Chapter 2
Understand Project Initiating

The first process group you will encounter in the project life cycle is the initiating process group. Although initiating is a relatively small topic that represents less than 10% of the questions on the PMP exam, it is an important topic. In addition to being a small topic, it is also one with which most project managers have little experience. In spite of clear PMI definitions of activities that should be carried out during initiating, many organizations approach the initial steps of projects differently. As a result, your firsthand experience might differ with the PMI recommendations in this process group. Don’t trivialize the material in this chapter. Ensure that you understand initiating before moving on to tackle some of the larger topics.

Initiating Process Group

Initiating Process Group—3.3

The initiating process group is the first step in the project life cycle. In fact, much of the work performed in this process group is actually outside the scope of the project. The main purpose of initiating is to authorize a project to begin or continue. Notice that the initiating process group serves two potential roles. It generally occurs at the beginning of a project, but can also occur several more times throughout the life of a project. Some larger projects define specific milestones that require revisiting the initiating processes to continue the project. Invoking the initiating processes at the start of each phase helps keep the project focused on the business need the project was undertaken to address.

The Purpose of Initiating a Project

Initiating commonly occurs at the beginning of a project and can also be required at certain points throughout the project. For example, a large project with the goal of producing a prototype of a commercial jet will likely encounter several points along the project life cycle at which important decisions must be made. After the fuselage and airfoil have been produced and joined together, they must be tested to evaluate performance against project goals. If the performance does not meet certain standards, the components must be reworked to meet standards before continuing. Alternatively, the whole project could be terminated if the product is deemed to be unable to effectively meet the project standards. This phase in the project is a crucial go/no-go decision point and constitutes activities in the initiating process group.

It is not uncommon for large projects to call for initiating processes several times throughout the project life cycle. Any time you need to assess the progress of a project, reevaluate its merit, and request approval to continue, initiating processes are executed.

In all cases, initiating processes require input from preceding activities. The entities charged with deciding whether to proceed require substantiating information on which to base a decision. When initiating occurs at the beginning of a project, at least some of the input must be created in tasks that are not part of the project. This work predates the project initiation date and can make the project start point fuzzy. The points in time at which a project begins and ends are referred to as the project boundaries. Because a substantial amount of the inputs to the initiating processes is created outside the scope of the project, the starting boundary can be unclear. A project always starts as a result of a business need, and the business need develops before the project commences. Likewise, any documentation of the need for the project is developed before the actual project starts.

Subsequent initiating iterations (within the project life cycle) use inputs from preceding activities. It is important to understand that the activities in the initiating process group always result in a critical project decision. The end of the initiating process group is represented by a decision to continue the project, go back and redo some of the work, or terminate the project altogether.

In most projects, you should include any customers and other stakeholders in many of the activities in the initiating process group. Including as many stakeholders as possible in the early project activities fosters a sense of pride and shared ownership of the project. Any stakeholder who feels a sense of ownership is apt to be more diligent about ensuring the project succeeds. Stakeholder participation increases the success of setting the project scope, gathering project requirements, and defining the overall criteria for project success.

The Project Manager Assignment

PMI requires that the project manager be assigned prior to any project planning taking place. The project manager doesn’t have to be assigned until the end of the initiating process group. However, it makes sense to assign the project manager earlier. A project manager who helped create the project charter is more comfortable with a project and has an easier time planning the project.

It is the responsibility of the project initiator, or project sponsor, to officially assign the project manager. After the project managers are assigned, the project charter identifies the project managers and provide them the authority to carry out project management tasks.

The Project Charter and Its Purpose

The initiating process group consists of two processes. The first process is the development of the project charter, and the second process is identifying stakeholders. The project charter is the initial document that describes the project at a high level and formally authorizes the project. PMI requires that a project charter be created and accepted before a project is considered official. As a PMP, you are required to insist on a project charter before proceeding in the role of project manager.

Authorization from the project sponsor, the project management organization (PMO), or portfolio steering committee is necessary for the project manager to allocate resources and actually perform the work of the project. Even before bestowing authorization, the stakeholders must assign the project manager to the project. The project charter provides the framework for carrying out these actions. It is also the first deliverable of the project and sets the stage for the whole project.

There is no standard format for a project charter, but each project charter should address these areas:

Purpose or justification

Project objectives

High-level requirements

Project description

Risks

Summary milestone schedule

Summary budget

Approval requirements

Project manager

Authorizing party

Cram Quiz

Answer these questions. The answers follow the last question. If you cannot answer these questions correctly, consider reading this section again until you can.

