Chapter 2: Organization Structure

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 Project Management Structures
• Challenges to Organizing Projects
– The uniqueness and short duration of projects relative to ongoing
longer-term organizational activities
– The multidisciplinary and cross-functional nature of projects
creates authority and responsibility dilemmas.
• Choosing an Appropriate Project Management
Structure
– A project management system provides a framework for launching
and implementing project activities within a parent organization.
– The best system balances the needs of the project with the needs
of the organization by defining the interface between the project
and parent organization in terms of authority, allocation of
resources, and eventual integration of project outcomes into
mainstream operations.

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 Project Management Structures
• Organizing Projects: Functional organization
– Different segments of the project are delegated
to respective functional units.
– Coordination is maintained through normal
management channels.
– Used when the interest of one functional area
dominates the project or one functional area has
a dominant interest in the project’s success.

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Functional Organizations

FIGURE 3.1

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Functional Organization
 Functional Organization of Projects
• Disadvantages
Advantages
1.
1. Lack
No Structural
of Focus Change
2.
2. Poor
Flexibility
Integration
3.
3. Slow
In-Depth Expertise
4.
4. Lack
Easy of
Post-Project
OwnershipTransition

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Functional Organization of Projects (advantages)

1. No Structural Change
• Projects are completed within the basic functional structure
of the parent organization. There is no radical alteration in
the design and operation of the parent organization
2. Flexibility
• There is maximum flexibility in the use of staff. Switching of
appropriate specialists between projects
3. In-Depth Expertise
• With narrow scope, in-depth expertise can be brought to
bear on the most crucial aspects of the project.
4. Easy Post-Project Transition
• Normal career paths within a functional division are
maintained.

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 Functional Organization of Projects (disadvantages)

1. Lack of Focus
• Each functional unit has its own core routine work to do;
responsibilities get pushed aside to meet primary obligations.
• Different priorities for different units.

2. Poor Integration
• Functional specialists tend to be concerned only with their
segment of the project
3. Slow
• Slow response time—project information and decisions have
to be circulated through normal management channels.
4. Lack of Ownership
• Week motivation; additional burden; no identification; Lack of
ownership discourages strong commitment.

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 Project Management Structures (cont’d)
• Organizing Projects: Dedicated Teams
– Teams operate as separate units under the leadership
of a full-time project manager.
– The interface between the parent organization and the
project teams will vary between tight rein through
financial controls or maximum freedom to get the
project done.
– Projects are the dominant form of business
(construction firm or a consulting firm).
– In a projectized organization where projects are the
dominant form of business, functional departments are
responsible for providing support for its teams.
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Dedicated Project Team

FIGURE 3.2

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 Project Organization: Dedicated Team
• Advantages • Disadvantages
1. Simple 1. Expensive
2. Fast 2. Internal Strife
3. Cohesive 3. Limited Technological
4. Cross-Functional Expertise
Integration 4. Difficult Post-Project
Transition

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 Project Organization: Dedicated Team (advantages)

1. Simple
• the functional organization remains intact with the project team
operating independently
2. Fast
• Participants devote their full attention to the project and are
not distracted by other obligations and duties. Response time
tends to be quicker because most decisions are made within
the team and are not deferred up the hierarchy.
3. Cohesive
• Participants share a common goal and personal responsibility
toward the project and the team.
4. Cross-Functional Integration
• Specialists from different areas work closely together and
become committed to optimizing the project.
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Project Organization: Dedicated Team (disadvantages)

1.Expensive
•Project manager and resources are assigned on a full-time basis
(duplication of efforts across projects and a loss of economies of
scale).
2.Internal Strife
•A disease known as projectitis develops; A strong we–they
divisiveness emerges between the project team and the parent
organization. Miss-integration of outcomes into mainstream
3.Limited Technological Expertise
•Technical expertise is limited somewhat to the talents and
experience of the specialists assigned to the project.
4.Difficult Post-Project Transition
•Transition back of employees to their original functional
departments may be difficult (prolonged absence)
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Projectized Organizational Structure

