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Projects, Organizations and Structures
Project Management CE PROJECT MANAGEMENT Projects, Organizations and Structures (Some of) the players and (some of) the rules L-3

What Is Organizing? Organizing
CE PROJECT MANAGEMENT Organizing Arranging the activities of the enterprise in such a way that they systematically contribute to the enterprise’s goals. L-3

Depicting the Organization
CE PROJECT MANAGEMENT Organization Chart A chart that shows the structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area. L-3

Organization Design and Structure
CE PROJECT MANAGEMENT Organization Design A process in which managers develop or change their organization’s structure Work Specialization A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job L-3

When Organizing: Always Keep Your Goals in Mind
CE PROJECT MANAGEMENT Business environments are in a constant state of change. An organization’s strategy must be adapted to changes in its competitive environment. Structure follows strategy. Strategic change creates the need for restructuring the organization to acquire new and different knowledge, skills and abilities. L-3

What Determines Organization Structure
CE PROJECT MANAGEMENT Environment. Fast-changing environments require organic structures; slowly changing environments favor mechanistic structures. Technology. Unit and continuous production processes favor organic structures. Mass production processes favor mechanistic structures. Goals. Ask, “What are the main goals we want to achieve via this organization?” Pros and cons. Each approach to departmentalization has pros and cons. Logic and common sense. L-3

Economies of Work Specialization
CE PROJECT MANAGEMENT L-3

Methods for Achieving Coordination
CE PROJECT MANAGEMENT Mutual Adjustment Achieving coordination through face-to-face interpersonal interaction. Use Rules and Procedures Standardize Exercise Direct Supervision: Use the Chain of Command Divisionalize Appoint Staff Assistants Appoint Liaisons Appoint Committees Organize Independent Integrators An individual or a group that coordinates the activities of several interdependent departments, but is independent of them. L-3

Types of Interdependence

Centralization and Decentralization
CE PROJECT MANAGEMENT Centralization A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made Decentralization/Flat The pushing down of decision-making authority to the lowest levels of an organization L-3

Stages of Organizational Development
CE PROJECT MANAGEMENT Simple structure An organization that is low in specialization and formalization but high in centralization Functional structure An organization in which similar and related occupational specialties are grouped together Divisional structure An organization made up of self-contained units L-3

Stages of Organizational Development (cont’d)
CE PROJECT MANAGEMENT Matrix structure An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager Team-based structure An organization that consists entirely of work groups or teams Boundaryless organization An organization that is not defined or limited by boundaries or categories imposed by traditional structures L-3

Mechanistic and Organic Organizations
CE PROJECT MANAGEMENT Mechanistic organization The bureaucracy; a structure that is high in specialization, formalization, and centralization Organic organization An adhocracy; a structure that is low in specialization, formalization, and centralization Structure follows strategy L-3

Burns and Stalker CE PROJECT MANAGEMENT L-3

Structure Variables Principles Departmentalization Chain of command
CE PROJECT MANAGEMENT Principles Chain of command Span of control Authority Power Responsibility Departmentalization Functional Divisional Product Customer Geographic Process L-3

Organizational Structure: Control
CE PROJECT MANAGEMENT Chain of command The management principle that no person should report to more than one boss Span of control The number of subordinates a manager can direct efficiently and effectively Authority The rights inherent in a managerial position to give orders and expect them to be obeyed Responsibility An obligation to perform assigned activities Power An individual’s capacity to influence decisions L-3

Chain of Command CE PROJECT MANAGEMENT L-3

Tall And Flat Organizations, And The Span Of Control
CE PROJECT MANAGEMENT Span of Control The number of subordinates reporting directly to a supervisor. Wide spans: larger number of direct reports. Narrow spans: fewer number of direct reports. Tall vs. Flat Organizations Tall organizations: more management layers and more hierarchical controls. Flat organizations: fewer management layer and decision making closer to the customer. L-3

Spans of Control in Country-Based Organization

Types of Organizational Authority
CE PROJECT MANAGEMENT Line authority The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees Staff authority Positions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority L-3

Authority Versus Power

Types of Power Legitimate Coercive Reward Expert Referent
CE PROJECT MANAGEMENT Legitimate Power based on one’s position in the formal hierarchy Coercive Power based on fear Reward Power based on the ability to distribute something that others value Expert Power based on one’s expertise, special skill, or knowledge Referent Power based on identification with a person who has resources or traits L-3