1. You are a project manager newly assigned to a project to implement new manufacturing management software. The project sponsor tells you he has chosen you because he is impressed with your record of completing projects. He tells you that work must start immediately and there is not enough time to go through all the formal documentation process. He asks for a quick list of tasks to start now. What do you do?

A. Put a quick list of the most important tasks together, per the sponsor’s request.

B. Start working on the project tasks and develop a general plan as soon as you can.

C. Refuse to start on the project until you develop a project charter and get it approved.

D. Explain the need for a project charter and project plan to the sponsor.

2. What is the main purpose for initiating a project?

A. Produce the project charter

B. Formally describe the project

C. Formally authorize the project

D. Assign the project manager to the project

Cram Quiz Answers

1. Answer D is correct. Answers A and B ignore the PMBOK requirement that a project manager insist on proper project management techniques. It is crucial that a PMP candidate understand the need for properly obtaining authorization for a project (initiating) and then planning a project before starting actual work. Answer C is too extreme for the initial response. The sponsor might have made the request to immediately begin work out of a lack of understanding of project management. Always start by getting as much information as you can and educating others on the benefits of good project management.

2. Answer C is correct. Answer A mentions one of the outputs of a process in initiating, but the project charter is not the main purpose of project initiation. Answer B is incorrect as well because describing the project is not the primary purpose of initiating. Answer D is incorrect because assigning a project manager is a task carried out during initiating but is not the primary purpose.

Integration Management

Develop Project Charter—4.1

After a decision is made to initiate a project, the collection of input information begins. This is where the project boundaries can be a little unclear, but it is generally accepted that activities starting with the collection of inputs for initiating are part of the project. Remember that the project has not yet been authorized, so all resources required for the initiating processes must be funded explicitly by the project initiator. In other words, someone has to pay for the time required to produce the project charter.

It is entirely possible that the organization decides not to pursue a project after it sees the project charter. The project charter might show that the project will not be worth the resource expenditures. In such a case, the resources already expended to produce the project charter have actually saved the organization from wasting many more resources. Therein lies part of the value of the initiating processes.

The specific project management process that results in the project charter is the Develop Project Charter process. Remembering the output of this process is easy because the only output is the project charter document. The inputs are more numerous, however. Table 2.1 lists the inputs, the tools and techniques, and the output for the develop project charter process.

TABLE 2.1 Develop Project Charter Process: Inputs, Tools and Techniques, and Output

As you study for the PMP exam, don’t just memorize each of the inputs, tools and techniques, and outputs for each process. Really think about why PMI put them where they are. In the case of the develop project charter process, ask yourself what you need before you start. Each piece of information you need to start the process of creating the project charter is represented in the input section. You need some sort of document that specifies the need for the project (contract or statement of work). You also need to understand the policies and procedures governing projects for your organization. Once you have all the necessary information to start, you can start the process of developing the project charter.

During the project charter development, you use your own expert judgment—as well as the expert judgment of subject matter experts in various areas—to create the output or deliverable. Expert judgment involves using all of the project selection techniques in your project manager bag of tricks. (We discuss some of the project selection and related accounting topics later in this chapter.)

In the case of the project charter, the only output is the project charter itself. The main point to listing each of the inputs, tools and techniques, and outputs for each process is to understand each component of each process. Don’t just memorize the tables! Really think through why each element is included.

Because the development of the project charter is the first project activity, much of the work to produce the input for this process occurs either before the project initiation or within the scope of another project. Most of the input for this process serves to define the project and the environment in which it exists.

After the input information has been collected, the project initiator compiles and issues the project charter. The initiator must be someone who holds the authority to fund the project. Although it is desirable to assign a project manager early in the process, the project manager is not absolutely necessary to issue the project charter. It is important that the stakeholders have a material role in the creation of the project charter. The project manager, if one has been assigned at this point, can be the one to actually do the work of compiling the stakeholders’ needs, but the actual input for the project charter and the authority to issue it comes from the project initiator. The main reason so much emphasis is put on the project charter is that it provides the first and best opportunity for the stakeholders to really think through a project before the work begins, and it gives everyone a chance to consider the project before committing to it.

