The Organizational Context:Strategy, Structure, and Culture

Chapter 2

OUTLINES

• Understand how effective project management contributes to achieving strategic objectives

• Recognize three components of the corporate strategy model: formulation, implementation, and evaluation.and evaluation.

• See the importance of identifying critical project stakeholders and managing them within the context of project development

OUTLINES (Cont.)

• Recognize the strengths and weaknesses of three basic forms of organizational structure and their implications for managing projects

• Understand how companies can change their • Understand how companies can change their structure into “heavyweight project organization” structure to facilitate effective project management practices

• Identify the characteristics of three forms of project management office (PMO)

OUTLINES (Cont.)

• Understand key concepts of corporate culture and how cultures are formed

• Recognize the positive effects of a supportive organizational culture on project management

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organizational culture on project management practices versus those of a culture that works against project management.

Introduction• Organization’s strategy, structure and culture are integral

parts that create environment in which a project is to be operated.

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• These parts provide the backdrop around which project activities must operate, so understanding what is beneath these issues is paramount.

Projects and Organizational Strategy

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Strategy

Projects and Organizational Strategy

Strategic management – the science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.

Consists of:– Developing vision and mission statements– Formulating, implementing and evaluating– Cross functional decisions– Achieving objectives

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Projects Reflect Strategy

Projects are stepping stones of corporate strategy

The firm’s strategic development is a driving forcebehind project development

Some examples include:

A firm wishing to… …may have a projectredevelop products or processes to reengineer products or

processes.

changes strategic direction or product portfolio configuration

to create new product lines.

improve cross-organizational communication & efficiency

to install an enterprise IT system.

Some examples include:

Relationship of Strategic Elements

Mission

Fig 2.1

Objectives

Goals ProgramsStrategy

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Stakeholder Management

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Stakeholder Management

Stakeholders are all individuals or groups who have an active stake in the project and can potentially impact, either positively or negatively, its development.

Sets of project stakeholders include:

Internal Stakeholders• Top management• Accountant• Other functional managers• Project team members

External Stakeholders• Clients• Competitors• Suppliers• Environmental, political,

consumer, and other intervenor groups

Project Stakeholder Relationships

Other Other Other Other Functional Functional Functional Functional ManagersManagersManagersManagers

External External External External EnvironEnvironEnvironEnviron

mentmentmentment

Parent Parent Parent Parent OrganizOrganizOrganizOrganiz

ationationationation

ClientsClientsClientsClientsProject

Manager

ProjectProjectProjectProject

TeamTeamTeamTeamAccountAccountAccountAccount

antantantant

Top Top Top Top ManageManageManageManage

mentmentmentment

Fig 2.3

Client Client Client Client • Concerned with the duration of receiving the project• Seek the right to make suggestions and request

alternations in project features

External Stakeholders

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• Result-oriented without overly involvement in project running

• Difficult to raise additional expenditure to client • May consist of a number of interest conflict clients• Communication must be done in business languages to

suit various clients.

CompetitorsCompetitorsCompetitorsCompetitors• Similar projects launched alter the project course of direction• Derive plausible lessons from competitor failures

SuppliersSuppliersSuppliersSuppliers• Raw material or resources provider

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• Raw material or resources provider• Ensure supplier receives the input information• Ensure supplier delivers items accordingly

Intervenor groupsIntervenor groupsIntervenor groupsIntervenor groups• Environmental, political, social, community-activist, or consumer

groups.• Effects asserted either positive or negative

Internal StakeholdersTop managementTop managementTop managementTop management• Control over project managers• Giving the initial ‘go’ decision, sanctions additional resource

transfers, supports and protects project managers.

AccountingAccountingAccountingAccounting• Support and actively monitor project budgets.

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• Support and actively monitor project budgets.

