PROJECT MANAGEMENT METHODOLOGIES AND ORGANIZATIONAL STRUCTURES:Systems, Programs, and Projects

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LESSON 04

PROJECT MANAGEMENT METHODOLOGIES AND ORGANIZATIONAL

STRUCTURES

Broad Contents

Project driven versus nonproject driven organizations

Project management methodologies

Systems, programs, and projects

Categories of projects

Product versus Project Management

Maturity and excellence

Informal Project Management

Organizational structures

Selecting the organizational form

4.1

Project driven versus Non project driven organizations:

On the micro level, virtually all organizations are marketing, engineering, or manufacturing

driven. But on the macro level, organizations are either project- or nonproject driven. In a

project driven organization, such as construction or aerospace, all work is characterized through

projects, with each project as a separate cost center having its own profit-and-loss statement.

The total profit to the corporation is simply the summation of the profits on all projects. In a

project driven organization, everything centers on the projects. In the nonproject driven

organization, such as low technology manufacturing, profit and loss is measured on vertical or

functional lines. In this type of organization, projects exist merely to support the product lines

or functional lines. Priority resources are assigned to the revenue-producing functional line

activities rather than the projects.

Project management in a nonproject driven organization is generally more difficult for these

reasons:

Projects may be few and far between.

Not all projects have the same project management requirements, and therefore, they cannot

be managed identically. This difficulty results from poor understanding of project

management and a reluctance of companies to invest in proper training.

Executives do not have sufficient time to manage projects themselves, yet refuse to delegate

authority.

Projects tend to be delayed because approvals most often follow the vertical chain of

command. As a result, project work stays too long in functional departments.

Because project staffing is on a "local" basis, only a portion of the organization understands

project management and sees the system in action.

There exists heavy dependence on subcontractors and outside agencies for project

management expertise.

Nonproject driven organizations may also have a steady stream of projects, all of which are

usually designed to enhance manufacturing operations. Some projects may be customer-

requested, such as:

· The introduction of statistical dimensioning concepts to improve process control.

· The introduction of process changes to enhance the final product.

· The introduction of process change concepts to enhance product reliability.

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If these changes are not identified as specific projects, the result can be:

· Poorly defined responsibility areas within the organization.

· Poor communications, both internal and external to the organization.

· Slow implementation.

· Lack of a cost tracking system for implementation.

· Poorly defined performance criteria.

Figure 4.1 below shows the tip-of-the-iceberg syndrome, which can occur in all types of

organizations but is most common in nonproject driven organizations.

Figure 4.1: The tip-of-the-iceberg syndrome for matrix implementations.

On the surface, all we see is a lack of authority for the project manager. But beneath the surface

we see the causes; there is excessive meddling due to lack of understanding of project

management, which, in turn, resulted from an inability to recognize the need for proper training.

In the previous sections we stated that project management could be handled on either a formal

or an informal basis. Informal project management most often appears in nonproject driven

organizations. It is doubtful that informal project management would work in a project driven

organization where the project manager has profit and loss responsibility.

In reality, most firms that believed that they were nonproject driven were actually hybrids.

Hybrid organizations are typically nonproject driven firms with one or two divisions that are

project driven.

Historically, hybrids have functioned as though they were nonproject driven, as shown in

Figure 4.2, but today they are functioning like project driven firms.

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Figure 4.2: Project driven versus non-project driven organizations

4.2

Project Management Methodologies:

Earlier there were no allies or alternative management techniques that were promoting the use

of project management. The recession of 19891993 finally saw the growth of project

management in the nonproject driven sector. This recession was characterized by layoffs in the

white collar/management ranks. Allies for project management were appearing and emphasis

was being placed upon long-term solutions to problems. Project management was now here to

stay. The allies for project management began surfacing in 1985 and continued throughout the

recession of 19891993.

1985: Companies recognized that they must compete on the basis of quality as well as cost.

There existed a new appreciation for Total Quality Management (TQM). Companies

began using the principles of project management for the implementation of TQM. The first

ally for project management surfaced with the "marriage" of project management and TQM.

1990: During the recession of 19891993, companies recognized the importance of

schedule compression and being the first to market. Advocates of concurrent engineering

began promoting the use of project management to obtain better scheduling techniques.

Another ally for project management was born.

Figure 4.3: From hybrid to project-driven.

19911992: Executives realized that project management works best if

decision-making and authority are decentralized. They further recognized

that control could still be achieved at the top by functioning as project sponsors.

