Chapter 2

Initiating the Project

The PMP exam content from the Initiating the Project performance domain covered in this chapter includes the following:

• Perform project assessment based upon available information and meetings with the sponsor, customer, and other subject matter experts, in order to evaluate the feasibility of new products or services within the given assumptions and/or constraints.
• Develop the project charter by further gathering and analyzing stakeholder requirements, in order to document project scope, milestones, and deliverables.
• Define the high-level scope of the project based on business and compliance requirements, in order to meet the customer’s project expectations.
• Identify and document high-level risks, assumptions, and constraints based on current environment, historical data, and/or expert judgment, in order to identify project limitations and propose an implementation approach.
• Obtain approval for the project charter from the sponsor and customer (if required), in order to formalize the authority assigned to the project manager and gain commitment and acceptance for the project.
• Perform key stakeholder analysis using brainstorming, interviewing, and other data-gathering techniques, in order to ensure expectation alignment and gain support for the project.

Initiating is the first of the five project management process groups. Initiating acknowledges that a new project (or the next phase in an active project) should begin. This process group culminates in the publication of a project charter and a stakeholder register.

Before diving into the Initiating process group, we’ll provide a high-level review of the nine Project Management Knowledge Areas, which is another way of classifying the project management processes. This review offers a high-level look at the Knowledge Areas and insight as to how they are tied into the five process groups.

The Initiating process group accounts for 13 percent of the questions on the PMP exam.

Understanding the Project Management Knowledge Areas

Throughout the project life cycle, a project utilizes a collection of processes that can be classified by the five process groups mentioned in Chapter 1, “Project Foundation.” They are Initiating, Planning, Executing, Monitoring and Controlling, and Closing. Processes can also be classified into nine categories called the Project Management Knowledge Areas, which bring together processes that have characteristics in common. According to the PMBOK® Guide, the nine Knowledge Areas are as follows:

• Project Integration Management
• Project Scope Management
• Project Time Management
• Project Cost Management
• Project Quality Management
• Project Human Resource Management
• Project Communications Management
• Project Risk Management
• Project Procurement Management

Processes within the Knowledge Areas are grouped by commonalities, whereas processes within the project management process groups are grouped in more or less the order in which you perform them. Once again, these are two ways of classifying the same set of project management processes. Processes tend to interact with other processes outside of their own Knowledge Area.

Project Integration Management

The Project Integration Management Knowledge Area consists of six processes. Table 2-1 lists the processes and the process group for each. The Project Integration Management Knowledge Area involves identifying and defining the work of the project and combining, unifying, and integrating the appropriate processes. This is the only Knowledge Area that contains processes across all five of the project management process groups. The processes within Project Integration are tightly linked because they occur continually throughout the project.

Table 2-1: Project Integration Management Knowledge Area

Process Name	Project Management Process Group
Develop Project Charter	Initiating
Develop Project Management Plan	Planning
Direct and Manage Project Execution	Executing
Monitor and Control Project Work	Monitoring and Controlling
Perform Integrated Change Control	Monitoring and Controlling
Close Project or Phase	Closing

The Project Integration Management Knowledge Area involves the following:

• Identifying and defining the work of the project
• Combining, unifying, and integrating the appropriate processes
• Managing customer and stakeholder expectations and meeting stakeholder requirements

The following tasks are typical of those performed during work covered by the Project Integration Management Knowledge Area:

• Making choices about where to concentrate resources
• Making choices about where to expend daily efforts
• Anticipating potential issues
• Dealing with issues before they become critical
• Coordinating the work for the overall good of the project
• Making trade-offs among competing objectives and alternatives

Figure 2-1 shows the highlights of the Knowledge Area’s purpose.

Project Scope Management

The Project Scope Management Knowledge Area consists of five processes. Table 2-2 lists the processes and the process group for each. These processes are interactive and define and control what is strategically included versus intentionally excluded from the project scope.

Table 2-2: Project Scope Management

Process Name	Project Management Process Group
Collect Requirements	Planning
Define Scope	Planning
Create WBS	Planning
Verify Scope	Monitoring and Controlling
Control Scope	Monitoring and Controlling

The Project Scope Management Knowledge Area encompasses the following:

Project Scope Project scope, according to the PMBOK® Guide, identifies the work that needs to be accomplished to deliver a product, service, or result with the specified features and functionality. This is typically measured against the project management plan.

