What is PRINCE2?

By on 09 Nov 2018

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PRINCE2 stands for PRojects IN Controlled Environments (2nd version). It’s the world’s most popular project management methodology. Since its inception in 1996, more than 1.6 million exams have been sat in more than 100 countries worldwide [1].

It is used by international organizations such as the United Nations and NATO as well as governments in the UK, Australia and Germany. It is used widely in businesses and NGOs across the world.

Why is PRINCE2 so popular?

PRINCE2 is so popular amongst organizations because it brings them some very useful benefits, including, but not limited to the following:

Based on best practices

PRINCE2 embodies proven best practice and governance in project management. By using it, you will be using tried and tested methods for managing projects effectively.

Business-focused

It ensures your project is focused on its business case objectives rather than seeing the completion of the project as an end-in-itself. This helps to ensure your project provides a return in investment.

Applicable to any project

PRINCE2 can be applied to any type of project, large or small in any industry. It can also easily be used alongside other models/methods/standards e.g. agile methods such as SCRUM or standards such as the PMBOK® Guide.

Roles & responsibilities

It defines specific project responsibilities for all project management team members, not just the project manager and project sponsor. It also defines a structure for accountability, delegation, authority and communication so that all decision-makers are clear about what is expected of them.

Product-focused

It focuses on what a project will deliver, why, when, by whom and for whom. This focuses minds on the project’s outputs and how they will help to achieve benefits for the organization.

Adaptable

PRINCE2 is adaptable because it can be tailored to meet the specific needs of the organization and scaled to the size, level of risk and complexity of a project.

Saves managers’ time

It's based on a ’management by exception’ framework, enabling an efficient use of management time. This means senior management can be involved in taking the big decisions, but don’t have to attend regular meetings.

Widely supported

It’s supported by a worldwide network of exam institutes, accredited training and consultancy organizations, who can supply expert support for PRINCE2 projects or for organizations planning to adopt PRINCE2.

Stakeholder involvement

It ensures that key stakeholders (including sponsors and resource providers) are properly represented in planning and decision making. PRINCE2 ensures that key managers from both the customer and supplier are involved in decision-making.

Continuous improvement

It promotes learning and continuous improvement in organizations which adopt it. This is because it has an in-built mechanism which enables practitioners and organizations to learn lessons which can be passed onto later projects.

Consistent working

PRINCE2 is widely understood and provides a common project vocabulary. It can help promote consistency of project work and the ability to reuse project assets. It also facilitates staff mobility and reduces the impact of personnel changes/handovers.

Customer supplier environment

PRINCE2 assumes that all projects operate with a ‘customer-supplier’ environment [2].

Customer

A customer (individual(s), group(s) or organization(s)) commissions a project because it has either a business problem to resolved or a business opportunity to exploit. The customer pays for the project and will specify the outputs or deliverables (known as products) from the project. Once delivered, these will be used by the customer to achieve desired outcomes which are measured in the form of benefits.

For example, a corporation specifies a new enterprise resource planning system (a product) to be rolled out across its global operations. After delivery, it will be used by staff in different business units. This will result in changes to the way these staff do their work (the outcomes). There will be certain positive results from these changes - e.g. reduction in costs (the benefits).

Supplier

A supplier (individual(s), group(s) or organization(s)) brings resources (people, equipment, plant, tools etc) to the project which are used to design, build and test the products which have been specified by the customer. A supplier might be internal to the customer organization (e.g. an in-house IT department) or external (e.g. a company contracted using a commercial contract).

PRINCE2 is prescriptive

PRINCE2 is a project management methodology. A methodology is a system of practices, techniques, procedures, and rules used by those who work in a discipline. As such it describes the following:

  • Who should be responsible and accountable for making decisions about the project
  • Which processes should be used to support this decision-making
  • When, during the project life-cycle, should these decisions be taken.

There is often confusion between PRINCE2 and the ANSI project management standard embodied within the Guide to the Project Management Body of Knowledge (PMBOK® Guide). The PMBOK® Guide makes it clear that it is not a methodology [3].

