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Department of Business Management

Institut Teknologi Sepuluh Nopember

(Manajemen Proyek TB 141207)

3rd week course material:

Project Management Structures & Organization Culture

Dr. Yani Rahmawati

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Main contents

A. Understanding background
B. Introduction to organization
C. Project management structure
D. Organizational culture
E. Implications of organizational culture for organizing projects

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A. Understanding background
Why understanding the 1. Understanding the environment of parent organization is
organization structure important in order to implement the selected project as
and culture is important well as the project management practices.
in PM implementation? 2. Information about parent organization will be useful for
planning & executing projects. Particularly in allocating
resources and making decision.
3. Two main essential terms that related with the
organizations environment are the structures and the
4. Organization structure tends to describe the powers
form, chain of command, and decision making flows .
The culture tend to reflect the personality of the
5. Each organization is unique, which has a different
structures as well as cultures.
6. Both aspects are needed to be recognized to prevent any
problems and to gain any benefits from them.

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B. Introduction to organization
1. Terminology 1. Organization defined as groups of people who must
coordinate their activities in order to meet organizatio-
2. Organizational nal objectives.
2. Organization requires strong communication and clear
3. Six elements: understanding of relationship & interdependencies
a. Work specialization among people.
b.Departmentalization 3. NOTE: There is no such thing as a good or bad
c. Chain of command organizational structure; there are only appropriate or
inappropriate ones
d.Span of control
e. Centralization &
f. Formalization

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B. Introduction to organization
1. Terminology 1. Organizational structure defines how job tasks are
formally divided, grouped, and coordinated.
2. Organizational
structure 2. Restructured organization often found to meet the envi-
ronmental requirements, in which it can change the role of
3. Six elements: individuals in the formal and the informal organization.
a. Work specialization 3. In realizing effective organization, formal channels must
b.Departmentalization be developed so that individual has clear description of the
c. Chain of command authority, responsibility, and accountability necessary for
the work to proceed.
d.Span of control
e. Centralization & Terms Definition
Authority power granted to individuals (possibly by their
position) so that they can make final decisions
f. Formalization Responsibility obligation incurred by individuals in their roles at for-
mal organization to effectively perform assignments
Accountability being answerable for the satisfactory completion of
a specific assignment
Taken from Kerzner(2009), pp. 94-95

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B. Introduction to organization
1. Terminology Six key elements to design the organizations structure are
built from these key design and answer.
2. Organizational
structure No Key question Answer is provided by
3. Six elements: 1 To what degree are activities Work specialization
a. Work specialization subdivided into separate jobs?

b.Departmentalization 2 On what basis will jobs be Departmentalization

grouped together?
c. Chain of command
3 To whom do individuals and Chain of command
d.Span of control groups report?
e. Centralization & 4 How many individuals can a Span of control
manager efficiently and
decentralization effectively direct?
f. Formalization 5 Where does decision-making Centralization and
authority lie? decentralization
6 To what degree will there be rules Formalization
and regulations to direct
employees and managers?
Taken from Robbins&Judge(2013), pp. 481

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B. Introduction to organization
1. Terminology 1. Work specialization a.k.a. division of labors is the degree
to which tasks in an organization are subdivided into
2. Organizational separate jobs.
2. The essence of work specialization is to divide a job into a
3. Six elements: number of steps, each completed by a separate individual.
a. Work specialization In essence, individuals specialize in doing part of an
b.Departmentalization activity rather than the entirety.
c. Chain of command
d.Span of control I. THE IMPLEMENTATION IN LATE 1940
e. Centralization & Most manufacturing jobs featured high work specializa-
Specialization is efficient, because not all employees have
f. Formalization similar skills.
Easier and less costly to find and train workers to do spe-
cific and repetitive tasks, especially in highly sophisticated
and complex operations.

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B. Introduction to organization
1. Terminology
2. Organizational
3. Six elements:
a. Work specialization
Taken from Robbins&Judge(2013),
b.Departmentalization pp. 482

c. Chain of command
Human diseconomies from specialization was changing.
d.Span of control It began to surface in the form of boredom, fatigue, stress,
e. Centralization & low productivity, poor quality, increased absenteeism, and
high turnover.
Managers could increase productivity by enlarging the
f. Formalization scope of job activities.
Giving employees variety of activities to do, allowing
them to do whole and complete job, and putting them
into teams with interchangeable skills. This approach
often achieved significantly higher output, with increased
employee satisfaction.

