UNIT V

Organizational Structure:
Organizational structure refers to the way a company or organization is setup. It is
usually defined using a hierarchy chart that shows how groups or functions report within the
organization.
A project organization is a structure that facilitates the coordination and implementation of
project activities. Its main reason is to create an environment that fosters interactions among the team
members with a minimum amount of disruptions, overlaps and conflict. One of the important decisions of
project management is the form of organizational structure that will be used for the project.
Each project has its unique characteristics and the design of an organizational structure should consider
the organizational environment, the project characteristics in which it will operate, and the level of
authority the project manager is given. A project structure can take on various forms with each form
having its own advantages and disadvantages.
One of the main objectives of the structure is to reduce uncertainty and confusion that typically
occurs at the project initiation phase. The structure defines the relationships among members of the
project management and the relationships with the external environment. The structure defines the
authority by means of a graphical illustration called an organization chart.
A properly designed project organization chart is essential to projectsuccess. An organization
chart shows where each person is placed inthe project structure. An organization chart is drawn in
pyramid formwhere individuals located closer to the top of the pyramid have moreauthority and
responsibility than members located toward the bottom.It is the relative locations of the individuals on the
organization chartthat specifies the working relationships, and the lines connecting theboxes designate
formal supervision and lines of communicationbetween the individuals.
For Project Managers, a company's organizational structure will affect how resources are
allocated to the project and will be a factor in how much influence the Project Manager will have
within the organization.
Factors in designing organizational structure
There are two design factors that significantly influence the process of developing a project management
structure. These are the level of specialization, and the need for coordination. The project manager should
consider these factors at the moment of designing the project organization in order to maximize the
effectiveness of the structure.
Organizational Structure Types
There are three basic types of organizational structures...
Functional Organizational Structure
Project-Based Organizational Structure
Matrix Organizational Structure

FUNCTIONAL ORGANIZATIONAL STRUCTURE

Functional organizations are structured around the organization's primary functions. In a
functional structure, a common configuration, an organization is divided into smaller groups by
areas of specialty (such as IT, finance, operations, and marketing). Some refer to these functional
areas as ” silos “—entities that are vertical and disconnected from each other. Correspondingly,
the company’s top management team typically consists of several functional heads (such as the
chief financial officer and the chief operating officer). Communication generally occurs within
each functional department and is transmitted across departments through the department heads.
Advantages of a Functional Structure
Functional departments arguably permit greater operational efficiency because employees with
shared skills and knowledge are grouped together by functions performed. Each group of
specialists can therefore operate independently with management acting as the point of cross-
communication between functional areas. This arrangement allows for increased specialization.

Disadvantages of a Functional Structure

A disadvantage of this structure is that the different functional groups may not communicate with
one another, potentially decreasing flexibility and innovation. Functional structures may also be
susceptible to tunnel vision, with each function perceiving the organization only from within the
frame of its own operation. Recent trends that aim to combat these disadvantages include the use
of teams that cross traditional departmental lines and the promotion of cross-functional
communication.

Functional structures appear in a variety of organizations across many industries. They may be
most effective within large corporations that produce relatively homogeneous goods. Smaller
companies that require more adaptability and creativity may feel confined by the communicative
and creative silos functional structures tend to produce.

Examples of functions within a company are:

Advertising
Engineering
Human Resources
Manufacturing
In a functional organization, every employee is positioned within only one function and has one
manager they report to, the Functional Manager. The Functional Manager assigns and manages
the employees work and handles administrative tasks such as employee compensation.

PROJECT-BASED ORGANIZATIONAL STRUCTURE

Project-based organizations are structured around projects and not functions. This type of
structure is also called a projectized organizational structure. A project organization is a structure
that facilitates the coordination and implementation of project activities. Its main reason is to
create an environment that fosters interactions among the team members with a minimum
amount of disruptions, overlaps and conflict.
In a project-based organization most of the organization's resources are involved in project work.
Project Managers have high levels of independence and authority for the project and control the
project resources.

MATRIX ORGANIZATIONAL STRUCTURE

Matrix organizations blend features of project-based and functional organizational structures.
The key challenge with a matrix organization is that every employee has two (or more) managers
they report to, their Functional Manager and the Project Manager. If they are working on
multiple projects, they may have even more managers to report to. The matrix structure is a type
of organizational structure in which individuals are grouped by two different operational
perspectives simultaneously; this structure has both advantages and disadvantages but is
generally best employed by companies large enough to justify the increased complexity.

