Lecture 14

Project Management: Centralized vs. Decentralized Delivery

Instructor
Hamza Ejaz
 Outline
• Centralized Vs. Decentralized Delivery
• Centralized Organization Characteristics
• Centralized Model
• Factors for Deciding Centralized or Decentralized Project Management
• Value-proposition considerations
• Organization Structure Considerations
• Degrees of centralization for planning and control
• Possible functions and forms of a project support office
 Centralized vs. Decentralized Delivery
• There is an ongoing dialogue in many enterprises:
Should project management be a centralized, shared-
service?
• Or, should project managers be decentralized and
embedded within their functional organizations?
• The answer is, "it depends." Every enterprise is unique
with its own organizational structure, culture,
expectations, and needs.
• Similarly projects and programs have different
characteristics that may favor one model over another.
 Defining Terms
• Clearly defining centralized vs.
decentralized project
management is complicated.
• Few organizations operate in
pure models.
• Within the same company, one
unit may be centralized, another
is decentralized, and a third does
both.
• Also the roles, responsibilities,
and expectations of the project
manager differ from one area to
the next.
 Centralized Organizations Characteristics
Centralized organizations generally have the following characteristics:

• An organizational unit that primarily includes project managers. The

group may also contain similar project resources such as scrum masters,
business analyst, or testers;
• The organization is focused on managing and delivering projects, and
• The organization’s leadership has experience and training in project
management.

Centralized project management organizations may have dozens or

hundreds of resources. They employ a spectrum of resources from junior
project analysts to senior program managers. They also hire a blend of
internal employees and external consultants/contractors.
 Decentralized Model
• In decentralized organizations project
managers are part of a functional
organization, such as: Finance, Marketing, or
Technology.
• These PMs may be part of a small team or
work alone.  
• In this model, the principal focus of the
organization is not project management.
 Factors for Deciding Centralized Or
Decentralized Project Management
There are many factors to consider when deciding to
centralize or decentralize project management. Two
key areas of consideration are:
• Value-proposition considerations; clarify the
expected benefit or value to be derived from the
organizational model; and
• Organization and structural considerations; reflect
the realities of the organization’s culture, size, and
the complexity of the projects being managed.  
Value-Proposition Considerations(VPC)

The value proposition considerations outline the

intended benefit from centralization or
decentralization. Defining the expected
outcomes can help clarify the preferred model.
– Consistency and Standardization
– Independence and Transparency
– Client Focus and Engagement
– Resource Allocation Efficiency
– Cultural Fit
 VPC: Consistency and Standardization
• Centralized organizations have a greater ability to develop and
maintain standards, practices, and processes. Consistent practices
ensure a more uniform experience and predictable outcomes.
• According to the PMI Pulse of the Profession™, consistent practices
significantly increase the likelihood of project success and lower costs.
Furthermore, standardization often leads to greater efficiency:
– Single project and portfolio management tools are adopted which is more
cost effective and avoids the perils of multiple, incompatible tools and
processes;
– Standardized reporting and execution practices ensure consistency across
portfolios, programs, and business units; and
– Single solutions are developed to address common problems instead of
multiple incompatible ones being developed by the decentralized teams.
• Centralized organizations can, fall into the “one-size-fits-all trap.” They
may establish standards and practices that do not resonate with or
provide the flexibility required by individual portfolios or programs.
 VPC: Independence and Transparency
• Ensuring transparency is an important role of the
project manager. Good PMs help their teams
effectively manage issues and risks; and ensure
accurate progress and status are reporting.
• Project managers that are part of a centralized
organization often have greater freedom to
provide an impartial point of view. Their
management chain is separate from the
sponsoring or delivery organizations. Conversely,
PMs that are embedded within the functional
teams may feel less independence.
 VPC: Client Focus and Engagement
• Clients appreciate and value project managers that have
business or technical domain knowledge. PMs with this
experience have context, can connect-the-dots, and help
ensure a better overall outcome.
• Decentralized project managers often have greater domain
knowledge because they are members of that functional
team. Centralized PMs do not have that same opportunity
because they are assigned to the next project, which may be
in a different part of the organization.
• Centralized organizations can run the risk of:
– Not being client focused;
– Being overly focused on process and tools,
– Lacking domain expertise, and
– Not adding incremental value.
 VPC: Resource Allocation Efficiency
• In organizations with many projects and project managers, efficiently
staffing the work is an important and critical function. Finding the
right resources, managing partial resource allocations, ensuring
coverage and continuity during leaves of absence is challenging. The
effort required to manage staffing is often underestimated.
• Centralized project management organizations have economies of
scale.  They have defined processes for staffing and managing the
resource needs. They are better at flexing their resource pool to cover
partial resource allocations and fluctuations in demand.   They also
have a pipeline of prospective employees or contract labor.

