PRINCE2 project management

To start learning about PRINCE2, read these short introductory sections for some key concepts to get you started.

What is a project?

In PRINCE2, a project is defined as “a temporary organization that is created for the purpose of delivering one or more business products according to an agreed business case”.

Organizations set up and invest in projects to introduce change into their day to day ‘business-as-usual’ activities. For example, out of date IT systems may be replaced by more modern, up to date systems and a project will be set up to define what is required, to design and build a solution and then finally to test that the solution meets the requirements specified by the users.

Once the new IT system has been shown that it meets these requirements, it is delivered to the users, and is operated and maintained on an ongoing basis by the operational and support staff.

The system will then be used by the staff performing their business-as-usual activities, so enabling benefits to be realized by the organization. The delivery of the new system will result in changes to the day-to-day business as usual activities. The improvements which result from these changes are measured in PRINCE2 in the form of benefits.

Projects can be distinguished from the everyday business-as-usual activities in five main ways.

1. Projects are how changes are introduced into the business.
2. A project is a temporary organization with a defined start and end date.
3. Because projects often bring together people with different skills from different departments and even different organizations, the project environment is often cross-functional in nature.
4. Every project is unique in what it delivers. In other words, no two projects, even IT projects are the same.
5. Projects have a greater level of uncertainty than business-as-usual activities. This is because the routine day to day business-as-usual activities are often performed according to well defined procedures. The same activities are often repeated daily. Over a period of years, the organization has often developed well established procedures which govern how this work is conducted. Therefore, the level of uncertainty of business-as-usual work is reduced.

On the other hand, project work often entails doing something that has never been done before by the organization, and therefore by its very nature carries a higher level of uncertainty. This uncertainty in PRINCE2 is referred to as risk. Therefore, projects carry more risk than business as usual work.

Project objectives

Each project will define objectives which are expected to be met by the end of the project. The role of the project manager is to achieve these objectives within expected performance targets. These performance targets are cost, time, scope, quality, risk and benefits.

The project manager will plan how these targets will be met by planning the products that will be delivered, the sequence of project activities that must be performed, the resources required, and the time, cost and effort required.

These activities are then delegated to teams who perform the work according to the agreed constraints. Whilst the work is being performed by teams, the project manager will monitor the progress against plans, and take corrective actions to get the plan back on track when the plan starts to slip, which is inevitably what happens on projects.

Why is it that projects do not always go according to plan? Well, there are several factors. Firstly, it is often impossible to forecast with 100% accuracy how much something will cost and how long something will take to complete in terms of time. For this reason, a plan will contain “tolerances” for cost and time. These tolerances are laid down by the next level of management above. By setting tolerances in this way, the project manager is given some room to manoeuvre in terms of achieving the targets.

An example of cost tolerance would be as follows. Suppose a plan is expected to cost $10,000 dollars and take 10 weeks to complete. It would be unrealistic to expect that the work in the plan could be achieved for exactly this cost and delivered exactly at the end of week 10. So, to avoid having to escalate every small slippage to the next highest management level, tolerances could be assigned for both cost and time to allow some leeway for the project manager to manage the work.

An example of cost tolerance might be to allow the project manager to spend within a range, starting a little lower than the $10,000 and finishing a little higher than this figure. For example, +$2,000 and -$1,000. This therefore would mean it would be acceptable to deliver the plan for any cost within the range $9,000 to $12,000.

Similarly, an example of time tolerance might be to allow the project manager to deliver anywhere between the start of week 8 and the end of week 12 i.e., -2 weeks/+2 weeks. Setting tolerances in this way is a key aspect of PRINCE2 and allows the project to be ‘managed by exception.’

What is PRINCE2 composed of?

PRINCE2 is composed of 4 integrated elements. These elements are principles, themes, processes, and the tailoring of the method to suit the needs of the project environment. Let’s look at each of these 4 elements in turn.

Principles

There are 7 principles in PRINCE2. These principles are the bedrock upon which everything else in PRINCE2 is based.

These principles are universal in that they can be applied to all projects irrespective of language, geography, or culture. They have been proven in practice by thousands of project managers managing tens of thousands of projects to be the most effective ways of planning and managing projects. They are therefore self-validating. They are also empowering to the practitioners who apply them in that they give a project manager a better chance of being successful.

The true test of whether a project is being run according to PRINCE2 is whether the 7 principles are being applied. Projects which claim to be PRINCE2 projects but do not apply these principles are PINO projects (PRINCE2 In Name Only).

Themes

There are 7 themes in PRINCE2. They are business case, organization, quality, risk, plans, change and progress. A theme refers to one aspect of project management which needs to be constantly addressed throughout the duration of the project.

