HOPE UNIVRSITY COLLEGE

SCHOOL OF GRADUATE STUDIES

MBA PROGRAM

PROJECT MANAGEMENT

ACADEMIC YEAR: 2020/2012

INSTRUCTOR:
ABDU MOHAMMED (Assist. Prof)

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 Chapter One
Introduction to Project

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 1.0. Introduction
• People have been conducting projects for centuries. The
pyramids, the Great Wall of China and the Roman bridge bear
witness to the sophistication of some of these projects.
• The development of project management has always been in
parallel to the development of general trends in worldwide
economics.
• Project nowadays is held as a very high priority to play in the
economic development of a country as all companies or
organizations, whether small or large, are at one time or
another involved in implementing new undertakings,
innovations and changes in projects related to industry,
minerals, power, transportation, irrigation, education etc. with a
view to improve the socio-economic conditions of the people.

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 Con’d
• A clear project definition and detailed objectives are
critical to the success of the project.
• If the definition and objectives are ambiguous, unrealistic,
not agreed upon, or not written down, the project is in
serious trouble before it begins.
• Whatever time and energy you need to define the project
properly in the planning stage is much less than what it
will cost to fix problems after the project is completed.

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 1.1. Meaning and Definitions of a Project
• Projects are a group of activities that have to be performed
with limited resources to yield specific objectives, in a specific
time, and in a specific locality.
• According to Kerzner (1998), a project is: “…any series of
activities and tasks that:
– have a specific objective to be completed within certain
specifications
– have defined start and end dates
– have funding limits (if applicable)
– consume resources (i.e., money, people, equipment).”

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 Con’d
• Project can thus be defined as” a temporary endeavor (run
with a set period of start and finish time) undertaken to create
a unique product or service, in which of a set of coordinated,
controlled and non-routine activities are directed towards
achieving a specific objective conforming to requirements,
within the constraints of time, cost, and resources.
• J. M. Juran defined that “a project is a problem scheduled for
solution. “Problem refers to the gap between where you are
and where you want to be, with an obstacle that prevents
easy movement to close the gap.
• A project is a one-time, multitask job with a definite starting
point, definite ending point, a clearly defined scope of work, a
budget, and usually a temporary team.

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 Con’d
• ‘A Project is an investment activity that involves expending of
financial resources to create capital assets that produce
benefits over a period of time’ Gittinger (1996)
• A Project is a temporary organisation, either as a freestanding
entity or now more commonly as an integrated component of a
programme, set up to produce something or manage a
particular change.
• A project is a series of activities aimed at bringing about clearly
specified objectives within a defined time-period and with a
defined budget. Aid Delivery Methods, Project Cycle
Management Guidelines Volume 1, March 2004.
• A project is a proposal for an investment to create, expand
and/or develop certain facilities in order to increase the
production of goods and/or services in a community during a
certain period of time.
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 Con’d
• These definitions denote that projects focus on
a single goal as compared to a program.
• They have customers who are affected by the
end results.
• They have to be completed within specified
time frame (completion date), within budget
(limited resources including, people, money,
machines) and should be according to the
specifications (with a certain level of
functionality and quality).
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 Examples of typical projects are
Personal projects: Business projects:
• obtain an Msc • develop a new course
• write a report • develop a new product
• plan a wedding • develop a computer system
• plant a garden • introduce a new product
• build a house extension • prepare an annual report
• set up a new office

Industrial projects: Public investment projects:

• construct a building • Education
• provide a gas supply to an • Health
industrial estate • Waste disposal
• build a motorway • Roads
• design a new car • Electricity
• Telecommunication etc..
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 1.2 Characteristics of a project
• Generally, all projects are characterized by a certain
features which may be common to all.
– Thus, the following are typical features of a project:
• Temporary: signifies that there is a discrete and definable
commencement and conclusion; and, as such, a key
indicator of project success is how it performs against its
schedule—that is, does is start and end on time? Projects
are temporary because they have a definite beginning and
a definite end.
• Has a defined life span with a beginning and an end.

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 Con’d
• Uniqueness: They are unique because the product or service they
create is different in some distinguishing way from similar products or
services. This does not mean that there are not similarities to other
projects, but that the scope for a particular project has deliverables
that must be produced within constraints, through risks, with specific
resources, at a specific place, and within a certain period; therefore,
the process to produce the deliverable as well as the deliverable itself is
unique.
• Every project is unique and no two projects are similar. Setting up a
cement plant and construction of a highway are two different projects
having unique features.
• At the end of the project, a unique product, service or result is created.
Some degree of customization is also a characteristic of projects.
• Deal with something that has never been done before.

