Chapter 5

The Role of Projects

in the Organization
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 Overview
 This chapter discusses the issues concerning
the way projects are organized in relation to
the organization of the parent firm. Recently,
many firms have adopted the “enterprise
project management” form of organization,
a.k.a “managing organization by projects”,
“project-oriented firms” etc. This is in
response to the same factors that have caused
the rapid growth in the use of projects
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themselves.
 Reasons for Rapid Growth of
Project-Oriented Organizations
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

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Switching to Project Environment
 Is difficult and time consuming
 Requires the full commitment of upper
management
 Generally causes a lot of “concern” among
employees
 As a result, organizations may have multiple
structures

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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

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 Organizational structure
Tall Organization
President

Flat Organization
President

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Traditional Forms of Organization
1. Functional
2. Pure project
3. Matrix
4. Mixed

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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

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 The Functional Organization
Project
Chief Executive
Coordination

Functional Functional Functional

Manager A Manager B Manager C

Staff Staff Staff

Staff Staff Staff

Staff Staff Staff

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 Example of a Typical Functional Organization
Corporation X
Project Coordination

Human Finance &

Resources Administration

Marketing Engineering Manufacturing Procurement

Electronics Software Mechanical Receiving

Design Purchasing
Engineering Engineering Engineering & Inspection

Customer Domestic International Fabrica- Production

Assembly Testing
Service Sales Sales tion Scheduling

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 Corporation X

Human Finance &

Resources Administration

Marketing Engineering Manufacturing Procurement

Project Manager

Project Team

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 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

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 Advantages Continued

3. Specialists can share knowledge and

experience
4. Functional units provide
technological/knowledge continuity
 Also provide continuity of policies and
procedures

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 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

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 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 client
2. Functional units not focused on project
 Function unit sees success in its area as most important
 Project seen as secondary, or worse, an interruption

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 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

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 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

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 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

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Pure Project Organization

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 The Projecticized Organization
Project Project
Chief Executive
Coordination Coordination

Project Project Project

Manager Manager Manager

Staff Staff Staff

Staff Staff Staff

Staff Staff Staff

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 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

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 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
3. Shorter communications lines

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 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

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 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

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 Advantages Continued

8. Structurally simple and flexible

 Easy to implement
9. Holistic approach
 Everyone on project is concerned about project,
not their functional unit

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 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

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 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

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 Disadvantages Continued

4. Organizational inconsistency
 Corner-cutting
5. Life of its own
 Projectitis
 Us versus them

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 Disadvantages Continued

6. Life after the project ends

 Lots of uncertainty
 Will there be layoffs
 Rusty skills

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The Matrix Organization

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 The Project Matrix Orgaization Form
General Manager

Lead Project Functional Functional Functional

Manager Manager A Manager B Manager C

Project
Manager 1 FI FI FI

Project
FI FI FI
Manager 2

Project FI FI FI
Manager 3

Project FI FI FI
Manager 4
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 Example of a Project Matrix Organization
General Manager

Lead Project
ENGINEERING MANUFACTURING MARKETING
Manager

PA E1 E2 E3 MA1 MA2 MA3 M1 M2 M3

PM X 1 2 1 3 2 1

PM Y 1 3 1 4 0,5 1

PM Z 0,5 1 2 0,5

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 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

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 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

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 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

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 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

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 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

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 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

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 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

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 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

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 Virtual Projects
 Project team crosses time, space,
organizational, or cultural boundaries
 Facilitated by the Internet
 Often organized as a matrix

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 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

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Org. Structure Matrix
Project Functional Weak Balanced Strong Projecti-
Characteristics cized

Project Little or Limited Low to Moderate to High to

Manager’s None Moderate High Almost Total
Authority
Resource Little or Limited Low to Low to High to
Availability None Moderate Moderate Almost Total

Who Controls Functional Functional Mixed Project Project

Project Budget Manager Manager Manager Manager

Project Part-Time Part-Time Full-Time Full-Time Full-Time

Manager’s Role

Project Part-Time Part-Time Part-Time Full-Time Full-Time

Management
Administrative
Staff

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Choosing an Organizational 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

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

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 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

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 Matrix Form Best for…
 Projects that require inputs from several
functional areas
 Projects that use technology from several
functional areas

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 Self Study
 Read
 Choosing an Organizational Form
 project management office
 tasks of project management office

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 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

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 The Project Team
 Different project need different staffs
 Some common members include
 Engineer
 Contract administrator
 Controller
 Should report to project manager

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