The PMBOK® Guide is based upon descriptive practices. As such, the PMBOK® Guide describes different project management techniques and processes and the inputs and outputs used on projects. It therefore forms a reference guide for project managers.

PRINCE2 on the other hand is based upon prescriptive practices. PRINCE2 describes how different project management best practices should be used on projects.

The composition of PRINCE2

composition of PRINCE2

PRINCE2 is composed of 4 integrated elements [4]:

1. Principles – these are universal. They can be applied to all projects, irrespective of culture, geography, size or complexity of the project. Because they are based upon best-practices, they have been proven in practice to be the best ways of managing projects. Applying the principles can also empower the practitioners because it gives their projects a better (but not guaranteed) chance of success.

2. Themes – these are the main aspects of project management which must be continuously addressed throughout a project. The themes cover the business case, organization, quality, plans, risk, change and monitoring progress.

3. Processes – these describe the decisions which should be taken at different points in a project and which member of the project management team should be responsible. They effectively describe how the themes and principles are applied during a project.

4. Tailoring – this brings all the other elements together. Since all projects are unique, the level of rigour which PRINCE2 gets applied on a massive, high cost, high risk project will be much higher than on a small, low risk, low cost taking just a few weeks. Since the latest version of PRINCE2 was released in July 2017, the PRINCE2 manual contains much more guidance about tailoring PRINCE2 on different project scenarios to make it a much more valuable guide than previously.

Principles

PRINCE2 principles

These are applied throughout the themes and the processes. One test of whether a project is a PRINCE2 project is whether all 7 principles are being applied on that project.

There are 7 principles [5] which will now be described.

Continued business justification

This principle enables a project to be aligned to the customer’s business objectives. If applied effectively, it prevents organizations from starting or continuing projects which cannot be justified from a business perspective.

Assessing business justification cannot just be a one-off decision taken at the beginning of a project, but instead it’s a decision which is continuously addressed throughout the project.

Defined roles and responsibilities

It is important to remember that managing projects is about managing people (stakeholders). PRINCE2 defines a broad range of stakeholders which form the project management team. The project management team members come from both the customer organization (e.g. executive, project manager) and from the supplier organization (e.g. team manager).

To avoid confusion, and passing the buck, each person on the project management team must be clear about what they are responsible and accountable for. Where these things are not clear, projects are often beset by communication problems and are a common reason why projects fail.

Learn from experience

This principle tries to avoid a typical situation whereby the same problems and mistakes often get repeated across multiple projects.

PRINCE2 recommends that previous projects are assessed for any lessons that can be applied on the current project prior to it being initiated. Lessons refer to anything which went well or went badly on previous projects. These are then incorporated into plans and the management approaches on the new project.

If lessons are learned during a project, these are reported and passed on to others in the customer organization so that they can apply them on their projects.

Focus on products

Prior to a project being initiated, PRINCE2 recommends that the project’s outputs (products) must start to be defined because these will be used later by the customer to achieve the desired outcomes. So, when deciding the business justification, it must be clear what products must be delivered for these outcomes to come about.

Some people mistakenly assume that PRINCE2 mandates a waterfall approach to projects. Actually, what PRINCE2 does say is that the requirements for the project’s outputs must begin to be defined prior to initiation and they can be elaborated further as the project progresses.

This focus on what is to be delivered (the project scope) enables the project team to understand the costs and timescales required to complete the project, and therefore is a basis for planning.

Manage by stages

This principle enables organizations to take a less risky approach to investment decisions. Rather than one big decision at the beginning of a project to commit the full project budget and resources, PRINCE2 recommends a series of decisions throughout the project. These occur at the end of a management stage.

Providing the project remains a worthwhile investment (i.e. still has business justification) the resources and funding for the next stage of the project can be committed. Otherwise, the project should be closed.

Manage by exception

On a PRINCE2 project, the project manager reports and takes direction from the project board, which takes the main decisions about the project. It delegates the day to day decision-making about a management stage to the project manager by setting tolerances for the project’s objectives (time, cost, scope, quality, risk, benefits).