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 Con’d
• Non – repetitive. A repetitive job is not a project. Neither is
performing a single task over and over.
 The uniqueness of the deliverable, whether it is a product, service, or
result, requires a special approach in that there may not be a pre-
existing blueprint for the project’s execution and there may not be a
need to repeat the project once it is completed.
• Objectives: Directed towards achieving a specific result or has
a single goal or a set of goals. Has an established objective.
 Once the objectives are achieved the project is treated as completed.
• Life cycle: a project has a life cycle which consists of five stages
i.e.
– Conception stage, definition stage, planning & organizing
stage, implementation stage and commissioning stage.

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 Con’d
• Risk and Uncertainty: risk and uncertainty go hand in hand with
project.
• Budget: usually during the planning adequate budget allocation
is mandatory for the smooth flow of all project related
activities.
• Use of Resources. In a project undertaking resources are quite
necessary for successful accomplishment activities.
 The resources i.e. Material, human, financial may be coordinated from
various sources.
 Project has specific time, cost, and performance requirements
• Customer specific nature: A project is always customer specific.
 It is the customer who decides upon the product to be produced or
services to be offered and hence it is the responsibility of any
organization to go for projects/services that are suited to customer
needs.
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 Con’d
• Change: Changes occur throughout the life span of a project as a
natural outcome of many environmental factors.
 The changes may vary from minor changes, which may have very little
impact on the project, to major changes which may have a big impact or
even may change the very nature of the project.
• Optimality: A project is always aimed at optimum utilization of
resources for the overall development of the economy.
• Unity in diversity: A project is a complex set of thousands of
varieties in terms of technology, equipment and materials,
machinery and people, work, culture and others.
• Teamwork: Project is a team work and it normally consists of
diverse areas.
 There will be personnel specialized in their respective areas and co-
ordination among the diverse areas calls for team work.
 Usually, requires the involvement of several departments and professionals.
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 1.3. Why deal with project?

• To eliminate uncertainties
• To increase the effectiveness and efficiency
of operations
• To identify and work towards a common goal
• To establish a means for monitoring and
control

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Reasons For Establishing Projects
• Exploit opportunities:
 Opportunity to get into a new market, to offer a better service
toto customers, to introduce a new capability, etc.
 This could be an enhancement, or something brand-new.
 But an opportunity exists to do something better or to do
something different.
 We can establish a project to take advantage of opportunities.
• Solve a problem:
 Possibly some equipment is not meeting service requirements,
or some process is not as efficient as desired, or does not
produce the customer satisfaction it should, etc.
 Identify problems using problem analysis tree (showing
problems and consequences at various levels).
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 1.4. National Plans, Programme and Project

• A national plan is a wider concept that incorporate

all sectors of the economy
• A programme can represent a sector and is a
collection of closely connected projects.
• A project is an investment activity derived from a
program where resources are used to create
capital assets

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 Con’d
 National planning is the mechanism by which governments set
up their proprieties, objectives and demonstrates their
intension.
 Planning:
• Is a continuous process.
• Involves decisions or choices about alternative ways of using
available resources.
• Aims at attaining a particular goal or set of goals at some time
the future.
• Serves as a tool for enhancing the effectiveness in mobilizing
resources.
• Enables allocation of resources into priority areas of
development.

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 Relationships between development plans and projects :
 Project analysis and national development planning are
closely related.
 Projects provide an important means by which investment &
other development expenditures foreseen in plans can be
clarified and realized.
 Sound development plans require good projects, good
projects require sound planning.
 A sound plan requires a great deal of knowledge about
existing and potential projects.
 Realistic planning involves knowing the amount that can be
spent on development activities each year and the resources
required for particular kind of project.

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 Con’d
 Project selection is meaningful only when it is placed within a
broader development framework – could be medium or long-
term development plans and policies.
 The best economic appraisal of projects cannot be made
without referring to such plans and policies.
 Projects are part of an overall development strategy and a
broader planning process.
 Governments must allocate available financial & administrative
resources among many sectors and competing programs –
project analysis improves this allocation process.
 Within the broad strategy, planners have to identify potential
projects that address the policy of production targets and
priorities.

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 Con’d
 Elaborated government plans and policies eases the work of the
project planner.
– We need to see whether the project being considered fits well
in the plan and contributes most to the fundamental objectives
of the government.
– Objectives like food self-sufficiency, self-sustaining growth,
promotion of employment, income distribution, etc
 Successful formulation and implementation of a national
development plan depends on proper selection of projects and
sectoral programs.
– Project formulation and evaluation is one of the basic
components of economic planning.
 Project can be seen as policy instruments through which
national and sub national plans are translated in to action.
 The national and sub national plans serves as frame of reference
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for the identification and evaluation of a project.
 Relationships between Programs and projects:
 Often used interchangeably but are not one and the same
 A project is narrower than a program in terms of technical
performance, time and resources (scope).
 A program may consist of more than one project.
 A program is an on-going development effort.
 A program is a wider concept than a project.
 A program may include one or several projects at various times
whose specific objectives are linked to the achievement of higher
level of common objectives.
 Example: a health program may include a water project as well as
construction of a health centre, both aim at improving the health
of a given community.
 A program aims at attaining relatively broader goals and objectives.
.
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 Con’d
.

