PRINCE2 is composed of 4 integrated elements: principles, themes, processes and tailoring. This study guide describes the PRINCE2 principles.

PRINCE2 principles
The PRINCE2 methodology is based upon a set of 7 principles. The principles are the foundations upon which everything else in the methodology is based.There are 7 principles in PRINCE2:- Continued business justification
- Learn from experience
- Defined roles and responsibilities
- Manage by stages
- Manage by exception
- Focus on products
- Tailor to suit the environment
Universal
PRINCE2 is based upon these principles for a very simple reason. By being principles-based, it means that the framework can be applied to any type, size or scale of project. In this way, the principles can be universally applied, both to a small in-house company project based here in London, or equally to a massive international aid project spanning many borders commissioned by the United Nations.Best practices
These principles have also been proven in practice over many years to be the most effective ways of managing projects i.e. they are based upon modern best practices in project management. This means they can be applied directly on projects and the project management team does not need to "re-invent the wheel" by creating their own project management method from scratch.Empowering
The principles are also empowering to the project management team because they can give them added confidence and an ability to shape and manage their projects. So, let’s look at each of these principles in turn.1. Continued business justification
The first principle of PRINCE2 emphasizes that the project must always remain desirable, viable and achievable, otherwise it must be closed. Desirable refers to the balance of costs, benefits and risks; viable refers to the ability to deliver the products; and achievable refers to whether the use of the project’s products is likely to result in the outcomes and benefits expected. The word ‘continued’ in this principle emphasizes these are questions to be asked not only when the project starts up, but must be asked continuously throughout the project.
Business case
The business case is updated throughout the project, as well as being used when starting up the project. If the factors underlying the business case change in such a way that the expected benefits are no longer likely to be realised, then the project should be closed prematurely. Changes detrimental to the business case are often linked to the economy; for example, in 2008 the credit crunch led to many major building projects being brought to a halt.Applies to compulsory projects This principle also applies if the project is compulsory (e.g. required to achieve compliance with new legislation) - the organization will require justification of the chosen project, as there may be several options available that yield different costs, benefits and risks.Benefits tolerance The business case contains the reasons for running the project, with the expected benefits documented in measurable terms. In PRINCE2, the benefits expected from a project are subject to tolerances; if they drop below those tolerances, then the business case is no longer viable.For example, if a project is mandated to make a profit, then the mandate should identify the threshold of profit that determines the viability of the business case. If the expected profit drops below that threshold, due to changes in circumstances, the project should be stopped.
Update stage-by-stage In PRINCE2, project work should be broken down into stages, for ease of manageability. The business case is updated by the project manager at the end of a stage and the project board will be presented with this updated documentation when they assess the project at a stage boundary.Checking ongoing viability At a stage end the project board decides if the business case remains viable, before authorising the plan for the next stage. If the viability of the business case raises concerns during a stage, a project issue can be raised to bring the matter to the attention of the project board as soon as possible, and before the end of stage assessment.Premature closure In the event of a project being closed prematurely, the organization must ensure that lessons are learned about the cause of the failure. In addition, every attempt should be made to derive maximum benefit from any outputs and outcomes that had been achieved by the project.Benefits are not always financial For most commercial organizations, the business justification for projects is often a financial one i.e. will there be a return on investment (in terms of money). But the business justification can be made in other ways too. Consider a proposal to equip a residential apartment block with a water sprinkler system in case of fire. Such a project would have clear benefits (in terms of saving people’s lives in a fire) but it probably cannot expect a return in investment in purely financial terms. The decision to invest in such a project would therefore need to consider the wider benefits to society of keeping its citizens safe.2. Learn from experience
As humans, we are inclined to repeat our mistakes. PRINCE2 addresses this tendency with its requirement for reporting the lessons which we learn from projects. This requirement is so important it is elevated to that of a principle within the method.
For example, suppose the quality management approach for a software project called for ‘user acceptance testing’ but some users recruited for the testing were found to lack the necessary experience. In later testing procedures, a more focused category of user could be recruited, in response to the lesson learned about inappropriate users.
