The Organizational Context Project management Lecture 2

PM is contextual „Successful PM is contextual” (Pinto) = „the organization itself matters” Before the beginning of a project, organizational context have to be examined, relationships have to be specified, rules and procedures have to be established for the successful completition of a project. Especially in organizations where PM practices are not the operating form. Most important contextual issues are strategy, structure and culture.

Projects and Organizational Strategy Strategic management – the science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives. Consists of: – Developing vision/mission statements – Formulating, implementing and evaluating: Projects are the vehicles to seize opportunities, capitalize strengths, and implement objectives. – Making cross functional decisions: operationalize business plans – Achieving objectives Stepping stones and buliding blocks of corporate strategy: operational reality behind strategies and visions

The firm’s strategic development is a driving force behind project development. Examples A firm wishing to…may have a project redevelop products or processes,to reengineer products or processes. change strategic direction or product portfolio configuration, to create new product lines. improve cross-organizational communication & efficiency to install an enterprise IT system.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Hierarchy of Strategic Elements Fig 2.1 Vision / Mission Objectives GoalsProgramsStrategy

Stakeholder Management Stakeholders are all individuals or groups who have an active stake in the project and can potentially impact, either positively or negatively, its development. Sets of project stakeholders include: Internal Stakeholders Top management Accountant Other functional managers Project team members External Stakeholders Clients Competitors Suppliers Environmental, political, consumer, and other intervenor groups

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 2-7 Project Stakeholder Relationships Clients Project Manager Other Functional Managers External Environment Project Team Accountant Top Management Parent Organization

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Managing stakeholders 1.Assess the environment 2.Identify the goals of the principal actors 3.Assess your own capabilities 4.Define the problem 5.Develop solutions 6.Test and refine the solutions

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Project Stakeholder Management Cycle Project Management Team Identify Stakeholders Gather Information on Stakeholders Determine Stakeholder Strengths & Weaknesses Implement Stakeholder Management Strategy Identify Stakeholders’ Mission Predict Stakeholder Behavior Identify Stakeholder Strategy

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Organizational Structure Consists of three key elements: 1.Designates formal reporting relationships – number of levels in the hierarchy – span of control 2.Groupings of – individuals into departments – departments into the total organization 3.Design of systems for – effective communication – coordination – integration across departments

Structure within structure In the structure of the whole organization exists the internal structure of the project team: – Relationship between members – Roles and responsibilities – Interactions It is affected in multiple ways by the structure of the whole organization

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Forms of Organizational Structure Functional organizations group people performing similar activities into departments Project organizations group people into project teams on temporary assignments Matrix organizations create a dual hierarchy in which functions and projects have equal prominence

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Functional Structures for Project Management StrengthsWeaknesses 1.Firm’s design maintained 2.Fosters development of in- depth knowledge 3.Standard career paths 4.Project team members remain connected with their functional group 1.Functional siloing 2.Lack of customer focus 3.Projects may take longer 4.Projects may be sub-optimized

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Project Structures for Project Management StrengthsWeaknesses 1.Project manager sole authority 2.Improved communication 3.Effective decision-making 4.Creation of project management experts 5.Rapid response 1.Expensive to set up and maintain teams 2.Chance of loyalty to the project rather than the firm 3.No pool of specific knowledge 4.Workers unassigned at project end

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Matrix Structures for Project Management StrengthsWeaknesses 1.Suited to dynamic environments 2.Equal emphasis on project management and functional efficiency 3.Promotes coordination across functional units 4.Maximizes scarce resources 1.Dual hierarchies mean two bosses 2.Negotiation required in order to share resources 3.Workers caught between competing project & functional demands

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Heavyweight Project Organizations Organizations can sometimes gain tremendous benefit from creating a fully-dedicated project organization Project manager authority expanded, functional leaders are subordinated Functional alignment abandoned in favor of market opportunism Gradual shifting towards full autonomy Focus on external customer

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Project Management Offices Centralized units that oversee or improve the management of projects Resource centers for: – Technical details offloaded from manager – Expertise in project management skills – Repository of lessons learned, documentation – Center for project management excellence Where to place it in the organizational structure?

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Forms of PMOs Weather station – monitoring and tracking Control tower – project management is a skill to be protected and supported – Establish standards – Consults on PM practice – Enforces the standards – Improves the standards Resource pool – maintain and provide a cadre of skilled project professionals

Organizational Culture „ The unwritten rules of behavior, or norms that are used to shape and guide behavior, is shared by some subset of organization members and is taught to all new members of the company. ” Cultures are evolved not created, but they can be affected and modified (= managed). It is unique.

Key factors that affect culture development – Technology – Environment (stable or dynamic; simple or complex) – Geographical location (social, political, physical) – Reward systems – Rules and procedures – Key organizational members (founders, ”heroes”) – Critical incidents

Culture Affects Project Management Departmental interaction Employee commitment to goals Project planning Performance evaluation

Example for the effect of culture on projects: Escalation of commitment the phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the cost, starting today, of continuing the decision outweighs the expected benefit. other name: sunk cost fallacy Why it is rooted in culture?

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