Product Scope Product scope addresses the features and functionality that characterize the product, service, or result of the project. This is measured against the product specifications to determine successful completion or fulfillment. Product scope entails the following:

• Detailing the requirements of the product of the project
• Verifying those details using measurement techniques
• Creating a project scope management plan
• Creating a work breakdown structure (WBS)
• Controlling changes to these processes

The following tasks are typical of those performed during work covered by the Project Scope Management Knowledge Area:

• Collecting the project requirements
• Defining the overall project scope
• Measuring the project against the project plan, project scope statement, and WBS
• Measuring the completion of a product against the product requirements

Keep in mind that the Project Scope Management Knowledge Area is concerned with making sure the project includes all the work required to complete the project—and only the work required to complete the project successfully.

Figure 2-2 shows the highlights of the Knowledge Area’s purpose.

Project Time Management

The Project Time Management Knowledge Area consists of six processes. Table 2-3 lists the processes and the process group for each. On small projects, the Sequence Activities, Estimate Activity Durations, and Develop Schedule processes are completed as one activity.

Table 2-3: Project Time Management

Process Name	Project Management Process Group
Define Activities	Planning
Sequence Activities	Planning
Estimate Activity Resources	Planning
Estimate Activity Durations	Planning
Develop Schedule	Planning
Control Schedule	Monitoring and Controlling

The Project Time Management Knowledge Area involves the following:

• Keeping project activities on track and monitoring those activities against the project plan
• Ensuring that the project is completed on time

The flow of the Project Time Management Knowledge Area is very intuitive. First, the project activities are defined and sequenced. Next, the resources are estimated for each activity, along with the estimated duration. Finally, the project schedule is developed and controlled as the project work moves forward.

Figure 2-3 shows the highlights of the Knowledge Area’s purpose.

Project Cost Management

The Project Cost Management Knowledge Area consists of three processes. Table 2-4 lists the processes and the process group for each. For small projects, the Estimate Costs process and Determine Budget process may be combined into a single process. Remember that your ability to influence cost is greatest at the beginning of the project. Minimal resources have been used, in comparison with other stages. Therefore, changes made during these processes have a greater impact on cost reduction, and your opportunities to effect change decline as you move deeper into the project.

Table 2-4: Project Cost Management

Process Name	Project Management Process Group
Estimate Costs	Planning
Determine Budget	Planning
Control Costs	Monitoring and Controlling

The Project Cost Management Knowledge Area involves the following:

• Establishing cost estimates for resources
• Establishing budgets
• Ensuring that the project is executed within the approved budget
• Improving the quality of deliverables through two techniques: life-cycle costing and value engineering

Life-cycle costing and value engineering are used to improve deliverables. The following is a brief overview of these two techniques:

Life-Cycle Costing Life-cycle costing is an economic evaluation technique that determines the total cost of not only the project (temporary costs) but also owning, maintaining, and operating something from an operational standpoint after the project is completed and turned over.

Value Engineering Value engineering is a technique that looks for alternative product ideas to make certain the team is applying the lowest cost for the same or better-quality results. So, for example, if the original engineer suggests a custom part for a step of the production process, a value engineering review might suggest an alternative that can use a readily available, lower-cost standard part that will produce the same output for a better value.

These are typical tasks performed during work covered by the Project Cost Management Knowledge Area:

• Developing the cost management plan
• Considering the effects of project decisions on cost
• Considering the information requirements of stakeholders

Figure 2-4 shows the highlights of the Knowledge Area’s purpose.

Project Quality Management

The Project Quality Management Knowledge Area consists of three processes. Table 2-5 lists the processes and the process group for each.

Table 2-5: Project Quality Management

Process Name	Project Management Process Group
Plan Quality	Planning
Perform Quality Assurance	Executing
Perform Quality Control	Monitoring and Controlling

The Project Quality Management Knowledge Area involves the following:

• Ensuring that the project meets the requirements that it was undertaken to produce
• Converting stakeholder needs, wants, and expectations into requirements
• Focusing on product quality and the quality of the project management processes used
• Measuring overall performance
• Monitoring project results and comparing them with the quality standards established in the project planning process

The following tasks are typical of those performed during work covered by the Project Quality Management Knowledge Area:

• Implementing the quality management system through the policy, procedures, and quality processes
• Improving the processes
• Verifying that the project is compatible with ISO standards

Figure 2-5 shows the highlights of the Knowledge Area’s purpose.

Project Human Resource Management

The Project Human Resource Management Knowledge Area consists of four processes. These processes organize, develop, and manage the project team. Table 2-6 lists the processes and the process group for each. Because the makeup of each team is different and the stakeholders involved in the various stages of the project might change, project managers use different techniques at different times throughout the project to manage these processes.

