Chapter 4 The Project in the Organizational Structure

Chapter 4 The Project in the Organizational Structure Copyright 2009 John Wiley & Sons, Inc.

Organizational Issues Related to Projects 1. 2. 3. How to tie project to parent firm How to organize the project How to organize activities common to multiple projects

Organizational Structure l l l An organization’s structure determines the way employees and jobs are arranged to meet its needs and objectives. It consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational goals. Organizational structure affects organizational action in two ways. – – First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions.

Traditional Forms of Organization 1. 2. 3. 4. Functional Pure project Matrix Mixed

The Project as Part of the Functional Organization is divided into functional sub-units called departments – – – Each of which addresses a function Integration between sub-units handled by rules, procedures Management chain handles problems

The Functional Structure of Pier 1 Imports

Functional Project Organization

Advantages 1. Flexible use of staff – – 2. Experts assigned to functional units Assigned to projects as needed Staff can easily be assigned to multiple projects – – Experts can be switched between projects easily Functional manager picks best expert for each project

Advantages Continued Specialists can share knowledge and experience Functional groups provide people with a focused and supportive job environment. Functional areas provide for a career path within a knowledge area 3. 4. 5. – Engineers can become supervisors or VP’s

Disadvantages 1. Client is not the focus – – 2. Function unit has its own work outside the project Functional manager not likely to be accountable for project and therefore client Functional units not focused on project – – Function unit sees success in its area as most important Project seen as secondary, or worse, an interruption

Disadvantages Continued Project manager may not have adequate authority 3. – – Must share authority with functional managers May be several managers responsible for various parts of project Client may not have a single point of contact at project This can make response to the client slow or non-existent

Disadvantages 4. Tendency to sub optimize – – 5. Continued Project issues that are directly within the interest area of functional home are dealt carefully Outside normal interest areas are given short shrift Motivation is weak – – – Project is not the worker’s “home” Project manager most likely does not do their performance evaluations May not receive additional pay for difficulties of working on project

Pure Project Organization Figure 5 -2

Example of Projectized structure for administering projects.

Advantages Project manager has full authority 1. – – – Will typically report to senior management (project sponsor) This gives project manager access to managerial advice This centralizes authority and makes for rapid decision making / response to client

Advantages 2. Everyone reports to the project manager – – 3. Continued This gives the project manager the ability to make quick decisions Makes it easier for project manager to motivate and reward members Shorter communications lines

Advantages 4. Can maintain project management skills – – 5. Continued Permanent cadre of experts It pays to hire, train, and promote skilled project managers Project team has its own identity – – – Project members work for the “project” not the functional unit High motivation This can significantly improve performance

Advantages Continued Unity of command 6. – – Each worker reports to one, and-onlyone, manager Project has a simple structure Holistic approach 7. – Everyone on project is concerned about project, not their functional unit

Disadvantages 1. Duplicate staffing – – 2. Each project has a full staff This leads to overstaffing Stockpiling – – Project managers tend to stockpile resources so they are available when needed They also tend to keep those resources longer than needed just-in-case

Disadvantages 3. 4. Continued Experts falling behind in other areas – Experts on a project will focus on the areas essential to the project – This can lead to them falling behind in other areas – It can also be difficult to feed their developing expertise back into the organization Organizational inconsistency – Corner-cutting – “They don’t understand our problems”

Disadvantages Continued Life of its own 5) – – Projectitis Us versus them Life after the project ends 6. – – – Lots of uncertainty Will there be layoffs Rusty skills

The Matrix Organization Figure 5 -3

Example of Matrix structure for administering projects.

The Matrix Organization l l l Continued Functional part provides home for workers after project Functional part helps maintain expertise Because an individual can be on a project for less than 100 percent of his time, he may work on more than one project at a time. In a strong matrix, people from functional areas are assigned to project In a weak matrix, capacity from functional areas are assigned to project

Advantages The project is the focus 1. – That remains the project manager’s responsibility The project has access to entire organization for labor and technology 2. – – Projects draw from functional organizations as required This reduces duplication of resources

Advantages 3. Less anxiety about the end of the project – 4. Continued Project members return to their functional organizations Response to client is rapid – – That remains the project manager’s responsibility With much remaining within parent organization, response to parent is also rapid

Advantages Continued Consistent policies 5. – – Representatives from administrative units Project creditability Easier to balance organizational resources Flexibility 6. 7. – – Many different possible structures between strong and weak Different structures can be used for different projects

Disadvantages Functional units make many decisions, including technology ones 1. – – Project manager has less control than in a pure project Project manager’s control is balanced against that of the functional manager If they disagree, it can be hard to resolve Negotiation is the key to project success

Disadvantages Continued Projects compete for resources 2. – – – This is especially true when there are several large projects Someone above project managers must set and enforce priorities Multiple schedules will add stress to functional managers

Disadvantages 3. Strong matrices mirror many disadvantages of project structure – 4. Continued People are assigned to, and identify with, “their” project much as in the project structure Workers do not have a single manager – – – This splits loyalty Makes performance appraisal difficult Information flow is difficult

Virtual Projects Project team crosses time, space, organizational, or cultural boundaries l Facilitated by the Internet l Often organized as a matrix l

Mixed Organizational Systems • Pure functional and pure project organizations may coexist in a firm Figure 5 -4

Mixed Organizational Systems l l Advantages of a mixed organization: – The hybridization of the mixed form leads to flexibility – The firm is able to meet special problems by appropriate adaptation of its organizational structure Disadvantages include: – – Conditions of overlap, duplication, and friction still exist Conditions still exist that result in conflict between functional and project managers

Choosing an Organizational Form Firms typically do not set out to “pick” an organizational form l Rather, the structure evolves over time l The structure is not static l Rather, it changes as the organization, its goals, and its environment changes l

Functional Form Best for… In-depth application of a technology l Large capital investment, especially when that investment is concentrated in one functional area l

Project Form Best for… Handling a large number of similar projects l Handling a one-time project that requires much control but is not focused on one functional area l

Matrix Form Best for… Projects that require inputs from several functional areas l Projects that use technology from several functional areas l

Two Special Cases 1. 2. Risk Management The Project Office

Risk Management l l l Projects are risky, uncertainty is high Project manager must manage this risk This is called “risk management” Risk varies widely between projects Risk also varies widely between organizations Risk management should be built on the results of prior projects

Parts to Risk Management 1. 2. 3. 4. 5. 6. 7. Risk management planning Risk identification Qualitative risk analysis Quantitative risk analysis Risk response planning Risk monitoring and control Risk management database

The Project Office l All projects should have an office dedicated to that project – l Often called the war room In addition to providing a place to work, this helps built a feeling of team among the workers

Human Factors and the Project Team l l l All projects are composed of inter-connected groups These groups can form teams It is not enough to have an effective team The team must also be working towards the good of the project Need to avoid “us versus them” mentality

Human Factors l Some of the problems that prevent a team from performing effectively: – – – l Continued Internal conflict Member frustration Wasting time Poor decision making Team members more concerned with finishing job than doing good job Project teams need to work together