Copyright 2012 John Wiley & Sons, Inc. Chapter 5 The Project in the Organizational Structure

5-2 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

The Project Management Office One of the most prominent ways of reorganizing a company for project management is the establishment of a PMO. Various projects will take place throughout the organization. Companies may organize personnel based on functionality, with overlapping teams, or by project, forming new disjoint teams whenever a project is initiated. (More in a few minutes.) But in almost all project oriented enterprises, the establishment of a PMO (or similar) has been recognized as indispensible.

What does the PMO do? Serve as coaches and facilitators to PMs (not as the doers of projects) Maintain knowledge about PM practices, and ensure the use of the proper methodology and tools for budget and timing estimations, for example Archive and audit projects over time Make sure teams are doing what they are doing the right way Improve the success rate and the efficiency of project completion

The BTO at Coca-Cola Enterprises driving standards, i.e. using a standardized methodology/approach and tools/templates to project management, change management, value mgmt, and continuous improvement enhancing capabilities, i.e. building the capabilities of our people in the four disciplines to reduce our spend on external resources. We have reduced our consultant expensive by $17M over 2008 creating visibility, i.e. ensuring leadership has the necessary visibility into the portfolio of projects and is helping prioritize opportunities and most importantly approving or rejecting project teams as they attempt to pass through the five tollgates. The tollgates occur at standard milestones in the project lifecycle where the team has to present to the senior executives and either get passed or sent back for more work. The other piece around visibility is ensuring alignment and coordinate of all transformational projects. One example from last week – I discovered two teams were redesigning a piece of the organization and were not aware that the other team was also impacting the same part of the organization. Therefore, I connected the two teams to ensure the work they are doing is aligned and coordinated. So, those of us in the BTO have visibility into the entire portfolio of projects and look for gaps, overlaps, interdependencies, etc.

Organizational Structure So the establishment of a PMO (or similar) that complements the existing functional groups (manuf., marketing, finance, etc.) is a common way to incorporate PM methods into a large existing firm. Traditional or stable operations are handled in the traditional way, but any changes are handled as projects. Other firms may adopt a more radical organizational approach, in which the entire firm is oriented around projects, a.k.a., managing an organization by projects, etc.

Organizational Structure At one extreme is the typical functional organization, with projects contained within a functional department. Downside: projects often take backseat to regular duties. At the other extreme is a “projectized” or pure-project organization. Team members work only on project work. Teams are disbanded upon project completion, and team members have no home department. – Advantages: PM authority, agility – Disadvantages: disaggregation of functional knowledge, redundancy, life-after-the-project fears.

5-10 Traditional Forms of Organization 1. Functional -> Everyone in a dept. 2. Projectized -> “No Home” 3. Matrix -> “Two bosses” 4. Composite

5-11 Projects in a Projectized Organization Figure 5-2

5-12 Advantages Project manager has full authority All members report to the project manager Short lines of communication When there are similar projects, expertise can be retained Strong and separate identity Swift decisions Unity of command Structurally simple and flexible Supports a holistic approach

5-13 Disadvantages Duplication in staffing Stockpiling Workers tend to fall behind in other areas of their technical expertise Inconsistency in policies and procedures A project takes on a life of its own Worry about life after the project is over

5-14 Projects in a Matrixed Organization Matrixed project organization – Keeps desirable features of both standalone and functional projects – Avoids some of the disadvantages of each type It is a combination of standalone projectized and functional organization structures Can take on a variety of specific forms

5-15 Strong Matrix Figure 5-3

5-16 Weak Matrix Project might have only one full-time person, the project manager Functional departments devote capacity to the project Primary task of the project manager is to coordinate project activities carried out by the functional departments

5-17 Advantages The project is the point of emphasis The project has access to the entire organization for labor and technology Less anxiety about what happens when the project is completed Response to client needs is rapid Access to administrative units of firm Better balance of resources Great deal of organizational flexibility

5-18 Disadvantages Power balance is delicate Projects compete for resources Projectitis is still a serious disease Division of authority and responsibility is complex Matrix management violates the management principle of unity of command

5-19 Projects in Composite Organizational Systems Figure 5-4

5-20 Selecting a Project 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

5-21 Functional Form Best for… In-depth application of a technology Large capital investment, especially when that investment is concentrated in one functional area

5-22 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

5-23 Matrix Form Best for… Projects that require inputs from several functional areas Projects that use technology from several functional areas