A tolerance is a range. For example, the time forecast to complete a management stage may be expressed as 10 weeks +1 week/-2 weeks. This means that providing the stage can be completed no earlier than 8 weeks and no later than 11 weeks, the project manager does not need to refer up the project board for a decision. This gives the project manager room to manoeuvre without bothering the project board members, who are likely to be busy with other responsibilities.

On the other hand, if the stage cannot be completed within its tolerances, this is an exception situation which must be escalated to the project board for its decision.

A key benefit therefore of management by exception is that it saves time for senior managers because they can clearly delegate authority by setting tolerances to the project manager.

Tailor to suit the project environment

In the updated version of PRINCE2 [6] released in July 2017, there was an even greater emphasis given to tailoring than previously. As such, the latest guidance provides some really practical advice for project practitioners.

Because every project is unique, the level of control required for a high cost, high risk, long term, multinational project involving several global partners will inevitably require a greater and more rigorous application of PRINCE2 than would a simple, short term, low cost, low risk project which is being conducted in-house.

If practitioners blindly apply the whole of the PRINCE2 methodology to every project, they will not gain the benefits which the method promises. Choosing which elements of PRINCE2 to apply more lightly, or which elements to combine or to leave out will provide its practitioners with the greater benefit.

Themes

PRINCE2 themes

Themes in PRINCE2 are very similar to the concept of knowledge areas in the PMBOK® Guide[7].

There are 7 themes which will now be described.

Business case

This theme is very much connected with the ‘continued business justification’ principle. It describes how a business case is created, maintained and approved throughout the project. The business case lays out the business justification for the project and contains an investment appraisal summarizing the costs versus benefits over the lifetime of the project’s outputs (products).

Understanding solely what the forecasted benefits are does not tell the customer organization whether a return on its investment has been achieved. For that, PRINCE2 recommends that a benefits management approach is developed which understands how the project’s products perform in their operational environment, and whether they enable the desired outcomes and benefits to be realised.

Organization

PRINCE2 defines a much broader range of stakeholders which form the project management team than does the PMBOK® Guide, which only addresses the project manager and project sponsor roles.

PRINCE2 defines 9 distinct project management team roles, each with their own accompanying set of responsibilities. PRINCE2 allows these roles to be shared (i.e. performed by several individuals) or combined (i.e. several roles performed by a single individual).

Whether roles are combined or shared is part of the tailoring which should be applied on any project. No matter how the combination or sharing of roles is applied, the most important thing is that all the project management responsibilities are performed by someone with the necessary authority and competencies.

Quality

PRINCE2 takes a standard approach to quality. The requirements for products should be specified and tested by the customer, the they should be designed, built and delivered by suppliers.

PRINCE2 recommends several management products are created and maintained to assist with the planning and management of quality. These include product descriptions which describe the criteria and quality tolerances which a product must conform to, the quality control methods which will be performed, and the responsibilities involved.

In PRINCE2 quality planning is performed throughout the project as products are defined prior to the management stage(s) in which they will be designed and built. As was stated earlier, progressive elaboration of requirements forms an expected part of quality planning.

Plans

PRINCE2 has the concept of different levels of plan which correspond to the needs of the different levels of the project management team. Planning in PRINCE2 therefore takes the form of rolling wave planning.

The 3 management levels are: directing (the project board taking the strategic decisions about the project); managing (the project manager taking the day to day decisions about a stage); delivering (the team manager taking the decisions relating to the work package under their responsibility).

Since each management level requires a different amount of detail, PRINCE2 recommends a high-level, long-term project plan (used by the project board), a medium-level, medium term stage plan for each management stage (used by the project manager), and a detailed-level, short-term plan for each work package (used by the team manager responsible).

Risk

PRINCE2 defines risk as an uncertain event, which if it occurs, might have a negative or positive effect on the project[8].

Effective risk management is essential for all projects. Therefore, PRINCE2 defines a risk management procedure which enables the project management team to identify and assess risks, plan and implement appropriate responses and to report the status of risks. A risk register is also recommended to track the status of all current risks. Reporting the status of risks is recommended in all reports.

