Chapter 4: Project Management Organisational Structures and Standards

Project Management

Chapter 4: Project management organisational structures and standards

Introduction

-  The organisational structure defines the arrangement of resources within an organisation, and is sometimes summarised in the form of a organisation breakdown structure (OBS), which shows the main components of the organisation and how they relate to each other in terms of control and communication, and in terms of other linkages or connections that cement the various elements together

-  The project manager must look at the organisational structure of the existing organisation and be able to see how to initiate a project structure within this organisational structure. Alternatively, the project manager must establish an external project management structure and integrate it as fully as necessary within the existing internal structure of the organisation

-  Project teams can be established that are:

o  Wholly internal

o  Wholly external

o  Partly internal to the organisation but with external specialist support

o 

-  Pure project structure: no functional specialisations exist

-  Matrix structure: functional groupings exist, but project teams are formed across the rigid functional boundaries

-  Sub-forms of project structure:

o  Internal (operational/non-executive): large organisations, constant high volumes of repetitive work

o  External (executive project management): smaller, more responsive projects with more variable workloads and a more flexible approach

Organisational theory and structures

-  Despite all technological advances concerning project management software packages etc, project success or failure is still mostly determined by the organisation and management of the people involved

-  The organisational structure of the project and its members is critical because this defines the position of each individual within the system in terms of authority, span of control and other classic variables

-  The most common project management form is where a project team is working within an existing functional organisational structure.

The project within an existing organisation

-  The project team is formed by the organisation to carry out a task or project, and works at this as long as is necessary. When completed the team is disbanded or absorbed back into the organisation. The project therefore acts in addition to the normal functional processes

-  What the relationship between the organisation and the project should be is determined by:

o  The size of the project relative to the organisation

o  The relative status and importance of the project

o  The resources that are made available

o  The strategic fit of the project with the overall strategic objectives of the organisation

-  The functional structure:

o 

o  The need to specialise leads to the concentration of particular skills in separate divisions or areas, and each division concentrates on a specific aspect of the organisations overall objectives

o  Power or status is defined by the vertical hierarchy through the OBS

o  There are clear functional boundaries between the various specialisations

o  Projects within this organisational structure might be of strategic importance, but they are seldom the reason for the existence of the organisation. Projects in this environment often are often established to improve systems, procedures, methods or products, or alternatively to address specific demands within the organisation where a multidisciplinary team is enabled to work on a one-off and unique task

o  The functional structure is common in large organisations:

§  Central government

§  Local government

§  Police forces

§  The armed forces

§  Most large private companies

o  Benefits of functional structure:

§  Clear and reliable reporting system where rules and responsibilities are clearly defined

§  It mirrors the traditional authority structures in most organisations

§  Is simple and straightforward and is compatible with human instincts (of specialisation)

§  Functional objectives tend to be repetitive which allows knowledge transfer between tasks –> higher efficiency

§  A “library” of specialist knowledge can be built up and shared within the function

o  Disadvantages of functional structures:

§  Inflexible and poorly adapted to innovation and change

§  The functional outputs tend to be of primary importance. This may cause projects within the structure to be considered of secondary importance

§  Cross-functional activities are discouraged, and this acts as a brake on innovation

§  Functional responsibilities are often regarded as the key to career development. Project responsibilities may not be prioritised

§  Functional sections tend to develop sub-groups, which have boundaries that restrict effective communications

§  Large constant payrolls and overheads -> little flexibility

§  Tend to demand greater central support (IT, HR, Administration)

o 

§  The main drawback with a pure functional structure is the development of:

·  Operational/organisational islands: a segment of the organisation within the overall organisational structure, which acts as a semi-independent sector. There tends to be relatively little communication and co-operation across the functional divisions

-  Pure project structure

o  Is more or less the antithesis of the functional structure, and is appropriate to an entirely different range of organisational types. However, a pure project structure could exist as a self-contained section within a functional structure

o  Pure project structures are typically used for projects that are difficult to plan accurately and where resources requirements and provision levels cannot be accurately established beforehand (innovative work)

o 

o  There may be pools of potential team members to choose from and also a pool of potential project managers. The whole set of resources would be under the control of senior managers

o  Most projects within a functional organisation would tend to be internal projects for the sole benefit of the organisation itself

o  Project organisations often have total freedom within their limits of financial accountability, others have functional support provided by their parent organisation, and may also have total responsibility for the development and design of a new product

o  Project organisations can also exist as separate organisations. These tend to be large one-off projects where team members have responsibility solely for the project. The project itself is often of relatively long duration

o  Benefits of pure project structure:

§  Flexible and responsive to change

§  No restrictions on innovation and evolution

§  Operational costs can be adjusted to variations in workload

§  The project manager is the only authority link. No need for negotiating with functional managers or project sponsors

§  The responsibilities in regard to team member accountability and reporting is clearly defined with the project manager as “central authority”

§  Shorter formal communication lines and they can develop more quickly due to lack of authority barriers

§  Authority is contained within the project. No need for functional reporting and authority systems

§  Project team members are not distracted by functional career paths of functional commitments

§  Simpler and smaller centralised support systems required

§  Easier to incorporate external consultants

o  Disadvantages of pure project structure:

§  Several projects running simultaneously may lead to a duplication of effort in some areas unless these projects can be executed and controlled as a single formalised programme

§  Initial operating costs may be high due to possibility of long project duration

§  Some degree of centralised direction is needed, and higher levels of authority may have difficulties interfacing with the various programmes and projects

§  Project managers tend to think ahead, and pulling in resources early may increase costs

§  A sense of competition can develop between various project teams

§  Due to the characteristics of projects, the team members may not have the same sense of permanence and long-term financial security as within functional structures.