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B. Introduction to organization
1. Terminology
2. Organizational Organizations have facilitated a new trend in micro-
structure specialization. Practically, the jobs is divided into
3. Six elements: extremely small pieces of programming, data processing,
or evaluation tasks. Those specific jobs are delegated to a
a. Work specialization
global network of individuals by a program manager who
b.Departmentalization then assembles the results.
c. Chain of command The bottom line is specific jobs are more likely to be
d.Span of control subordinated to other specialists (individuals) nowadays.
e. Centralization &
f. Formalization

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B. Introduction to organization
1. Terminology 1. Once jobs have been divided through work specializa-
tion, they must be grouped so common tasks can be
2. Organizational coordinated. The basis by which jobs are grouped is
structure called departmentalization.
3. Six elements: 2. Departmentalization basis: by functions (I), by products/
a. Work specialization services (II), by geography (III), or by customer (IV).
c. Chain of command
d.Span of control 1. Is the most popular ways to group activities. The major
advantage of this type is efficiencies .
e. Centralization &
2. Examples:
decentralization Manufacturing manager might organize a plant into
f. Formalization engineering, accounting, manufacturing, personnel, and
supply specialists departments.
A hospital might have departments devoted to research,
surgery, intensive care, accounting, etc.
Professional football franchise has departments of
player personnel, ticket sales, travel & accommodations

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B. Introduction to organization
2. Organizational 1. The major advantage is to increase accountability for
structure performance, because all activities related to a specific
product or service are under the direction of a single
3. Six elements: manager.
a. Work specialization 2. Examples:
b.Departmentalization Procter & Gamble (P&G) places each major product
c. Chain of command such as Tide, Pampers, Charmin, and Pringlesunder an
executive who has complete global responsibility.
d.Span of control
e. Centralization &
f. Formalization

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B. Introduction to organization
2. Organizational 1. The major advantage is to increase accountability for
structure performance, because all activities related to a specific
product or service are under the direction of a single
3. Six elements: manager.
a. Work specialization 2. Examples:
b.Departmentalization Fast food chain McDonnalds has been organized by
c. Chain of command product division
d.Span of control
e. Centralization &
f. Formalization ign

Fast Food Product Restaurant Supplies Beverages

(core business) (Tableware) (unbranded drinks mixed)

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B. Introduction to organization
2. Organizational 1. When a firm is departmentalized on the basis of geogra-
structure phy/territory, the sales function, for instance, may have
western, southern, midwestern, and eastern regions. It
3. Six elements: has departments that are organized around geography.
a. Work specialization 2. This form is valuable when an organizations customers
b.Departmentalization are scattered over a large geographic area and have
c. Chain of command similar needs based on their location.
d.Span of control 3. Examples:
CocaCola Bottling divides its market division in
e. Centralization & Indonesia by area.
f. Formalization

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B. Introduction to organization
2. Organizational 1. The purpose of this departmentalization is to accommo-
structure date and facilitate particular customers in order to
better understand customers and give prompt respond
3. Six elements: to their needs.
a. Work specialization 2. Examples: Microsoft
b.Departmentalization Microsoft is organized by four customer segments:
c. Chain of command consumers, software developers, small businesses, and
large corporations.
d.Span of control Products and services the company designs for
e. Centralization & consumers include Bing, Windows, Windows Phone 7,
decentralization Xbox 360, and Microsoft retail stores, which give the
company direct contact with consumers.
f. Formalization

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B. Introduction to organization
1. Terminology 1. The chain of command is an unbroken line of authority
that extends from the top of the organization to the
2. Organizational lowest echelon and clarifies who reports to whom.
2. Authority & unity of command is essential to be
3. Six elements: concerned in this element.
a. Work specialization 3. Authority refers to the intrinsic rights in a managerial
b.Departmentalization position to give orders and expect them to be obeyed.
c. Chain of command To facilitate coordination, each managerial position is
given a place in the chain of command, and each
d.Span of control manager is given a degree of authority in order to meet
e. Centralization & his or her responsibilities.
decentralization 4. The principle of unity of command helps preserve the
f. Formalization concept of an unbroken line of authority. It says a person
should have one and only one superior to whom he or
she is directly responsible. If the unity of command is
broken, an employee might have to deal with
conflicting demands or priorities from several superiors.