Table 2-6: Project Human Resource Management

Process Name	Project Management Process Group
Develop Human Resource Plan	Planning
Acquire Project Team	Executing
Develop Project Team	Executing
Manage Project Team	Executing

The Project Human Resource Management Knowledge Area involves the following:

• All aspects of people management and personnel interaction
• Ensuring that the human resources assigned to the project are used in the most effective way possible
• Practicing good project management by knowing when to enact certain skills and communication styles based on the situation

The Project Human Resource Knowledge Area also includes enhancing the skill and efficiency of the project team, which, in turn, improves project performance.

Keep in mind that the project management team and project team are different. The project management team is the group of individuals responsible for planning, controlling, and closing activities. They are considered to be the leadership team of the project. The project team is made up of all the individuals that have assigned roles and responsibilities for completing the project. They are also referred to as the project staff.

Figure 2-6 shows the highlights of the Knowledge Area’s purpose.

Project Communications Management

The Project Communications Management Knowledge Area consists of five processes. Together, these processes connect people and information for successful communication throughout the project. Table 2-7 lists the processes and the process group for each.

Table 2-7: Project Communications Management

Process Name	Project Management Process Group
Identify Stakeholders	Initiating
Plan Communications	Planning
Distribute Information	Executing
Manage Stakeholder Expectations	Executing
Report Performance	Monitoring and Controlling

The Project Communications Management Knowledge Area involves the following:

• Ensuring that all project information is collected, documented, archived, and disposed of at the proper time.
• Distributing and sharing information with stakeholders, management, and project team members.
• Archiving information after project closure to be used as reference for future projects; this information is known as historical information.

As mentioned in Chapter 1 of this book, a good project manager spends up to 90 percent of their time communicating. Overall, much of the project manager’s work involves managing project communication.

Figure 2-7 shows the highlights of the Knowledge Area’s purpose.

Project Risk Management

The Project Risk Management Knowledge Area consists of six processes, some of which may be combined into one step. Table 2-8 lists the processes and the process group for each. Risks include both threats to and opportunities within the project.

Table 2-8: Project Risk Management

Process Name	Project Management Process Group
Plan Risk Management	Planning
Identify Risks	Planning
Perform Qualitative Risk Analysis	Planning
Perform Quantitative Risk Analysis	Planning
Plan Risk Responses	Planning
Monitor and Control Risk	Monitoring and Controlling

The Project Risk Management Knowledge Area involves the following:

• Identifying, analyzing, and planning for potential risks, both positive and negative, that may impact the project
• Minimizing the probability and impact of negative risks, and increasing the probability and impact of positive risks
• Identifying the positive consequences of risk and exploiting them to improve project objectives or discover efficiencies that may improve project performance

According to the PMBOK® Guide, a risk is an uncertain event or condition that has a positive or negative effect on a project objective. Every project has some level of uncertainty and, therefore, some level of risk. Keep in mind that a risk is different from an issue. A risk may or may not occur. But when a negative risk materializes and impacts the project, it becomes an issue that must be handled.

Figure 2-8 shows the highlights of the Knowledge Area’s purpose.

Project Procurement Management

The Project Procurement Management Knowledge Area consists of four processes. Table 2-9 lists the processes and the process group for each. While reviewing the procurement processes, remember that you are viewing the process from the perspective of the buyer, and that sellers are external to the project team. Together, these four processes allow you to manage the purchasing activities of the project and the life cycle of the procurement contracts.

Table 2-9: Project Procurement Management

Process Name	Project Management Process Group
Plan Procurements	Planning
Conduct Procurements	Executing
Administer Procurements	Monitoring and Controlling
Close Procurements	Closing

The Project Procurement Management Knowledge Area involves purchasing goods or services from vendors, contractors, suppliers, and others outside the project team.

Keep in mind that a contract can be simple or complex; contracts can be tailored to the needs of the project. The PMBOK® Guide defines a contract as an agreement that binds the seller to provide the specified products or services; it also obligates the buyer to compensate the seller as specified.

Figure 2-9 shows the highlights of the Knowledge Area’s purpose.

Performing a Project Assessment

Before an organization decides to embark on a project, several considerations must take place, such as an assessment of the various potential projects. As part of performing a project assessment, management will need to evaluate existing needs and demands, perform feasibility studies, and use project selection methods to help in making good decisions.

