a

life that spans several years.

A project may be part of a programme, and the programme manager may

commission a project to enable or deliver products or outputs that
contribute to some of the programmes expected outcomes. The project
will be impacted by the programmes approach to governance, its
structure and its reporting requirements.

Tip
PRINCE2 defines the term sponsor as the role that is the main
driving force behind a programme or project. The guidance uses the
term commission for the activity or authority to request the project.
The organization commissioning the project will usually provide the
project sponsor.

2.5.3 Projects within a portfolio

Definition: Portfolio
The totality of an organizations investment (or segment thereof) in
the changes required to achieve its strategic objectives.

Corporate organizational structures can vary from traditional functional

structures to project-focused corporate organizations. In the traditional
functional structure, staff are organized by type of work (e.g. marketing,
finance and sales) and there are clear reporting lines. In contrast, the
standard practice in project-focused corporate organizations is to work
with project teams.
Organizations may have corporate structures in which projects are
commissioned to deliver products or outputs that contribute to the
strategic objectives of the organization, and are managed within
portfolios. A portfolio may comprise programmes, projects and other work
that may not necessarily be interdependent or directly related but must all
contribute to achieving the strategic objectives.

2.5.4 Projects in a commercial environment

If the project is being run to deliver to a specific set of customer

requirements, the customer may have entered into a commercial
relationship with a supplier following a formal tender. The organization
delivering the project (the supplier) will do so in order to satisfy a
particular need identified by the customer. The contract between the
parties sets out how the customer and supplier will work together to
deliver the project but the rights and duties covered by the agreement
may constrain how a project manager manages the project.
The customer may break the work down into one or more elements. The
number of elements is that which is necessary to deliver the customers
business case. Some of those elements may then be used to procure
suppliers to deliver that work, while others may form the basis of work to
be delivered by the customer itself. For a supplier, the work to be
delivered may be the subject of a legally binding contract resulting from
the procurement process. In order to deliver this work, the supplier may
itself procure subcontractors by further breaking down its work into
additional elements.
In a commercial environment, sometimes there may be hierarchies of
commercial relationships between suppliers. Rather than a simple
customer/supplier relationship involving two organizations, projects often
involve multiple organizations constrained by multiple contracts. There
may be a primary commissioning organization (or one prime contractor),
but there may be several customers and/or several supplier
organizations, each of which may have its own business case for
undertaking the project. Examples include:
joint ventures
collaborative research
intergovernmental projects
interagency projects (e.g. for the United Nations Development
Programme)
bidding consortium and alliance contracting
partnerships.
When managing projects in a commercial environment, consider that
there may be multiple sets of:
reasons for undertaking the project (business case)
management systems (including project management methods)
governance (possibly requiring disclosure of different sorts of project
data at different points in the projects life)
organization structures
delivery approaches (see section 2.6.3)
corporate cultures (e.g. behaviours, cultures, risk appetite).
Further advice and guidance related to tailoring PRINCE2 in a
commercial environment can be found throughout this manual.

2.6 Applying PRINCE2

2.6.1 PRINCE2, international standards and bodies
of knowledge

A standard provides rules, guidelines or characteristics that can be used

consistently to ensure that materials, products, processes and services
are fit for their purpose; it does not, however, state how activities should
be carried out to achieve this.
A method, such as PRINCE2, provides not only a set of activities to be
done, together with roles, but also techniques for undertaking these
activities.
A body of knowledge looks at what a competent project manager should
know and focuses on what and how to do it.
The PRINCE2 method exists within the context of a number of such
standards and bodies of knowledge including:
ISO 21500:2012 Guidance on Project Management (International
Organization for Standardization, 2012)
BS 60791:2010 Project Management. Principles and Guidelines for
the Management of Projects (British Standards Institution, 2010)
A Guide to the Project Management Body of Knowledge (PMBOK
Guide) (Project Management Institute, 2013)
APM Body of Knowledge (Association for Project Management,
2012)
The IPMA Individual Competence Baseline for Project, Programme &
Portfolio Management (4th version, ICB4): an inventory of
competences for individuals to use in career development,
certification, training, education, consulting, research and more
(International Project Management Association, 2015).
When designing and embedding a project management method based
on PRINCE2 (see Chapter 4), an organization needs to be aware of
these standards and bodies of knowledge, and should apply them in a
manner appropriate to its business.
For more information about PRINCE2 and international standards, see
Appendix B.

