Organization: Structure and Culture

CHAPTER THREE

Student Version

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin

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Where We Are NowWhere We Are NowWhere We Are NowWhere We Are Now

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Project Management StructuresProject Management StructuresProject Management StructuresProject Management Structures

• Challenges to Organizing Projects–The uniqueness and short duration of projects relative

to ongoing longer-term organizational activities–The multidisciplinary and cross-functional nature of

projects creates authority and responsibility dilemmas.

• Choosing an Appropriate Project Management Structure–The best system balances

the needs of the project with the needs of the organization.

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Project Management StructuresProject Management StructuresProject Management StructuresProject Management Structures

• Organizing Projects: Functional organization

–Different segments of the project are delegated to respective functional units.

–Coordination is maintained through normal management channels.

–Used when

•the interest (work content) of one functional area dominates the project or

•one functional area has a dominant interest in the project’s success.

Functional OrganizationsFunctional OrganizationsFunctional OrganizationsFunctional Organizations

FIGURE 3.1

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Functional Organization of ProjectsFunctional Organization of ProjectsFunctional Organization of ProjectsFunctional Organization of Projects

•Advantages

1. No Structural Change

2. Flexibility

3. In-Depth Expertise

4. Easy Post-Project Transition

•Disadvantages

1. Lack of Focus

2. Poor Integration

3. Slow

4. Lack of Ownership

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Project Management Structures (cont’d)Project Management Structures (cont’d)Project Management Structures (cont’d)Project Management Structures (cont’d)

• Organizing Projects: Dedicated Teams

–In a projectized organization where projects are the dominant form of business, functional departments are responsible for providing support for its teams.

–Teams operate as separate units under the leadership of a full-time project manager.

Dedicated Project TeamDedicated Project TeamDedicated Project TeamDedicated Project Team

FIGURE 3.2

Project Organizational StructureProject Organizational StructureProject Organizational StructureProject Organizational Structure

FIGURE 3.3

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Project Organization: Dedicated TeamProject Organization: Dedicated TeamProject Organization: Dedicated TeamProject Organization: Dedicated Team

•Advantages

1. Simple

2. Fast

3. Cohesive

4. Cross-Functional Integration

•Disadvantages

1. Expensive

2. Internal Strife• Divisiveness between project

team and the parent company

3. Limited (in-house) Technological Expertise

4. Difficult Post-Project Transition

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Project Management Structures (cont’d)Project Management Structures (cont’d)Project Management Structures (cont’d)Project Management Structures (cont’d)

• Organizing Projects: Matrix Structure–Hybrid organizational structure (matrix) is overlaid on

the normal functional structure.•Two chains of command (functional and project)

•Project participants report simultaneously to both functional and project managers.

–Matrix structure optimizes the use of resources.•Allows for participation on multiple projects while

performing normal functional duties.

•Achieves a greater integration of expertise and project requirements.

Matrix Organization StructureMatrix Organization StructureMatrix Organization StructureMatrix Organization Structure

FIGURE 3.4

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Different Matrix FormsDifferent Matrix FormsDifferent Matrix FormsDifferent Matrix Forms

• Weak Form–The authority of the functional manager predominates

and the project manager has indirect authority.

• Balanced Form–The project manager sets the overall plan –The functional manager determines how work to be

done.

• Strong Form–The project manager has broader control.–Functional departments often act as subcontractors

to the project.

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Project Organization: Matrix FormProject Organization: Matrix FormProject Organization: Matrix FormProject Organization: Matrix Form

• Advantages (compared to functional org.)

1. Efficient

2. Strong Project Focus

3. Easier Post-Project Transition

4. Flexible

• Disadvantages

1. Dysfunctional Conflict• Predicated on tension between

functional managers and project managers,

• Due to different expertise & perspectives, resulting from conflicting agendas and accountabilities.

2. Infighting• Among project managers due to

sharing resources

3. Stressful• As it violates the unity of command

mgt. principle

4. Slower than projectized org.• In order to forge agreements across

functional groups

Division of Project Manager and Division of Project Manager and Functional Manager Responsibilities Functional Manager Responsibilities

in a Matrix Structurein a Matrix Structure

Division of Project Manager and Division of Project Manager and Functional Manager Responsibilities Functional Manager Responsibilities

in a Matrix Structurein a Matrix Structure

TABLE 3.1

Project Manager Negotiated Issues Functional Manager

What has to be done? Who will do the task? How will it be done?