Principles of Delegation
CE PROJECT MANAGEMENT The manager can delegate authority but cannot delegate responsibility. Clarify the assignment. Delegate, don’t abdicate. Know what to delegate. Specify the subordinate’s range of discretion. Authority should equal responsibility. Make the person accountable for results. Beware of backward delegation. L-3

Departmentalization: Creating Departments
CE PROJECT MANAGEMENT Departmentalization The process through which an organization’s activities are grouped together and assigned to managers; the organizationwide division of work. L-3

Departmentalization Functional Product Customer Geographic Process
CE PROJECT MANAGEMENT Functional The grouping of activities by functions performed Product The grouping of activities by product produced Customer The grouping of activities by common customers Geographic The grouping of activities by territory Process The grouping of activities by work or customer flow L-3

Organizing Departments by Function
CE PROJECT MANAGEMENT Functional Departmentalization A form of organization that groups a company’s activities around essential functions such as manufacturing, sales, or finance. L-3

Functional Departmentalization

Organizing Departments by Self-Contained Divisions/Purposes
CE PROJECT MANAGEMENT Product Departmentalization Grouping departments around a firm’s products or services, or each family of products or services; also referred to as a “divisional” organization. Customer Departmentalization Self-contained departments are organized to serve the needs of specific groups of customers. L-3

Divisional Organization for a Pharmaceuticals Company

Customer Departmentalization, Grayson Steel Company

Organizing Departments by Self-Contained Divisions/Purposes (cont’d)
CE PROJECT MANAGEMENT Marketing-channel Departmentalization Departments focus on particular marketing channels, such as drugstores or grocery stores. Geographic (Territorial) Departmentalization Separate departments are established for each of the territories in which the enterprise does business. L-3

Marketing Channel Departmentalization

Divisional Organizations Facilitate Coordination

Functional vs. Divisional Organizations
CE PROJECT MANAGEMENT Functional Organization Advantages It is simple, obvious, and logical. It fosters efficiency. It can simplify executive hiring and training. It can facilitate the top manager’s control. Functional Organization Disadvantages It increases the workload on the executive to whom the functional department heads report. It may reduce the firm’s sensitivity to and service to the customer. It produces fewer general managers. G.Dessler, 2003 L-3

(cont’d) Functional vs. Divisional Organizations
CE PROJECT MANAGEMENT Divisional Organization Advantages The product or service gets the single-minded attention of its own general manager and unit, and its customers may get better, more responsive service. It’s easier to judge performance. It develops general managers. It reduces the burden for the company’s CEO. Divisional Organization Disadvantages It creates duplication of effort. It may diminish top management’s control. It requires more managers with general management abilities. It can breed compartmentalization. G.Dessler, 2003 L-3

Functional/Hierarchical

Remarks CE PROJECT MANAGEMENT Operational decisions originate at the top of the hierarchy and propagate Sharp distinction of functions and rigid structure Good for small firms, geographically concentrated, with a small set of standard products, mainly focused in operational work Organization of work in projects is clumsy (unless project managers are in the Direction) L-3

Divisional CE PROJECT MANAGEMENT L-3

Remarks Strategy located in the Direction
CE PROJECT MANAGEMENT Strategy located in the Direction Responsibility and operational decisions are taken by the Division Allows for specialization to specific markets/sectors (e.g. expert in the A.I.) Profits and losses are shared L-3

Remark (Fierce) competition among divisions
CE PROJECT MANAGEMENT (Fierce) competition among divisions Divisions tend to operate on smaller term goals Duplication of functions may increase costs Projects within Division are relatively simple. Interdivisional projects more complex. L-3

Projectized/Autonomous Project Organizational Structure
CE PROJECT MANAGEMENT Project is central Disadvantages: lack of specialization continuity of work and reallocation of people after the project ends L-3

