Organisational context of PM Project Management

Organisation within the organisation Company organisation Project organisation Project activities Structure Culture Values and interests Effectiveness Efficiency

Organisational structures and projects Hierarchical functional structure Matrix structure Pure project structure

Hierarchical functional structure (linear-functional structure) Longest history Heads of specialist functions report directly to the CEO The CEO is responsible for co-ordinating the functions Strict hierarchical chain

Advantages Tight control at the top Logically represents the functions & maintains their power and prestige Reduces duplication of functional effort Concentrates functional skills Simple reporting relations High utilisation Utilisation = (realised output) / (designed capacity)

Disadvantages Over-specialisation Parochialism of key personnel Weak co-ordination between functions It stifles the development of generalist leaders Ineffecient in fast changing and diverse market environment It imposes an increasing burden on the chief executive as the rate of change increases It requires extremely detailed pre-production plans (extremely high rate of formalised work) Parochialism = being narrow in scope & considering only tose part of an issue that is connected to the function

Problems arise when… Jobs requires greater resources than a single function has. Jobs cut across functional boundaries. Chief executive is overburdened with co-ordination problems between functions. The solution: project manager(s) & project team(s) PM Office (PMO)

Projects in a functional structure Place in the structure Staff (team): where do they come from? Project manager What if the project team is not enough? Professional skills Resources of one or more functions Responsibility of the staff Project team Functional staff involved in the project

Project Management Offices Centralized units that oversee or improve the management of projects Resource centers for: Technical details offloaded from manager Expertise in project management skills Repository of lessons learned, documentation Center for project management excellence Where to place it in the organizational structure? Copyright © 2010 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 Establish standards Consults on PM practice Enforces the standards Improves the standards Resource pool – maintain and provide a cadre of skilled project professionals Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Matrix structure without projects (true matrix) Division of labor in a matrix structure 2 dimensions Responsibilities Dual reporting Biggest advantages Managing complexity Managing changing environment Greatest disadvantages High number of conflicts Low speed of decision making

Matrix organisation with projects If there are (continuously) too many projects for the functional structure One dimension of the division of labour is the project structure = A project management function is created The project management function group Separation: The staff members are organisationally disengaged from their previous positions Physically (communication, atmosphere) Double reporting: Linear Functional

Problems with the project-matrix structure Latent responsibility and loyalty It affects career Dual reporting: Confusion and conflicts on two levels Problems arise at the CEO’s level Temporary structure: uncertainty

A possible solution: strong corporate culture Shared views (and values) Different project teams Functional managers

Advantages of the project-matrix structure Rapid response to changes Better balance between time, cost and resources Independent policies and budgets for different projects Clear definition of responsibility and authority (project managers)

Disadvantages of the project-matrix structure Requires significant effort from the top management to: Define policies, procedures, authorities for the whole organisation Monitoring and controlling the balance of power between project and functional managers Ensuring the shared view on company objectives (project and functional managers)

The true project structure The usual business activity is in form of projects Frequent only in some industries Functions disappeared: skills are concentrated in project teams Reserve staff (central pool of extra resources) Project teams are not temporary

Advantages Clear project responsibilities and authorities Clear and controlled project budgets Better communication between project managers and the CEO Generalists managers are developed who can manage change Strong team loyalty and understanding Management costs are identified ? subcultures

Readings Lockyer – Gordon (2005) Chapter 2

Structure of projects

Organisation within the organisation Company organisation Project organisation Project activities Structure Culture Values and interests Effectiveness Efficiency

Project features affects its organisational form Uncertainty Uniqueness → diversity of projects Temporary existence → diversity of projects → variations of the project organisations

Elements of the project organisation Project sponsor Project manager (Project champion) Project management team Project team Stakeholders

Stakeholders 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 External Stakeholders Clients Competitors Suppliers Environmental, political, consumer, and other intervenor groups

The project manager Appointed as early as possible If not he/she will be committed to the former decisions. If this problem exists, he/she must record and report it immediately and suggest modifications if possible. Main task: team management Additional source of difficulties: consortium project.

Desirable skills Technological understanding Understanding of project economics Personnel management Incentive systems Interviewing techniques Personal leadership Team building and motivation Industrial economics and relations Legal knowledge according to the project Non-learnable skills and abilities: being a leader, honesty, integrity, vision etc. + OPTIMISM Marketing (customer’s view) System management Planning and control Financial skills Competence in procurement Communication skills

The project team Project team ≠ whole staff working on the project Size depends on: Project scope and size Complexity Needed speed Assistance of functional specialists: two supervisors divided loyalty multiple responsibility (who to turn to) Integration of new members Create a creative, innovative, problem-solving atmosphere Maintain a monitoring and reporting system (formal and informal)

Readings Lockyer – Gordon (2005) Chapter 3

Thanks for the attention!