Processes

There are 7 processes in PRINCE2, each containing several activities which need to be performed. The processes describe the activities which need to be performed at different points within the project. The processes also describe which of the PRINCE2 project management team roles are responsible for each of the different activities.

Tailor to suit the project environment

Tailoring is the 4th element within PRINCE2 after the principles, processes, and themes. Tailoring refers to how the project management team adapts PRINCE2 and applies PRINCE2 to suit the needs of a project.

Every project is different, and every organization is different. Therefore, the method must be applied in a sensible way which meets the needs of each project.

Simply applying the method in the same way on every project is a sure way to fail because doing things this way takes no account of the different environments in which each project operates. Therefore, to give a project a better chance of success requires the project management team to tailor the framework to suit the needs of the project environment.

The elements which can be tailored include:

• PRINCE2 themes
• PRINCE2 processes
• PRINCE2 management products
• PRINCE2 roles and responsibilities.

The PRINCE2 principles cannot be tailored because they are universal, and by their nature therefore cannot be modified.

What are products in PRINCE2?

One word often used on projects is ‘deliverable’. This is used to refer to those things that are ‘delivered’ from the project, for example, a new IT system, a new house, a marketing campaign etc. The features of these deliverables need to be specified by the users, and then need to be designed, developed, and tested, or reviewed, to ensure they meet the users’ specifications. PRINCE2 does not use the word deliverable to refer to such items, but instead refers to these items as ‘products’.

Within PRINCE2 there are two types of products. There are ‘specialist’ products which require specialist skills to design and build. For example, the new IT system, new house, or marketing campaign just mentioned.

There are also ‘management’ products. These are products which are used to help plan, manage, and control projects. Some examples are a project plan, a business case or an end stage report. There are 26 management products defined in PRINCE2 and they are described in detail in Appendix A of the PRINCE2 manual.

These 26 management products are sub-divided into 3 basic categories.

1. Baseline management products. These products define aspects of the project and once approved, are subject to change control. One example of a baseline product is the project plan. As just described, projects are how changes are introduced into the business.
2. Records. These are management products which are regularly updated with information about project progress. Examples are the issue register and risk register.
3. Reports. These are management products which provide a snapshot of certain aspects of the project. They are used to communicate information about project progress to each level of management. One example is the highlight report, written by the project manager to inform senior management of progress within a management stage.

The customer supplier environment

PRINCE2 is based upon one simple assumption: that the project operates within what’s called a customer-supplier environment.

This means that there is always a customer, which can be an individual, group or organization which has a business need. This might be a business problem that they are facing, such as the need to cut costs. The customer ‘sponsors’ the project in that it will be responsible for providing the funding for the project. Not only that, but the customer specifies what will be delivered from the project i.e. the specialist products.

These specialist products will in turn be used by the customer organization to bring about some kind of change. Suppose an organization is facing increasing pressure from its competitors. Let’s assume that this organization has a sales team which uses sales software to track and manage its own leads and sales. Let’s also assume that this software is outdated and inefficient and means that some sales leads are being lost due to the inadequacies of this software. So, the customer organization may decide to replace the existing sales software to a newer and better system. This will require a project to manage the implementation of the new software.

So, the problem being faced may be resolved by investing in such a project. After implementing the new software, this will result in a change in the way the sales team does it work. The change in turn, it is hoped, will enable the sales team to be more efficient in its work, lose fewer leads and be able to turn more sales lead into actual sales. This is what’s known as an outcome in PRINCE2.

The customer organization will need to understand what benefits it expects to gain by investing in the project before committing the money. This is so it can understand if it will get a return on investment (ROI). In PRINCE2, benefits are the measurable improvement which results from an outcome that is perceived to be advantageous by the customer. In PRINCE2, benefits are expected to be made measurable.

In our example, what might be some benefits? The benefits may be that the company can increase its sales by X% and that Y% fewer sales leads are lost each year.

So, as you can see, projects deliver specialist products which are used to bring about change (an outcome) which in turn is measured in the form of benefits.

So, the customer organization invests in the project, specifies what the project must deliver, then uses the project’s products to bring about change, which in turn will lead to benefits.

The supplier in the customer-supplier environment refers to the individuals, groups or organizations which commit specialist resources (i.e., people with specialist skills) to design, build and deliver the products which have been specified by the customer.

Now, does the supplier need to be a separate organization from the customer? What if all the work on the project is being done ‘in-house’? Well, in this case there is still a supplier organization, it just happens to be the same organization as the customer organization. If, however, the products are being bought in from a separate organization, then there will be two separate organizations.