Chapter 5

The Project in the

Organizational Structure

Copyright 2018 John Wiley & Sons, Inc.

Learning Objectives
• 03-01 Identify different project management structures and understand
their strengths and weaknesses.
• 03-02 Distinguish three different types of matrix structures and
understand their strengths and weaknesses.
• 03-03 Describe how project management offices (PMOs) can support
and improve project execution.
• 03-04 Understand organizational and project considerations that should
be considered in choosing an appropriate project management
structure.
• 03-05 Appreciate the significant role that organizational culture plays in
managing projects.
• 03-06 What makes good project team

2
Introduction (1)
• Commonly, the focus of the structure is specialization
of the human elements of the group.
• When the structure begins to inhibit the work of the firm,
pressures arise to reorganize along some other line.
• The underlying principle will still be specialization, but the
specific nature of the specialization will be changed.
• In addition to the ever-popular functional division,
firms organize by product line, by geographic location,
by production process, by business process, by type
of customer, by subsidiary organization, by time, and
by the elements of vertical or horizontal integration.
• Indeed, large firms frequently organize by several of
these methods at different levels.
5-3
Introduction (2)
• New structure: “enterprise project management”
(Dinsmore, 1998; Levine, 1998; Williams, 1997), also
known as “managing organizations by projects,” the
“project-oriented firm,” and other names.
• Described as applying “project management practices and
tools across an enterprise” (Levine, 1998).
• A great many firms adopted a system whereby their
traditional business is carried out in the traditional way,
but anything that represents a change is carried out as a
project.
• In some cases a project-oriented structure is a natural fit
to an organization’s traditional business.
• Consulting firms assign staff to specific client engagements,
and as the engagements are completed the employees are
reassigned to new client engagements.
• Firms that construct large office buildings assign their
equipment and human resources to specific projects. 5-4
Growth of Project Oriented Organizations
• Need for speed, market responsiveness, and product
flexibility
• The development of new products, processes, or
services regularly requires input from diverse areas of
specialized knowledge (Need for broader areas of
knowledge in developing new products and services)
• Rapid expansion of technological possibilities in almost
every area of enterprise tends to destabilize the
structure of organizations
• A majority of senior managers rarely feel much
confidence in their understanding and control of the
activities in their areas (Management inability to
understand and control large numbers of activities)
Switching to Project Environment
• Is difficult and time consuming
• Requires the full commitment of upper
management
• Generally causes a lot of “concern” among
employees
• As a result, organizations may have multiple
structures
Organizational Issues Related to Projects

• How to tie project to parent firm

• How to organize the project
• How to organize activities common to multiple
projects

The is no universally best

organizational structure

5-7
Forms of Organization
1. Functional
2. Projectized/Product
3. Matrix
• Weak matrix
• Balanced matrix
• Strong matrix
4. Composite

5-8
Projects in a Functional Organization
• Top management decides to implement the project,
and different segments of the project are
distributed to appropriate areas.
• Coordination is maintained through normal
management channels.
• Make it a part of one of the functional divisions
• Usually the function that has the most interest in
ensuring its success or the most helpful in
implementing it
• More than one choice may exist
• If support from other areas is needed, they are
expected to help support the project
• Another way is to assign the work to all divisions
with the top management overseeing the effort 5-9
Functional Organizations

10
• FIGURE 3.1
Advantages and Disadvantages Functional Organization for Projects
• Advantages • Disadvantages
1. No change 1. Lack of focus
2. Flexibility 2. Tend to be oriented to
3. In-depth expertise activities of that particular
4. Utilization of experts in function
many projects 3. No individual is given full
5. Knowledge sharing and responsibility
experience 4. Tendency to suboptimize
6. Functional division serves the project
as a base of technological 5. Poor integration
continuity 6. Slow
7. Normal path of 7. Lack of ownership
advancement 8. A holistic approach is not
8. Easy post-project transition facilitated