When should the task be done? Where will the task be done?

How much money is available to Why will the task be done? How will the project involvementdo the task? impact normal functional activities?

How well has the total project Is the task satisfactorily How well has the functional been done? completed? input been integrated?

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Choosing the Appropriate Project Choosing the Appropriate Project Management StructureManagement Structure

Choosing the Appropriate Project Choosing the Appropriate Project Management StructureManagement Structure

• Organization (Form) Considerations–How important is project (mgt.) to the firm’s success?

• If critical, => consider projectized organization

–What percentage of core work involves projects?• More than 75% of core work involves projects => use project org.• Have both MTS & MTO in the org., => consider matrix.• Very few projects, => dedicated teams or outsourcing

–What level of critical resources (human and physical) are available?

• Somewhat available but need to share, => matrix• Not available, => outsourcing

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Choosing the Appropriate Project Choosing the Appropriate Project Management Structure (cont’d)Management Structure (cont’d)

Choosing the Appropriate Project Choosing the Appropriate Project Management Structure (cont’d)Management Structure (cont’d)

• Project Considerations1. Size of project

2. Strategic importance

3. Novelty and need for innovation

4. Need for integration (number of departments involved)

5. Environmental complexity (number of external interfaces)

6. Budget and time constraints

7. Stability of resource requirements

• Notes:– The higher the levels of these factors, the more autonomy and

authority the project manger and project team need in order to be successful

Rated Effectiveness of Different Rated Effectiveness of Different Project Structures by Type of Project Structures by Type of

ProjectProject

Rated Effectiveness of Different Rated Effectiveness of Different Project Structures by Type of Project Structures by Type of

ProjectProject

FIGURE 3.6

Source: Larson, E. W., and Gobeli, D. H., “Matrix Management: Contradictions and Insights,” California Management Review, vol. 29, no. 4 (Summer 1987), p. 137.

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Organizational CultureOrganizational CultureOrganizational CultureOrganizational Culture

• Organizational Culture Defined

–A system of shared values, beliefs, norms, and assumptions which bind people together, thereby creating shared meanings.

–The “personality” of the organization that sets it apart from other organizations.

•Provides a sense of identify to its members.

•Helps legitimize the management system of the organization.

•Clarifies and reinforces standards of behavior.

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Identifying Cultural CharacteristicsIdentifying Cultural CharacteristicsIdentifying Cultural CharacteristicsIdentifying Cultural Characteristics

• Study the physical characteristics of an organization.

• Read about the organization.

• Observe how people interact within the organization.

• Interpret stories and folklore surrounding the organization.

Key Dimensions Defining an Organization’s CultureKey Dimensions Defining an Organization’s CultureKey Dimensions Defining an Organization’s CultureKey Dimensions Defining an Organization’s Culture

FIGURE 3.7

Organizational Culture Diagnosis Organizational Culture Diagnosis WorksheetWorksheet

Organizational Culture Diagnosis Organizational Culture Diagnosis WorksheetWorksheet

FIGURE 3.8

Cultural Dimensions of an OrganizationCultural Dimensions of an OrganizationSupportive of Project ManagementSupportive of Project Management

Cultural Dimensions of an OrganizationCultural Dimensions of an OrganizationSupportive of Project ManagementSupportive of Project Management

FIGURE 3.9

Mechanisms for Sustaining Mechanisms for Sustaining Organizational CultureOrganizational Culture

Mechanisms for Sustaining Mechanisms for Sustaining Organizational CultureOrganizational Culture

FIGURE A3.1

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Key TermsKey TermsKey TermsKey Terms

Balanced matrix

Dedicated project team

Matrix

Organizational culture

Projectitis

Projectized organization

Project Office (PO)

Strong matrix

Weak matrix

Organization of Product Development Organization of Product Development Projects at ORIONProjects at ORION

Organization of Product Development Organization of Product Development Projects at ORIONProjects at ORION

FIGURE C3.1

Traditional Master Plan at ORIONTraditional Master Plan at ORIONTraditional Master Plan at ORIONTraditional Master Plan at ORION

FIGURE C3.2

Proposed Project Organization for the Proposed Project Organization for the Jaguar ProjectJaguar Project

Proposed Project Organization for the Proposed Project Organization for the Jaguar ProjectJaguar Project

FIGURE C3.3

Jaguar Master PlanJaguar Master PlanJaguar Master PlanJaguar Master Plan

FIGURE C3.4