Chapter 5
The Project in the
Organizational Structure
Copyright 2009 John Wiley & Sons, Inc.
Project Growth
1.
2.
3.
4.
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
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
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
Traditional Forms of Organization
1.
2.
3.
4.
Functional
Pure project
Matrix
Mixed
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
Including Project In Traditional
Forms
Figure 5-1
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 units provide
technological/knowledge continuity
3.
4.
–
–
Also provide continuity of policies and
procedures
Functional manager can train and
inspect
Advantages
Continued
Functional areas provide for a career
path within a knowledge area
5.
–
–
Engineers can become supervisors or
VP’s
Does not require movement into project
management to advance
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.
Slow response
–
–
5.
Continued
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
Disadvantages
Continued
Motivation is weak
6.
–
–
–
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
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
May be tempered by relationship to functional
unit
Shorter communications lines
Advantages
4.
Can maintain project management skills
–
–
5.
Continued
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
Advantages
Continued
Quick decisions
6.
–
Authority is centralized
Unity of command
7.
–
–
Each worker reports to one, and-onlyone, manager
Project has a simple structure
Advantages
Continued
Structurally simple and flexible
8.
–
Easy to implement
Holistic approach
9.
–
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
Continued
Experts falling behind in other areas
3.
–
–
–
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
Disadvantages
Continued
Organizational inconsistency
4.
–
–
Corner-cutting
“They don’t understand our problems”
Life of its own
5.
–
–
Projectitis
Us versus them
Disadvantages
Continued
Life after the project ends
6.
–
–
–
Lots of uncertainty
Will there be layoffs
Rusty skills
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

The Matrix Organization
Figure 5-3
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
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
5.
Consistent policies
–
–
6.
Continued
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
Advantages
Continued
Flexibility
7.
–
–
–
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
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
 Facilitated by the Internet
 Often organized as a matrix

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
Mixed Organizational Systems
Figure 5-4
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

Functional Form Best for…
In-depth application of a technology
 Large capital investment, especially
when that investment is concentrated in
one functional area

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

Matrix Form Best for…
Projects that require inputs from
several functional areas
 Projects that use technology from
several functional areas

Two Special Cases
1.
2.
Risk Management
The Project Office
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
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
Risk Identification
1.
2.
3.
4.
5.
6.
List ways a project can fail
Evaluate severity
Estimate likelihood
Estimate the ability to detect
Find the risk priority number
Consider ways to reduce
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
The Project Team
Different project need different staffs
 Some common members include

–
–
–

Engineer
Contract administrator
Controller
Should report to project manager
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
Human Factors

Some of the problems that prevent a team
from performing effectively:
–
–
–
–
–

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