What Is the Purpose of a Project Charter?

Written before a project gets official approval, a project charter offers a basic description of a project and connects it to the organization's goals to present a business case. Typically just one to three pages long, the document serves to market the project's benefits so that the company can determine whether the costs are worth the potential benefits.

The numerous project charter elements also have purposes related to improving project communication, clarifying resource needs, helping with risk mitigation and moving forward with official project planning.

Tip

The primary project charter purpose is to provide a project description that allows stakeholders to determine whether the project is worth pursuing and whether the organization has the necessary resources. It allows the project initiator to get approval to move forward with project planning and execution.

The project charter, in the form of a problem statement and project goals, explains why the company should undertake the project. It also identifies involved stakeholders, any known risks and limitations, potential benefits, basic budget and timeline information and the scope of the project. Other content usually includes project assumptions, success criteria, project approval requirements, details about the project team and a place for sponsors to sign off on the project.

After a project initiator completes the charter, he presents it to stakeholders for approval. If successful, the sponsors will sign the project charter, and the project can officially kick off. If the stakeholders reject the project, there may be negotiations about project details to address any concerns mentioned.

The project charter serves as a reference for creating other project documents like the project plan. While sometimes confused with each other, the project charter vs. project plan differs in terms of purpose, contents and depth.

While a project initiator creates a project charter with basic information and the intent to get approval for a project, the project team creates a project plan only after the project receives approval. The project plan goes much deeper to include details such as specific project task assignments, human resources plans, a communication management plan, tools used and change control procedures. The contents also include the detailed scope of the project, a procurement plan, risk register, quality management plan, budgets and schedules.

Therefore, the project plan consists of many documents rather than a single document like the project charter. The plan will serve as a guide on how to actually carry out the project's day-to-day activities.

The main project charter purpose is to justify the company's need for the project in terms of potential benefits versus costs, time and resources so that the company will approve the project. At the same time, the document serves these purposes:

• Clarify costs and resources. A project charter provides a basic estimate of how much the project will cost and which human resources it will require. Thus, it serves as a way to determine whether the company's budget and current staff can handle the requirements. This helps reduce the risk that the company starts a project that it can't afford or handle and is unable to otherwise see through to completion.
  
  
• Use as a reference for further project planning. Although it only covers the basics, the project charter helps the project manager with actual planning activities. For example, the estimated project cost serves as a baseline for obtaining necessary resources, while the estimated time to completion helps create the project schedules and work breakdown structures that help with assigning tasks. The project team can also revisit the project charter to help avoid taking on work beyond the scope of the originally approved project.
  
  
• Improve project communication. Since it identifies stakeholders and their roles and responsibilities related to the project, a project charter helps keep the whole project team informed. Team members can easily identify who is responsible for different tasks so that there is less confusion that might lead to costly mistakes or disrupt the project execution process.
  
  
• Identify potential problems. A project charter also serves as a basic risk assessment tool that will help the project team prepare for potential problems. For example, the charter might cite scope creep and budget creep as two risks to watch. The team would know to monitor change requests carefully and ensure that activities closely follow the budget so that the company doesn't have to drop the project prematurely due to lack of financial resources.
  
  
• Allow for negotiation about project details. If the stakeholders reject the project initially, the project charter serves as crucial documentation that allows for further negotiation to try to obtain approval. For example, stakeholders can look closely at the project requirements and resource requirements and possibly negotiate on factors such as scope, cost or human resource needs.
  

When writing a project charter, you'll often use a template that your company provides, but you can also find templates online. Although not all templates look the same or use the same terminology or order for the various sections, you'll usually include these common project charter elements:

1. Basic project overview. This header section usually lists the project's title, date and contact information for at least the project's manager and head sponsor.
   
   
2. Project purpose and benefits. This is the business case for the project that states what needs it fulfills in the company and which benefits it will offer. It should mention a specific problem that the project will solve and how it will do so.
   
   
3. Project scope. Not only should this section explain what is part of the project, but it should also clarify what the project should not include. This will help prevent scope creep later.
   
   
4. Project objectives and deliverables. This section should include specific, clear and measurable goals for the project along with the expected intangible or tangible deliverables. For example, the deliverables for a company's app project might include various testing versions along with a final version that goes out to end users.
   
   
5. Project assumptions and constraints. This part will list assumptions you have about the project, its resources and its activities. For example, you might assume the workers you need will be available when scheduled. You'll also list constraints and limitations such as time, resources, money, government regulations and any technical requirements.
   
   
6. Project risks and dependencies. This section lists specific risks that can impact the project's success. This might include issues like potential system incompatibility, changes in laws, bad weather or staffing issues. You'll also list dependencies such as important tasks that need to be completed before additional project tasks can proceed.
   
   
7. Budget, schedule and human resource requirements. While you won't have to go into detail, you should list any important personnel or tools you'll need, an estimated project length or completion date and a basic estimated project cost.
   
   
8. Project milestones with a basic timeline. Here you'll list some high-level milestones for the project along with projected dates if available. This might include events like the project's kick-off meeting, finalization of requirements, testing, training and hand off of the end product.
   
   
9. List of project team members. You'll want to list the project team members along with their job title and description of responsibilities for the specific project.
   
   
10. Signature area. Key stakeholders including the customer, project sponsors and project manager will need to sign and date this area to officially approve the project.