1. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall The Organizational Context: Strategy, Structure, and Culture 02-01

2. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Chapter 2 Learning Objectives After completing this chapter, students will be able to: Understand how effective project management contributes to achieving strategic objectives. Recognize three components of the corporate strategy model: formulation, implementation, and evaluation. See the importance of identifying critical project stakeholders and managing them within the context of project development. Recognize the strengths and weaknesses of three basic forms of organizational structure and their implications for managing projects. 02-02

3. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Chapter 2 Learning Objectives After completing this chapter, students will be able to: Understand how companies can change their structure into a “heavyweight project organization” structure to facilitate effective project management practices. Identify the characteristics of three forms of project management office (PMO). Understand key concepts of corporate culture and how cultures are formed. Recognize the positive effects of a supportive organizational culture on project management practices versus those of a culture that works against project management. 02-03

4. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 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 and mission statements Formulating, implementing and evaluating Making cross functional decisions Achieving objectives 02-04

5. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Projects Reflect Strategy A firm wishing to……may have a project redevelop products or processesto reengineer products or processes. changes strategic direction or product portfolio configuration to create new product lines. improve cross-organizational communication & efficiency to install an enterprise IT system. Projects are stepping stones of corporate strategy The firm’s strategic development is a driving force behind project development Some examples include: 02-05

6. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Relationship of Strategic Elements Mission Objectives Strategy GoalsPrograms Figure 2.2 02-06

7. 02-07 “… the business of supplying system components to a world- wide nonresidential air conditioner market.” Mission Objectives a.14.5% ROI b.Non-decreasing dividends c.Socially-conscious image Strategies a.Existing products in existing markets with image maintenance b.Existing products in new markets (foreign, restricted) c.New products in existing markets (significantly improve image) Goals Year 1: 8% ROI, $1 dividend, maintain image, unit cost down 5% Year 2: 9% ROI, $1 dividend, improve image Year 3: 12% ROI, $1 dividend, improve image Year 4: 14% ROI, $1.10 dividend Programs 1. Product Cost Improvement Program (PCIP) 2. Image Assessment Program (IAP) 3. Product Redesign Program (PRP) 4. Product Development Program (PDP) FIGURE 2.3 Illustrating Alignment Between Strategic Elements and Projects Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

8. 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 intervener groups 02-08

9. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Project Stakeholder Relationships Figure 2.4 02-09

10. Copyright © 2013 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 02-10

11. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Project Stakeholder Management Cycle 2. Gather information on stakeholders 7. Implement stakeholder management strategy 4. Determine stakeholder strengths and weaknesses 5. Identify stakeholder strategy 6. Predict stakeholder behavior 3. Identify stakeholders’ mission 1. Identify Stakeholders Figure 2.5 02-11

12. Copyright © 2013 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. Identifies groupings of: individuals into departments departments into the total organization 3. Design of systems for effective communication coordination integration across departments 02-12

13. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Forms of Organization 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 02-13

14. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Functional Organizational Structure 02-14 Figure 2.6

15. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Functional Structures 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 02-15

16. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Silo Effect Found in Functional Structures 02-16 Figure 2.7

17. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Project Organizational Structure 02-17 Figure 2.8

18. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Project Structures 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 02-18

19. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Matrix Organizational Structure 02-19 Figure 2.9

20. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Matrix Structures 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 02-20

21. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Heavyweight Project Organizations Organizations can sometimes gain tremendous benefit from creating a fully-dedicated project organization Lockheed Corporation’s “Skunkworks” Project manager authority expanded Functional alignment abandoned in favor of market opportunism Focus on external customer 02-21

22. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Manager’s Perceptions of Effectiveness of Various Structures on Project Success 02-22 Figure 2.10

23. Copyright © 2013 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 Expertise Repository Center for excellence 02-23

24. Copyright © 2013 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 Resource pool – maintain and provide a cadre of skilled project professionals 02-24

25. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall PMO Control Tower Performs four functions: Establishes standards for managing projects Consults on how to follow these standards Enforces the standards Improves the standards 02-25

26. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Alternative Levels of Project Offices 02-26 Figure 2.11

27. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 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. Unwritten Rules of behavior Held by some subset of the organization Taught to all new members 02-27

28. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Key Factors That Affect Culture Development Technology Environment Geographical location Reward systems Rules and procedures Key organizational members Critical incidents 02-28

29. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Culture Affects Project Management Departmental interaction Employee commitment to goals Project planning Performance evaluation 02-29

30. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Summary Understand how effective project management contributes to achieving strategic objectives. Recognize three components of the corporate strategy model: formulation, implementation, and evaluation. See the importance of identifying critical project stakeholders and managing them within the context of project development. Recognize the strengths and weaknesses of three basic forms of organizational structure and their implications for managing projects. 02-30

31. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Summary Understand how companies can change their structure into a “heavyweight project organization” structure to facilitate effective project management practices. Identify the characteristics of three forms of project management office (PMO). Understand key concepts of corporate culture and how cultures are formed. Recognize the positive effects of a supportive organizational culture on project management practices versus those of a culture that works against project management. 02-31

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