I recently taught a young engineering student and some high school graduates heading off to engineering school about how to properly manage capital equipment manufacturing projects in the oil and gas industry. The students were surprised to learn that many projects fail simply because there is no understanding of WHY the project was being undertaken in the first place. To these young students, it seemed common sense to have clearly defined reasons for initiating a project. There had to be a catch, right?
Well, not really. The fact is, most organizations that I’ve been in or worked with in the oil and gas industry don’t create a project charter before starting a project. What’s a project charter anyway? It’s a formal document that the project manager and project sponsor both sign that authorizes the project, describes the business case, assigns the project manager and commits the use of organizational resources. I’d be willing to bet one of our engraved Yeti cups that most people in our industry have never even seen or heard of a project charter. But I’ve found that creating a project charter is the most important first step of any project because, among other things, it documents WHY the organization is doing the project in the first place. It’s a tool that provides the big picture that unites the project team and steers them towards a clear purpose.
If I told you to start a project and gave you no other information, your first question might be: WHAT are we doing? Many organizations make the mistake of spending time defining WHAT to do without clearly defining the WHY first. Starting a project without defining WHY is like telling somebody to start walking without telling them which direction to go. “Just start walking. When I figure out exactly which direction I want you to go in, I’ll call you.” How many projects have you been on that were a bit like that? For me, too many to count.
The project charter should explain WHY the organization is taking on the project. It must clearly state the business case. And yes, there’s always a business case. Whether you’re trying to increase revenue, lower costs, improve utilization of resources, or you’re just making sure the company stays out of the courtroom, there’s a business case that needs to be explicitly spelled out and communicated to the project’s stakeholders—the people with a stake in the outcome of the project. And all of this can easily be achieved with a charter.
Many years ago, I found that the odds of completing my projects on time and on budget increased substantially by creating a charter that clearly defined WHY the organization was doing the project. I think the other part of it was, in trying to find out the WHY, I was able to identify WHO had the authority to make it all happen. In project management terminology, this person with the authority is called the project sponsor. In past manufacturing organizations, I figured out that if I could get my hands on the corporate expenditure Approval Authority policy, I could hunt down the sponsor. The sponsor’s role (usually a high level executive) is to take ownership and to provide top cover for the project manager. This only makes sense, right? If a project is simply an extension of the higher level strategy and objectives of an organization, then it seems logical that it falls under at least one senior executive’s purview. And that executive should be committed to the project’s objective(s) and understand how the project is going to generate revenue and/or consume cash and what impact there will be, if any, on current operations. Whether the executive physically takes on the sponsor’s role or delegates this authority to someone else, the executive is still responsible for the project’s success. One of the most successful projects I’ve ever managed happened to be the first time I insisted on getting a signed charter. I wrote up the charter, explained the WHY, did everything else you’re supposed to do in a charter and got the COO to sign and sponsor it.
So what are some tips for creating an effective charter? First and foremost, it needs to be short and sweet. Keep it under three pages. Two is probably best. I recall many years ago, I struggled to read through a 30 page charter only to discover there was no WHY. I also recall that the project never got off the ground. So if you want your charter to be read and understood, keep it short and uncomplicated. Clearly state WHY the project is being initiated. To figure out the WHY, here are some questions to ask: What are the business objectives? Which aspect of the company’s strategy will this project support? How much money is authorized to be spent? How much profit do we expect? What’s the return on investment? What are the deliverables? When are they due? Who is the Approval Authority for the expenditures?
By the way, even if you have a customer purchase order you still need to create a charter. Many times a customer order is taken and nobody has completely thought through how the project will be executed, much less determined how much (and when) cash will be consumed throughout the life of the project, or how much profit is expected. The charter will help you think through these details BEFORE you start work.
There isn’t enough space here to cover everything that goes into a good charter. But if you at least answer WHY, the project stands a better chance of success.
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