23
 Con’d
.

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 Con’d
 Similarities Between Projects and Programs
 They both have objectives.
 Require financial, human, material, and other inputs (or
resources).
 Generate outputs of value (goods/services).
 Serve as instruments for the execution of development
plans and attain national goals.

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 Con’d
.

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 1.5. Typical Project Challenges/Problems
1. Scope may not be clearly defined when commitment is made
to a client.
2. There may not be enough resources allocated (people, money,
materials, time, space, etc.)
3. Conflict of interest between or among stakeholders (ops vs.
engineers, sales vs. technical support, line vs. staff).
4. Commitment to unrealistic dates – the PM may be too
optimistic about the completion date of the project.
5. There may be unclear roles and responsibilities.
6. Things may go wrong for some natural reasons.
 The first challenge of project management is ensuring that a project is
delivered within the defined constraints. The second, more ambitious,
challenge is the optimized allocation and integration of the inputs needed
to meet those pre–defined objectives.
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 1.6. What is Project Management
 Project Management is the discipline of organizing and managing
resources in such a way that these resources deliver all the work
required to complete a project within defined scope, time, and
cost constraints.
 Project management is:
– an organized venture for managing projects.
– “…the application of knowledge, skills, tools and techniques to
project activities in order to meet stakeholders needs and
expectations from a project.” – (PMI, 1996):PMBOK
– “The process by which projects are defined, planned, monitored,
controlled and delivered so that agreed benefits are realized,” –
(APM, 2006): PMBOK
– “is the skills, tools and management processes required to
undertake a project successfully”.
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 Project management comprises: Con’d
 A set of Skills. Specialist skills and experience are required
to reduce the level of risk within a project and thereby
enhance its likelihood of success.
A Suit of Tools. Various types of tools are used by project
managers to improve their chances of success. Examples
include registers, planning software, modelling software,
audit checklist and review forms.
 A Series of Processes. Various management techniques
and processes are required to monitor and control time,
cost, quality and scope of projects.
Examples include time management, quality management,
change management, risk management, etc.

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 1.7. Benefits of Project Management
• Effective project management helps individuals, groups, and
public and private organizations to:
 Meet business objectives;
 Satisfy stakeholder expectations and improve customer
relationships;
 Be more predictable;
 Increase chances of success;
 Deliver the right products at the right time;
 Resolve problems and issues;

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 Con’d
 Respond to risks in a timely manner;
 Optimize the use of organizational resources;
 Identify, recover, or terminate failing projects;
 Manage constraints (e.g., scope, quality, schedule, costs,
resources);
 Balance the influence of constraints on the project (e.g.,
increased scope may increase cost or schedule); and
 Manage change in a better manner.
 Better control of financial, physical, and human resources.
 Lower costs and improved productivity.

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 1.8. Functions of the Project Managers
• A project manager is a professional in the field of
project management.
• He/she has the responsibility of the planning and
execution of any project.
• A project manager's central duty is to ensure the
success of a project by minimizing risk throughout
the lifetime of the project.
– This is done through a variety of methods, both
formal and informal.

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 Con’d
 Project managers perform the following major functions:
1. Plan work (scope, budget, schedule),
2. Obtain and manage resources,
3. Resolve conflicts and problems,
4. Motivate people
5. Communicate to the team, to the organization, and to
the clients,
6. Set priorities,
7. Make decisions,
8. Control technical quality, budget, and schedule
9. Integrate multiple skills

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Success for Project Managers
• There are three general preconditions for achieving lasting
success as Project Manager. These include:
1. Ability (A)
2. Motivation to manage (M)
3. Opportunity (O)
• Together, they constitute the basic formula for managerial
success (S): S = A x M x O

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 1.9. History of Project Management
• Some people argue that building the Egyptian pyramids
was a project, as was building the Great Wall of China
• Most people consider the Manhattan Project to be the first
project to use “modern” project management
• This three-year, $2 billion (in 1946 dollars) project had a
separate project manager and a technical manager
• Early Gantt Charts, first used in 1917, were drawn by
hand.
• Network diagrams were first used in 1958 on the Navy
Polaris project, before project management software was
available.
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 1.10. Project Management Today
• Today, modern project management has emerged as a
premier solution in business operations.
• Large and small organizations recognize that a structured
approach to planning and controlling projects is a necessary
core competency for success.
• International organizations such as the Project Management
Institute (PMI) and the International Project Management
Association (IPMA) promote project management by providing
professional development programs.
• PMI offers Project Management Professional (PMP)
certification to those who demonstrate competency in the
field of project management through education and
experience and by passing a rigorous certification exam.
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 Con’d
• PMI sets standards and accredits degree granting educational
programs in project management.
• In 1987, PMI published the first Project Management Body of
Knowledge (PMBOK) in an attempt to document and
standardize generally accepted project management
information and practices.
• Universities offer undergraduate and graduate degree
programs in project management.
• Organizations such as PMI and Project World hold symposia
and seminars throughout the year, which are great
opportunities to increase basic skills, get new ideas by hearing
current success stories, and network with other professionals.