Functional managersFunctional managersFunctional managersFunctional managers• Project members – individuals on loan from departments• Divided loyalties among team members• Performance evaluations are conducted by functional managers

Project team membersProject team membersProject team membersProject team members• Motivation, commitment and productivity

Project Stakeholder Management Cycle

Identify Stakeholders

Gather Information on Stakeholders

Implement Stakeholder Management

Strategy

Fig 2.4

Project Management Team

Determine Stakeholder Strengths & Weaknesses

Strategy

Identify Stakeholders

Mission

Predict Stakeholder

Behavior

Identify Stakeholder

Strategy

Organizational Structure

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Organizational Structure

Organizational Structure

Consists of three key elements:

1. Designates formal reporting relationships– number of levels in the hierarchy– span of control

2. Groupings of:– individuals into departments– departments into the total organization

3. Design of systems for– effective communication– coordination– integration across departments

Forms of Organization Structure

• Functional organizations – group people performing similar activities into departments

• Project organizations – group people into • Project organizations – group people into project teams on temporary assignments

• Matrix organizations – create a dual hierarchy in which functions and projects have equal prominence

Functional organizations – group people performing similar activities into

departments

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Functional Structures for Project Management

Strengths Weaknesses1. Firm’s design maintained

2. Fosters development of in-depth knowledge

1. Functional siloing

2. Lack of customer focusdepth knowledge

3. Standard career paths

4. Project team members remain connected with their functional group

3. Projects may take longer

4. Projects may be sub-optimized

Functional Siloing Effect

• Siloing occurs when similar people in a work group are unwilling or unable to consider alternative viewpoints, collaborate with other groups or work in cross-functional ways.

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• Leads to interdepartmental arguments for crashing of interests and priority.

Project organizations – group people into project teams on temporary assignments

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Project Structures for Project Management

Strengths Weaknesses

1. Project manager sole authority

2. Improved communication

1. Expensive to set up and maintain teams

2. Chance of loyalty to the

3. Effective decision-making

4. Creation of project management experts

5. Rapid response

2. Chance of loyalty to the project rather than the firm

3. No pool of specific knowledge

4. Workers unassigned at project end

Matrix organizations – create a dual hierarchy in which functions and projects have equal prominence

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Matrix Structures for Project Management

Strengths Weaknesses1. Suited to dynamic

environments

2. Equal emphasis on project

1. Dual hierarchies mean two bosses

2. Negotiation required in order 2. Equal emphasis on project management and functional efficiency

3. Promotes coordination across functional units

4. Maximizes scarce resources

2. Negotiation required in order to share resources

3. Workers caught between competing project & functional demands

Weak Matrix vs Strong Matrix

Weak matrix (functional matrix)• Functional departments maintain control over their

resources and are responsible for managing their components of the project.

• Project manager – coordinator

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• Project manager – coordinator• Prepare schedules, update project statusStrong matrix (project matrix)• Control of project activities and functions • Assignment and control of project resources.• Functional manager – consultative position.

Heavyweight Project Organizations

Organizations can sometimes gain tremendous benefit from creating a fully-dedicated project organization

• Project manager authority expanded• Project manager authority expanded• Functional alignment abandoned in favor of market

opportunism• Focus on external customer

Project Management Offices

Centralized units that oversee or improve the management of projects

Resource centers for:Resource centers for:– Technical details– Expertise– Repository– Center for excellence

Forms of PMOs

• Weather station – monitoring and tracking

• Control tower – project management is a skill to be protected and supportedbe protected and supported

• Resource pool – maintain and provide a cadre of skilled project professionals

Organizational Culture

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Organizational Culture

The unwritten rules of behavior, or norms that are used to shape and guide behavior, is shared by some subset of organizationmembers and is taught to all new members of the company.

Key factors that affect culture developmentKey factors that affect culture development– Technology– Environment– Geographical location– Reward systems– Rules and procedures– Key organizational members– Critical incidents

Culture Affects Project Management

• Departmental interaction

• Employee commitment to goals

• Project planning

• Performance evaluation