13
Organizing Projects as Dedicated Teams
• Dedicated project teams operate as units separate from the
rest of the parent organization.
• Projects have a full compliment of functions
• Each project is stand-alone: with its own technical team, its
own staff, etc.
• Like an organization structure by Product
• A full-time project manager is designated to pull together a
core group of specialists who work full time on the project.
• The project manager recruits necessary personnel from
both within and outside the parent company.
• In a projectized organization where projects are the
dominant form of business, the entire organization is
designed to support project teams.
• “Projectitis” is referred to as a negative dimension to
dedicated project teams. A we-they attitude can emerge
between project team members and the rest of the
organization. 14
Dedicated Project Team (Pure Project)

15
• FIGURE 3.2
Projectized Organization Structure

16
• FIGURE 3.3
Strengths and Weaknesses of the Dedicated Project Team Approach
• Strengths • Weaknesses
1. Simple 1. Expensive
2. Fast 2. Duplication of staffing
3. Cohesive 3. Internal strife
4. Cross-functional 4. Stockpiling
integration 5. Limited technological
5. Unity of command expertise
6. Short line of 6. Inconsistency in policies
communication and procedures
7. Swift decision 7. Project takes on a life of
8. Strong & separate its own (projectitis)
identity 8. Difficult post-project
9. Holistic approach transition
9. Worry about life after
17
project is over
Organizing Projects within a Matrix Arrangement
• Matrix management is a hybrid organizational form in which
horizontal project management structure is overlaid on the
normal functional hierarchy.
• There are usually two chains of command, one along functional lines
and the other along project lines.
• Project participants report simultaneously to both functional and
project managers.
• The matrix structure is designed to utilize resources
optimally.
• Individuals work on multiple projects as well as being capable of
performing normal functional duties.
• It attempts to achieve greater integration by creating and legitimizing
the authority of a project manager.
• It provides dual focus between functional/technical expertise and
project requirements.
• Matrixed project organization
• Keeps desirable features of both standalone and functional projects
• Avoids some of the disadvantages of each type 18
Strong Matrix

5-19
Matrix Organization Structure

20
• FIGURE 3.4
Project Manager and Functional Manager Responsibilities in a Matrix Structure

21
• TABLE 3.1
Different Matrix Forms - Strong
• The project manager may report to a program
manager, or a functional manager
• The project manager controls most aspects of the
project, including scope trade-offs and assignment of
functional personnel. The project manager controls
when and what specialists do and has final say on
major project decisions.
• PM controls when and what employees assigned to them do
• The functional managers have title over their people
and are consulted on a need basis. The functional
managers serve as subcontractors for the project.
• Who will be assigned to the project
• How the work will be done

22
Different Matrix Forms –Weak Matrix
• This form is very similar to a functional approach with
the exception that there is a formally designed project
manager responsible for coordinating project
activities.
• Functional managers are responsible for managing
their segment of the project.
• The project manager acts as a staff assistant who
draws the schedules and checklists, collects
information on the status of the work, and facilitates
project completion.
• Project might have only one full-time person, the
project manager
• Functional departments devote capacity to the project
23
Different Matrix Forms – Balanced Matrix
• The project manager is responsible for defining what
needs to be accomplished. The project manager
establishes the overall plan for completing the project,
integrates the contribution of the different disciplines,
set schedules, and monitors progress.
• The functional managers are concerned with how it
will be accomplished. The functional managers are
responsible for assigning personnel and executing
their segment of the project according to the
standards and schedules set by the project manager.
• It is in between the weak and strong matrix
• May not be evenly balanced between them

24
5-25
Advantages and Disadvantages of Matrix Management
• Advantages
1. Efficient
2. Strong project focus
3. Access to the entire
organization for labor and
technology
4. Response to client needs is
rapid
5. Access to administrative
units of firm
6. Better balance of resources
7. Easier post-project
transition
8. Flexible
• Disadvantages
1. Dysfunctional conflict
2. Stressful
3. Slow
4. Power balance is delicate
5. Projects compete for
resources (infighting)
6. Projectitis is still a serious
disease
7. Division of authority and
responsibility is complex
8. Matrix management
violates the management
principle of unity of
command
26
5-27
Virtual Projects
• Project team crosses time, space, organizational, or
cultural boundaries
• Facilitated by the use of the Internet
• Often organized as a matrix
• Kalu (1993, p. 175) further defines virtual positions
as “task processes, the performance of which
requires composite membership” in both project
and functional organizations.
• When complex organizations conduct projects,
virtual positions are typical because projects usually
require input from several functional departments.
• This creates overlapping and shared responsibility
for the work with functional managers and PMs
sharing responsibility for execution of the project.
5-28
Virtual Project Rules For Success (Gratton, 2007)
• Challenging and interesting projects, and meaningful
to the company
• Use volunteers
• Include some people who know each other
• Create an online resource to learn about each other
• Encourage frequent communication
• Divide work into geographically independent
modules