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1.11. Project Management Standards

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Project Management Standards
(What Are They?)
• A Project Management Standard can be
considered as a set of processes and tools
which serve as a guide for developing,
planning, managing and implementing as
well as monitoring, evaluating and
controlling projects so that they achieve
their goal within their specified time-
frames and allocated budgets to the
satisfaction of their key stakeholders.

• The Standard must be consistent with the

organization’s nature, structure, culture
and other project-related frameworks.
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Project Management Standards
(Why Use Them?)

• Using a mature and proven

Project Management Standard on
projects ensures a higher
likelihood that the projects will be
undertaken success-fully.

• Using a Standard also gives

assurance to (primary) project
stakeholders that the resources
which are being used on a project
are being effectively and
efficiently managed.
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Project Management Standards
(A Note of Caution)
• Using a Project Management
Standard – even in the most
professional possible way - is no
guarantee that the project
undertaken will be successful!

• All what a Project Management

Standard basically does is ensure
that the likelihood of project
success will be greater than
would be the case of no Standard
was applied or a Standard is not
carefully applied.
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Project Management Standards
(When and How to Use Them?)
• A Standard should be used on every
project an organization undertakes.
However, the intensity of the standard
must be consistent with the project’s
complexity and the resources
allocated to it. It is, for example,
inappropriate to use a standard’s
entire gamut of sophisticated tools on
a simple and inexpensive project of
very short-term duration and
consisting of a handful of activities
which are performed by two or three
persons.

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Project Management Standards
(Focus on Best Practices)

• Project Management Standards are

not static in nature. They are still
evolving as the environments in
which projects are being undertaken
changes and new issues and
challenges emerge.

• High-powered Project Management

Standards, such as the Project
Management Institute’s Body of
Knowledge (3rd Edition) incorporate
“best practices” in project manage-
ment accumulated over the years.
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 Benefits of a Project Management Standard
(Some Examples)

• Higher likelihood of the Project Succeeding (i.e. achieving its

goal within time and budget and to the satisfaction of all key
stakeholders)
• Consideration of Project Requirements and Specifications
• Efficient Use of Project Resources
• Higher-Quality Deliverables and Project Output
• Customer or End-User Satisfaction
• Avoidance of Common Project-related Pitfalls and Mistakes
• Proactive Approach to Managing Risk
• All Stakeholders Know What to Expect
• Systematic Project Monitoring, Evaluation and Control
• Standardized Documentation 44
 1.12. Organization Breakdown Structure (OBS)
• Organization Breakdown Structure or OBS is a hierarchical model
describing the established organizational framework for project
planning, resource management, time and expense tracking, cost
allocation, revenue/profit reporting, and work management.
• It can be defined as a model that is structured to help identify which
employees will be responsible for specific parts of a project.
• Work Breakdown Structure (WBS) captures all elements of projects in
an organized fashion.
• Breaking down large, complex projects into smaller project pieces
provides a better framework for organizing and managing current
and future projects.
• WBS facilitates resource allocation, task assignment, measurement
and control of project cost and billing.
• The WBS is utilized at the beginning of the project to define scope,
identify cost centres and is the starting point to developing project
plans/Gantt charts. 45
 Con’d
• The Organization Breakdown Structure groups together similar
project activities or “work packages” and relates them to the
organization’s structure.
• OBS (also known as Organizational Breakdown Structure) is used
to define the responsibilities for project management, cost
reporting, billing, budgeting and project control.
• The OBS provides an organizational rather than a task-based
perspective of the project.
• The hierarchical structure of the OBS allows the aggregation
(rollup) of project information to higher levels.
• To develop an Organization Breakdown Structure:
1. Draw of the entire organization as a hierarchy
2. Define all departments and project teams.
3. Specify functional (where cost for the work the user does is
allocated to) and approval (who approves the work the user
performs and any leave time approvals) groups for every user. 46
 Sample Organization Breakdown Structure
• .

