Project Management
Organization: Structure and Culture
Haeryip Sihombing & Nor Akramin
Universiti Teknikal Malaysia Melaka
(UTeM)
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
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
Competitive Advantage
Providing greater value for customers than competitor
can
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 :
Valuable Resources
allows companies to improve efficiency and effectiveness
Rare Resources
not controlled or possessed by many competing firms
Imperfectly Imitable Resource
impossible or extremely costly or difficult for other firms to
duplicate
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

Efficient use of resources

Skill specialization development

Top management control

Excellent coordination

Quality technical problem solving
22
DIVISIONAL STRUCTURE DISADVANTAGES

Poor communications

Slow response to external changes

Decisions concentrated at top

Pin pointing responsibility is difficult

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

Same advantages as functional structure

Reduced barriers among departments

Quicker response time

Better morale

Reduced administrative overhead
28
TEAM DISADVANTAGES

Dual loyalties and conflict

Time and resources spent on meetings

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

More efficient use of resources than single
hierarchy

Adaptable to changing environment

Development of both general and specialists
management skills
Expertise available to all divisions
 Enlarged tasks for employees

35
Dual Authority Structure in a Matrix
Organization
36
Horizontal Matrix Disadvantages

Dual chain of command

High conflict between two sides of matrix

Many meetings to coordinate activities

Need for human relations training

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

Global competitiveness

Work force flexibility

Reduced administrative overhead
41
NETWORK APPROACH DISADVANTAGES

No hands-on control

Loss of part of the organization severely
impacts remainder of organization

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