FIGURE 3.3

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Projectized Organization
 Project Management Structures (cont’d)
• Organizing Projects: Matrix Structure
– Hybrid organizational structure (matrix) is overlaid on
the normal functional structure.
• Two chains of command (functional and project)
• Project participants report simultaneously to both functional and
project managers.
– Matrix structure optimizes the use of resources.
• Allows for participation on multiple projects while performing
normal functional duties.
• Achieves a greater integration of expertise and project
requirements.
• Designed to optimally utilize resources by having individuals work
on multiple projects as well as being capable of performing normal
functional duties.
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Matrix Organization Structure

FIGURE 3.4

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 Division of Project Manager and Functional
Manager Responsibilities in a Matrix Structure

Project Manager Negotiated Issues Functional Manager

What has to be done? Who will do the task? How will it be done?

When should the task be done? Where will the task be done?

How much money is available Why will the task be done? How will the project involvement
to do the task? impact normal functional activities?

How well has the total project Is the task satisfactorily How well has the functional
been done? completed? input been integrated?

TABLE 3.1

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 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.

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 Different Matrix Forms (weak form)
– The authority of the functional manager predominates
and the project manager has indirect authority.
– This form is very similar to a functional approach with
the exception that there is a formally designated
project manager responsible for coordinating project
activities.
– Functional managers are responsible for managing
their segment of the project and decide who does
what and when the work is completed.
– The project manager basically acts as a staff assistant
who monitor the project indirectly and draws the
schedules and checklists, collects information on
status of work, and facilitates project completion.
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Weak Matrix Organization
Different Matrix Forms (balanced form)
– The project manager is responsible for defining what
needs to be accomplished while the functional
managers are concerned with how it will be
accomplished.
– 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.

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Balanced Matrix Organization
 Different Matrix Forms (strong form)
– Attempts to create the “feel” of a project team within a
matrix environment.
– The project manager controls most aspects of the
project, including scope trade-offs and assignment of
functional personnel as well as controls when and
what specialists do and has final say on major project
decisions.
– The functional manager has title over her people and
is consulted on a need basis.

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Composite Organization

PMO
 Project Organization: Matrix Form
• Advantages • Disadvantages
1. Efficient 1. Dysfunctional Conflict
2. Strong Project Focus 2. Infighting
3. Easier Post-Project Transition
3. Stressful
4. Flexible 4. Slow

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Project Organization: Matrix Form (advantages)

1. Efficient
• reduces duplication required in a projectized structure through
sharing resources & dividing personnel energy on as-needed basis.
2. Strong Project Focus
• provided by having a formally designated project manager who is
responsible for coordinating and integrating contributions of
different units.
3. Easier Post-Project Transition
• specialists maintain ties with their functional group, so they have a
homeport to return to once the project is completed.
4. Flexible
• provide for flexible utilization of resources and expertise within the
firm.

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 Project Organization: Matrix Form (disadvantages)

1. Dysfunctional Conflict
• 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
• 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
• Decision making can get slow down as agreements have to be
forged across multiple functional groups. (balanced matrix).
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Organizational Influences on Projects
 Choosing the Appropriate Project
Management Structure

• Organization (Form) Considerations

• Project Considerations

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 Choosing the Appropriate Project
Management Structure

• Organization (Form) Considerations

– How important is the project to the firm’s success?
– What percentage of core work involves projects?
• If over 75 percent of work involves projects, then an
organization should consider a fully projectized organization.
• If an organization has both standard products and projects,
then a matrix arrangement would appear to be appropriate.
• If an organization has very few projects, then a less formal
arrangement is probably all that is required.
– What level of resources (human and physical)
are available?

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 Choosing the Appropriate Project
Management Structure (cont’d)

• Project Considerations
– Size of project
– Strategic importance
– Novelty and need for innovation
– Need for integration (number of departments involved)
– Environmental complexity (number of external
interfaces)
– Budget and time constraints
– Stability of resource requirements

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 Organizational Culture (importance)
• There is a strong connection between project
management structure, organizational culture, and project
success.
• Organizations successfully manage projects within the
traditional functional organization because the culture
encouraged cross-functional integration.
• Conversely we have seen matrix structures break down
because the culture of the organization did not support
the division of authority between project managers and
functional managers.
• Companies relying on independent project teams
because the dominant culture would not support the
innovation and speed necessary for success.
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