5-29
Projects in Composite Organizational Systems
• We often see combinations of the previous forms
• This form is rarely observed for a long duration.
• Divisionalization is a means of dividing a large
organization into smaller more flexible units
• This enables the parent organization to capture
some of the advantages of small, specialized
organizational units while retaining some of the
advantages that come with larger size units
• Spin off the large, successful, long-term projects as
subsidiaries
• Many firms nurture young, unstable, smaller
projects under the wing of an existing division, then
wean them to standalone projects with their own
identity
• Allow the formation of venture team/firm
• Composite form leads to flexibility 5-30
Projects in Composite/Mixed Organizational Systems

Spin-off when the project finish

5-31
Composite/Mixed Organizational Systems
• Advantages of a mixed organization:
• The hybridization of the mixed form leads to flexibility
• The firm is able to meet special problems by appropriate
adaptation of its organizational structure
• Disadvantages include:
• Dissimilar groupings within the same accountability center
tend to encourage overlap, duplication, and friction
because of incompatibility of interests
• Conditions still exist that result in conflict between
functional and project managers
Selecting a Project Form
• Firms typically do not set out to pick an
organizational form
• Rather, the structure evolves over time
• The structure is not static
• Rather, it changes as the organization, its goals, and
its environment changes
• Selecting the organizational interface between the
project and the firm is a difficult task
• The choice is determined by the situation, but is also
partly intuitive
• Must consider the nature of the potential project, the
characteristics of the various organization options, the
advantages and disadvantages of each, the cultural
preferences of the parent organization, and then make
the best compromise that can be made
5-33
Criteria for selecting an Organizational Form
1. Define the project with a statement of the objective(s)
that identifies the major outcomes desired
2. Determine the key tasks associated with each objective
and locate the units in the parent organization that serve
as functional “homes” for these types of tasks
3. Arrange the key tasks by sequence and decompose them
into work packages
4. Determine which organizational units are required to
carry out the work packages and which units will work
particularly closely with which others
5. List any special characteristics or assumptions associated
with the project
6. In light of items 1-5, and with full cognizance of the pros
and cons associated with each structural form, choose a
structure
Best Fit Organization

• Functional Form Best for…

• In-depth application of a technology
• Large capital investment, especially when that investment
is concentrated in one functional area
• Project Form Best for…
• Handling a large number of similar projects
• Handling a one-time project that requires much control,
but is not focused on one functional area
• Matrix Form Best for …
• Projects that require inputs from several functional areas
• Projects that use technology from several functional areas

5-36
The Project Management Office (PMO) (1)
• A primary task of the PM is to acquire the
resources, technical skills, knowledge, and
whatever is needed by the project.
• No project has ever been completed precisely as it
was planned
• Successful execution of a project is a complex
managerial task
• Requires the use of planning, budgeting, scheduling,
and control tools
• Contractual, administrative, and reporting duties must
be performed in accord with the law
• In order to deal with the managerial and
administrative issues of all its projects, and in a
way that meets the parent organization’s rules,
many firms have created a PMO (Project
Management Office).
5-37
The Project Management Office (PMO) (2)
• The move toward “management by projects,” the need
has arisen for an organizational entity to help manage
these fast‐multiplying forms of getting work done. This is
the role of the PMO.
• Is a centralized unit within an organization or a
department that oversees and supports the execution
of projects.
• Plays a critical role in helping matrix systems mature
into more effective project delivery platforms.
• Can be characterized in different kinds (Larson & Gray):
• Weather station—tracks and monitors project performance.
• Control tower—improves project execution.
• Resource pool—provides the organization with a cadre of
trained project managers and professionals.
• Command and control center—has direct authority over the
project. 5-38
The Project Management Office (PMO) (3)
• According to Greengard (2013), nearly 7 out of 10
organizations have a PMO
• Different names:
• The most popular is the (Organization Unit) PMO;
• Next most common at slightly less than half is the Project
Support Office;
• Next is the Enterprise PMO;
• Then at just over a third is the Center of Excellence;
• Then the Project‐Specific PMO;
• And last at about one out of six is the Change
Management Office.