Projectized/Autonomous Project Organizational Structure
CE PROJECT MANAGEMENT Companies with this organization are in the projects business; they do not produce standard products Company works on multiple projects at any given time; usually high dollar value and long term projects As projects are completed, the company hopes to get new contracts for projects Each project team is dedicated to only one project Each project is operated like a mini-company There is little opportunity for members of different project teams to share knowledge or technical expertise Autonomous Project Organizational Structure Companies with an autonomous organizational structure are in the projects business; they do not produce standard products. They typically work on multiple projects at any given time. As projects are completed, the company continually hopes to get new contracts for projects. Each project team is dedicated to only one project. In the project-type organization, each project operates like a mini-company. All the resources needed to accomplish each project are assigned full-time to that project. A full-time project manager has complete project and administrative authority over the project team. A project-type organization can be cost-inefficient both for individual projects and for the company. Each project must pay the salaries of its dedicated project team, even during parts of the project when they are not busy. There is little opportunity for members of different project teams to share knowledge or technical expertise, because each project team tends to be isolated. Project organization structures are found primarily in companies that are involved in very large projects. Such projects can be of high (multimillion) dollar value and long (several years) duration. Project organization structures are prevalent in the construction and aerospace industries. They are also used in the nonbusiness environment, such as for volunteer-managed projects. L-3

Matricial CE PROJECT MANAGEMENT L-3

Creating Matrix Organizations
CE PROJECT MANAGEMENT Matrix Organization An organization structure in which employees are permanently attached to one department but also simultaneously have ongoing assignments in which they report to project, customer, product, or geographic unit heads. L-3

Matricial Structural “accommodation” of projects
CE PROJECT MANAGEMENT Structural “accommodation” of projects May or may not contain a PMO (Project Management Office) for sharing resources, monitoring and control Two bosses “syndrome” The point is where the decisions are taken: Weak matrix Balanced matrix Strong matrix L-3

Matrix Organizational Structure
CE PROJECT MANAGEMENT Multiple projects are in progress at any given time, and these projects vary in size and complexity Hybrid structure—a mix of both the functional and autonomous project organizational structures Provides for effective utilization of company resources Employees assigned to the project for the length of time they are needed Pursue career development through assignment to various types of projects Have a dual reporting relationship—a (temporary) project manager and a (permanent) functional manager Project manager is the intermediary between the company and the customer Checks-and-balances and fast response upon problem identification Matrix Organizational Structure With the matrix organizational structure, multiple projects are being worked on at any one time and these projects can vary greatly in size and complexity. Projects are continually begun and finished The matrix organization is a hybrid—a mix of both the functional and project organization structures. It provides the project and customer focus of the project structure, but it retains the functional expertise of the functional structure. The project manager is responsible for the project results, while the functional managers are responsible for providing the resources needed to achieve the results. The matrix organization provides for effective utilization of company resources. Project managers come under the projects component of the organization. When the company receives an order for a new system, the vice president of projects assigns a project manager to the project. A small project may be assigned to a project manager who is already managing several other small projects. A large project may be assigned a full-time project manager. Individuals are assigned to the project for the length of time they are needed. Some individuals may be assigned to the project full-time, while others may be assigned only part-time. Some people may be assigned to a project for its entire duration; others may work on only one part of the project. Sharing of individuals’ time across several projects results in effective utilization of resources and minimizes the overall costs for each project. The objective is to maximize the number of functional person-hours applied to work on projects and minimize the unapplied time. The company always needs to have new projects coming in as other projects are completed in order to maintain a high applied-time rate for the functional staff. Individuals can pursue career development through assignment to various types of projects. As they broaden their experience, individuals become more valuable for future assignments. Each member of a project team has a dual reporting relationship; in a sense, each member has two managers—a (temporary) project manager and a (permanent) functional manager. The project manager is the intermediary between the company and the customer. She or he is responsible for leading the development of the project plan, establishing the project schedule and budget, and allocating specific tasks and budgets. Each functional manager in a matrix organization structure is responsible for how the assigned work tasks will be accomplished and who (which specific people) will do each task. The matrix organization provides checks-and-balances and a fast response upon problem identification because it has both a horizontal (project) and a vertical (functional) path for the flow of information. L-3

Matrix Organizations Advantages Access to expertise.
CE PROJECT MANAGEMENT Advantages Access to expertise. Stability of permanent department assignments for employees. Allows for focus on specific projects, products, or customers. Disadvantages Confusion of command. Power struggles and conflicts. Lost time in coordinating. Excess overhead for managing matrix functions. L-3

