1. The Organizational Context: Strategy, Structure, and Culture
Chapter 2

2. Learning Goals
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.

3. Learning Goals
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.

4. 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 business opportunities
Making cross functional decisions
Achieving objectives

5. Projects Reflect Strategy
Projects are stepping stones of corporate strategy.
The firm’s strategic vision 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.
change strategic direction or product portfolio configuration
to create new product lines.
improve cross-organizational communication & efficiency
to install an enterprise IT system.

6. Relationship of Strategic Elements
Mission
Objectives
Goals
Programs
Strategy
Review Figure 2.2 page 36 for an example

7. Stakeholder Management
Stakeholders are 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
Accounting
Other functional managers
Project team members
External Stakeholders
Clients
Competitors
Suppliers
Environmental, political, consumer, and other intervenor groups

8. Stakeholder Register Used to record stakeholders of the project
Useful to build communication plans

9. Stakeholder Analysis
Will inform you of the interests and influence of those involved in a project change.
Should show each person or group’s interest in the change, where interests converge, the level of influence, and who will have a voice in new developments.
Can be beneficial at the beginning of new projects and when projects change direction.
Displayed in a stakeholder analysis grid
See World Wildlife Foundation example at:

10. Stakeholder Analysis Grid
Begin by making a list of anyone who has interest and influence over your project. i.e. investors, customers, general public, etc.
Use this list to weigh the interest and influence of each person.
Create the Matrix: (example - four levels per category)
Draw a box divided into four equal quadrants.
Divide each quadrant into fourths again. You should now have sixteen boxes.
Label down the left side starting at the top with “Significant Importance,” “Some Importance,” “Little Importance,” “No Importance.”
Label across the top starting at the left with “Significant influence,” “Some influence,” “Little influence,” “No influence.”
Organize your stakeholders according to importance and influence.
When you are done, your matrix will be a graphic display of who holds the most importance and influence (the group in the upper left-hand corner) and who holds the least amount of influence and importance (the group in the lower right-hand corner).

11. Project Stakeholder Relationships
Manager
Other Functional Managers
External Environment
Project Team
Accountant
Top Management
Parent Organization
Clients

12. Managing Stakeholders
Assess the environment - Is this low key or significant?
Identify the goals of the principal actors - What true goals do the stakeholders have?
Assess your own capabilities - What are your strengths and weaknesses?
Define the problem
Develop solutions - Try to cover as many stakeholder’s concerns as possible (80%).
Test and refine the solutions – it is an iterative process.
The goal is to formulate strategies to identify and manage for positive results.

13. Project Stakeholder Management Cycle
Project Management Team
Identify Stakeholders
Gather Information on Stakeholders
Determine Stakeholder Strengths & Weaknesses
Implement Stakeholder Management Strategy
Identify Stakeholder’s Mission
Predict Stakeholder Behavior
Identify Stakeholder Strategy

14. Organizational Structure
Consists of three key elements:
Designates formal reporting relationships
including the number of levels in the hierarchy
span of control of management
Groupings of:
individuals into departments
departments into the total organization
Functional? Geographic? Product type? Project based?
Design of systems to
ensure effective communication
coordination
integration of efforts across departments

15. Forms of Organization Structure
Functional organizations – groups people performing similar activities into departments
Project organizations – groups people into project teams on temporary assignments
Matrix organizations – creates a dual hierarchy in which functions and projects have equal prominence

16. A Functional Organizational Structure
Board of Directors
Board of Directors
Board of Directors
Silos of work
Chief Executive
Chief Executive
Chief Executive
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Vice President of
Marketing
Marketing
Marketing
Production
Production
Production
Production
Finance
Finance
Finance
Research
Research
Research
New Product
New Product
Market Research
Market Research
Development
Development
Accounting
Accounting
Logistics
Logistics
Logistics
Services
Services
Sales
Sales
Testing
Testing
Testing
Outsourcing
Outsourcing
Outsourcing
Contracting
Contracting
After Market
After Market
After Market
Research Labs
Research Labs
Support
Support
Support
Distribution
Distribution
Distribution
Investments
Investments
Quality
Quality
Advertising
Advertising
Advertising
Warehousing
Warehousing
Warehousing
Employee
Employee
Benefits
Benefits
Manufacturing
Manufacturing
Manufacturing

17. Functional Structure for Project Management
Strengths
Weaknesses
Fosters development of in-depth knowledge
Projects are developed within the basic functional structure – no change to firms functional design
Project team members remain connected with their functional group
Standard career paths
Functional siloing – no collaboration
Lack of customer focus -self-focusing
Projects may take longer as tasked are routed from one department to another
Projects may be sub-optimized