2.6.2 PRINCE2 and commissioning organization

standards
An organization will typically develop values, principles, policies,
standards and processes that are fit for purpose, including those required
to govern, manage and support programmes and projects.
A programme defines its strategies in a plan which must ensure that the
programmes vision and goals align with those of the organization.
Projects commissioned by a programme will typically inherit programme
strategies which may be used to replace the projects approach to
quality management, risk management etc., tailoring them as
appropriate.
If the project is commissioned by a customer from outside the project
organization, then the mandate may require the use of some or all of the
customers standards or methods. Examples may include the use of the
customers issue management process and specific reporting
requirements.
The project manager may need to tailor the project (see section 4.3) to
meet standards and process requirements, but within the guidelines of
the organizations method. This will be recorded in the project initiation
documentation (PID).

Tip
Varied uses of terminology can be particularly confusing where
multiple best-practice methods are employed within the same
organization, and care must be taken to map or integrate the
methods.

2.6.3 PRINCE2 and delivery approaches

The project approach is the way in which the work of the project is to be
delivered. It may rely on one or more delivery approaches, which are the
specialist approaches used by work packages to create the products.
Typical approaches include:
a waterfall approach where each of the delivery steps to create the
products takes place in sequence (e.g. in a construction project
where requirements gathering and design take place before building
begins) and the product is made available during or at the end of the
project
an agile approach often, but not exclusively, for software
development where requirements gathering, design, coding and
testing all take place iteratively through the project.
There are typically a number of delivery steps within the delivery
approach (e.g. the sprints within an agile approach or steps such as
study, design, build, test, etc. within a waterfall approach).
The application of PRINCE2 can be very different depending on which
delivery approach is used. For further guidance, see sections 9.3 and
16.5.

Key message
PRINCE2 Agile regards agile as a family of behaviours, concepts,
frameworks and techniques. For more information about using agile
and PRINCE2 together, see PRINCE2 Agile (AXELOS, 2015).

2.6.4 Measures of success

The traditional approach to measuring time, cost and quality may still
have its place but it does not necessarily tell the whole story. The best
way to summarize the project status at a point in time is to identify key
performance indicators (KPIs).
When designing KPIs, a balance should be struck between qualitative
and quantitative measures, leading and lagging indicators, and project
inputs and outputs. The number of KPIs should be balanced to create
only information that is necessary and sufficient.

Key message
Objectives are what the project needs to achieve, whereas KPIs are
the measures that indicate whether or not progress is being made
towards achieving the objectives.

What are lagging and leading indicators?

Lagging indicators
Measure performance that follows events, and allow management
to track how well actual performance matches that which was
expected. An example could be the number of unexpected errors
reported after a particular software release.

Leading indicators
Measure progress towards events, and allow management to track
whether it is on course to achieve the expected performance. An
example would be the persistent failure of a supplier to meet quality
requirements early in the project.
The KPIs should be aligned with the quality expectations and
acceptance criteria defined in the project product description, and the
project tolerances (time, cost, quality, scope, benefits and risk) defined in
the PID.
One way to show project progress is through a project dashboard that
uses graphical representations such as pie charts and histograms to
display the status and trends of performance indicators. These can show
the status for quantitative KPIs and are easy to understand by relevant
stakeholders at all levels.

2.6.5 PRINCE2 and organizational capability

It is generally recognized that organizations which demonstrate higher

levels of project management capability can also demonstrate increases
in business performance through the effective use of project
management methods such as PRINCE2. Maturity models such as
AXELOS Limiteds Portfolio, Programme and Project Management
Maturity Model (P3M3) provide a way of baselining organizational
capability against a maturity scale, diagnosing weaknesses and planning
for improvements.
P3M3 characterizes an organizations maturity using the following 5-point
scale:
Level 1: Awareness of process
Level 2: Repeatable process
Level 3: Defined process
Level 4: Managed process
Level 5: Optimized process.
An organization assessed at level 3 would typically ensure that a project
management method such as PRINCE2 is consistently deployed and
used by all projects (see Chapter 21). The organizations embedded
version of PRINCE2 may need to take account of the types and scale of
project being delivered, the environment within which the organization
operates (e.g. regulatory or commercial), commissioning organization
standards and the delivery approach(es) used. The method may also
allow for tailoring (see Chapters 4 and 21), perhaps within specific rules
or guidelines, in order to recognize the differences specific to individual
projects.