Project assessment should entail a careful evaluation of information carried out through meetings with the sponsor, customer, and other subject matter experts. This group of key individuals will then determine whether the new products or services are feasible under the existing assumptions and constraints.

Initiating a Project

Project initiation is the formal recognition that a new project, or the next phase in an existing project, should begin and resources may be committed to the project. A project may come about as a result of a need, demand, opportunity, or problem. Once those needs and demands are identified, the next logical step may include performing a feasibility study to determine the viability of the project.

Identifying Needs and Demands

Needs and demands represent opportunities, business requirements, or problems that need to be solved. Management must decide how to respond to these needs and demands, which will, more often than not, initiate new projects. According to the PMBOK® Guide, projects come about as a result of one of the following seven needs or demands:

Market Demand The demands of the marketplace can drive the need for a project. Some companies must initiate projects in order to take advantage of temporary and long-term market changes.

Organizational Need An organization may respond to an internal need that could eventually affect the bottom line. For example, this may include addressing company growth or even the need to downsize.

Customer Request A new project may emerge as a result of internal or external customer requests.

Technological Advance New technology often requires companies to revamp their products as a way of taking advantage of the latest technology.

Legal Requirement Both private industry and government agencies generate new projects as a result of laws passed during every legislative season.

Ecological Impact Many organizations today are undergoing a greening effort to reduce energy consumption, save fuel, reduce their carbon footprint, and so on.

Social Need Projects arise out of social needs, such as a developing country that offers medical supplies and vaccination in response to a fast-spreading disease.

Conducting a Feasibility Study

Some organizations require that a feasibility study take place prior to making a final decision about starting a project. Feasibility studies may be conducted as separate projects, as subprojects, or as the first phase of a project.

When evaluating the feasibility of new products or services, it’s generally a good idea to meet with the sponsor, customer, and other subject matter experts. Here are some of the reasons that a feasibility study may be undertaken:

• To determine whether the project is viable
• To determine the probability of success
• To examine the viability of the product, service, or result of the project
• To evaluate technical issues related to the project
• To determine whether the technology proposed is feasible, reliable, and easily assimilated into the existing technology structure

Selecting a Project

As shown in Figure 2-10, there are a variety of selection methods an organization may choose to utilize. Selection methods help organizations decide among alternative projects and determine the tangible benefits to the company of choosing or not choosing a project. Project selection methods are also used to evaluate and choose between alternative ways to implement the project.

Depending on the organization, a steering committee may be responsible for project review, selection, and prioritization. A steering committee is a group comprising senior managers and, sometimes, mid-level managers who represent each of the functional areas in the organization.

There are generally two categories of selection methods:

• Mathematical models (also known as constrained optimization methods)
• Benefit measurement methods (also known as decision models)

Mathematical Models

For the exam, simply know that mathematical models, also known as constrained optimization methods, use the following in the form of algorithms:

• Linear
• Dynamic
• Integer
• Nonlinear
• Multi-objective programming

Benefit Measurement Methods

Benefit measurement methods, also known as decision models, employ various forms of analysis and comparative approaches to make project decisions. These methods include comparative approaches, such as these:

• Cost-benefit analysis
• Scoring models
• Cash flow analysis techniques

Let’s take a closer look at the benefit measurement methods.

Cost-Benefit Analysis

Cost-benefit analysis, also known as cost analysis or benefit analysis, compares the cost to produce the product, service, or result of the project with the benefit that the organization will receive as a result of executing the project.

Scoring Models

For weighted scoring models, the project selection committee decides on the criteria that will be used on the scoring model. Each of these criteria is then assigned a weight depending on its importance to the project committee. More-important criteria should carry a higher weight than less-important criteria. Each project is then rated on a numerical scale, with the higher number being the more desirable outcome to the company and the lower number having the opposite effect. This rating is then multiplied by the weight of the criteria factor and added to other weighted criteria scores for a total weighted score. The project with the highest overall weighted score is the best choice.

For example, if Project A contains a weighted score of 31, Project B contains a weighted score of 42, and Project C contains a weighted score of 40, which project would you choose? The correct answer is Project B, since it has the highest weighted score.

Cash Flow Analysis Techniques

The final benefit measurement methods involve a variety of cash flow analysis techniques:

• Payback period
• Discounted cash flows
• Net present value
• Internal rate of return

Figure 2-11 provides an overview of the cash flow analysis techniques.

Let’s take a closer look at these techniques.

Payback Period

The payback period is the length of time it takes the company to recoup the initial costs of producing the product, service, or result of the project. This method compares the initial investment to the cash inflows expected over the life of the product, service, or result.

