The Project in the Organizational Structure

1
Chapter 5

• The Project in the Organizational Structure

2
Project Growth

• Need for speed, market responsiveness, and
  product flexibility
• Need for broader areas of knowledge in developing
  new products and services
• Rapid expansion of technology
• Management inability to understand and control
  large numbers of activities

3
Switching to Project Environment

• Is difficult and time consuming
• Requires the full commitment of upper management
• Generally causes a lot of concern among
  employees
• As a result, organizations may have multiple
  structures

4
Organizational Issues Related to Projects

• How to tie project to parent firm
• How to organize the project
• How to organize activities common to multiple
  projects

5
Traditional Forms of Organization

• Functional
• Pure project
• Matrix
• Mixed

6
The Project as Part of the Functional Organization

• Organization is divided into functional sub-units
• Integration between sub-units handled by rules,
  procedures
• Management chain handles problems
• Works well in stable environment

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Including Project In Traditional Forms
Figure 5-1
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Advantages

• Flexible use of staff
• 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

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Advantages Continued

• Specialists can share knowledge and experience
• Functional units provide technological/knowledge
  continuity
• Also provide continuity of policies and
  procedures
• Functional manager can train and inspect

10
Advantages Continued

• Functional areas provide for a career path within
  a knowledge area
• Engineers can become supervisors or VPs
• Does not require movement into project management
  to advance

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Disadvantages

• Client is not the focus
• 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

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Disadvantages Continued

• Project manager may not have adequate authority
• 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

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Disadvantages Continued

• Slow response
• Functional managers manage their part to benefit
  their functional unit
• Interests outside their area may not be fully
  considered
• Tendency to sub optimize
• Complex projects require input from a large
  number of different areas
• This can be difficult to coordinate without a
  common manager

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Disadvantages Continued

• Motivation is weak
• Project is not the workers home
• Project manager most likely does not do their
  performance evaluations
• May not receive additional pay for difficulties
  of working on project

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Pure Project Organization
Figure 5-2
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Advantages

• Project manager has full authority
• 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

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Advantages Continued

• Everyone reports to the project manager
• This gives the project manager the ability to
  make quick decisions
• Makes it easier for project manager to motivate
  and reward members
• May be tempered by relationship to functional
  unit
• Shorter communications lines

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Advantages Continued

• Can maintain project management skills
• Project managers can move from project to project
• 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
• This can significantly improve performance

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Advantages Continued

• Quick decisions
• Authority is centralized
• Unity of command
• Each worker reports to one, and-only-one, manager
• Project has a simple structure

20
Advantages Continued

• Structurally simple and flexible
• Easy to implement
• Holistic approach
• Everyone on project is concerned about project,
  not their functional unit

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Disadvantages

• Duplicate staffing
• 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

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Disadvantages 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

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Disadvantages Continued

• Organizational inconsistency
• Corner-cutting
• They dont understand our problems
• Life of its own
• Projectitis
• Us versus them

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Disadvantages Continued

• Life after the project ends
• Lots of uncertainty
• Will there be layoffs
• Rusty skills

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Comments on Pure Project

• Only way to do large, one-time projects
• Disadvantages make it impractical for continually
  doing projects, e.g. construction
• Matrix developed in aerospace to deal with this

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The Matrix Organization
Figure 5-3
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The Matrix Organization Continued

• Functional part provides home for workers after
  project
• Functional part helps maintain expertise
• In a strong matrix, people from functional areas
  are assigned to project
• In a weak matrix, capacity from functional areas
  are assigned to project

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Advantages

• The project is the focus
• That remains the project managers responsibility
• The project has access to entire organization for
  labor and technology
• Projects draw from functional organizations as
  required
• This reduces duplication of resources

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Advantages Continued

• Less anxiety about the end of the project
• Project members return to their functional
  organizations
• Response to client is rapid
• That remains the project managers responsibility
• With much remaining within parent organization,
  response to parent is also rapid

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Advantages Continued

• Consistent policies
• Parent organization will oversee project
• Project will have closer access to parent
  administration
• Easier to balance organizational resources
• Less competition for resources
• Competition can be controlled by parent
  organization and functional managers

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Advantages Continued

• Flexibility
• Many different possible structures between strong
  and weak
• Different structures can be used for different
  projects
• Different structures can be used for different
  functional areas

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Disadvantages

• Functional units make many decisions, including
  technology ones
• Project manager has less control than in a pure
  project
• Project managers 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

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Disadvantages Continued

• Projects compete for resources
• 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

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Disadvantages Continued

• Strong matrices mirror many disadvantages of
  project structure
• 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

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Virtual Projects

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

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Virtual Project Rules

• Challenging and interesting projects
• Use volunteers
• Use people who know each other
• Create a resource to learn about one another
• Encourage frequent communications
• Divide work into modules

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Mixed Organizational Systems
Figure 5-4
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Choosing an Organizational Form

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

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Functional Form Best for

• In-depth application of a technology
• Large capital investment, especially when that
  investment is concentrated in one functional area

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Project Form Best for

• Handling a large number of similar projects
• Handling a one-time project that requires much
  control but is not focused on one functional area

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Matrix Form Best for

• Projects that require inputs from several
  functional areas
• Projects that use technology from several
  functional areas

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Two Special Cases

• Risk Management
• The Project Office

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Risk Management

• 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

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Parts to Risk Management

• Risk management planning
• Risk identification
• Qualitative risk analysis
• Quantitative risk analysis
• Risk response planning
• Risk monitoring and control
• Risk management database

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Risk Identification

• List ways a project can fail
• Evaluate severity
• Estimate likelihood
• Estimate the ability to detect
• Find the risk priority number
• Consider ways to reduce

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The Project Office

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

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The Project Team

• Different project need different staffs
• Some common members include
• Engineer
• Contract administrator
• Controller
• Should report to project manager

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Human Factors and the Project Team

• 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

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Human Factors Continued

• Some of the problems that prevent a team from
  performing effectively
• 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