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B. Introduction to organization
1. Terminology
Supervisors &
2. Organizational team leaders
Workers &
3. Six elements: Employees

a. Work specialization
c. Chain of command Flat Hierarchy
d.Span of control
e. Centralization & CEO
f. Formalization management

Supervisors &
team leaders

Workers &

Tall Hierarchy
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B. Introduction to organization
1. Terminology 1. Span of control is the number of subordinates a
manager can efficiently and effectively direct.
2. Organizational
structure 2. Span of control is important because it largely
determines the number of levels and managers an
3. Six elements: organization has. The wider/larger span, the more
a. Work specialization efficient organization.
b.Departmentalization 3. Narrow spans have three major weaknesses. First, theyre
c. Chain of command expensive because they add levels of management.
Second, they make vertical communication in the
d.Span of control organization more complex. The added levels of
e. Centralization & hierarchy slow down decision making and tend to isolate
decentralization upper management. Third, narrow spans encourage
overly tight supervision and discourage employee
f. Formalization autonomy.
4. The trend in recent years has been toward wider spans
of control. Theyre consistent with firms efforts to
reduce costs, cut overhead, speed decision making,
increase flexibility, get closer to customers, and
empower employees.
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B. Introduction to organization
1. Terminology Example:
2. Organizational Assume two organizations each have about 4,100 operative-level
employees. One has a uniform span of four and the other a span of
structure eight. As Exhibit 15-3 illustrates, the wider span will have two fewer
3. Six elements: levels and approximately 800 fewer managers. If the average manager
makes $50,000 a year, the wider span will save $40 million a year in
a. Work specialization management salaries! Obviously, wider spans are more efficient in
b.Departmentalization terms of cost. However, at some point when supervisors no longer have
time to provide the necessary leadership and support, they reduce
c. Chain of command effectiveness and employee performance suffers.
d.Span of control
e. Centralization &
f. Formalization

Taken from Robbins&Judge(2013), pp. 484

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B. Introduction to organization
1. Terminology 1. Centralization refers to the degree to which decision
making is concentrated at a single point in the
2. Organizational organization.
2. In centralized organizations, top managers make all the
3. Six elements: decisions, and lower-level managers carry out their
a. Work specialization directives.
b.Departmentalization 3. In organizations at the other extreme, decentralized
c. Chain of command decision making is pushed down to the managers closest
to the action.
d.Span of control
4. The concept of centralization includes only formal
e. Centralization & authoritythat is, the rights inherent in a position.
decentralization 5. A decentralized organization can act more quickly to
f. Formalization solve problems, more people provide input into
decisions, and employees are less likely to feel alienated
from those who make decisions that affect their work

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Centralized-Decentralized Structures

Good for Suits Good for Suits creative For

strict control company large & technology companies
& formal with many corporations companies in that rely on
relationships, global offices with complex which innovation &
as in military or product projects in everyone is are customer
lines different online focused

CEO CEO Divisional & Core Staff self-

Coordinates Coordinates functional company coordinate
& each managers collaborates
division is coordinate with virtual
responsible community

Adopted from:
Palffy et al (2015),

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B. Introduction to organization
1. Terminology 1. Formalization refers to the degree to which jobs within
the organization are standardized.
2. Organizational
structure 2. If a job is highly formalized, the incumbent has a minimal
amount of judgment over what to do and when and
3. Six elements: how to do it.
a. Work specialization 3. Employees can be expected always to handle the same
b.Departmentalization input in exactly the same way, resulting in a consistent
c. Chain of command and uniform output.
d.Span of control 4. Where formalization is low, job behaviors are relatively
unprogrammed, and employees have a great deal of
e. Centralization & freedom to exercise discretion in their work.
decentralization 5. The degree of formalization can vary widely between and
f. Formalization within organizations.

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C. Project management structure
1. Functional Organizing Project within Functional Organization
1. Once management decides to implement project, the
2. Dedicated team
different segments of the project are delegated to the
3. Matrix arrangement respective functional units with each unit responsible for
completing its segment of the project.
2. Coordination is maintained through normal management
3. The functional organization is also commonly used when,
given the nature of the project, one functional area plays
dominant role in completing the project or has dominant
interest in the success of project. High ranking manager
in that area is given the responsibility of coordinating
the project.
4. Most of project work would be done within the specified
department and coordination with other departments
would occur through normal channels.