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 1.13. Organizational Theory and Structures
1.13.1. Organization theories
•Organizational theory was a product of the industrial revolution to
help businesses appropriate their workforce.
•Workers' values and motivations became an important factor
around the 1960s as businesses were expanding, and it was
necessary for them to have managers function more
autonomously.
•Organizational theory is the sociological study of formal social
organizations, such as businesses and bureaucracies, and their
interrelationship with the environment in which they operate.
•It complements the studies of organizational behaviour and
human resource studies.
•Organisational theory means the study of the structure,
functioning and performance of organisation and the behaviour of
individual and groups within it. 48
 Con’d
• There are several theories which explain the organization and
its structure.
1. Classical Or Traditional Organization Theory
1.1. Scientific Management approach
1.2. Weber's Bureaucratic approach
1.3. Administrative theory.
2. Neoclassical Or Human Relation Theory
3. Modern Organization Theory
3.1. Systems approach
3.2. Socio-technical approach
3.3. Contingency or Situational approach

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1.1. Scientific management approach
• The scientific management approach is based on the concept
of planning of work to achieve efficiency, standardization,
specialization and simplification.
• The approach to increased productivity is through mutual trust
between management and workers.
• This theory was introduced by Frederick Winslow Taylor to
encourage production efficiency and productivity.
• Taylor argues that inefficiencies could be controlled through
managing production as a science.
• Taylor (1947) proposed four principles of scientific
management:
– Science, not rule-of-thumb;
– Scientific selection of the worker
– Management and labour cooperation rather than conflict
– Scientific training of workers 50
1.2. Weber's bureaucratic approach
• Weber's bureaucratic approach considers the organization as a part
of broader society. The organization is based on the principles of:
• structure;
• specialization;
• predictability and stability;
• rationality; and
• democracy.
• Observe that this approach is considered rigid, impersonal, self-
perpetuating and empire building.
• Official Jurisdiction on all areas are ordered by rules or laws already
implemented. There is an office hierarchy; a system of super- and
subordination in which there is supervision of lower office by higher
ones.
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 1.3. Administrative theory
• Administrative theory was propounded by Henry Fayol and is based
on several principles of management.
– In addition, management was considered as a set of planning,
organizing, training, commanding and coordinating functions.
• This theory made its contribution on the managerial aspect of an
organisation.
• The theory is very much associated with the proper understanding of
the task of management.
• It provides directions or principles how to activate management
effectively.
• Henry Fayol stressed effective management principles from his past
experience as a businessman. He separated technical and
administrative activities of management to distinguish them as two
separate activities.

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2. Neoclassical Or Human Relation Theory
• The Neoclassical perspective began with the Hawthorne studies in the
1920s.
• Neoclassical theory emphasizes individual or group behaviour and
human relations in determining productivity.
• The main features of the neoclassical approach are individual, work
group and participatory management.
• The theory states that while designing an organisation structure, the
people who are employed there and their behaviour should be taken
into consideration. No manager can think solely of job descriptions,
he has also to think of why people behave as they do and what
influences their behaviour.
• This approach gave emphasis to “affective and socio-psychological
aspects of human behaviours in organizations.”
• The Hawthorne study suggested that employees have social and
psychological needs along with economic needs in order to be
motivated to complete their assigned tasks.
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3. Modern Organization Theory
 Modern theories are based on the concept that the organization is
an adaptive system which has to adjust to changes in its
environment.
 Discuss the important characteristics of the modern approach to
organizations.
 Modern theories include the systems approach, the socio- technical
approach, and the contingency or situational approach.
Characteristics of modern approaches to the organization
Systems viewpoint
 Dynamic process of interaction
 Multi-levelled and multidimensional
 Multi-motivated
 Probabilistic
 Multidisciplinary
 Descriptive
 Multivariable
 Adaptive 54
3.1. Systems approach
The systems approach considers the organization as a system
composed of a set of inter-related - and thus mutually
dependent - sub-systems.
This approach emphasises that we should not deal with
problems in isolation, but consider their interactions.
Thus the organization consists of components, linking
processes and goals .
The systems approach COMPONENTS
The individual
The formal and informal organization
Patterns of behaviour
Role perception
The physical environment
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 3.2. Socio-technical approach
The socio-technical approach considers the organization
as composed of a social system, technical system and its
environment.
These interact among themselves and it is necessary to
balance them appropriately for effective functioning of the
organization.

56
3.3. Contingency or situational approach
The contingency or situational approach recognizes that
organizational systems are inter-related with their
environment and that different environments require
different organizational relationships for effective working
of the organization.
This theory is a class of the behavioural theory that claims
that there is no best way to organize a corporation, to lead a
company, or to make decisions. An organizational,
leadership, or decision making style that is effective in some
situations, may not be successful in other situations. The
optimal organization, leadership, or decision making style
depends upon various internal and external constraints
(factors).
57
 1.13.2. Organizational Structure
• Organizational structure refers to the way in which a group
is formed, its lines of communication, and its means for
channeling authority and making decisions.
• It clarifies the formal relationships of individuals in the
various positions within the organization
• It determines the manner and extent to which roles, power,
and responsibilities are delegated, controlled, and
coordinated, and how information flows between levels of
management.
• There are different classifications of organizational
structures. Among these classifications, there are two main
types of organizational structures:
1) Tall or Centralized Organizational Structure
2) Flat or Decentralized Organizational Structure
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1. Centralized (Tall) Organizational Structure

• Large, complex organizations often require a taller hierarchy.