18. A Project Organization Structure

19. Project Structure for Project Management
Strengths
Weaknesses
Project manager sole authority
Improved communication across the organization
Rapid decision-making
Promotes the creation of project management experts
Flexible and rapid response
Expensive to set up and maintain teams
Chance of loyalty to the project rather than the firm
No pool of specific knowledge
Workers unassigned at project end

20. A Matrix Organization Structure
Seeks a balance between the functional and project organizations

21. Matrix Structures for Project Management
Strengths
Weaknesses
Suited to dynamic environments
Equal emphasis on project management and functional efficiency
Promotes coordination across functional units
Maximizes scarce resources
Dual hierarchies mean two bosses
Negotiation required in order to share resources
Workers caught between competing project & functional demands

22. Organizational Structure Influences on Projects
-PMBok 2004

23. 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

24. Project Management Offices (PMO)
Centralized units that oversee or improve the management of projects
Resource centers for:
Support with technical details
Expertise
Central repository for lessons learned
Center for excellence

25. Forms of PMOs Weather station Resource pool Control tower
used only to monitor and track projects
Resource pool
maintain and provide a group of skilled project professionals
Control tower
project management is a skill to be protected and supported
focuses on establishing standards, consulting/enforcing, and improving project management skills

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.
Key factors that affect culture development
Technology level
Business environment
Geographical location
Reward systems
Rules and procedures
Key organizational members
Critical incidents
Have you heard of “The Toyota Way?”

27. Key Factors That Affect Culture Development
Technology
Environment
Geographical location
Reward systems
Rules and procedures
Key organizational members
Critical incidents

28. Culture Affects Project Management Success
Departmental interaction
Employee commitment to goals
Project planning
Performance evaluation
Attitudes

29. TRADITION Start with a cage containing five apes.
In the cage, hang a banana on a string and put stairs under it. Before long, an ape will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the apes with cold water. After a while, another ape makes an attempt with the same result - all the apes are sprayed with cold water. This continues through several more attempts.
Pretty soon, when another ape tries to climb the stairs, the other apes all try to prevent it. Now, turn off the cold water. Remove one ape from the cage and replace it with a new one. The new ape sees the banana and wants to climb the stairs. To his horror, all of the other apes attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.
Next, remove another of the original five apes and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm. Again, replace a third original ape with a new one. The new one makes it to the stairs and is attacked as well. Two of the four apes that beat him have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest ape. 
After replacing the fourth and fifth original apes, all the apes, which have been sprayed with cold water, have been replaced. Nevertheless, no ape ever again approaches the stairs. Why not? Because that's the way they've always done it and that's the way it's always been around here.
And that's how company policy begins....

30. Chapter 2 Review and Discussion
The chapter suggests that a definition of strategic management includes four components:
Developing a strategic vision and sense of mission
Formulating, implementing, and evaluating
Cross-functional decisions
Achieving its objectives
Discuss how each of these four elements are important to understanding the challenge of strategic project management. How do projects serve to allow an organization to realize each of these three components of strategic management?
Discuss the difference between organizational objectives and strategies.
Your company is planning to construct a nuclear power plant in Oregon. Why is stakeholder analysis important as a precondition of the decision whether or not to follow through with such a plan?
Consider a medium-sized company that has decided to begin using project management in a wide variety of its operations. As part of their operational shift, they are going to adopt a project management office (PMO) somewhere within their organization. Make an argument for the type of PMO they should be adopting (weather station, control tower, or resource pool). What are some of the key decision criteria that will help them determine which model makes the most sense?

31. Chapter 2 Review and Discussion
What are some of the key organizational elements that can affect the development and maintenance of a supportive organizational culture? As a consultant, what advice would you give to a functional organization that was seeking to move from an old, adversarial culture, where the various departments actively resisted helping each other, to one that encourages “project thinking” and cross-functional cooperation?
You are a member of the senior management staff at XYZ Corporation. You have historically been using a functional structure set up with five departments: finance, human resources, marketing, production, and engineering.
Create a drawing of your simplified functional structure, identifying the five departments.
Assume you have decided to move to a project structure. What might be some of the environmental pressures that would contribute to your belief that it is necessary to alter the structure?
With the project structure, you have four projects currently ongoing: stereo equipment, instrumentation and testing equipment, optical scanners, and defense communications. Draw the new structure that creates these four projects as part of the organizational chart.

32. In-class exercise: “Good Answers” is Growing
Your task:
In your groups, prepare a two-minute briefing for the class to identify the project and what you see as the key elements your project will have to address. Include a discussion of aspects of Good Answers’ operations that would not be part of the project but rather are part of Good Answers’ general procedures.
Specifically, address the following questions:
What is the project in this scenario?
Who are the stakeholders? Create a stakeholder matrix.
What are some of the main issues that you will need to address in this project?