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C. Project management structure
1. Functional Organizing Project within Functional Organization
Example: Organizing project in Delta Manufacturing Inc
2. Dedicated team Project To differentiate product: offers special design tools
3. Matrix arrangement for left-handed individual

The project is coordinate by the President.

Job is divided into special tasks and then
distributed to available departments.
Taken from Larson&Gray (2014), pp. 68-69

Estimate demand Produce tools in

& price, identify accordance with new
distribution outlets design & specification

specification for
left-handed tools

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C. Project management structure
1. Functional Organizing Project within Functional Organization
organization ADVANTAGES
2. Dedicated team No change
Projects are completed within basic functional structure
3. Matrix arrangement
of parent organization
No radical change in organization design & operation
Maximum flexibility of staff usage
Easy to organize temporary works for the employees
Easy to swift employees among different projects
In-depth expertise
Easy to solve crucial aspects of narrow scope projects by
assigning proper functional units
Easy post-project transition
Easy to maintain normal career paths. Although specia-
lists contribute to projects, they still can focus on their
professional growth & advances because they are
assigned in special units.

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C. Project management structure
1. Functional Organizing Project within Functional Organization
organization DISADVANTAGES
2. Dedicated team Lack of focus
Diverse priority of responsibilities between units caused
3. Matrix arrangement
difficulties in finishing tasks, since some units have to
wait other units to be able to do their tasks.
Poor integration
Specialists tend to concern their priority tasks only. They
do the tasks as assigned, and not for the best of project.
Generally takes longer to complete project.
Project information & decisions have to be circulated
through normal management channel.
Lack of horizontal & direct communication produce
Lack of ownership
Weak motivation appeared as caused of unclear distinc-
tions between the works of operational & projects.

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C. Project management structure
1. Functional Organizing Project as Dedicated Team
1. Operate as separate units from parent organization.
2. Dedicated team
2. Usually a full-time project manager is designated to pull
3. Matrix arrangement together a core group of specialists.
3. Project manager can recruits necessary personnel from
within and outside company or parent organization.
4. The team is physically separated from parent organiza-
tion and given marching orders to complete the project.
5. Clear border between team and parent organization.
6. In some cases, parent organization maintains tight
restriction to control. And in other case, firms grant pro-
ect manager maximum freedom to get the projects goal.
7. Not all projects are dedicated project teams, personnel
can work part-time on several project.

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C. Project management structure
1. Functional Organizing Project as Dedicated Team
Example: Organizing project in Zeus Electronic
2. Dedicated team
3. Matrix arrangement

Project team is separated

from the parent

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C. Project management structure
1. Functional Organizing Project as Dedicated Team
1. Project can also plays dominant to organization, for
2. Dedicated team
example the construction firm.
3. Matrix arrangement 2. Entire organization is designed to support project teams.

3. Organization consists of independent

teams working on specific project.
Main role: generating new Maintaining,
business that will lead to more recruiting, and
projects training employees 4. Main responsibility of traditional
functional departments is to assist
and support project teams.
5. This kind of organization is a.k.a.
Projectized Organization


ORGANIZATION structure ProjectManagement/MB-ITS/YRahmawati/2017 28
C. Project management structure
1. Functional Organizing Project as Dedicated Team
organization ADVANTAGES
2. Dedicated team Simple
Functional organization unites with project team, in
3. Matrix arrangement
which both are operating independently
Projects are done quickly because the team has
undistracted works. This form also causes quick responses
since most decisions are made within team.
High level motivation & cohesiveness often emerges.
Participants share common goal and personal
responsibility toward project as well as team.
Cross-functional integration
Diversity (specialists/experts) are needed to deliver
Participants work closely together and become
committed to optimize project.

