Project Management Organization Structure and Culture Haeryip Sihombing

Project Management Organization: Structure and Culture Haeryip Sihombing & Nor Akramin Universiti Teknikal Malaysia Melaka (UTe. M) BMFP 4542 3

ORGANIZING • Organization is the deployment of resources to achieve strategic goals. • It is reflected in – Division of labor into specific departments & jobs – Formal lines of authority – Mechanisms for coordinating diverse organizational tasks

Designing Adaptive Organizations • Organizing Principles and Concepts • Organizing the Vertical Structure • Using Mechanisms for Horizontal Coordination • Tailoring Various Elements of Structural Design to Organizational Situations

ORGANIZATION STRUCTURE Defines how tasks are divided, resources are deployed, and departments are coordinated ●Set of formal tasks assigned ●Formal reporting relationships The design of systems to ensure effective coordination of employees across department

THE ORGANIZATION CHART Visual representation Set of formal tasks “The Home Depot is the world's largest home improvement retailer currently operating 1, 363 stores. Framework for vertical control Formal reporting relationships

ORGANIZATIONAL STRATEGY Resources are critical to organizational strategy because they can help companies create and sustain an advantage over competitor q. Resources The assets, capabilities, processes, information, and knowledge that an organization uses to improve its effectiveness and efficiency and to create and sustain an advantage over competitors and to fulfill a need or solve a problem

ORGANIZATIONAL STRATEGY q. Competitive Advantage Providing greater value for customers than competitor can q. Sustainable Competitive Advantage A competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

CERTAIN CONDITION Firm’s resources are to be used to achieved a sustainable competitive advantage : q. Valuable Resources allows companies to improve efficiency and effectiveness q. Rare Resources not controlled or possessed by many competing firms q. Imperfectly Imitable Resource impossible or extremely costly or difficult for other firms to duplicate q. Non-Sustitutable Resources without equivalent substitutes or replacements that produces value or competitive advantage

WORK SPECIALIZATION Division of labor concept • Tasks are subdivided into individual jobs • Employees perform only the tasks relevant to their specialized function • Jobs tend to be small, but they can be performed efficiently

Line and Staff Authority • Line Authority = individuals in management positions have the formal power to direct and control immediate subordinates • Staff Authority = granted to staff specialists in their area of expertise

Span of Management/Span of Control • Number of employees who report to a supervisor – Traditional view = seven subordinates per manager – Lean organizations today = 30+ subordinates • Supervisor Involvement – must be closely involved with subordinates, the span should be small – need little involvement with subordinates, it can be large

Factors Associated With Less Supervisor Involvement • Work is stable and routine • Subordinates perform similar work tasks • Subordinates are concentrated in a single location • Subordinates are highly trained • Rules and procedure defining task activities are available • Support systems and personnel are available for the manager • Little time is required in non-supervisory activities • Managers’ preferences and styles favor a large span

Tall vs. Flat Structure • Span of Control used in an organization determines whether the structure is tall or flat • Tall structure has a narrow span and more hierarchical levels • Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels • The trend has been toward wider spans of control

Centralization vs. Decentralization • Greater change and uncertainty in the environment are usually associated with decentralization • The amount of centralization or decentralization should fit the firm’s strategy • In times of crisis or risk of company failure, authority may be centralized at the top

DEPARTMENTALIZATION The basis on which individuals are grouped into departments Vertical functional approach. People are grouped together in departments by common skills. Divisional approach Grouped together based on a common product, program, or geographical region. Horizontal matrix approach Functional and divisional chains of command. Some employees report to two bosses Team-based approach Created to accomplish specific tasks

DEPARTMENTALIZATION The basis on which individuals are grouped into departments Network approach Small, central hub electronically connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere. Virtual approach Brings people together temporarily to exploit specific opportunities then disbands

PROJECT MANAGEMENT STRUCTURE • Challenges to Organizing Projects – The uniqueness and short duration of projects relative to ongoing longer-term organizational activities – The multidisciplinary and cross-functional nature of projects creates authority and responsibility dilemmas. • Choosing an Appropriate Project Management Structure – The best system balances the needs of the project with the needs of the organization.

PROJECT MANAGEMENT STRUCTURE • Organizing Projects: Functional organization – Different segments of the project are delegated to respective functional units. – Coordination is maintained through normal management channels. – Used when the interest of one functional area dominates the project or one functional area has a dominant interest in the project’s success.

Functional Organizations

Functional Organization of Projects • Advantages • Disadvantages – No Structural Change – Lack of Focus – Flexibility – Poor Integration – In-Depth Expertise – Slow – Easy Post-Project Transition – Lack of Ownership

DIVISIONAL STRUCTURE ADVANTAGES n Efficient use of resources n Skill specialization development n Top management control n Excellent coordination n Quality technical problem solving 22

DIVISIONAL STRUCTURE DISADVANTAGES n Poor communications n Slow response to external changes n Decisions concentrated at top n Pin pointing responsibility is difficult n Limited view of organizational goals by employees 23

PROJECT MANAGEMENT STRUCTURE • Organizing Projects: Dedicated Teams – Teams operate as separate units under the leadership of a full-time project manager. – In a projectized organization where projects are the dominant form of business, functional departments are responsible for providing support for its teams.

