Organisational context of PM Project Management (seminar)

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

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

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)

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

Projects in a functional structure Place in the structure –Staff (team) –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

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 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 decisions –Physically (communication, atmosphere) 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

Does the true project structure exist?

Readings Lockyer – Gordon (2005) Chapter 2

Thanks for the attention!