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C. Project management structure
1. Functional Organizing Project as Dedicated Team
organization DISADVANTAGES
2. Dedicated team Expensive
The need to create new management position
3. Matrix arrangement
Resources are assigned on full-time basis
The appearance of duplication of effort across projects
Internal strive
Conflicts may appear and cause projects outcomes as
well as operations by the time the individuals back into
their functional units
Limited technological expertise
High demand in technology, where limited technological
expertise makes individuals find help to others in their
functional division
Difficult post-project transition
Individuals transition to original functional department is
difficult due to their prolonged absence and the need to
catch up with their recent development.

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C. Project management structure
1. Functional Organizing Project within Matrix Arrangement
1. Matrix management is hybrid organizational form in
2. Dedicated team
which a horizontal project management structure is
3. Matrix arrangement overlaid on the normal functional hierarchy.
2. Two chains of command: along functional lines and along
project lines.
3. Project participants report simultaneously to both
functional and project managers.
4. Matrix can be temporary and permanent in organization.
5. Matrix structure is designed to optimally utilize resources
by having individuals work on multiple projects as well
as being capable of performing normal functional duties.
6. The matrix approach attempts to achieve greater
integration by creating and legitimating authority of
project managers.

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C. Project management structure
1. Functional Organizing Project within Matrix Arrangement
1. Theoretically, matrix approach provides dual focus
2. Dedicated team
between functional/technical expertise and project
3. Matrix arrangement requirements that is missing in either project team or
functional approach to project management.
2. The focus can be seen in the relative input of functional
managers & project managers over key project decisions.

Project Manager Negotiated Issues Functional Manager

What has to be done? Who will do the How will it be done?
When should the task Where will the task
be done? be done?
How much money is Why will the task How will project involve-
Division of Project Manager & available to do task? be done? ment impact normal func-
Functional Manager Responsibilities tion activities?
in Matrix Structure
How well has the total Is the task satisfac- How well has the functio-
Taken from:
Larson&Gray (2014), pp. 75 project been done? tory completed? nal input been integrated?

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C. Project management structure
1. Functional Organizing Project within Matrix Arrangement
Example: Organizing project in Zeta Manufacturing Inc
2. Dedicated team
3. Matrix arrangement

Taken from:
Larson&Gray (2014), pp. 76-77
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C. Project management structure
1. Functional Organizing Project within Matrix Arrangement
organization ADVANTAGES
2. Dedicated team Efficient
Resources can be shared across multiple projects as
3. Matrix arrangement
well as within functional divisions.
Individuals can divide energy across multiple project.
Strong Project Focus
Formal PM designation with responsible to coordinate
& integrate contribution of different units.
Support the problem solving activities.
Easier Post-Project Transition
Specialists able to maintain ties with their functional
group, because project organization overlaid on
functional division.
Flexible in utilizing resources & expertise within firm.

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C. Project management structure
1. Functional Organizing Project within Matrix Arrangement
organization DISADVANTAGES
2. Dedicated team Dysfunctional conflict
Able to produce tension & conflicts between project
3. Matrix arrangement
manager & functional manager because of critical
expertise & perspectives to the project.
Shared resources produces conflict & competition for
their scarcity.
Project participants have two bosses which cause
extreme stressful when they are required to do conflict
things by different boss.
Decision making can get bogged down as agreements
have to be forged across multiple functional group.

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D. Organizational Culture
1. Understanding Concept of Organizational Culture
culture 1. Organizational culture refers to system of shared norms,
beliefs, values, and assumptions which binds people
2. Identify cultural together, thereby creating shared meanings.
2. Culture reflects the personality of the organization and,
similar to individuals personality, can enable us to predict
attitudes and behaviors of organizational members.
3. Culture defines organization aspect that differentiate
with other organizations.
4. There are 10 dimensions (primary characteristics) that
provides composite pictures of the organizations culture.

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D. Organizational Culture
1. Understanding 10 Primary characteristics which capture the essence of
organizational organizational culture
1. Member identity the degree to which employees
2. Identify cultural identify with the organization as a whole rather than with
characteristic their type of job or field of professional expertise.
2. Team emphasis the degree to which work activities are
organized around groups rather than individuals.
3. Management focus the degree to which management
decision take into account the effect of outcomes on
people within the organization.
4. Unit integration the degree to which units within the
organization are encouraged to operate in a coordinated
or interdependent manner.
5. Control the degree to which rules, policies, and direct
supervision are used to oversee and control employee

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D. Organizational Culture
1. Understanding 10 Primary characteristics which capture the essence of
organizational organizational culture
6. Risk tolerance the degree to which employees are
2. Identify cultural encouraged to be aggressive, innovative, and risk seeking.
7. Reward criteria the degree to which rewards such as
promotion and salary increases are allocated according to
employee performance rather than seniority, favoritism,
or other nonperformance factors.
8. Conflict tolerance the degree to which employees are
encouraged to air conflicts and criticisms openly.
9. Means versus end orientation the degree to which
management focuses on outcomes rather than on
techniques and processes used to achieve those results.
10. Open-systems focus the degree to which the
organization monitors and responds to changes in the
external environment.