• In its simplest form, a tall structure results in one long chain
of command similar to the military.
• As an organization grows, the number of management levels
increases and the structure grows taller. In a tall structure,
managers form many ranks and each has a small area of
control.

59
 Con’d

Top mgt to take

Decision

Exercise of Control
over

Departments and
Divisions

• In a centralized structure, the decision making power is

concentrated in the top layer of the management and tight
control is exercised over departments and divisions

60
 Advantages and Disadvantages of Centralized (Tall) Structure
ADVANTAGES:
1. The quality of performance will
improve due to close supervision.
2. Discipline will improve.
3. Superior - Subordinate relations will
improve.
4. Control and Supervision will become
easy and convenient.
5. The manager gets more time to plan
and organize the future activities.
6. The efforts of subordinates can be
easily coordinated.
7. Tall Organization encourages
development of staff.
8. There is mutual trust between superior
and subordinates
DISADVANTAGES:
1. Tall Organization creates many levels of
management.
2. There are many delays and distortion in
communication.
3. Decisions and actions are delayed.
4. It is very costly because there are many
managers. The managers are paid high
salaries.
5. It is difficult to coordinate the activities of
different levels.
6. There is strict supervision. So the
subordinates do not have any freedom.
7. Tall Organization is not suitable for
routine and standardized jobs.
8. Here, managers may became more
dominating.
61
1. Decentralized (Flat) Organizational Structure

• Flat structures have fewer management levels, with each level

controlling a broad area or group.
• Flat organizations focus on empowering employees rather
than adhering to the chain of command.
• By encouraging autonomy and self-direction, flat structures
attempt to tap into employees’ creative talents and to solve
problems by collaboration.

62
 Con’d

Central
Governance

Dept-3

• In a decentralized structure, the decision making power is

distributed and the departments and divisions have varying
degrees of autonomy.
63
 Advantages and Disadvantages of Flat Structure
ADVANTAGES
1. Flat Organization is less costly
because it has only few
managers.
2. It creates fewer levels of
management.
3. Quick decisions and actions
can be taken because it has
only a few levels of
management.
4. Fast and clear communication
is possible among these few
levels of management.
5. Subordinates are free from
close and strict
and control. supervision
6. It is more suitable for routine
and standardized activities.
7. Superiors may not be too
dominating because of large
numbers of subordinates.
DISADVANTAGES
1. There are chances of loose control because
there are many subordinates under one
manager.
2. The discipline in the organization may be
bad due to loose control.
3. The relations between the superiors and
subordinates may be bad. Close and informal
relations may not be possible.
4. There may be problems of team work
because there are many subordinates under
one manager.
5. Flat organization structure may create
problems of coordination between various
subordinates.
6. Efficient and experienced superiors are
required to manage a large number of
subordinates.
7. It may not be suitable for complex activities.
8. The quality of performance may be bad 64
 1.14. Project organization structures
• An organization is like an organic system and such a system
must be dynamic in nature; that is, it must be capable of rapid
restructuring, in an attempt to adapt to the changing
conditions in the environment so that it can survive.
• Organization can be grouped into major subdivisions on the
basis of
– a number of frameworks.
– Responsibilities & type of work for each subdivision
– Official lines of authority & communication
• Organization structures represents the management
hierarchy:
– Reporting relationships who report to whom
– The official chain of control or authority, which deals of
official activities, such firing, hiring, and promotion.
65
 Con’d
• The organizational structure strongly influences how
efficiently project management operates.
• Organizational structures typically span the spectrum from
functional to project, with a variety of matrix structures in
between.
• Any of these variations might be appropriate and effective if
the advantages and disadvantages are understood and
handled properly.
• There are three forms of organization structures are:
1. Functional organizational structure
2. Project organizational structure
3. Matrix organizational structure

66
1. The Functional (Pure Line) Organization Structure
• It does not have a specific position for project managers.
• Directors of the functional divisions manage both project and
functional personnel. They are responsible for defining
requirements, scheduling work, setting priorities, providing
facilities, acquiring and managing resources, adhering to
company policies, and ensuring quality.
• People are assigned to work on projects for which their skills
and services are needed. They might be moved around within
the division wherever they are needed.
• Project managers are specialist or line managers who are
aligned to the project for a specific time.
• The project is divided into partial tasks and delegated to
responsible departments.
• The team members continue to report to their line-directors
67
and upper managers
 Con’d
• .