Weak Matrix Responsibility mainly located in the functional areas
CE PROJECT MANAGEMENT Responsibility mainly located in the functional areas PM more as a facilitator (helps keeping focus, monitor and control) and negotiator Useful in structures where products are standardized but production is complex Facilitates an orientation of the organization towards a project management culture L-3

Strong Matrix PM is responsible of:
CE PROJECT MANAGEMENT PM is responsible of: Planning operational activities (it “tells” functional areas what has to be done - in practice slightly weaker than that!) Coordinating people Monitoring and Controlling progresses Friction between PM and Functional Areas: PM focused on shorter term goals Functional area responsible inclined to think of the lending personnel as a “favour”. Necessity of mediating requests of different projects and project managers for the Functional Areas Good for complex products with standard production cycles L-3

Balanced Matrix Something between Strong and Weak Need for a PM
CE PROJECT MANAGEMENT Something between Strong and Weak Need for a PM PM hasn’t got all the authority of a Strong Matrix (usually embedded in a functional unit - it may report to the person responsible of an area) L-3

Advantages and Disadvantages of Organizational Structures
CE PROJECT MANAGEMENT Advantages and Disadvantages of Organizational Structures Here you see a table that depicts the advantages and disadvantages of the different types of organizational structures. Functional Organizational Structure: Advantages: A functional-type organization removes potential for duplication and overlap of activities. It provides the benefits associated with specialization and functional excellence. Disadvantages: Functional-type organizations can be insular, with each component only concerned about its own performance. Teamwork is not emphasized; there is little cross-fertilization of ideas. Decisions may be parochial rather than in the best interests of the overall project. The hierarchical structure causes communication and problem resolution problems, and decision making can be slow. There is a lack of customer focus. There is a stronger allegiance to the function than to the project or the customer. Autonomous Project Organizational Structure The project team has full control over the resources, including authority over how the work gets completed and by whom. The project organization is highly responsive to the customer. This structure can be cost-inefficient because of underutilization of resources. When things are slow, individuals have a tendency to stretch out their work to fill up the time available or if they do not have any tasks to do for temporary periods, they still must be paid by the company. There is a potential for duplication of activities on several concurrent projects. There is a low level of knowledge transfer between projects. Individuals are dedicated to working on one project. At the end of a project, people may be laid off if there is no new project to which they can be assigned, leading to team members to experience high anxiety about reassignment. Matrix Organizational Structure It allows efficient utilization of resources by assigning individuals from various functions to work on specific projects. Because they have a functional home, individuals can be moved between projects. It provides a core of functional expertise that is available to all projects. Knowledge stays with the company, ready to be used on future projects. People experience greater learning and growth, and their knowledge and skills are transferred from project to project. The matrix structure also facilitates information flow. Project team members can inform the project manager and the functional manager. The matrix organization is customer focused. Members of a project team in a matrix organization structure have a dual reporting relationship, which can cause anxiety and conflict over work priorities. A company that uses a matrix organization structure must establish operating guidelines to assure a proper balance of power between project managers and functional managers. Conflicts are likely to arise between project managers and functional managers regarding priorities. L-3

Critical Success Factors
CE PROJECT MANAGEMENT In a matrix organization, it is important to delineate the project management responsibilities and the functional management responsibilities. When implementing a matrix organizational structure, operating guidelines should be established to assure proper balance of power between project managers and functional managers. Project teams should be kept as small as feasible throughout the project. Critical Success Factors In a matrix organization, it is important to delineate the project management responsibilities and the functional management responsibilities. When implementing a matrix organizational structure, operating guidelines should be established to assure proper balance of power between project managers and functional managers. Project teams should be kept as small as feasible throughout the project. L-3

Summary CE PROJECT MANAGEMENT The three most common structures used to organize people to work on projects: The functional organizational structure is typically used in businesses that primarily sell and produce standard products. The advantages of a functional organizational structure are no duplication of activities and functional excellence. Disadvantages include insularity, slow response time, and lack of customer focus. The projectized organizational structure is used by companies that are working on multiple projects at any one time and do not produce standardized products. The advantages of the autonomous project organizational structure are control over resources and responsiveness to customers . Cost inefficiency and low level of knowledge transfer among projects are its disadvantages. Summary The three most common structures used to organize people to work on projects are functional, autonomous project, and matrix organizational structures. The functional organizational structure is typically used in businesses that primarily sell and produce standard products. The advantages of a functional organizational structure are no duplication of activities and functional excellence. Disadvantages include insularity, slow response time, and lack of customer focus. The autonomous project organizational structure is used by companies that are working on multiple projects at any one time and do not produce standardized products. The advantages of the autonomous project organizational structure are control over resources and responsiveness to customers. Cost inefficiency and low level of knowledge transfer among projects are its disadvantages. L-3

