Download Project Organizational Structure

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
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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
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02-15
Silo Effect Found in Functional
Structures
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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