PRINCE2 Foundation and Practitioner Principles Tutorial

2.1 PRINCE2® Principles

Hello and welcome to PRINCE2 Foundation Certification Course offered by Simplilearn. This lesson is about PRINCE2 Principles. The principles are guiding standards and imply the attitude of a person or an individual. PRINCE2 is a principles-based project management methodology. These principles have originated from the lessons learnt from projects that have been successfully executed and the projects that have failed. Let us discuss the objectives of this lesson in the next screen.

2.2 Objectives

After completing this lesson, you will be able to: List the seven principles of PRINCE2® methodology Explain the seven principles of PRINCE2® methodology In the following screen, we will list the seven principles.

2.3 Seven Principles of PRINCE2®

The seven principles of PRINCE2® methodology are as follows: Continued business justification, Learn from experience, Defined roles and responsibilities, Manage by stages, Manage by exception, Focus on products and Tailor to suit the project environment. In the next screen, we will discuss the first principle, which is continued business justification.

2.4 Continued Business Justification

Let us discuss the first principle of PRINCE2, i.e. (pronounced as: that is) continued business justification. A PRINCE2® project must have continued business justification. There should be a justifiable reason to start a project. For example, a popular pizza chain has an online order processing system which allows registered customers to place an order for their products. The same system has been used in the organisation to process the order and to deliver the products for the last three years. The number of customers has gone up in the last couple of years and most of the customers complained about the slow speed of the system. Due to the increase in sales and users, the current system is no longer able to process the data efficiently. So a decision was taken to upgrade the order processing system. The new system will process orders 50 per cent faster, leading to an increase in customer satisfaction by at least 20 per cent. In this example, there is a justification why the current system should be changed. The justification is that the new system will process orders faster and make customer happier leading to a possible increase in repeat of orders. This justification should remain valid throughout the life of the project and should be documented and approved. Although the justification should remain valid, it may change or evolve. This project is part of the nationwide programme being implemented by the pizza chain to promote greater automation, leading to lesser dependence on brick-and-mortar stores for increase in sales For a PRINCE2 project, the justification should be approved and documented in a Business Case. The justification should drive the decision of continuing the project, throughout the project lifecycle. So the first principle of PRINCE2 says that every project should have a continued business justification. If, for whatever reason, the project is no longer justified, it should be stopped. It is a wise decision to close the project if it is proved that it is not going to achieve its objectives. The funds and resources should be released and utilised in a better manner in a project with business justification.

2.5 Learn From Experience

Let us discuss the second principle of PRINCE2, i.e. learn from experience. PRINCE2® project teams learn from previous relevant experience: lessons are sought, recorded and acted upon throughout the life of the project. Learning can be from historical data based on previous similar projects in the same organisation or from a different organisation but in the same industry. Learning from experience happens as the project progresses, which means learning is a continuous process. Lessons are included in reports and reviews. Learning from experience happens as the project closes, which means the project passes on the lessons learnt. It is the responsibility of everyone involved with the project to proactively seek the lessons learnt. For example, a Japanese bank is to provide partial funding of an infrastructure project in a developing country. However, they want an assurance from the local government as a similar project in the past had faced local labour problems. The next principle we will discuss is defined roles and responsibilities.

2.6 Roles and Responsibilities

Let us discuss the third principle of PRINCE2, i.e. defined roles and responsibilities. A PRINCE2 project has defined and agreed upon roles and responsibilities within an organisation structure that engages the business, user and supplier stakeholder interests. A project is typically cross-functional, may involve more than one organisation, and may involve a mixture of full-time and part-time resources. To be successful, projects must have an explicit project management team structure consisting of defined and agreed upon roles and responsibilities for the people involved in the project and a means for effective communication between them. As seen in the image on the screen, all projects have the following primary stakeholders: “Business” sponsors are those who endorse the objectives and ensure that the business investment provides value for money. “Users” are those who will use the products which enable them to gain the intended benefits. “Suppliers” are those who provide the resources and expertise required to make the product. Suppliers may be internal or external to the organisation where project is being implemented.

2.7 Manage by Stages

Let us discuss the next principle of PRINCE2, i.e. manage by stages. If the work is broken in small manageable chunks then it becomes easy to deliver the product. PRINCE2 also suggests that the work be divided in multiple logical stages which helps in better management of the project work and these stages are called Management Stages. A PRINCE2 project is planned, monitored and controlled on a stage-by-stage basis. The steps followed to produce the specialist product of the project are dependent on the technology, domain and industry. For example, the technical requirements of constructing a bridge and for producing a cola bottle are different. However, the production is carried out in phases, and is driven by the technical aspect of the finished product. These phases are called technical stages. PRINCE2 requires a minimum of two management stages: one initiation stage and one or more further management stages. Shorter stages offer more control, while longer stages reduce the burden on senior management. Stages are to be planned, delegated, monitored and controlled according to the business priority, risk and complexity involved. Management stages provide senior management with control points at major intervals throughout the project. At the end of each stage, the project’s status should be assessed. The Business Case and plans should be reviewed to ensure that the project remains viable. We will look at the next principle, which is Manage by Exception, in the next screen.

