IISc MG 286 Project Management Organisation

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PROFICIENCE PMC Course

• Module 3
• Project Organization

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Project Organisation
The Right Organisation Will Have The Right People
Doing The Right Things In The Right Place At The
Right Time.
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Organizations are partly described by their
structure

• Formal organizational structure as published in a
  chart, gives a fundamental overview of the
  organizational elements or units. It describes
  the normative superior subordinate relationship,
  chain of commands, sub-division etc.
• Informal organizational structure comprises of
  relationships evolved through interactions of
  people grouping, authority figures, communication
  lines, etc.

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Organizations are partly described by their
structure
There is no one best way to structure project
organizations, but there are structural patterns
and specific roles that enhance project
performance. Though project managers are seldom
involved in organization design decisions, they
should understand the kinds of organizational
designs used in project management, and their
relative advantages and disadvantages.
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Project Organisation

• Explain formal and informal organisation
  structures
• Examine various forms of organisation structures
• Evaluate requirements-project organisations
• Establish merits / demerits of pure / matrix
• Elucidate the criteria for selecting a suitable
  project organisation form .

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Formal organization Structure published in a
chart.

• Range of activities in which the organization is
  involved
• Management hierarchy and reporting relationships
• Major sub-divisions of the organization
• Type of work and responsibility of each division
• Official lines of authority and communication

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NASA Organization Chart ISRO Organization
Chart DEIL (Matrix) Organization Chart
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Project Organization Design

• There is no best kind of organization structure.
  The most appropriate structure depends on
• The organizations goals
• The type of work
• The environment

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Project Organization Design
Organization structures typically develop through
a combination of planned and evolutionary
responses to ongoing problems and areas of work.
Organizations create specialized roles and units.
As organizations grow or as the environment
changes, additional subdivisions and new
groupings are implemented to handle emerging
problems better.
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Project Organization Design
E.g Organization increases product line -
manufacturing units are subdivided into product-
oriented divisions. As organizations expand sales
territory marketing force is subdivided
geographically. Differentiation is subdivision
into specialized areas . Integration is when sub
units interact, coordinate and mutually adjust
returns to fulfill the organizations goals.
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Traditional forms of Organization
  Basis for Differentiation   Functional
Geographic Product Customer
Process Project (new form)
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Traditional Organisation Structure

• Merits
• Works well in repetitive, stable environments (
  mass production )
• Low level of integration can get job done
• Easier budgeting and cost control
• Broad manpower base, flexible personnel
• Well-defined levels of authority, responsibility,
  and communication channels

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Traditional Organisation Structure

• Demerits
• Absence of clear project responsibility
• Difficult to integrate activities across
  functional lines ( conflict between groups).
• Lack of customer focal point wrt the project
• Slow and tedious decision-making process
• Lack of flexibility and organic dynamism.

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Typical Functional Form of Organization Structure
(Industrial Gadgets/Instrument Co)

• Works well in repetitive and stable environments.
• Most prevalent basis for organization structure

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Geographic Differentiation

• Regional subunits operate relatively autonomously
• Within each subunit there is functional
  differentiation
• Easily monitored through standardized accounting
  and reporting procedures.

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Geographical Organisation Structure

• Merits
• Personalized services in different regions
• Regional unit- market oriented and focussed
• Can tap more business opportunities
• Greater career opportunities and challenges

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Geographical Organisation Structure

• Demerits
• Communications may be time-consuming, hence
  difficult to manage.
• If regional units are organized via traditional
  o.s., all those demerits accrue.
• Higher overheads due to replication of technical
  skills amd facilities.
• Us versus them syndrome( Branch vs. HQ).

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Product differentiation and process
differentiation

• Each major product subdivisions designs,
  manufactures and markets its own product line
• Low level of integration,
• Financial reporting rules and procedures
  standardized.