Discounted Cash Flows

Money received in the future is worth less than money received today. Therefore, you can calculate what the value of funds will be in the future by using the following formula:

FV = PV (1 + i)n

This formula says that the future value (FV) of the investment equals the present value (PV) times (1 plus the interest rate) raised to the value of the number of time periods (n) the interest is paid.

The discounted cash flow technique compares the value of the future cash flows of the project to today’s dollars. It is literally the reverse of the FV formula. To calculate discounted cash flows, you need to know the value of the investment in today’s terms, or the present value (PV). PV is calculated using the following formula:

PV = FV (1 + i)n

To calculate discounted cash flow for the projects you are comparing for selection purposes, apply the PV formula, and then compare the discounted cash flows of all the projects against each other to make a selection.

Net Present Value

Net present value (NPV) allows you to calculate an accurate value for the project in today’s dollars. NPV works like discounted cash flows in that you bring the value of future monies received into today’s dollars. With NPV, you evaluate the cash inflows using the discounted cash flow technique applied to each period the inflows are expected instead of in one sum. The total present value of the cash flows is then deducted from your initial investment to determine NPV. NPV assumes that cash inflows are reinvested at the cost of capital.

Here are some important notes on NPV calculations:

• If the NPV calculation is greater than zero, accept the project.
• If the NPV calculation is less than zero, reject the project.
• Projects with high returns early in the project are better projects than projects with lower returns early in the project.

Internal Rate of Return

Internal rate of return (IRR) is the discount rate when the present value of the cash inflows equals the original investment. When choosing between projects or when choosing alternative methods of doing a project, projects with higher IRR values are generally considered better than projects with low IRR values.

Keep the following in mind:

• IRR is the discount rate when NPV equals zero.
• IRR assumes that cash inflows are reinvested at the IRR value.
• You should choose projects with the highest IRR value.

Defining the High-Level Project Scope

During the Initiating process group, the high-level project scope is defined and documented. As the project moves into the Planning process group, the high-level scope is further elaborated and defined. This is typically based on the business and compliance requirements and is documented to meet the customer’s project expectations. According to the PMBOK® Guide, the high-level project scope is contained within the project charter.

Identifying High-Level Risks, Assumptions, and Constraints

The Initiating process group focuses on documenting not only the high-level project scope, as mentioned previously, but also high-level risks, assumptions, and constraints. This information will be documented within the project charter and will be largely based on the existing environment, historical information, and expert judgment.

As you may have noticed, this process group is concerned with setting a foundation and common understanding of what the project is setting out to achieve. The Planning process group will later expand on this high-level information by working out the granular details.

Developing the Project Charter

Creating the project charter is an important initial step to beginning any project because it formally initiates the project within an organization and gives authorization for resources to be committed to the project. The creation of this document involves gathering and analyzing stakeholder requirements, which will lead the way for properly identifying and documenting the project and product scope, milestones, and deliverables.

The project charter document is created out of the first process within the Project Integration Knowledge Area, called Develop Project Charter. This document attempts to not only formally recognize the project, but also identify project limitations and propose an implementation approach.

The project charter documents the name of the project manager and gives that person the authority to assign organizational resources to the project. It also documents the business need, justification, and impact; describes the customer’s requirements; sets stakeholder expectations; and ties the project to the ongoing work of the organization. The project is officially authorized when the project charter is signed.

Figure 2-12 shows the inputs, tools and techniques, and outputs of the Develop Project Charter process.

Inputs of the Develop Project Charter Process

For the exam, you should know the following inputs of the Develop Project Charter process:

• Project statement of work (SOW)
• Business case
• Contract
• Enterprise environmental factors
• Organizational process assets

Let’s look at each of these inputs more closely.

Project Statement of Work The project statement of work (SOW) describes the product, service, or result the project was undertaken to complete. When the project is internal, either the project sponsor or the initiator of the project typically writes this document. When the project is external to the organization, it is the buyer that typically writes the SOW. According to the PMBOK® Guide, a project SOW should contain or consider all of the following elements:

• Business need
• Product scope description
• Strategic plan

Business Case The purpose of a business case is to understand the business need for the project and determine whether the investment in the project is worthwhile. Performing a feasibility study is a great first step in building the business case. Most business case documents contain the following items:

• Description of the business need for the project
• Description of any special requirements that must be met
• Description of alternative solutions
• Description of the expected results of each alternative solution
• Recommended solution

Contract The contract input is applicable only when the organization you are working for is performing a project for a customer external to the organization. The contract is used as an input to this process because it typically documents the conditions under which the project will be executed, the time frame, and a description of the work.