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D. Organizational Culture
1. Understanding Key Dimensions Defining an Organizations Culture
2. Identify cultural

This picture becomes the basis

for feelings of shared
understanding that the
members have about the
organization, how things are
done, and the way members
are supposed to behave

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D. Organizational Culture
1. Understanding Organization Culture Functions and Roles
culture 1. An organizations culture provides a sense of identity for
its members. The more clearly an organizations shared
2. Identify cultural perceptions and values are stated, the more strongly
characteristic people can identify with their organization and feel a vital
part of it
2. Culture helps legitimize the management system of the
organization. Culture helps clarify authority relationships.
It provides reasons why people are in a position of
authority and why their authority should be respected.
3. Organizational culture clarifies and reinforces standards
of behavior. Culture helps define what is permissible
and inappropriate behavior. These standards span a wide
range of behavior from dress code and working hours to
challenging the judgment of superiors and collaborating
with other departments

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D. Organizational Culture
1. Understanding Organization Culture Functions and Roles
culture 4. Culture helps create social order within an organization.
Imagine what it would be like if members didnt share
2. Identify cultural similar beliefs, values, and assumptionschaos! The
characteristic customs, norms, and ideals conveyed by the culture of an
organization provide the stability and predictability in
behavior that is essential for an effective organization.

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D. Organizational Culture
1. Understanding Identify/Diagnose Organization Characteristic
culture 1. Study the physical characteristics of an organization.
What does the external architecture look like? What image
2. Identify cultural
does it convey? Is it unique? Are the buildings and offices the
characteristic same quality for all employees? Or are modern buildings and
fancier offices reserved for senior executives or managers
from a specific department? What are the customs concerning
dress? What symbols does the organization use to signal
authority and status within the organization?
2. Read about the organization
Examine annual reports, mission statements, press releases,
and internal newsletters. What do they describe? What
principles are espoused in these documents? Do the reports
emphasize the people who work for the organization and
what they do or the financial performance of the firm? Each
emphasis reflects a different culture. The first demonstrates
concern for the people who make up the company. The
second may suggest a concern for results and the bottom line.

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D. Organizational Culture
1. Understanding Identify/Diagnose Organization Characteristic
3. Observe how people interact within the organization.
What is their paceis it slow and methodical or urgent and
2. Identify cultural spontaneous? What rituals exist within the organization? What
values do they express? Meetings can often yield insightful
characteristic information. Who are the people at the meetings? Who does the
talking? To whom do they talk? How candid is the conversation?
Do people speak for the organization or for the individual
department? What is the focus of the meetings? How much time is
spent on various issues? Issues that are discussed repeatedly and
at length are clues about the values of the organizations culture.
4. Interpret stories and folklore surrounding the organization
Look for similarities among stories told by different people. The
subjects highlighted in recurring stories often reflect what is
important to an organizations culture. Try to identify who the
heroes and villains are in the folklore company. It is also important
to pay close attention to the basis for promotions and rewards.
What do people see as the keys to getting ahead within the
organization? What contributes to downfalls? These last two
questions can yield important insights into the qualities and
behaviors which the organization honors as well as the cultural
taboos and behavioral land mines that can derail a career.

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Most of materials in this lecture are adopted from:

Larson, E.W., and Gray, C.F., (2014), Project Management: The
Managerial Process, 6th Ed., New York: McGraw-Hill Education.
Robbins, S.P., and Judge, T.A., (2013), Organizational Behavior, 15th
Ed., New Jersey: Pearson Education (Prentice Hall).
Kerzner, H., (2009), Project Management: A System Approach to
Planning, Scheduling, and Controlling, 10th Ed., New Jersey: John
Wiley & Sons.

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