Cultural Fit
• As Drucker said, “culture eats strategy for breakfast.” The decision to
centralize or decentralize must be consistent with organization’s
culture. Efforts to align organizations that are inconsistent with the
culture will not realize the intended benefits.
OSC: Organizational Structure Considerations
The size of the projects and organizations is also an important factor when deciding to
centralize or not.
– Small Organizations
– Large Organizations
– Large Enterprise Programs

Small Organizations
• Small companies or small units within a large company tend to decentralize project
management and embed them within the business or technology teams.
• These organizations may not have the scale required to support a centralized
organization. They may want to avoid the “overhead” of the central organization, as the
benefit may not outweigh the cost.
• A small organization may elect to create a centralized project management team if:
– They are managing very complex or large projects that require a level expertise
and coordination;
– There are a relatively large number of project managers and the benefits defined
in the value-proposition are expected to be realized;
– The organization is experiencing chronic project delivery problems.
OSC: Organizational Structure Considerations
Large Organizations
• Large organizations have the opportunity to build centralized PM organizations. There
are a sufficient number of project and PMs to support a centralized team. They are also
more likely to realize efficiencies and benefits of a centralized team.
• Large organizations may choose to adopt centralized, hybrid, or decentralized
organizational models. Often large companies have several divisional project
organizations within the business units.

Large Enterprise Programs

• Organizations that are implementing large strategic initiatives or programs may choose
to use a centralized program office to coordinate the efforts of the individual projects
and/or staff the PMs throughout the program. A centralized model promotes
consistency of practices, standardized reporting, and transparent communications
which are critical to large initiatives.
• Both centralized and decentralized models can be effective. The most important
consideration is adopting a model that resonates with overall organizational structure
and corporate culture. Organizations seeking to affect a change should ensure they are
addressing their needs.
Degrees of Centralization for Planning and Control
Centralization is the degree to which formal authority is concentrated in one area or level of the
organization. The optimal span of control is determined by the following five factors:

1. Nature of the task. The more complex the task, the narrower the span of control.
2. Location of the workers. The more locations, the narrower the span of control.
3. Ability of the manager to delegate responsibility. The greater the ability to delegate,
the wider the span of control.
4. Amount of interaction and feedback between the workers and the manager. The more
feedback and interaction required, the narrower the span of control.
5. Level of skill and motivation of the workers. The higher the skill level and motivation,
the wider the span of control.

• In a highly centralized structure, top management makes most of the key decisions in the
organization, with very little input from lower-level employees.
• Centralization lets top managers develop a broad view of operations and exercise tight
financial controls. It can also help to reduce costs by eliminating redundancy in the
organization.
• But centralization may also mean that lower-level personnel don’t get a chance to develop
their decision-making and leadership skills and that the organization is less able to respond
quickly to customer demands.
 Possible functions and forms of a Project Support Office
(PSO)
• Very often you hear people talking of Project Management Office (PMO) and Project
Support Offices (PSO) or even Project Office (PO).
• Some of them are using these terms without having a clear idea of what they
encompass.
• In complex structures PMO co-exists with PSO. It is often confusing, for their roles are
different.
• The PMO is an entity that is involved in the creation of the business strategy and
portfolio of its organization, while the PSO is meant to support the project team
members in their daily work on the site where they are operating.
PSO Missions and Functions
• The PSO is a local structure close to the project team members and stakeholders.
• It facilitates the monitoring of the project using the available infrastructure and coping
with site-specific constraints.
• The PSO will provide support for managing project documentation and archiving. It is
also an active player for the quality assurance processes.
• Three Main Functions are:
1. Project Support and Tools
2. Site Consistency
3. Quality Control
 Possible functions and forms of a Project Support Office
(PSO)
Project Support and Tools

• The PSO is composed of data administrators and tools experts who will act as project
management tool facilitators.
• These administrators will support end-users on tools (Project Management, financial
control, and benchmarking, manufacturing and supply chain management).
• The PSO also drives project-related documentation control and help for maintaining the
project library according to configuration management rules.
• The PSO supports the Project Managers in the following:
– Entering the project WBS, costs and schedule data
– Generating the reports and distributing project information according to corporate
standards.
• The PSO follows up on all the steps of Project Change Management to support the
Project Manager with documenting them and having them approved.
 Possible functions and forms of a Project Support Office
(PSO)
Site Consistency
• In the approach of multi-national companies, the PSO will provide project support to a
specific site, or to sites, that are located in a similar environment (same country, same
culture, identical infrastructure.
• The PSO is embedded in operational teams and is aware of site-specific requirements
(laws and regulations, IT and Network infrastructure). With this wide view, it can
balance requirements for tailored processes that would be too specific.

Quality Control
• The PSO supports Quality Assurance in preparing the reviews and audits with the
quality organization.
• The PSO members will also take part in peer reviews with QAOs (Quality Assurance
Officers).
• They will gather data for performance measurement of all the projects managed on the
site.
• The PSO can also help the project leaders on site to prepare the gate passing by
organizing peer reviews and assessments by colleagues who are not involved in the
project.
Questions?