5-39
When Organization Needs A PMO?
Project Management
• Greengard (2013) states thatOffice (PMO) is
if the organization
projectized, it needs a PMO.
• Any organization that does more than a handful of
projects should have a PMO
• Some cues are:
• a lack of project transparency,
• significant discrepancies in project results,
• poor funder satisfaction rates,
• the inability to cost projects accurately,
• a high percentage of delayed or canceled projects,
• the existence of projects without clear ownership,
• a lack of visibility into how projects are performing,
• and high project failure rates.
5-40
Purposes of the PMO

• Establish project administrative procedures (what is

known as its “supportive” role)
• Ensures the firm’s project portfolio supports its
overall goals and strategies (“controlling” role)
• Gradual assimilation of project management
practices into the entire firm
• Assess project management maturity assessment
and compare to industry averages
• Enabler/Facilitator of projects, not the doer of
projects

5-41
Forms of PMO (Meredith et al,)

• Information center
• Establish procedures and practices
• Establish a resource database and monitor inter-
project dependencies

5-42
Why Organizations Establish PMO’s

• To establish and keep good project management

processes
• To distribute project management expertise through
organization
• To improve project success rate
• To reduce project lead times
• To consolidate project data
• To own an “enterprise project management” system
Tasks of the PMO (Slide 1 of 2)
• Establish and enforce good practices
• Improve maturity
• Develop and improve enterprise project management
systems
• Offer training
• Identify, develop, mentor PM and maintain stable if
competent candidate
• Offer consulting services
• Help with administrative details
• Establish a process for dealing with risk
• Determine if a project is a good fit
• Identify impact of changes on projects
5-44
 Potential PMO Problems
• Greengard (2013) reports that about one‐third fail to
accomplish their desired results,
• Gale (2011): half of all PMOs fail the first time they are
tried.
• Tennant (2001), the primary problems of PMOs is that
the executives often do not understand project
management practices themselves.
• Unrealistic expectations:
• PMO may not save a project already in trouble
• PMO cannot correct upper management failures
such as:
• Inflated project goals
• Insufficient project support
• Inadequate resource availability
• The PMO is not a quick fix for saving projects that are
failing; its primary objective is to improve project
management processes over the long run.
Project Management Maturity

• Project management competency is one of the key

factors in project management success
• Includes the standardization of project management
techniques

5-46
Project Management Maturity Levels

• Initial – no formal process

• Repeatable – procedures in place for planning,
scheduling, tracking, and estimating
• Defined – the firm has integrated system for tracking
and managing, but they are not routinely used or
understood
• Managed – systems are installed and used
• Optimizing – integrated databases used to track
historical projects to help obtain continuous
improvement

5-47
Five Steps for PMO Success
1. Identify quantifiable measures to prove
accomplishments
2. Set a realistic time frame for results
3. Have resources needed to achieve goals
4. Establish credibility throughout the organization
5. Get the best people for the PMO