Dedicated Project Team

Project Organization: Dedicated Team • Advantages • Disadvantages – Simple – Expensive – Fast – Internal Strife – Cohesive – Limited Technological Expertise – Cross-Functional Integration – Difficult Post-Project Transition

Project Organizational Structure

TEAM ADVANTAGES n Same advantages as functional structure n Reduced barriers among departments n Quicker response time n Better morale n Reduced administrative overhead 28

TEAM DISADVANTAGES n Dual loyalties and conflict n Time and resources spent on meetings n Unplanned decentralization 29

PROJECT MANAGEMENT STRUCTURE • Organizing Projects: Matrix Structure – Hybrid organizational structure (matrix) is overlaid on the normal functional structure. • Two chains of command (functional and project) • Project participants report simultaneously to both functional and project managers. – Matrix structure optimizes the use of resources. • Allows for participation on multiple projects while performing normal functional duties. • Achieves a greater integration of expertise and project requirements.

Matrix Organization Structure

Division of Project Manager and Functional Manager Responsibilities in a Matrix Structure Project Manager Negotiated Issues Functional Manager What has to be done? Who will do the task? How will it be done? When should the task be done? Where will the task be done? How much money is available to do the task? Why will the task be done? How will the project involvement impact normal functional activities? How well has the total project been done? Is the task satisfactorily completed? How well has the functional input been integrated?

Different Matrix Forms • Functional (also Weak or Lightweight) Form – Matrices in which the authority of the functional manager predominates and the project manager has indirect authority. • Balance (or Middleweight) Form – The traditional matrix form in which the project manager sets the overall plan and the functional manager determines how work to be done. • Strong (Heavyweight) Form – Resembles a project team in which the project manager has broader control and functional departments act as subcontractors to the project.

Project Organization: Matrix Form • Advantages • Disadvantages – Efficient – Dysfunctional Conflict – Strong Project Focus – Infighting – Easier Post-Project Transition – Stressful – Flexible – Slow

Horizontal Matrix Advantages n More efficient use of resources than single hierarchy n Adaptable to changing environment n Development of both general and specialists management skills Expertise available to all divisions n Enlarged tasks for employees n 35

Dual Authority Structure in a Matrix Organization 36

Horizontal Matrix Disadvantages n Dual chain of command n High conflict between two sides of matrix n Many meetings to coordinate activities n Need for human relations training n Power domination by one side of matrix 37

PROJECT MANAGEMENT STRUCTURE • Organizing Projects: Network Organizations – An alliance of several organizations for the purpose of creating products or services. • A “hub” or “core” firm with strong core competencies outsources key activities to a collaborative cluster of satellite organizations.

Mountain Bicycle Network Project

Project Organization: Network Form • Advantages – Cost Reduction – High Level of Expertise – Flexible • Disadvantages – Coordination of Breakdowns – Loss of Control – Conflict

NETWORK APPROACH ADVANTAGES n Global competitiveness n Work force flexibility n Reduced administrative overhead 41

NETWORK APPROACH DISADVANTAGES n No hands-on control n Loss of part of the organization severely impacts remainder of organization n Employee loyalty weakened 42

Rated Effectiveness of Different Project Structures by Type of Project Source: Larson, E. W. , and Gobeli, D. H. , “Matrix Management: Contradictions and Insights, ” California Management Review, vol. 29, no. 4 (Summer 1987), p. 137.

Choosing the Appropriate PROJECT MANAGEMENT STRUCTURE • Organization (Form) Considerations – How important is the project to the firm’s success? – What percentage of core work involves projects? – What level of resources (human and physical) are available?

Choosing the Appropriate PROJECT MANAGEMENT STRUCTURE • Project Considerations – Size of project – Strategic importance – Novelty and need for innovation – Need for integration (number of departments involved) – Environmental complexity (number of external interfaces) – Budget and time constraints – Stability of resource requirements

ORGANIZATIONAL CULTURE • Organizational Culture Defined – A system of shared norms, beliefs, values, and assumptions which bind people together, thereby creating shared meanings. – The “personality” of the organization that sets it apart from other organizations. • Provides a sense of identify to its members. • Helps legitimize the management system of the organization. • Clarifies and reinforces standards of behavior.

Key Dimensions Defining an Organization’s Culture

Identifying Cultural Characteristics • Study the physical characteristics of an organization. • Read about the organization. • Observe how people interact within the organization. • Interpret stories and folklore surrounding the organization.

Organizational Culture Diagnosis Worksheet

Implications of Organizational Culture for Organizing Projects • Challenges for Project Managers in Navigating Organizational Cultures – Interacting with the culture and subcultures of the parent organization – Interacting with the project’s clients or customer organizations – Interacting with other organizations connected to the project

Cultural Dimensions of an Organization Supportive of Project Management

THE END DISCUSSION

Organization of Product Development Projects at ORION

Traditional Master Plan at ORION

Proposed Project Organization for the Jaguar Project

Jaguar Master Plan

Mechanisms for Sustaining Organizational Culture