Risk tolerance defines the threshold level of risk above which a specific risk needs to be escalated either the project board, or even higher to corporate or programme management. PRINCE2 recommends a risk budget to pay for all risk responses.

Change

Since change on projects is inevitable, PRINCE2 recommends a systematic approach to controlling change.

Whether changes to scope or requirements, or changes external to the project, the approach is the same. PRINCE2 recommends an issue and change control procedure whereby issues are captured and assessed, then recommended options for resolution are proposed before a decision is taken to implement the option.

Scales for severity and prioritization are defined in the project’s change control approach. Levels of severity determine which management level has the authority to decide upon the response to an issue, whereas the prioritization levels determine which options take precedence over others.

PRINCE2 recommends a change budget to pay for all changes, although for other types of issues, these are paid for from the project or stage budgets.

Progress

This theme covers both event-driven and time-driven project controls. Event-driven controls are those which occur in response to events and enable the project management team to respond to situations and take decisions. For example, an exception report is written by a project manager and sent to the project board to alert it to the fact that one of the tolerances is forecast to be exceeded. The report therefore enables the project board to take an appropriate decision.

Time-driven controls are those which occur on a regular basis. For example, the team manager writes a regular checkpoint highlight for the project manager (say once a week), which details the work being done by the team during the work package. This therefore enables the project manager to monitor the progress being made against the stage plan.

Processes

PRINCE2 processes

There are 7 processes in PRINCE2 which covers all the work of the project, as well as a small but very important bit of work prior to the project’s initiation.

The 7 processes are now described.

Starting up a project

This is the only process performed prior to the project being initiated. It is therefore a pre-project process. Its purpose is to decide whether the idea for the project is sensible and whether resources should be committed to initiating the project. It is also where the project board members and the project manager are appointed.

The process should be done quickly with just enough time spent to produce a project brief and initiation stage plan. The project brief, as its name implies is short – perhaps only 1 or 2 pages. It answers some key questions about the project such as: why, what, how and who? The initiation stage plan covers the work to be done during the first stage of the project (the initiation stage).

Both the project brief and initiation stage plan are handed over to the project board for approval.

Directing a project

The process describes all the main decisions which are taken by the project board. It starts as soon as the ‘starting up a project’ process is complete when its first decision is to approve (or not) the project brief. If is believes the project is a sensible idea it authorizes the initiation stage and commits the resources required to implement the initiation stage plan.

Subsequent activities of the project board in this process involve authorizing the project which happens at the end of the initiation stage, authorizing all subsequent stage plans which happens at the end of subsequent stages, and authorizing the project closure which happens at the end of the final stage.

In addition, the project board gives ad-hoc direction by taking decisions about issues and risks, reviewing reports from the project manager and acting as the interface to the project for corporate or programme management.

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When authorizing a stage, the project board commits the necessary resources required to implement the stage plan. Thereby it delegates authority to the project manager on a stage-by-stage basis.

Initiating a project

This process is where the project manager performs much more detailed planning and preparation work.

The result is the project initiation documentation (PID) which is composed of management approaches for quality, risk, change control and communications. It also contains a detailed business case and project plan, and the project’s controls and organization structure.

A separate benefits management approach is also developed but is not incorporated into the PID because it lives on after the project has closed.

The PID therefore forms a much more detailed view of the project compared with the project brief and lays down the firm foundations for the management of the project.

Controlling a stage

This process describes the day-to-day activities of the project manager during the stage. It covers the allocation and monitoring of work packages to team managers; the identification and management of risks and issues; the writing of regular highlight reports for the project board; the escalation of issues and risks to the project board in the event of an exception; the taking of corrective action when the stage plan slips from its targets but can be recovered within the project manager’s delegated level of authority (i.e. tolerances).

Managing product delivery

This process is performed by team managers. The purpose of this process is to control the link between the project manager (representing the customer) and the team manager(s) (representing the supplier) by placing formal requirements on the work of the team using a work package.

In a commercial arrangement, the work package would be a legal contract between the customer and supplier. On a small in-house project, the work package could be a very loose description of the work to be done.

