Copyright 2009 John Wiley & Sons, Inc.

Chapter 5

The Role of Projects in the Organization

Project Growth

1. Need for speed, market responsiveness, and product flexibility

2. Need for broader areas of knowledge in developing new products and services

3. Rapid expansion of technology

4. Management inability to understand and control large numbers of activities

Switching to Project Environment

Is difficult and time consumingRequires the full commitment of upper

managementGenerally causes a lot of “concern” among

employees

As a result, organizations may have multiple structures

Organizational Issues Related to Projects

1. How to tie project to parent firm

2. How to organize the project

3. How to organize activities common to multiple projects

Traditional Forms of Organization

1. Functional

2. Pure project

3. Matrix

4. 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– Experts assigned to functional units– Assigned to projects as needed

2. 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

3. Specialists can share knowledge and experience

4. Functional units provide technological/knowledge continuity

– Also provide continuity of policies and procedures

– Functional manager can train and inspect

Advantages Continued

5. Functional areas provide for a career path within a knowledge area

– Engineers can become supervisors or VP’s

– Does not require movement into project management to advance

Disadvantages

1. Client is not the focus– Function unit has its own work outside the

project– Functional manager not likely to be accountable

for project and therefore client2. 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

3. Project manager may not have adequate authority

– 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 Continued

4. Slow response– Functional managers manage their part to benefit

their functional unit– Interests outside their area may not be fully

considered

5. 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

6. Motivation is weak– 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

1. Project manager has full authority– 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 Continued

2. Everyone reports to the project manager– 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

3. Shorter communications lines

Advantages Continued

4. Can maintain project management skills– Project managers can move from project to

project– It pays to hire, train, and promote skilled project

managers

5. Project team has its own identity– Project members work for the “project” not the

functional unit– This can significantly improve performance

Advantages Continued

6. Quick decisions– Authority is centralized

7. Unity of command– Each worker reports to one, and-only-

one, manager– Project has a simple structure

Advantages Continued

8. Structurally simple and flexible– Easy to implement

9. Holistic approach– Everyone on project is concerned about

project, not their functional unit

Disadvantages

1. Duplicate staffing– Each project has a full staff– This leads to overstaffing

2. 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

3. Experts falling behind in other areas– 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

4. Organizational inconsistency– Corner-cutting– “They don’t understand our problems”

5. Life of its own– Projectitis– Us versus them

Disadvantages Continued

6. Life after the project ends– Lots of uncertainty– Will there be layoffs– Rusty skills

Comments on Pure Project

Only way to do large, one-time projectsDisadvantages 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

1. The project is the focus– That remains the project manager’s

responsibility

2. The project has access to entire organization for labor and technology

– Projects draw from functional organizations as required

– This reduces duplication of resources

Advantages Continued

3. Less anxiety about the end of the project– Project members return to their functional

organizations

4. 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 Continued

5. Consistent policies– Parent organization will oversee project– Project will have closer access to parent

administration

6. Easier to balance organizational resources– Less competition for resources– Competition can be controlled by parent

organization and functional managers

Advantages Continued

7. Flexibility– 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

1. Functional units make many decisions, including technology ones

– 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

2. Projects compete for resources– 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 Continued

3. Strong matrices mirror many disadvantages of project structure

– People are assigned to, and identify with, “their” project much as in the project structure

4. 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 InternetOften 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 timeThe structure is not staticRather, it changes as the organization,

its goals, and its environment changes

Functional Form Best for…

In-depth application of a technologyLarge 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. Risk Management

2. 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. Risk management planning

2. Risk identification

3. Qualitative risk analysis

4. Quantitative risk analysis

5. Risk response planning

6. Risk monitoring and control

7. Risk management database

Risk Identification

1. List ways a project can fail

2. Evaluate severity

3. Estimate likelihood

4. Estimate the ability to detect

5. Find the risk priority number

6. 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 staffsSome 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 Continued

Some of the problems that prevent a team from performing effectively:– 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