5-48
 The Project Team (1)
• To staff a project, the project manager works from a
forecast of personnel needs over the life cycle of the
project
• A work breakdown structure (WBS) is prepared to determine
the exact nature of the tasks required to complete the
project
• Skills requirements for these tasks are assessed and like skills
are aggregated to determine work force needs
• From this base, the functional departments are contacted to
locate individuals who can meet these needs
• Certain tasks may be subcontracted
The Project Team (2)
• There are some people who are more critical to the
project’s success than others and should report
directly to the project manager or the project
manager’s deputy:
• Senior project team members who will be having a long-
term relationship with the project
• Those with whom the project manager requires
continuous or close communication
• Those with rare skills necessary to project success
• Some common members include
• Engineer
• Contract administrator
• Controller
The Project Team (2)
Example for Software Engineering Project:
• Systems architect
• Basic product design and development and is responsible
for functional analysis, specifications, drawings, cost
estimates, and documentation.
• Development engineer
• Efficient production of the product or process the project
engineer has designed, including responsibility for
manufacturing engineering, design and production of
code, unit testing, production scheduling, and other
production tasks.
• Test engineer
• Responsible for the installation, testing, and support of
the product (process) once its engineering is complete.
5-51
The Project Team (3)
Example for Software Engineering Project:
• Contract Administrator
• In charge of all official paperwork, keeping track of standards
compliance (including quality/reliability), funder (engineering)
changes, billings, questions, complaints, legal aspects, costs,
and negotiation of other matters related to the contract
authorizing the project. Not uncommonly, the contract
administrator also serves as project historian and archivist.
• Project Controller
• Keeps daily account of budgets, cost variances, labor charges,
project supplies, capital equipment status, etc. The controller
also makes regular reports and keeps in close touch with both
the PM and the company controller. If the administrator does
not serve as historian, the controller can do so.
• Support Service Manager
• In charge of product support, subcontractors, data processing,
purchasing, contract negotiation, and general management
support functions. 5-52
5-53
Human Factors & Project Team
• All projects are composed of inter-connected groups
• These groups can form teams
• It is not enough to have an effective team
• The team must also be working towards the good of
the project
• Need to avoid “us versus them” mentality
• Meeting schedule and cost goals, without
compromising performance is a technical problem,
with a human dimension
• Project professionals tend to be perfectionists
• Pride in workmanship leads the team member to
improve (and thus change) the product
• These changes cause delays in the project
5-54
Human Factors & Project Team
• Another problem is motivating project team
members to accomplish the work of the project.
Unfortunately, the PM often has little control over
the economic rewards and promotions of the
people working on the project.
• The use of participative management is also a way
of motivating people. This is not a new theory. The
concept suggests that the individual worker (or
team) should play a significant role in deciding
what means should be employed in meeting
desired ends, and in finding better ways of
accomplishing things.

5-55
Human Factors & Project Team (Slide 1 of 2)
• Some of the problems that prevent a team from
performing effectively:
• Internal conflict
• Member frustration
• Wasting time
• Poor decision making
• Team members are more concerned with finishing the
job than doing a good job
• Project teams need to work together

5-56
Human Factors and the Project Team
• Inspiring Project Team Members:
• The project manager often has little control over the
economic rewards and promotions of project team
members, but this does not mean he/she cannot facilitate
motivation of team
• How are technical employees motivated?
• Recognition
• Achievement
• The work itself
• Responsibility
• Advancement
• Learning new skills
• Participative management (CIT, Six Sigma, SDWT)
• Agile project management
Participative Management
• Individual workers should play a role in how work
is accomplished
• This empowers the team
• Advantages of empowerment:
• Harnesses ability of team
• Professionals don’t like micromanagement
• Team members know they are accountable
• Synergy
• Team members get timely feedback
• PM given tool to evaluate team’s performance

5-58
Interpersonal Conflict
• Another behavioral problem for the PM is
interpersonal conflict.
• The problem is so pervasive that conflict between
project team members and between team members
and outsiders (including the client) seems to be the
natural state of existence for projects.
• It is our strong feeling that the PM who cannot
manage conflict is doomed to failure.
Interpersonal Conflict
• The focus of conflict can often be related to the
stage in the project’s life cycle
• When the project is first organized, priorities, procedures
and schedules all have roughly equal potential to cause
conflict
• During the buildup phase, priorities become significantly
more important than any other conflict factor
• In the main program phase schedules are the most
important cause of conflict followed by technical
disagreements
• At the project finish, meeting the schedule is the critical
issue
Interpersonal Conflict

• Conflict and the Project Manager

• Most of the conflict on project teams is the result of
individuals focusing on the project through the eyes of
their individual discipline or department
• Conflict avoiders do not make successful project
managers
• On occasion, compromise appears to be helpful, but
most often, gently confronting and resolving the conflict
is the method of choice, for a win-win situation
Major Sources of Conflict

5-62
Major Sources of Conflict

5-63
Frequency of Conflict

5-64
Copyright
Copyright © 2018 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Act without the express written permission of the
copyright owner is unlawful. Request for further information should be addressed to
the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up
copies for his/her own use only and not for distribution or resale. The Publisher
assumes no responsibility for errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.

Copyright ©2018 John Wiley & Son, Inc. 65