Enterprise Environmental Factors Enterprise environmental factors refer to the factors outside the project that may have significant influence on the success of the project. According to the PMBOK® Guide, the environmental factors, in relation to this process, include but are not limited to the following items:

• Governmental or industry standards, which include elements such as regulatory standards and regulations, quality standards, product standards, and workmanship standards
• Organizational infrastructure, which refers to the organization’s facilities and capital equipment
• Marketplace conditions, referring to the supply-and-demand theory along with economic and financial factors

Organizational Process Assets Organizational process assets are the organization’s policies, guidelines, procedures, plans, approaches, or standards for conducting work, including project work.

These assets include a wide range of elements that might affect several aspects of the project. In relation to this process, organizational process assets refer to the following items:

• Processes, policies, and procedures of the organization
• Corporate knowledge base

Tools and Techniques of the Develop Project Charter Process

The Develop Project Charter process has only one tool and technique that you should be familiar with: expert judgment. The concept behind expert judgment is to rely on individuals, or groups of individuals, who have training, specialized knowledge, or skills in the areas you’re assessing. These individuals may be stakeholders, consultants, other experts in the organization, subject matter experts, the project management office (PMO), industry experts, or technical or professional organizations.

In addition, you should be familiar with who is considered to be a key stakeholder. Key project stakeholders include the following individuals:

Project Manager The project manager is the person who assumes responsibility for the success of the project. The project manager should be identified as early as possible in the project and ideally should participate in writing the project charter. The following are examples of what the role of project manager entails:

• Project planning and then executing and managing the work of the project
• Setting the standards and policies for the projects on which they work
• Establishing and communicating the project procedures to the project team and stakeholders
• Identifying activities and tasks, resource requirements, project costs, project requirements, performance measures, and more
• Keeping all stakeholders and other interested parties informed

Project Sponsor The project sponsor is usually an executive in the organization who has the power and authority to make decisions and settle disputes or conflicts regarding the project. The sponsor takes the project into the limelight, gets to call the shots regarding project outcomes, and funds the project. The project sponsor should be named in the project charter and identified as the final authority and decision maker for project issues.

Project Champion The project champion is usually someone with a great deal of technical expertise or industry knowledge regarding the project who helps focus attention on the project from a technical perspective. Unlike the sponsor, the project champion doesn’t necessarily have a lot of authority or executive powers.

Functional Managers Project managers must work with and gain the support of functional managers in order to complete the project. Functional managers fulfill the administrative duties of the organization, provide and assign staff members to projects, and conduct performance reviews for their staff.

Outputs of the Develop Project Charter Process

The Develop Project Charter process results in a single, but critical, output: the project charter.

According to the PMBOK® Guide, a useful and well-documented project charter should include at least these elements:

• Purpose or justification for the project
• Project objectives that are measurable
• High-level list of requirements
• High-level description of the project
• High-level list of risks
• Summary milestone schedule
• Summary budget
• Criteria for project approval
• Name of the project manager and their authority levels
• Name of the sponsor (or authorizer of the project) and their authority levels

Obtaining Project Charter Approval

The project charter isn’t complete until sign-off has been received from the project sponsor, senior management, and key stakeholders. Sign-off indicates that the document has been read by those signing it and that they agree with the contents and are on board with the project. The signature signifies the formal authorization and acceptance of the project. Acceptance of the charter is also important to formalize the assignment of the project manager and their level of authority.

The last step in this process is publishing the charter. Publishing, in this case, simply means distributing a copy of the project charter to the key stakeholders, the customer, the management team, and others who might be involved with the project. Publication can take several forms, including printed format or electronic format distributed via the company email system or the company intranet.

Performing Key Shareholder Analysis

Identifying stakeholders and performing analysis on key stakeholders is an important part of setting the stage for a successful project outcome. Stakeholder analysis is carried out through the Identify Stakeholders process and involves the use of brainstorming, interviewing, and several data-gathering techniques.

By performing stakeholder identification and analysis, the project manager can better document stakeholder expectations and ensure that the expectations are aligned with the project objectives. It also serves as a way of gaining project support.

Identify Stakeholders is the first process of the Project Communications Management Knowledge Area and part of the Initiating process group. This process involves identifying and documenting all the stakeholders on the project, including their interests, impact, and potential negative influences on the project. Stakeholder identification should occur as early as possible in the project and continue throughout its life cycle.