Project Selection Methods

PMI encourages organizations to employ formal methods to select projects. Formal methods make it possible to compare multiple projects and select the one(s) that will produce the most benefit for an organization without being persuaded by emotional ties to certain projects. Additionally, organizations can set specific standards potential projects must meet to be accepted. There are two main selection method categories you need to know for the PMP exam. It is not important that you have an in-depth knowledge of these methods, but you need to be able to identify each type of method and understand their basic differences.

Benefit Measurement Methods

Benefit measurement methods document the relative benefits of completing each project. This approach enables organizations to compare projects by comparing their impact. Each specific method uses different measurements and results in different types of output. You don’t need to understand how to assess the relative measurements for the exam. Just know that these methods produce relative output an organization can use to compare projects.

Mathematical Models

Mathematical models analyze project description data to result in a more standardized set of output values. Simply put, a mathematical model can rate a project on a scale from 1 to 100. The organization then decides how desirable a single project is based on its rating.

Project Management Methodology

The organization’s standard practices when conducting project activities, along with the project management standards, make up the project management methodology. Any standards, guidelines, procedures, or common practices work together to form the general way of managing projects within any organization. The particular methodology you use depends on the culture of your organization, and all these factors affect the content of the project charter.

Project Management Information System

The project management information system (PMIS) is the collection of computerized tools used to collect, store, analyze, and interpret project information. Although most project managers use software to schedule projects, the PMIS often consists of far more than just project management software. When managing a project, learn which tools are available and use them to support the project throughout its life cycle.

Expert Judgment

The primary tool and technique referenced in creating the project charter is tapping into the expert judgment of others. Expert judgment of the project manager is included here if the project manager has been assigned. Some technical or procedural details might require input from an expert in a specific area. Such experts can be stakeholders or customers of the project, or they can be totally unrelated to the project. PMI encourages using any available source for project information input. When considering input sources for the project charter, or any needed expert input, consider any of these alternatives:

Internal organization assets with specific expertise

External consultants

Stakeholders, including customers

Professional or trade associations

Industry or user groups

Cram Quiz

Answer these questions. The answers follow the last question. If you cannot answer these questions correctly, consider reading this section again until you can.

1. Which of the following statements does NOT apply to the project charter?

A. The project charter formally authorizes the project.

B. The project charter provides the project manager with authority to devote organizational resources to project activities.

C. The project charter identifies an external project sponsor.

D. The project charter includes a work breakdown structure (WBS) and associated WBS dictionary.

2. Who is responsible for creating the project charter?

A. The project manager

B. The project sponsor

C. The project team

D. The project management office (PMO)

Cram Quiz Answers

1. Answer D is the correct response. A work breakdown structure (WBS) is not a component of the project charter. Answers A, B, and C are all components of the project charter.

2. Answer B is correct. The project sponsor creates the project charter. Answers A, C, and D list groups that can assist in creating the project charter but do not have the responsibility to create the project charter.

Communications Management

Identify Stakeholders—10.1

The only other process in the initiating process group is the identify stakeholders process. Although you might have a preliminary list of interested parties during the development of the project charter, the official identification of stakeholders does not occur until after the project charter is complete. You are only prepared to identify all of the parties affected by the project after reviewing a complete project charter.

Identifying stakeholders is a crucial part of any project. As a project manager, you spend much of your time in the project communicating frequently with stakeholders. It is important that you include every necessary stakeholder and no one else. The identify stakeholders process results in an effective list of stakeholders and a description of how each one is involved in your project. Table 2.2 lists the inputs, the tools and techniques, and the output for the identify stakeholders process.

TABLE 2.2 Identify Stakeholders Process: Inputs, Tools and Techniques, and Outputs

There is a lot of duplication in the process requirements. The important point is that you understand what each process does and how its inputs and outputs connect with other processes.

The most noteworthy point for the identify stakeholders process is the stakeholder analysis. This process is far more than just writing down a list of names. In addition to creating a list of stakeholders, you also need to know how much each stakeholder is involved in the project and how much influence each stakeholder can, and will, assert on the project.

A stakeholder who is very interested in the project and has a lot of influence is apt to demand substantial attention. A stakeholder with little interest or influence should not require as much of your time. You always want to provide full disclosure of project activities to all of the stakeholders, but knowing who’s who among your stakeholders allows you to manage the project more efficiently.

Cram Quiz

Answer these questions. The answers follow the last question. If you cannot answer these questions correctly, consider reading this section again until you can.