Summary (continued) CE PROJECT MANAGEMENT The matrix organization is a hybrid of both the functional and the autonomous project organizational structures. The advantages of a matrix organizational structure include efficient utilization of resources, functional expertise available to all projects, increased learning and knowledge transfer, improved communication, and customer focus. Its disadvantages are the dual reporting relationships and the need for a balance of power. In the matrix structure, the project manager is the intermediary between the company and the customer. The project management office in the matrix organizational structure oversees and coordinates multiple projects. Summary (continued) The matrix organization is a hybrid of both the functional and the autonomous project organizational structures. The advantages of a matrix organizational structure include efficient utilization of resources, functional expertise available to all projects, increased learning and knowledge transfer, improved communication, and customer focus. Its disadvantages are the dual reporting relationships and the need for a balance of power. In the matrix structure, the project manager is the intermediary between the company and the customer. The project management office in the matrix organizational structure oversees and coordinates multiple projects. L-3

Dedicated Team CE PROJECT MANAGEMENT A special unit is created for the duration of the project. PM has complete responsibility over the planning, team, etc. Similar to projectized organization Example: Lockheed-Martin (sixties): 60 C54 airplanes (milliard dollars contract), pieces per airplane, several subcontractors Dedicated team with ~ hundred people Disadvantages include: Strong focus on shorter term goals Re-allocation of people after the project’s end Integration in the company (e.g. evaluation of people, feeling of belonging to the company) L-3

Dedicated Team CE PROJECT MANAGEMENT L-3

Summing up… CE 447 - PROJECT MANAGEMENT L-3 Functional Weak Matrix
Balanced Matrix Strong Matrix Projectized PM Authority Little or none Limited Low to Moderate Moderate to High High to almost Total Resource Availability Moderated to High High to almost total Who controls the project budget Functional Manager Mixed Project Manager Project Manager Role Part-time Full-times Full-time Project Management Administrative Staff L-3

Projects and their Environment
CE PROJECT MANAGEMENT Projects and their Environment The players L-4

The players CE 447 - PROJECT MANAGEMENT L-4 Project Sponsor Project
Manager Project Management Team Project Team Project Stakeholder L-4

The Players Stakeholders:
CE PROJECT MANAGEMENT Stakeholders: who is involved in the project and/or people whose interest may be affected by the project may have different influence and varying level of responsibility during the project may have positive or negative influence on the project may be difficult to identify L-4

The Players CE PROJECT MANAGEMENT Customer/User: person or organization that will use the results of a project. There may be multiple layers of users. Performing Organization: the organization mostly involved in the project Project team members: the group performing the work Project management team: the members of the team directly involved in project management Sponsor: person or group providing the financial resources Influencers: people or groups not directly related to the project who could influence the course of a project L-4

The Players (ctd) CE PROJECT MANAGEMENT There may be overlaps among different stakeholders (the customer may also be the sponsor) There are other characterisations: Internal/external Sellers and contractors … L-4

The Players Project Manager:
CE PROJECT MANAGEMENT Project Manager: person responsible of managing the project person responsible of managing stakeholder expectations a negotiator and a facilitator the reference person for a project Some skills communication and negotiation skills a little predisposition to risk goal oriented Leadership Summing up (according to Sernia): Solid know-how A lot of common sense Professional correctness A bit of style L-4

The role of the PM CE PROJECT MANAGEMENT The PM ensures that the project goals are met according to the constraints Cost Time Quality L-4

The PM and its environment
CE PROJECT MANAGEMENT sponsor Expectations, resources Achievable goals performing organization Constraints, opportunities influencers resources PM results Goals, plan, … Products, Services, or results Achievable goals, Information, Commitment … requirements project team customer L-4

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