68
 The advantages
• Reduced overhead, as no additional project team members
have to be hired
• Provides clearly marked career paths for hiring and promotion
• Employees work alongside colleagues who share similar
interests, therefore the expertise of the team members stays
within their departments
• No structural change for running the project required
• Flexibility for changes in the project scope
• Easy post-project transition as the project team members
simply continue doing their line job again.
• Projects can be completed more accurately since project
managers and team members have expertise in the functional
area.
69
  The disadvantages
• The focus on the needs of the functional division might make
it difficult to see and respond to the needs of the organization
as a whole. Enterprise policies and practices might not be
enforced uniformly across divisions.
• Project control and status reporting to upper management is
not standardized across the organization. It might be difficult
for senior executives to manage the various projects within
the organization.
• Project costs tend to have little or no accounting. Many
aspects of a project are handled as ongoing functional work of
the division, so it might be difficult to identify and account for
the true cost of a project.
• The distinction between project and functional roles might be
vague and projects might be lost in routine work. 70
 Con’d
• Lack of ownership discourages strong commitment to project-
related activities since the project may be seen as an
additional burden that is not directly linked to their
professional development or advancement.
• Co-ordination of functional tasks is difficult as little reward for
co-operation with other departments is granted since
authority resides with functional supervisor. There may be
poor integration across functional units since functional
specialists tend to be concerned only with their segment of
the project and not with what is best for the total project.
• Slow reaction time due to long communication lines within
the project. It generally takes longer to complete projects due
to slow response time-project information and decisions have
to be circulated through normal management channels.
71
 2. The Project Organizational Structure
• Here, projects are centralized in a separate division of skilled project
managers that serves the project management needs of all divisions
of the company.
• This is often referred to as a project office and is becoming
increasingly popular in organizations.
• The project as a free-standing part of the parent organization the
project manager is fully responsible for a group of specialists, which
have temporarily dedicated their entire workforce to the project
Characteristics
• A central group is responsible for planning, controlling, managing,
and reporting the progress of all projects in the organization.
• Project managers have a great deal of independence and authority.
• Team members can be collocated.

72
 Project organization structure
• .

73
 The advantages
 A formal project management system is adopted and
applied uniformly throughout the organization which
typically creates high efficiency in the organization.
 Common standards of planning, controlling, and reporting
exist throughout the life of each project and are applied
across all projects which aid communication and provide
efficiency.
 Highly-skilled project managers can be available for the
benefit of all. Costs can be reduced by using common tools
(such as project management software) to manage all
projects.
 All projects of the organization can be managed as a whole.

74
 Con’d
 Simple and fast, as the project manager has full line
authority over the project and all members of the project
team are reporting directly to the project manager
 The lines of communication are shortened; the ability to
make a swift decision is enhanced
 A cross-functional integration is supported as a pure
project organization can maintain a permanent cadre of
experts who develop skills in specific technologies
 A project team that has a strong and separate identity and
develops a high level of commitment from its members
 The organizational structure tends to support a holistic
approach to the project

75
  The disadvantages

 Qualified technical leaders might be scarce. Project

managers might not have the technical background needed
for a project, and might have little access to people with the
appropriate knowledge and skills.
 Project managers might seem unresponsive to the needs of
people who request their time and skills. Because project
managers are located in a separate project office, they
might become out of touch with the needs and practices of
individual departments.
 Each project has to be fully staffed which can lead to a
duplication of staff numbers

76
 Con’d
 Project managers tend to stockpile equipment and technical
assistance as this represents the importance of their project
within the organization
 Pure project groups seem to foster inconsistency in the way
in which policies and procedures are carried out
 In a pure project organization , the project takes on a life of
its own, with own rules and processes
 The post-project transition is difficult as there tends to be
concern among team members about career after the
project ends

77
 3. A Matrix Organizational Structure
• It is a hybrid of the two main types (a combination of a
functional and a pure project Organization which combines
the advantages of the pure functional structure and the
project organizational structure.
• It allows for participation on multiple projects while
performing normal functional duties.
• A greater integration of expertise and project requirements
can be achieved.
• Each project manager reports directly to the vice president
and general manager.
• There are two chains of command (functional and project)
• Project participants report simultaneously to both functional
and project managers.
78
 Con’d
 The project manager has total responsibility and accountability
for project success.
 Because a matrix organization has characteristics of both the
project and functional organizations, project personnel report
both to functional and project lines.
 Project personnel report to a functional manager for definition
of requirements, feasibility and economic evaluation, changes
in priorities, allocation of work, and ultimate success or failure
in meeting their goals.
 Project personnel report to a project manager for refining tasks
and assignments, planning and budgets, and project schedules.
 The project team has a dual reporting role to a project
manager, coordinator, or expediter (who provides project
management skills) and a functional manager (who provides
technical and functional skills).
79
 Different Matrix Forms
• Weak Form
– The authority of the functional manager predominates and
the project manager has indirect authority.
• Balanced Form
– The project manager sets the overall plan and the
functional manager determines how work to be done.
• Strong Form
– The project manager has broader control and functional
departments act as subcontractors to the project.

