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The Organizational Context: Strategy, Structure, and Culture Copyright © 2013 Pearson Education 02-01 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. Copyright © 2013 Pearson Education 02-02 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. Copyright © 2013 Pearson Education 02-03 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 Copyright © 2013 Pearson Education 02-04 Projects Reflect Strategy Projects are stepping stones of corporate strategy The firm’s strategic development is a driving force behind project development Some examples include: 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. Copyright © 2013 Pearson Education 02-05 Relationship of Strategic Elements Mission Objectives Strategy Copyright © 2013 Pearson Education Goals Programs Figure 2.2 02-06 FIGURE 2.3 Illustrating Alignment Between Strategic Elements and Projects Mission “… the business of supplying system components to a worldwide nonresidential air conditioner market.” Objectives a. b. c. Strategies a. b. c. Existing products in existing markets with image maintenance Existing products in new markets (foreign, restricted) New products in existing markets (significantly improve image) 14.5% ROI Non-decreasing dividends Socially-conscious image Goals Programs 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 1. Product Cost Improvement Program (PCIP) 2. Image Assessment Program (IAP) 3. Product Redesign Program (PRP) 4. Product Development Program (PDP) Copyright © 2013 Pearson Education 02-07 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 Copyright © 2013 Pearson Education External Stakeholders • Clients • Competitors • Suppliers • Environmental, political, consumer, and other intervener groups 02-08 Project Stakeholder Relationships Figure 2.4 Copyright © 2013 Pearson Education 02-09 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 Copyright © 2013 Pearson Education 02-10 Project Stakeholder Management Cycle 1. Identify Stakeholders 7. Implement stakeholder management strategy 2. Gather information on stakeholders 6. Predict stakeholder behavior 3. Identify stakeholders’ mission 5. Identify stakeholder strategy Copyright © 2013 Pearson Education 4. Determine stakeholder strengths and weaknesses Figure 2.5 02-11 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 Copyright © 2013 Pearson Education 02-12 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 Copyright © 2013 Pearson Education 02-13 Functional Organizational Structure Copyright © 2013 Pearson Education Figure 2.6 02-14 Functional Structures Strengths Weaknesses 1. Firm’s design maintained 1. Functional siloing 2. Fosters development of in-depth knowledge 2. Lack of customer focus 3. Standard career paths 3. Projects may take longer 4. Project team members remain connected with their functional group 4. Projects may be suboptimized Copyright © 2013 Pearson Education 02-15 Silo Effect Found in Functional Structures Copyright © 2013 Pearson Education Figure 2.7 02-16 Project Organizational Structure Figure 2.8 Copyright © 2013 Pearson Education 02-17 Project Structures Strengths 1. Project manager sole authority Weaknesses 1. Expensive to set up and maintain teams 2. Improved communication 2. Chance of loyalty to the project rather than the firm 3. Effective decision-making 4. Creation of project management experts 3. No pool of specific knowledge 5. Rapid response 4. Workers unassigned at project end Copyright © 2013 Pearson Education 02-18 Matrix Organizational Structure Figure 2.9 Copyright © 2013 Pearson Education 02-19 Matrix Structures Strengths Weaknesses 1. Suited to dynamic 1. Dual hierarchies mean environments two bosses 2. Equal emphasis on 2. Negotiation required in project management and order to share resources functional efficiency 3. Workers caught between 3. Promotes coordination competing project & across functional units functional demands 4. Maximizes scarce resources Copyright © 2013 Pearson Education 02-20 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 Copyright © 2013 Pearson Education 02-21 Manager’s Perceptions of Effectiveness of Various Structures on Project Success Figure 2.10 Copyright © 2013 Pearson Education 02-22 Project Management Offices Centralized units that oversee or improve the management of projects Resource centers for: Technical details Expertise Repository Center for excellence Copyright © 2013 Pearson Education 02-23 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 Copyright © 2013 Pearson Education 02-24 PMO Control Tower Performs four functions: Establishes standards for managing projects Consults on how to follow these standards Enforces the standards Improves the standards Copyright © 2013 Pearson Education 02-25 Alternative Levels of Project Offices Figure 2.11 Copyright © 2013 Pearson Education 02-26 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 Copyright © 2013 Pearson Education 02-27 Key Factors That Affect Culture Development Technology Environment Geographical location Reward systems Rules and procedures Key organizational members Critical incidents Copyright © 2013 Pearson Education 02-28 Culture Affects Project Management Departmental interaction Employee commitment to goals Project planning Performance evaluation Copyright © 2013 Pearson Education 02-29 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. Copyright © 2013 Pearson Education 02-30 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. Copyright © 2013 Pearson Education 02-31 02-32