1. How much do stakeholders influence a project after the initiating and planning process groups?

A. None at all. Stakeholders only influence a project during the initiating and planning process groups.

B. Very little. Stakeholders only occasionally monitor a project’s progress after the planning process group.

C. Substantial influence. Stakeholders can potentially influence all aspects of a project throughout its lifecycle.

D. It depends entirely on the project manager.

2. Which of the following are generally NOT project stakeholders?

A. Vendors

B. Customers

C. Functional managers

D. Project management office (PMO)

Cram Quiz Answers

1. Answer C is correct. Since stakeholders all have an interest in the outcome of the project they generally use their influence to ensure the project proceeds in a manner with which they are comfortable. The project manager must ensure stakeholders do not interfere with the overall project’s goals by protecting their own interests.

2. Answer A is correct. Although a vendor might be a stakeholder in some cases, vendors generally do not appear on the common stakeholders list. All other entities listed are generally considered stakeholders.

What the Project Manager Needs to Know

Develop Project Charter—4.1

The project manager is responsible for all activity that takes place during the project lifecycle. In addition, the project manager is responsible for properly managing all of the resources associated with the project. These resources can include people, equipment, money, supplies, and even influence. An important aspect of project manager responsibilities is the ability to measure the effectiveness and impact of project decisions and compare various options. Project managers need to be able to assess the potential impact of various options and select the option that makes the most sense for the project and the organization. Let’s look at a general management approach and a few specific techniques to measure and assess decisions.

Using Management by Objectives

Many organizations use a common management technique called management by objectives (MBO). MBO is not covered directly in the PMBOK, but you need to understand its general concept for the PMP exam. In very simple terms, MBO helps ensure that objectives within various areas or levels within an organization agree, or harmonize, with objectives from other areas and levels. In short, MBO gets everyone thinking with an enterprise-wide perspective.

The initiating process group is really a set of activities that directly support MBO techniques. The main purpose of initiating a project is to ensure the project is understood, provides value to the organization, and is fully authorized by the organization.

MBO is closely related to solid project management practices for several reasons:

MBO implements goal setting and recurring reviews and suggests activities similar to the project control process.

MBO is concerned with ensuring that goals are consistent across an organization, and one task of the project charter is to state how the project supports an organization’s overall goals.

Both MBO and sound project management work only if management supports them at a high level.

Implementing MBO is relatively simple. Here are the basic MBO process steps:

1. Establish clear and achievable objectives.

2. Periodically check whether objectives are being met.

3. Take corrective actions on any discovered discrepancies.

Accounting Concepts Used with Initiating Processes

It is important for project managers to have a good general understanding of the basic accounting principles that apply to their projects. Nearly all phases of the project life cycle require some type of accounting processes and valuation. Even initiating requires projects to be evaluated for the benefit to the organization. We discussed the two general categories of project selection methods earlier in this chapter. Both benefit measurement methods and constrained optimization methods require the application of some accounting methods.

For the PMP exam, you need to understand several cost accounting concepts that are frequently used when performing the project selection process. Of the two main project selection methods, the benefit measurement methods require more cost calculations. You are not expected to be an expert at cost methods for the PMP exam. However, you need to understand all these accounting concepts and know how to use them during the project selection activity. Table 2.3 lists the main accounting concepts you need to know and how they relate to project selection.

TABLE 2.3 Project Selection Accounting Concepts

PMI also expects a project manager to understand other accounting concepts. Table 2.4 lists some of the most common accounting concepts you need to know for the PMP exam.

TABLE 2.4 General Accounting Concepts

Cram Quiz

Answer these questions. The answers follow the last question. If you cannot answer these questions correctly, consider reading this section again until you can.

1. When should a project manager be assigned to a project?

A. Prior to the start of project planning

B. After the project charter is approved

C. During project planning

D. During project execution

2. Which accounting concept refers to the value today of future cash flow?

A. Present value

B. Net present value (NPV)

C. Opportunity cost

D. Sunk cost

Cram Quiz Answers

1. Answer A is the best response. A project manager should be assigned prior to the start of project planning. Answer B is incorrect because the project manager should be assigned prior to the creation of a project charter. Answer C is incorrect because a project manager should be assigned prior to, not during, project planning. Similarly, Answer D is incorrect because a project manager should be in place before project execution.

2. Answer A is correct. Answers B, C, and D refer to other accounting concepts. Refer to Table 2.3 for more information.

What Next?

If you want more practice on this chapter’s exam topics before you move on, remember that you can access all of the Cram Quiz questions on the CD. You can also create a custom exam by topic with the practice exam software. Note any topic you struggle with and go to that topic’s material in this chapter.