§  It can be difficult to compare the performance of different projects when they are of different natures

§  Most staff will have some form of functional specialisation. Prolonged absence may cause knowledge obsolescence

-  Matrix structure (internal or non-executive project management structure)

o  Pure project and pure functional structures really represents the extremes of organisational structure, and represent the limits of the appropriate format for operations ranging from mechanistic and repetitive (pure functional), to research and innovative (pure project structure)

o  Most large organisations however, operate somewhere in between these extremes. One type of compromise that makes use of both types of structure is the matrix structure.

o  Matrix structures encourages horizontal communication and accountability, neither of which are promoted in the existing functional structure, and is an attempt at combining the benefits of pure functional and pure project structures

o  The matrix structure is a pure project structure overlaid on the functional divisions of the parent organisation

o  The matrix structure is suitable for projects of all sizes and natures, where team members can be employed or assigned to projects either full time or part time whilst retaining their home in the functional discipline

o  Usually the technical decisions on the project are made by the function, whereas resourcing, scheduling and cost decisions are controlled by the project manager

o 

o  Strong matrix structures: are close to pure project structures and tend to be used on large projects where employees are assigned to projects on a long-term full-time basis, such as in large construction projects

o  Weak matrix structures: exist where the only full-time employee is the project manager, and everyone else is commissioned to the project on a short-time basis. This is common on smaller, shorter term projects

o  The strength of the matrix structure can therefore be said to be a function of component project time-scale and life span.

o  Matrix or internal project management structures are generally restricted to large organisations with a constant and predictable workload.

o  Main characteristics of internal project management structures are:

§  Functional boundaries

·  Run vertically through the system and defines areas of control of individual functions and are generally headed by an appropriate functional manager

·  Act as barriers to effective communication (invisible walls), where only higher level managers can see across the boundaries

·  The only gateways through these barriers at lower levels are called interfaces

§  Power or status boundaries

·  Run horizontally through the system, with a power structure developed (power triangle)

§  Organisational islands

·  Large organisations tend to be subdivided by vertical (functional) and horizontal (power) boundaries. Segments are created where two power boundaries and two functional boundaries define a specific grouping

§  A project sponsor

·  In an internal system the project manager and the functional managers share the same resources, conflicts and destructive competition can occur. To control and monitor the possibility of such occurrences a project sponsor is introduced

·  The project sponsor must have executive authority over both the project and functional manager

·  The project sponsor may have different roles and responsibilities concerning the project, but the most common role is that of moderator of conflicts, or “monitor” of project progress and development. He is the “fourth leg” on the project management chair

§  The project management chair

·  The project manager works within three levels of control and counter-control, and involves working and communicating across three different organisational interfaces at any one time:

o  Project manager-project sponsor (subordinate-boss)

o  Project manager-functional manager (peer-peer)

o  Project manager-project team (boss-subordinate)

§  Interfaces

·  The communication barriers caused by departmental segments (vertical and horizontal boundaries), could be of a physical and/or psychological nature

·  The gateways through any barrier where information can flow, is the interface. The traffic of information through an interface must be controlled through an interface management system

§  Interface management

·  One of the key requirements for an internal project manager is good interface management skills, making sure that the interface management system enables information to flow rapidly and accurately between the various components of the project team.

·  One of the objectives of the interface management system is to ensure that information goes to the right people and within a predetermined time

§  The process of bidding

·  With internal systems, the most usual way of resourcing project teams is through some form of bidding, where the project manager develops a resource allocation proposal, with approximated costs for labour, plant and materials.

·  This bid is then presented to the project sponsor for relay to senior management, where it is accepted or rejected

·  When bidding for individual people, the project tends to be granted a compromise, containing some people initially requested and some not requested. This is why organisational and leadership skills is essential for the project manager

§  Time recording and cost-centre charging

·  One of the most common causes of conflict is when team members, who are a part of both project and functional teams, are registering the time spent on activities. It is important that the cost is charged to the right cost centre.

·  ABC-systems (activity based costing) are often used on large projects, and involve computerised timesheet recording

o  Benefits of internal project management structures:

§  The project manager has executive control over the project as a self-contained unit

§  The project has reasonable access to the various functional units

§  The project retains flexibility and adaptability

§  The close link with functional units ensures that the project stays in touch with the operational objectives of the functional units and also with the overall strategic objectives of the organisation

§  Internal project management structures effectively spreads the risk between project and functional profitability

§  Internal project management systems allow for efficient balancing of functional and project resources provided necessary control systems are in place