It’s during this process when the specialist work to design, build and test products is done. It does not matter if the teams and suppliers understand PRINCE2 or not, because the interface between the project manager and team manager enables the project’s work to be completed without them having to know about PRINCE2.

The team manager(s) provide regular checkpoint reports to the project manager, so it can monitor the progress of the work package. The teams can use any development methods they choose (e.g. agile methods such as Scrum) because PRINCE2 is separated from the delivery methods chosen by the supplier’s teams.

Managing a stage boundary

This process is performed by the project manager at the end of every management stage except the final one.

It’s where the project manager provides the updated information necessary for the project board to re-assess whether the project can still be justified. This requires the project manager to update the project plan with revised forecasts for time and cost, and to update the detailed business case with revised forecasts for cost, time and benefits.

The project manager also develops the next stage plan and provides a summary of project’s outlook in the form of an end stage report.

The updated business case and project plan, the next stage plan and end state report are then represented to the project board for approval.

Closing a project

This process is performed by the project manager at the end of the final stage, whether the final stage was reached as planned, or whether the project was prematurely terminated.

The process is designed to prevent a long, slow drift into operational use of the project’s products. If this happens, then the customer organization will find it very hard to know how much a project cost, or how long it took. Therefore, there will be less information to base subsequent estimations upon when later projects start up.

There are some key activities to do in this process. Firstly, acceptance for the project’s products must be obtained from users and operational teams. This will often require acceptance tests to have been successfully passed. After acceptance has been obtained, the handover of the products to the users and/or operational teams can occur. This marks the time when the products can be used to realize the forecasted benefits. (Note: on some projects a phased handover is done, whereby partial acceptance must be obtained at the time).

Any unfinished work, open issues or risks are documented in the form of follow-on action recommendations, lessons learned from the project are captured in a lessons report, and the achievements of the project are written into the end project report.

Finally, the project manager can recommend the closure of the project to the project board. If the project board authorizes the closure of project that’s the point at which nobody does any more work on the project.

Tailoring

Tailoring to the project environment is the 4th of the integrated elements. Tailoring effectively does require skill and experience to get the greatest benefit.

The things which can be tailored include the themes, processes, terminology and management products. Principles cannot be tailored.

Some factors which will affect the tailoring on a project includes the scale, level of risk, duration, the nature of the customer/supplier relationship, organization culture, policies and procedures, and the level of maturity of the organization’s project management capability.

Conclusion

PRINCE2 is without doubt the most popular project management methodology in the world today. It provides numerous benefits to organizations which adopt it. Its business-driven approach helps ensure projects provide value for money and a return on investment.

Recent refinements to the methodology provide much more practical advice to project practitioners especially in its ability to integrate with agile development methods.

If you are not yet familiar with PRINCE2, I would highly recommend that you either attend a classroom PRINCE2 course, or study PRINCE2 at home. To help you with studying at home, check out the free videos above and start to learn about this very effective project management methodology.

PMBOK is a registered mark of the Project Management Institute, Inc.

References

[1] This is an estimate based upon figures released by the APMG International in 2013 which stated that year on year, the number of students sitting PRINCE2 exams grew every year except during 2009 when there was a minor contraction. By 2012 there were almost 145,000 exams sat somewhere in the world and the total number of examinations sat since its inception in 1996 reached over 1 million. Until 31 December 2014, APMG was the accreditation body for PRINCE2.

Since 2014, AXELOS became the accreditation body for PRINCE2 and has not released annual figures for the number of examinations.

[2] AXELOS [2017]. Managing Successful Projects with PRINCE2®. Norwich: TSO. p11.

[3] PMI [2017]. A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Pennsylvania: Project Management Institute, Inc. p2

[4] AXELOS [2017]. Managing Successful Projects with PRINCE2®. Norwich: TSO. p3

[5] AXELOS [2017]. Managing Successful Projects with PRINCE2®. Norwich: TSO. p20-27

[6] AXELOS [2017]. Managing Successful Projects with PRINCE2®. Norwich: TSO. P30-40

[7] PMI [2017]. A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Pennsylvania: Project Management Institute, Inc. p23-24

[8] AXELOS [2017]. Managing Successful Projects with PRINCE2®.

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