There are three types of matrix organizations:Weak Matrix, Balanced Matrix, Strong Matrix

WEAK MATRIX
A weak matrix organizational structure maintains many of the features of the functional
organizational structure. The role of the Project Manager is more that of a Project Coordinator.
Their ability to make or enforce decisions is low and most of the authority remains with the
Functional Manager.

BALANCED MATRIX

A balanced matrix organizational structure recognizes the need for a Project Manager. However,
the Project Manager does not have full authority over the project, project staff or project budget.

STRONG MATRIX

Advantages of a Matrix Structure

Proponents of matrix management suggest that this structure allows team members to share
information more readily across task boundaries, countering the “silo” critique of functional
management. Matrix structures also allow for specialization that can both increase depth of
knowledge and assign individuals according to project needs.
Disadvantages of a Matrix Structure
A disadvantage of the matrix structure is the increased complexity in the chain of command
when employees are assigned to both functional and project managers. This increase in
complexity can result in a higher manager-to-worker ratio, which can in turn increase costs or
lead to conflicting employee loyalties. It can also create a gridlock in decision making if a
manager on one end of the matrix disagrees with another manager. Blurred authority in a matrix
structure can result in reduced agility in decision making and conflict resolution.

Matrix structures should generally only be used when the operational complexity of the
organization demands it. A company that operates in various regions with various products may
require interaction between product development teams and geographic marketing specialists—
suggesting a matrix may be applicable. Generally speaking, larger companies with a need for a
great deal of cross-departmental communication benefit most from this model.
How Organizational Structure Influences Project Management
Two of the key project aspects affected by organizational structure types are Project Manager
Authority and Resource Availability.

As you move across the spectrum from Functional to Matrix to Project-Based

organizational structure types, the organization will move from favoring ongoing operations to
favoring projects.
On the left side of the spectrum are Functional Organizational Structures. As a Project
Manager, you will have limited positional authority in these type of organizations. You will need
to rely on expert authority and referent authority to get project tasks completed. Because of this,
you will need to develop your influencing and negotiating skills if you want to be successful.
From a Resource Availability perspective, you will be dependent on the Functional
Managers in your organization to provide you with resources. In these cases, the project
resources will report indirectly to you.
On the right side of the spectrum are Project-Based Organizations. As a Project Manager,
you will have more positional authority the further right your project sits on the spectrum. This
doesn't mean you can just command others, but you will have more formal authority for getting
project tasks completed.
From a Resource Availability perspective, you will also have greater control over your
project resources since they will be more likely to directly report to you and not to a functional
manager.Understanding what type of organizational structure is used by your company will help
you determine how you should manage your project.
Conflict
Conflict is "a situation of competition in which the parties are aware of the incompatibility of
potential future positions and in which each party wishes to occupy a position which is
incompatible with the wishes of the other." Conflict is viewed as a cycle: "As with any social
process, there are causes; also, there is a core process, which has results or effects. These effects
feed back to effect the causes." To understand conflict further, the situation must include
elements of interdependence, emotions, perceptions, and behaviors. For example, conflict occurs
between parties whose tasks are interdependent, who are angry with each other, who perceive the
other party as being at fault, and whose actions cause a business problem.

Conflict can be constructive and healthy for an organization. It can aid in developing individuals
and improving the organization by building on the individual assets of its members. Conflict can
bring about underlying issues. It can force people to confront possible defects in a solution and
choose a better one. The understanding of real interests, goals and needs is enhanced and
ongoing communication around those issues is induced. In addition, it can prevent premature and
inappropriate resolution of conflict. Constructive conflict occurs when people change and grow
personally from the conflict, involvement of the individuals affected by the conflict is increased,
cohesiveness is formed among team members, and a solution to the problem is found. However,
if conflict is not managed properly, it can be detrimental to an organization by threatening
organizational unity, business partnerships, team relationships, and interpersonal connections.
Deconstructive conflict occurs when a decision has not been found and the problem remains,
energy is taken away from more important activities or issues, morale of teams or individuals is
destroyed, and groups of people or teams are polarized.
Destructive conflict has a predictable pattern known as the Drama Triangle. By learning how to
identify these unproductive roles and how to effectively handle each role player, managers can
prevent some conflicts from occurring and resolve those that do. Most individuals know how to
assume the following three roles:

Persecutor refers to a person who uses aggressive behavior against another person, attacking the
intended victim. An attack can be direct or indirect and be physical, verbal, or both. The
persecutor's actions deliver a message that "you are not okay" while making the persecutor feel
righteous and superior.
Victim refers to a person who uses nonassertive behavior so others view them as "I'm not okay."
This behavior encourages others to either rescue or persecute the victim. Victims will feel
helpless, inadequate, sad, scared, or guilty. The victim role is often used because the individual is
feeling stressed, has low self-esteem, or is being persecuted by another.
Rescuer refers to a person who uses either nonassertive or agressive behavior. Individuals
become rescuers because they will not say "no" and unwillingly assume the responsibility of
solving the victim's problem. In contrast, others will assume the rescuer role to demonstrate
superiority over the victim.
These roles are learned in early childhood and are used throughout adulthood. They involve the
perception of oneself or someone else as inadequate or not acceptable. The aggressive and
nonassertive behaviors that are present in these roles lead to win-lose outcomes and do not
provide an opportunity for a win-win resolution.
It is important for a project manager to understand the dynamics of conflict before being able to
resolve it. The internal characteristics of conflict include perception of the goal, perception of the
other, view of the other's actions, definition of problem, communication, and internal group
dynamics.

Perception of the goal becomes a problem when success becomes competitive or "doing better
than the other guy." The focus is placed on the solution rather than attaining the goal.
Perception of the other can create conflict when the attitude becomes "us versus them."
Similarities and differences are emphasized causing division within a group.
View of other's actions can be a problem when the situation is competitive instead of
cooperative. Behavior can be suspicious in a competitive environment.
Definition of problem can result in conflict when the size of the problem is escalated, issues are
misconstrued, and original issues are lost.
Communication in a competitive environment can cause mistrust and information may be
withheld or may be lacking. Communication is not open and honest.
Internal group dynamics can be negative when the group structure is centralized and rigid rather
than safe and open. Conformity is emphasized and tasks dominate over the needs of the team
members.
These characteristics can strongly influence the behavior style of group members and affect the
potential outcome of the conflict. In some instances, the project manager's lack of skills to
effectively manage and resolve conflict can be the problem.

Approaches to Conflict Resolution

In Project Management: A Systems Approach to Planning, Scheduling, and Controlling, five
modes for conflict resolution are explained and the situations when they are best utilized are
identified. These modes are Confronting, Compromising, Smoothing, Forcing, and Avoiding.

Confronting is also described as problem solving, integrating, collaborating or win-win style. It

involves the conflicting parties meeting face-to-face and collaborating to reach an agreement that
satifies the concerns of both parties. This style involves open and direct communication which
should lead the way to solving the problem. Confronting should be used when:

Both parties need to win.

You want to decrease cost.
You want create a common power base.
Skills are complementary.
Time is sufficent.
Trust is present.
Learning is the ultimate goal.
Compromising is also described as a "give and take" style. Conflicting parties bargain to reach a
mutually acceptable solution. Both parties give up something in order to reach a decision and
leave with some degree of satisfaction. Compromising should be used when:

Both parties need to win.

You are in a deadlock.
Time is not sufficient.
You want to maintain the relationship among the involved parties.
You will get nothing if you do not compromise.
Stakes are moderate.
Smoothing is also referred to as accommodating or obliging style. In this approach, the areas of
agreement are emphasized and the areas of disagreement are downplayed. Conflicts are not
always resolved in the smoothing mode. A party may sacrifice it's own concerns or goals in order
to satisfy the concerns or goals of the other party. Smoothing should be used when:

Goal to be reached is overarching.

You want to create obligation for a trade-off at a later time.
Stakes are low.
Liability is limited.
Any solution is adequate.
You want to be harmonious and create good will.
You would lose anyway.
You want to gain time.
Forcing is also known as competing, controlling, or dominating style. Forcing occurs when one
party goes all out to win it's position while ignoring the needs and concerns of the other party. As
the intesity of a conflict increases, the tendency for a forced conflict is more likely. This results
in a win-lose situation where one party wins at the expense of the other party. Forcing should be
used when:

A "do or die" situation is present.