Figure 2-13 shows the inputs, tools and techniques, and outputs of the Identify Stakeholders process.

Inputs of the Identify Stakeholders Process

There are four inputs within the Identify Stakeholders process:

Project Charter Within this process, the project charter provides the list of stakeholders along with other individuals or organizations that are affected by the project.

Procurement Documents When the project is procured, the list of key stakeholders and other relevant individuals or organizations may be obtained through the procurement documents.

Enterprise Environmental Factors The following enterprise environmental factors are utilized within this process:

• Company culture
• Organizational structure
• Governmental or industry standards

Organizational Process Assets The following organizational process assets pertain to this process:

• Stakeholder register templates
• Lessons learned
• Stakeholder register from previous projects

Tools and Techniques of the Identify Stakeholders Process

The tools and techniques of Identify Stakeholders are stakeholder analysis and expert judgment.

Stakeholder Analysis During stakeholder analysis, you’ll want to identify the influences stakeholders have in regard to the project and understand their expectations, needs, and desires. From there, you’ll derive more specifics regarding the project goals and deliverables. Stakeholders are often concerned with their own interests and what they have to gain or lose from the project.

According to the PMBOK® Guide, three steps are involved in stakeholder analysis:

Expert Judgment Expert judgment is used in combination with stakeholder analysis to ensure that stakeholder identification is comprehensive. This may involve interviewing key stakeholders that are already identified and senior management, subject matter experts, or other project managers.

Outputs of the Identify Stakeholders Process

The Identify Stakeholders process has two outputs: stakeholder register and stakeholder management strategy.

Stakeholder Register A stakeholder register captures all of the information about the stakeholders in one place. This general information includes things like the department they work in, contact information, knowledge levels, and influence levels. In addition, the stakeholder register contains at least the following:

Identifying Information This includes items like contact information, department, role in the project, and so on.

Assessment Information This includes elements regarding influence, expectations, key requirements, and when the stakeholder involvement is most critical.

Stakeholder Classification Stakeholders can be classified according to their relationship to the organization and, more importantly, whether they support the project, are resistant to the project, or have no opinion.

Stakeholder Management Strategy The stakeholder management strategy is the documented approach used to minimize negative impacts or influences that stakeholders may have throughout the life of the project. According to the PMBOK® Guide, the following elements should be included in the stakeholder management strategy:

• Name of key stakeholders who could have a significant impact on the project
• Stakeholders’ anticipated level of participation
• Stakeholder groups
• Assessment of impact
• Potential strategies for gaining support

Bringing the Processes Together

As a recap, the Initiating process group kicks off the project and results in the creation of the project charter and the stakeholder register. This phase acknowledges that a new project or phase should begin.

But before a project formally exists, several scenarios may unfold:

After a project is selected, a project charter is created (using the Develop Project Charter process) and signed, formally authorizing the project. By the end of the Develop Project Charter process, the project charter contains several documented elements, including the justification for the project, high-level requirements and description, summary milestone schedule and budget, and the sponsor and project manager (if already selected).

Once the project charter is generated, project stakeholders can be identified. This occurs in the Identify Stakeholders process. You learned that stakeholders, along with their interests and levels of influence, are important to identify and define early on within the project. As a result, a stakeholder register, which identifies, assesses, and classifies the individual stakeholders, is created. A strategy for managing stakeholders is also developed as part of the Identify Stakeholders process.

Figure 2-14 shows the potential path of a new project, from its inception and through the initiating phase.

In this chapter, we also covered the nine project management knowledge areas, which are summarized in Table 2-10.

Table 2-10: Project Management Knowledge Areas summary

Knowledge Area	Description
Project Integration Management	Concerned with coordinating all the aspects of the project management plan to accomplish the project objectives
Project Scope Management	Concerned with managing the project scope and defining and controlling what is (and isn’t) included within the project
Project Time Management	Concerned with completing the project on time
Project Cost Management	Concerned with completing the project within budget
Project Quality Management	Concerned with ensuring that the project satisfies the needs for which it was undertaken
Project Human Resource Management	Concerned with organizing, developing, and managing the project team
Project Communications Management	Concerned with connecting people and information together to result in successful communications throughout the project
Project Risk Management	Concerned with increasing the probability and impact of positive events and decreasing the probability and impact of adverse events
Project Procurement Management	Concerned with managing the purchasing activities of the project and the life cycle of the procurement contracts

With the initiating phase taken care of, we are ready to move into the next phase of the project’s life cycle: planning.

