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The Organizational Context:Strategy, Structure, and
Culture
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Chapter 2 Learning ObjectivesAfter 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.
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Chapter 2 Learning ObjectivesAfter 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.
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Projects and Organizational StrategyStrategic 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
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Projects Reflect Strategy
A firm wishing to… …may have a project
redevelop products or processes to 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 forcebehind project development
Some examples include:
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Relationship of Strategic Elements
Mission
Objectives
Strategy Goals Programs
Figure 2.202-06
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“… 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 HallCopyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Stakeholder ManagementStakeholders 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
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Project Stakeholder Relationships
Figure 2.4
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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
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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
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Organizational StructureConsists 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
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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
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Functional Organizational Structure
02-14Figure 2.6
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Functional Structures
Strengths Weaknesses
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 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Silo Effect Found in Functional Structures
02-16Figure 2.7
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Project Organizational Structure
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Figure 2.8
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Project StructuresStrengths Weaknesses
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 end02-18
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Matrix Organizational Structure
02-19
Figure 2.9
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Matrix Structures
Strengths Weaknesses
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
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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
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Manager’s Perceptions of Effectiveness of Various Structures on Project Success
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Figure 2.10
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Project Management OfficesCentralized units that oversee or improve the
management of projects
Resource centers for:
Technical details
Expertise
Repository
Center for excellence
02-23 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
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PMO Control Tower
Performs four functions:
Establishes standards for managing projects
Consults on how to follow these standards
Enforces the standards
Improves the standards
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Alternative Levels of Project Offices
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Figure 2.11
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Organizational CultureThe 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 membersof the company.
Unwritten
Rules of behavior
Held by some subset of the organization
Taught to all new members
02-27 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
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Culture Affects Project Management
Departmental interaction
Employee commitment to goals
Project planning
Performance evaluation
02-29 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
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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.
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