Hiring based upon lessons Recruiting an individual with experience in a similar project, or purchasing documentation from a previous project, can be an effective means of avoiding past mistakes. A number of high-profile project managers from the Olympic Games in Sydney, Australia, were recruited to work on the London 2012 Olympic Games project management team - they brought with them their own lessons learned.Lessons repository An organization’s project management office (PMO) should create a repository of lessons reports, ensuring that lessons are made available to future projects. Learning from experience is crucial to PRINCE2’s ‘best practice’ approach to project management.3. Defined roles and responsibilities
The principle ‘defined roles and responsibilities’ emphasizes that each person involved in a project should be aware of the particular contribution that he/she is expected to make to that project.
For example, a lack of clear leadership is a common cause of project failure. With defined roles and responsibilities in place, the risk of project failure due to inadequate leadership can be reduced.
Levels of management The principle requires a management hierarchy - from the project board at the top, to the project manager below, and then down to the team manager. The hierarchy ensures that the project is managed using three clearly defined levels of management.Project board On a PRINCE2 project, the project board consists of three roles: executive, senior user, and senior supplier. Only one person fulfils the executive role, but any number of people may perform the other roles. If the project board members are unable to agree on a particular issue, the executive acts as the decision maker.Small projects For small projects, the project board may consist of just the executive, who will perform all three project board duties. If the project is large, the project board is likely to be complex, consisting of a cross-functional representation of many elements of the participating organizations. In PRINCE2, the project board is part of the project team, which also includes the project manager, project support and team managers.Stakeholders Moreover, PRINCE2 identifies three stakeholder interests: business, user and supplier and the project board is designed to represent all three interests.Business The business interest (in the PRINCE2 manual this is referred to as ‘corporate, programme or the customer’) sponsors the project, endorses its objectives, and aims to ensure that the business investment provides value for money. In this article and the other 2 in this series when we refer to ‘corporate’ or ‘corporate management’ we mean ‘corporate, programme or the customer’.User The user interest refers to members of the business who, after the project is completed, will use the project’s products to enable the organization to gain the intended benefits.Both user and business interests collectively represent the customer (with the executive being responsible for the business element).Supplier The supplier interest represents those who provide the resources and expertise required by the project. They may be internal or external to the customer organization. All three stakeholder interests must be represented within the project for it to succeed.4. Manage by stages
According to this principle each stage of a project must be properly planned, monitored, and controlled. A PRINCE2 project requires a minimum of two stages - the first one being called the ‘initiation’ stage (during which the project is planned), and then at least one more which covers the delivery of the project’s specialist products.
5. Manage by exception
On a PRINCE2 project, tolerances are established for each project objective (time, cost, quality, scope, benefits and risk). Limits of delegated authority are also defined, so that it is clear who has authority to take a decision about corrective action if tolerances are exceeded. The activities associated with directing, managing, and delivering the project must be performed within agreed tolerance levels.
6. Focus on products
PRINCE2 recognises the importance of delivering products that meet their agreed quality criteria, hence the 'focus on products' principle.
7. Tailor to suit the project
The final principle 'tailor to suit the project’ highlights a key advantage of using PRINCE2 - its adaptability.
For example, one element of PRINCE2 that is routinely tailored is the schedule for project board meetings. Such meetings are not a requirement of the PRINCE2 methodology; regular highlight reports are considered sufficient. In many organizations, however, regular meetings are part of the corporate culture. They can be accommodated by PRINCE2, thanks to the tailoring principle.
If your organisation tailors PRINCE2, you should document the changes made to the method and describe these in the project initiation documentation (PID). In this way, the changes can be audited and provide evidence of compliance with PRINCE2 and corporate standards.Tailoring whilst remaining compliant When you are tailoring PRINCE2, you must bear in mind that no part of the method should be ignored or removed. Even on a small project, you will need to address risk, quality and change control. If the method is changed too much, you will be in danger of running a ‘PINO’ (that’s ‘PRINCE2 In Name Only’) project.Organizations can address the PINO problem by referring to the PRINCE2 Maturity Model1. Organizations can use the model to establish their level of compliance with PRINCE2.Tailoring goals The goal of the tailoring principle is to adapt the PRINCE2 method to the needs of your project thereby avoiding the creation of a ‘template-driven’ project management method in which everything is done unquestioningly. Remember that PRINCE2 focuses on decisions being taken by those with delegated authority based upon timely information, rather than focussing on documents, templates and meetings.