Review Questions

1. Identify Stakeholders, Distribute Information, and Report Performance are all processes of which Knowledge Area?

A. Project Integration Management

B. Project Communications Management

C. Project Human Resource Management

D. Project Procurement Management

2. Ron is the project manager of a pharmaceutical company that develops multiple products to help fight diseases affecting children. There are currently two new drugs that the company is planning to develop within the next two years. Ron has been tasked with determining which of the two drugs has the greatest opportunity for success in today’s marketplace. This is an example of:

A. A business need

B. A demand

C. A project selection method

D. A feasibility study

3. Your manager has recently given you the responsibility of selecting the next project, which you will manage as the project manager. There are currently three projects on hold to choose from. Using the weighted scoring models method, you determine that Project A has a weighted score of 16, Project B has a weighted score of 14, and Project C has a weighted score of 17. Which project do you choose?

A. Project A

B. Project B

C. Project C

D. None of the prospects are good selections.

4. What type of project selection method is multi-objective programming?

A. Benefit measurement method

B. Constrained optimization method

C. Decision model

D. Scoring model

5. What is $5,525 four years from now worth today given a 10 percent interest rate?

A. $3,773.65

B. $5,022.73

C. $5,525.00

D. $6,077.50

6. Which of the following BEST describes the characteristics of the product, service, or result of the project?

A. Strategic plan

B. Product scope description

C. Contract

D. Project charter

7. All of the following are inputs to the Develop Project Charter process EXCEPT:

A. Project statement of work

B. Business case

C. Organizational process assets

D. Project charter

8. Maryann has just wrapped up the final draft of the project charter and emailed a copy to the appropriate individuals. A kick-off meeting in two days has already been scheduled to complete the project charter, with all those involved having accepted the meeting invitation. What will Maryann need done during the kick-off meeting to complete the project charter?

A. Have the charter published

B. Confirm that the sponsor, senior management, and all key stakeholders have read and understand the charter

C. Gather excitement and buy-in for the project among the key stakeholders

D. Obtain sign-off of the project charter from the sponsor, senior management, and key stakeholders

9. All of the following are inputs to the Identify Stakeholders process EXCEPT:

A. Procurement documents

B. Project charter

C. Project statement of work

D. Enterprise environmental factors

10. Stakeholder management strategy can BEST be defined as:

A. A method that captures all information about the stakeholders in one place

B. The documented approach used to minimize negative impacts or influences that stakeholders may have throughout the life of the project

C. A list of potential strategies for gaining the support of stakeholders

D. A classification method that classifies all stakeholders according to their influence, expectations, key requirements, and when the stakeholder involvement is most critical

Answers to Review Questions

1. B. Identify Stakeholders, Distribute Information, and Report Performance are all processes of the Project Communications Management Knowledge Area. Other processes of this Knowledge Area include Plan Communications and Manage Stakeholder Expectations.

2. D. A feasibility study takes place prior to making a final decision about starting a project and determines the viability of the project or product, the probability of it succeeding, and whether the technology proposed is feasible.

3. C. When projects are evaluated using the scoring model, the project with the highest overall weighted score is the best choice. Therefore, Project C, which has the highest score at 17, is the correct answer.

4. B. Multi-objective programming is a mathematical model technique. Mathematical models are also known as constrained optimization methods, making B the correct choice. As a side note, A and C refer to the same method, and D is a type of benefit measurement method.

5. A. To calculate the present value you would use the following formula:

PV = FV ÷ (1 + i)n

PV = $5,525 ÷ (1 + 0.10)4

After working out the problem, the result is a planned value of $3,773.65.

6. B. Notice that the question asks for the best choice. Both the product scope description and project charter provide information about the characteristics of the product, service, or result of the project, but the product scope description directly defines these characteristics, making B the best choice.

7. D. The Develop Project Charter process contains five inputs: the project statement of work, business case, contract, organizational process assets, and enterprise environmental factors. D is an output of this process.

8. D. The project charter isn’t complete until sign-off has been received from the project sponsor, senior management, and key stakeholders. The signatures signify the formal authorization of the project. A project charter cannot be published until after sign-off has been obtained.

9. C. There are four inputs to the Identify Stakeholders process: procurement documents, project charter, enterprise environmental factors, and organizational process assets. C is an input to the Develop Project Charter process, and this information is reflected within the project charter input (B).

10. B. A and D both refer to the stakeholder register; C seems like a likely choice but simply refers to one part of the stakeholder management strategy. The best choice is B, which directly describes the overall purpose of the stakeholder management strategy.