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Customer differentiation
Proposal, contracting and product specifications
differ. Eg Defense applications and corporate
clients. Figure 3-1 - A typical
traditional/functional organization
structure Figure 3-2 A typical geographical
organization structure Figure 3-3 A typical
product organization structure
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Drawbacks of traditional forms of organizations

• Can address only certain anticipated classifiable
  kinds of problems
• Reacts to changes by further differentiating
  subunits and by adding more rules, procedures and
  levels of management.
• Assume that problems can be neatly classified and
  resolved within subunits, which work independently

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Requirements of Project Organizations

• Each project is a new undertaking to satisfy a
  new goal. Sub units must work together to
  estimate resource requirement, combine them into
  a coordinated plan and work accordingly
• Project organizations must be organic
• Highly differentiated to accommodate a large
  variety of potential problems
• Highly integrated to respond rapidly to problems
  involving multiple subunits
• Highly flexible to alter structure as goals
  change.

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Two essential properties required of project
organization

• They integrate subunits into horizontal relations
• Their organization structures are specific to
  problems or environment

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Integration of subunits in projects

• Liaison roles, task forces and teams through a
  specialized person linking two departments or
  groups at lower levels E.g. Inventory Controller
  links assembly and purchases.
• Interdisciplinary task force of a group of
  representatives from several areas is set up to
  solve a problem
• Interdisciplinary teams with representatives from
  various departments coordinate decisions about
  changes in market conditions
• Project expeditors manage a team within a single
  functional area with no formal authority over
  team members. Eg. Marketing.
• Project coordinators manage a multifunctional
  team with representatives from other departments.

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Pure project Organization

• It is suitable for projects that entail a high
  level of complexity, major resource commitments
  and high stake in outcome.
• It is a separate organization almost like another
  company
• A project manager who has full authority over all
  people and physical resources assigned to the
  project heads it and thus has maximum control.

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3 Types

• Project Centre The parent organization remains
  the same except for the addition of a separate
  project arm and a project manager. E.g. For the
  functional organization of Industrial Instrument
  Co. a project organization can be added as
  follows
• Figure 3-5 A typical pure project organization
  structure
• Stand Alone project An organization created
  for accomplishing the project especially for
  large-scale government or public sector projects.
• Partial project Function critical to the
  project like construction or engineering may be
  assigned to the project manager while other
  support-oriented functions remain with functional
  departments.

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Demerits of Pure project Organization

• It is an additional cost to the parent
  organization since it should be adequately
  staffed
• Resources must be acquired in advance
• Outplacement of personnel on completion of the
  project
• Pure project organizations are strictly temporary

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Matrix Organization

• Matrix Organization is set up when the need
  capability arises in multi project organizations
  to quickly create large project groups, without
  the personnel and cost disadvantages of pure
  project organization
• Matrix organization is a grid like structure of
  authority and reporting relationships
• created by the overlay of a project
  organization on a traditional functional
• organization
• The functional part provides the repository for
  technical expertise and physical resources

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Matrix Organization

• Staff is assigned to different projects to enrich
  the expertise of people in functional areas.
• When individual assignments are fulfilled, staff
  goes back to their functional houses for a new
  assignment
• Large fluctuations in work force and staff
  replacement are reduced.
• The primary role of project manager (also called
  matrix manager) is integration

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Problems with matrix form of organization

• The combination of vertical and horizontal
  structure is the root cause of problems in the
  matrix
• Matrix is just not a structure but a whole new
  way of doing things
• It needs efficient information systems and human
  behavior that support two dimensional information
  flow and dual reporting relationship
• Can induce conflict without coordinating decision
  making It violates the traditional principle of
  single and scalar chain of command.

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Selecting a project Form

• The four basic criteria for selecting project
  organization forms are
• Frequency of projects how often and to what
  degree is the parent company involved in the
  project related activity
• Duration of project - how long a typical project
  lasts
• Size of project level of human, capital and
  material resources in relation to other
  activities in the company
• Complexity of relationships number of
  functional areas involved in the project and
  degree of interdependency

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Applicability of A Project

• The approximate applicability of different
  project organization forms depending on the
  referred-to criteria is as shown below
• For small, less complex projects - a single
  function task force or team
• For medium size and complexity projects If
  infrequent, task force for short duration and
  temporary matrix for long duration. If frequent
  task force or permanent matrix
• For large size or high complexity partial
  project or pure project depending on frequency.

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Figure 3-6 A Project Organization
continuum Figure 3-7 Using some criteria for
selecting project organization structure