Stakes are high.
Important principles are at stake.
Relationship among parties is not important.
A quick decision must be made.
Avoiding is also described as withdrawal style. This approach is viewed as postponing an issue
for later or withdrawing from the situation altogether. It is regarded as a temporary solution
because the problem and conflict continue to reoccur over and over again. Avoiding should be
used when:

You can not win.

Stakes are low.
Stakes are high, but you are not prepared.
You want to gain time.
You want to maintain neutrality or reputation.
You think problem will go away.
You win by delaying.
Researchers examined the impact of the conflict resolution styles used by individuals in shaping
their work environment and affecting the level of ongoing conflict and stress. Results of the
study showed that individuals who use a certain style to conflicts can create environments with
varied degrees of conflicts. Individuals who use more of a confronting style create an
environment with lower levels of task conflict, which reduces relationship conflict and stress.
Whereas, individuals who use more of the forcing or avoiding styles tend to create an
environment with more task conflict, which increases relationship conflict and stress. The study
suggests conflict develops not only in environmental circumstances but in the styles used by
individuals when confronted with a conflict. The manner in which a person responds to
organizational dissension and uncertainty will influence the responses of others and the
individual's work experience.

1. Mediate the conflict. The manager intervenes and tries to negotiate a resolution by using
reasoning and persuasion, suggesting alternatives and the like. One of the keys is trying to find
common ground. In some cases the project manager can make the argument that the widlose
interchange has escalated to the point that it has become losenose for everyone and now is the
time to make concessions.
2. Arbitrate the conflict. The manager imposes a solution to the conflict after listening to each party.
The goal is not to decide who wins but to have the project win. In doing so, it is important to seek
a solution that allows each party to save face; otherwise the decision may provide only
momentary relief. One project manager admits that she has had great success using a King
Solomon approach to resolving conflict. She confided she announces a solution that neither party
will like and gives the opponents two hours to come up with a better solution they can both agree
on.
3. Control the conflict. Reducing the intensity of the conflict by smoothing over differences or
interjecting humor is an effective strategy. If feelings are escalating, the manager can adjourn the
interaction and hope cooler heads prevail the next day. If the conflict continues to escalate,
project assignments may need to be rearranged if possible so that two parties don't have to work
together.
4. Accept it. In some cases the conflict will outlive the life of the project and, though a distraction, it
is one the manager has to live with.
5. Eliminate the conflict. Sometimes the conflict has escalated to the point that it is no longer
tolerable. In this case the manager removes the members involved from the project. If there is a
clear villain then only he or she should be removed. If, as is often the case, both parties are at
fault, then it would be wise if possible to elirninate both individuals. Their removal would give a
clear signal to the others on the team that this kind of behavior is unacceptable.

In summary, project managers establish the foundation for functional conflict by establishing clear roles
and responsibilities, developing common goals or a shared vision, and using group incentives that reward
collaboration. Project managers have to be adroit at reading body language to identify unspoken
disagreement. They also have to keep in touch with what is going on in a project to identify small
problems that might escalate into big conflicts. Well-timed humor and redirecting the focus to what is
best for the project can alleviate the interpersonal tensions that are likely to flare up on a project team

Negotiation Among Conflicting Parties

The use of the cognitive analysis approach resulted in more agreement among the parties in
conflict. Cognitive feedback provided information on reasons why the disagreement occurred
among the parties and on areas that needed to be addressed to reach an agreement. This approach
allowed the project members involved in the conflict to concentrate on the real differences that
provoked the disagreement rather than only discussing the effects of the conflicting situation.
The findings from this study suggest the use of cognitive feedback can be effectively applied to
conflict resolution.

Active listening is a proven technique managers can use to help resolve conflict. Developing this
skill takes practice, but it can be extremely effective when mastered. Listening allows the
conflict to take its natural course by giving individuals the opportunity to disagree, express
strong opinions, and show passion for ideas. A respect for individual differences is demonstrated
and an environment of understanding is fostered. Listening is helpful in achieving a winning
resolution by enabling an employee to identify the criteria that is considered an acceptable
outcome. When a manager is able to understand the needs and interests of individuals, the
chances of satisfactorily resolving the conflict for both parties are increased. As a result of this
process, trust and a relationship bond will form preparing individuals to listen also to the needs
of the manager.

An awareness of the potential approaches to conflict resolution and the understanding of their
consequences can provide project managers with a invaluable set of tools to create an optimal
work environment.