3–80
A. A strong matrix organizations
 It is most closely resemble the pure project organization, with a full-
time project manager who has significant authority and a project
administrative staff.
 The project manager decides work- and personnel-progress; the line
manager provides resources and consults the project manager as a
specialist.
 The project manager has more power than the functional manager.
 This form attempts to create the "feel' of project team within a
matrix environment. 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.
 The functional manager has title over her/his people and is
consulted on a need basis.
81
– .
A strong matrix organization

82
B. A weak matrix organization
It is most closely resembles the functional form with the
exception that there is a formally designated project manager
responsible for coordinating project activities..
The project manager only co-ordinates the contributions of the
different departments, the authority stays with the department-
directors.
Functional managers are responsible for managing their segment
of the project.
The project manager basically acts as a staff assistant who draws
the schedules and checklists, collects information on status of
work, and facilitates project completion.
The project manager has indirect authority to expedite and
monitor the project.
 Functional managers call most of the shots and decide who does
what and when the work is completed. 83
–A
. Weak matrix organization

84
C. The balanced matrix organization
It lies in between the others.
Project and line managers approximately have equal competence
and agree upon a common decision.
This is the classic matrix in which the project manager is responsible
for defining what needs to be accomplished while the functional
managers are concerned with how it will be accomplished.
More specifically, the project manager establishes the overall plan
for completing the project, integrates the contribution of the different
disciplines, sets schedules, and monitors progress.
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.
The manager of "what and how" requires both parties to work
closely together and jointly approve technical and operational
decisions
85
– Balanced
. matrix organization

86
 The advantages of matrix organizational structure
 A matrix structure capitalizes on the advantages of both a
project structure (project office) and a functional structure.
Personnel and skills are less redundant, and when expertise is
scarce, it can be applied more flexibly and efficiently to
different projects.
 The focus on teamwork easily accommodates changes in
personnel requirements.
 The expertise of both project and functional management is
available to assist in the project, and both can be applied to
handle complex issues and coordinate various tasks. This can
often result in completing the project in less time and at lower
cost.
 The advantages of some functional organization and project
team structure are retained
87
 Con’d
 Resources can be co-ordinated in a way that applies them
effectively to different projects
 Team Members can maintain contact with project teams as
well as with their functional department colleagues, they can
be chosen in-time, according to the needs of the project
 The project team will be more agile and able to view
problems in a different way as specialists have been brought
together in a new environment.
 Project managers are directly responsible for completing the
project by a specific deadline and budget.
 Team members can return to their old line responsibility after
finishing the project

88
 Con’d
 In short matrix organizational structure has the following
advantages:
1. Efficient. Resources can be shared across multiple projects as well
as within func­tional divisions.
2. Strong Project Focus. A stronger project focus is provided by
having a formally designated project manager who is responsible
for coordinating and integrating con­tributions of different units.
3. Easier Post-Project Transition. Because the project organization
is overlaid on the functional divisions, specialists maintain ties
with their functional group, so they have a homeport to return to
once the project is completed.
4. Flexible. Matrix arrangements provide for flexible utilization of
resources and ex­pertise within the firm. In some cases functional
units may provide individuals who are managed by the project
manager. In other cases the contributions are monitored by the
functional manager.
89
 The disadvantages of matrix organizational structure
 Dual management lines make communications more difficult
to manage. When team members receive conflicting
instructions from project and functional managers, time and
effort are wasted clarifying the communication. The team
might be unable to react fast enough to meet changing project
requirements.
 Conflicts and competition can exist between project and
functional management. In the process of resolving conflicting
priorities, project personnel can become confused and
demoralized.
 Potential for conflict between functional vs. project groups due
to unclear responsibilities as the principle of unity of command
is violated with a matrix organization

90
 Con’d
 A conflict of loyalty between line managers and project
managers over the allocation of resources
 Costs can be increased if more (project) managers are created
through the use of project teams
 The balance of power between the project and functional
areas is very delicate
 The division of authority and responsibility in a matrix
organization is complex and uncomfortable for the project
manager
 Project workers have at least two bosses, their functional
heads and the project manager.

91
 Con’d
 In short matrix organizational structure has the following
disadvantages:
1. Dysfunctional Conflict. The matrix approach is founded on
tension between functional managers and project managers who
bring critical expertise and perspectives to the project.
2. Infighting. Any situation in which equipment, resources, and
people are being shared across projects and functional activities
lends itself to conflict and competition for scarce resources.
3. Stressful. Matrix management violates the management principle
of unity of command. Project participants have at least two
bosses-their functional head and one or more project managers.
4. Slow. In theory, the presence of a project manager to coordinate
the project should accelerate the completion of the project. In
practice, decision making can get bogged down as agreements
have to be forged across multiple functional groups. This is
especially true for the balanced matrix. 92
– .

93
94