2.8 Manage by Exception

A PRINCE2® project has defined tolerances for each project objective to establish limits of delegated authority. Every PRINCE2 project has four levels of management organisation. The first level is called “Corporate or Programme Management”. This is the senior management level that decides to take on the project and it defines the Project Level Tolerances. “Corporate or Programme Management” can lay down a rule saying that if Project Cost is expected to exceed 5 per cent of the original Project Cost, it must be brought to its notice and approved to continue with the project. The “Corporate or Programme Management” appoints an “Executive”, whose responsibility is to get the project executed as per the tolerances defined by them. The “Executive” is a part of “Project Board”. Along with Executive, the “Project Board” also has representation from User and Supplier. “Project Board” is the second level of organisation. It is responsible for providing overall direction and management to the project. The “Project Board” appoints “Project Manager” to take care of day-to-day management of the project within the constraint set by the “Project Board”. This is the third level of organisation. The “Project Manager” gets the work done through “Team managers”, who deliver the actual specialist product of the project. This is the fourth level of management. Let us take an example. The corporate management defines the budget and timeline for the project of upgrading the CRM system. The corporate management appoints Mr Smith as an Executive for this project. He has been handling two more projects. Mr Smith appoints Ms Julie as a project manager to manage day-to-day activities of this project. He allocates budget and gives timelines to Ms Julie. Mr Smith does not want to spend time in day-to-day activities of the projects, however would expect regular progress reports from Ms Julie. So this principle provides a very efficient use of senior management time. The senior management including Mr Smith and corporate management should be available for guidance and ad-hoc directions whenever the project team needs their help. So the senior management directs the project manager, the project manager manages day-to-day work and the team managers deliver the project, which means they deliver the specialist product of the project. There is a defined accountability at each level. Next management level is involved only if tolerances are forecast to be exceeded. Implementation of ’management by exception’ provides for very efficient use of senior management time. We will continue our discussion of this principle in the next screen.

2.9 Manage by Exception (contd.)

The accountability is established by delegating authority from one management level to the next by setting tolerances against six objectives for the respective level of the plan. According to PRINCE2, the project manager controls six aspects of the project and they are Time, Cost, Scope, Benefits, Risks and Quality. So the project controls are set at each level of management for these six parameters. Time: Plus or minus an amount of time on the target completion dates. Cost: Plus or minus an amount of the planned budget. Scope: Permissible variation of the plan’s products, e.g., mandatory requirements plus or minus desirable requirements. Benefits: Plus or minus degrees off an improvement goal, e.g., 30-40 per cent cost reduction. Risks: Limits on the plan’s aggregated threats, e.g., cost of aggregated risks to remain less than 10 per cent of the plan’s budget. It also refers limits on any individual threat, e.g., a threat to operational service. Quality: Plus or minus degrees of a quality target, e.g., a product that weighs a target of 300g, with an allowed -5 g to + 10 g tolerance. By setting up controls, if those tolerances are forecast to be exceeded, they are immediately referred to the next management layer for a decision. This ensures that senior management time is used aptly and right decision is made by people at a right level at the right time.

2.10 Focus on Products

Now we will consider the next principle, which is Focus on Products. A PRINCE2 project focuses on the definition and delivery of products, in particular their quality requirements. The document that captures the details of each product is called a Product Description. The product description includes each product’s purpose, composition, derivation, format, quality criteria and quality method. The “Product Description” is used to Estimate efforts, determine resource requirements, determine dependencies and determine schedule of the activities. Without a product focus, projects are exposed to several major risks such as acceptance disputes, uncontrolled change or “scope creep”, user dissatisfaction and underestimation of acceptance activities. According to PRINCE2, a successful project is output-oriented, not activity-oriented. Output-oriented project means the project agrees upon and defines the project’s product prior to undertaking the activities required to produce them.

2.11 Tailor to Suit the Project Environment

Let us now discuss the last principle of PRINCE2, i.e. tailor to suit the project environment. PRINCE2 is a generalised methodology that can be applied to any industry, it is tailored to suit the project’s environment, size, complexity, importance, capability and risk. The tailoring aspect of a project is documented in PID (Pronounced as p-e-e-d). The “Project Initiation Documentation” or the “PID” describes how the method is being tailored for a project. The purpose of tailoring is to ensure the project management method relates to the project’s environment, e.g., aligning the method to the business processes that may govern and support the project, such as human resources, finance and procurement. Project controls are set based on scale, complexity, importance, capability and the risks involved in the project. All the principles of PRINCE2 have to be followed. If any one of them is missed, then the project is not a PRINCE2 project. Let us move on to the quiz questions to check your understanding of the concepts covered in this lesson.

2.13 Summary

Here is a quick recap of what we have learnt in this lesson: A PRINCE2® project has continued business justification PRINCE2® project teams learn from previous experience: lessons are sought, recorded and acted upon throughout the life of the project A PRINCE2® project has defined and agreed upon roles and responsibilities within an organisation structure that engages the business, user and supplier stakeholder interests A PRINCE2® project is planned, monitored and controlled on a stage-by-stage basis A PRINCE2® project has defined tolerances for each project objective to establish limits of delegated authority A PRINCE2® project focuses on the definition and delivery of products, in particular, their quality requirements PRINCE2® is tailored to suit the project’s environment, size, complexity, importance, capability and risk

2.14 Thank You

In the next lesson, we will discuss themes.

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