ahead to proceed with planning and execution. 

5. Publish the Project Charter

The final step is to publish the project charter. This document should be made available to all stakeholders so that they know the project's scope, objectives, and goals. 

Once you follow this process, you will be able to wrap up the project charter with ease. However, to achieve perfection, one needs PRINCE2 certification training for managing project delivery, controlling resource usage, and managing project risks effectively. 

Project Charter Templates 

Using tried and tested templates can simplify the process of drafting a project charter. These templates provide predefined sections and prompts, which will help you to capture all essential elements, while ensuring consistency across projects. 

A typical project charter template includes the following: 

• Project Title and Description 
• Business Case/Justification 
• Scope and Objectives 
• Milestones and Timeline 
• Stakeholders and Roles 
• Risks and Assumptions 
• Budget Summary 
• Authorization/Approval Section 

Several platforms offer downloadable or online editable templates. Here are some trusted project charter templates: 

• Asana Project Charter Template 
• Lucidchart Project Charter Guide 
• ClickUp Project Charter Template 
• Project Charter Template by Institute of Project Management 

These templates help you to create a comprehensive project charter in a fast and efficient manner. 

Benefits of Having a Project Charter 

A project charter also serves as a contract between the project manager and the sponsor. It defines the roles and responsibilities of each party and outlines what will happen if the project is not completed on time or within budget. Many benefits make people wonder why is a project charter important. Let us find out:

• First, it provides clarity to everyone involved in the project about what needs to be accomplished.  
• Second, it sets expectations for all stakeholders and ensures everyone is working towards the same goal.  
• Third, it gives the project manager authority to make decisions and take actions on behalf of the sponsor.  
• Finally, it provides a reference point for all future decisions made about the project.  

Having a charter helps ensure the project is completed on time, within budget, and with minimal conflict. Going for PMP certification classes raises the bar even further. It gives you the skills necessary to plan, coordinate, implement, and make projects successful in any field. 

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What to Do After Writing the Project Charter? 

The next step after the approval of the project charter is all about planning and executing the project. The finalized project charter is communicated to all project stakeholders, including the project team, sponsors, and external partners. This is necessary to ensure that everyone is aligned with the scope, objectives, and roles of each member. 

Once that is done, it is now time to start planning the project. All details mentioned in the charter are expanded into actionable strategies. The project manager needs to develop an entire project plan that highlights budgets, timelines, and resource allocation. Probable risks and assumptions mentioned in the charter are analyzed, and mitigation strategies are developed to avoid the project facing any deviation.  

Governance mechanisms such as regular check-ins, status reporting, and escalation procedures need to be set up. Simultaneously, all outlined success criteria and stakeholder expectations need to be translated into measurable goals. 

Finally, assemble your team and begin project kick-off meetings, using the charter as a baseline for discussions. It serves as a north star throughout the project’s lifecycle. 

Who Should be Involved in the Creation of a Project Charter? 

It depends on the size and scope of the project. It may be sufficient for the project manager to create the Charter for small projects. However, for larger projects, it is often helpful to involve other stakeholders in the development of the Charter.  

This way, everyone knows the project's goals and objectives and can provide input into how the project should be structured. Ultimately, deciding who should be involved in creating the Project Charter depends on the specific needs of your project. 

Who Signs and Issues a Project Charter?

Now that we understand the importance of a project charter, let’s look at who signs and issues it? A project charter is typically created near the beginning of a project's lifecycle and is signed by the sponsor, project manager, and other key stakeholders. The project charter gives the project manager the authority to execute the project and make decisions on behalf of the sponsor.  

It also outlines the high-level objectives of the project and assigns responsibility for achieving those objectives to specific individuals. The charter serves as a contract between the sponsor and the project team, setting expectations for both parties and providing a mechanism for holding each other accountable.

Summing Up

To have a successful project, creating and following a project charter is important. This document will outline the goals of the project, who is responsible for what, and how the team will work together to achieve success. The importance of the project charter includes increased clarity, communication, and accountability. 

If you're looking to learn more about creating and implementing a Project Charter, KnowledgeHut certificate course in Project Management offer project management courses that can help you get started on the right foot.