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1993: As the recession of 19891993 came to an end, companies began "re-engineering"

the organization, which really amounted to elimination of organizational "fat." The

organization was now a "lean and mean" machine. People were asked to do more work in

less time and with fewer people; executives recognized that being able to do this was a

benefit of project management.

Figure 4.4: New processes supporting project management.

1994: Companies recognized that a good project cost control system (i.e., horizontal

accounting) allows for improved estimating and a firmer grasp of the real cost of doing

work and developing products.

1995: Companies recognized that very few projects were completed within the framework

of the original objectives without scope changes. Methodologies were created for effective

change management.

1996: Companies recognized that risk management involves more than padding an estimate

or a schedule. Risk management plans were now included in the project plans.

1997-1998: The recognition of project management as a professional career path mandates

the consolidation of project management knowledge and a centrally located project

management group.

Figure 4.5: Integrated Processes (Past, present, and future)

1999: Companies that recognized the importance of concurrent engineering and rapid

product development found that it was best to have dedicated resources for the duration of

the project. The cost of over management may be negligible compared to risks of under

management. More and more organizations could be expected to use collocated teams all

housed together.

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2000: Mergers and acquisitions were creating more multinational companies. It was

believed that multinational project management will become the major challenge for the

next decade.

The reason for the early resistance to project management was that the necessity for project

management was customer-driven rather than internally driven, despite the existence of allies.

Project management was being implemented, at least partially, simply to placate customer

demands. By 1995, however, project management had become internally driven and a necessity

for survival. Project management benchmarking was commonplace, and companies recognized

the importance of achieving excellence in project management.

As project management continues to grow and mature, more allies will appear. In the twenty-

first century, second and third world nations will come to recognize the benefits and importance

of project management. Worldwide standards for project management will occur.

4.3

Systems, Programs, and Projects:

4.3.1

Systems:

In the preceding sections the word "systems" has been used rather loosely. The exact

definition of a system depends on the users, environment, and ultimate goal. Modern

business practitioners define a system as:

A group of elements, either human or nonhuman, that is organized and arranged in

such a way that the elements can act as a whole toward achieving some common

goal, objective, or end.

Systems are collections of interacting subsystems that either span or interconnect all

schools of management. Systems, if properly organized, can provide a synergistic

output. Systems are characterized by their boundaries or interface conditions. For

example, if the business firm system were completely isolated from the environmental

system, then a close system would exist, in which case management would have

complete control over all system components. If the business system does in fact react

with the environment, then the system is referred to as open. All social systems, for

example, are categorized as open systems. Open systems must have permeable

boundaries.

4.3.2

Programs:

Programs can be explained as the necessary first-level elements of a system. Two

representative definitions of programs are given below:

Air Force Definition: The integrated, time-phased tasks necessary to accomplish a

particular purpose.

NASA Definition: A relative series of undertakings that continue over a period of

time (normally years) and that are designed to accomplish a broad, scientific or

technical goal in the NASA long range plan (lunar and planetary exploration,

manned spacecraft systems). Programs can be regarded as subsystems. However,

programs are generally defined as time-phased efforts, whereas systems exist on a

continuous basis.

4.3.3

Projects:

Projects are also time-phased efforts (much shorter than programs) and are the first

level of breakdown of a program. A typical definition would be:

NASA/Air Force Definition: A project is within a program as an undertaking that

has a scheduled beginning and end, and that normally involves some primary

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purpose. The majority of the industrial sector, on the other hand, prefers to describe

efforts as projects, headed by a project manager. Whether we call our undertaking

project management or program management is inconsequential because the same

policies, procedures, and guidelines that regulate programs most often apply to

projects also. For the remainder of this text, programs and projects will be discussed

interchangeably. However, the reader should be aware that projects are normally

the first-level subdivision of a program.

4.4

Categories of Projects:

Once a group of tasks is selected and considered to be a project, the next step is to define the

kinds of project units. There are four categories of projects:

1. Individual projects: These are short-duration projects normally assigned to a single

individual who may be acting as both a project manager and a functional manager.

2. Staff projects: These are projects that can be accomplished by one organizational unit, say a

department.

3. Special projects: Very often special projects occur that require certain primary functions

and/or authority to be assigned temporarily to other individuals or units. This works best for

short-duration projects. Long-term projects can lead to severe conflicts under this

arrangement.

4. Matrix or Aggregate projects: These require input from a large number of functional units

and usually control vast resources. Each of these categories of projects can require different

responsibilities, job descriptions, policies, and procedures. Project management may now be

defined as the process of achieving project objectives through the traditional organizational

structure and over the specialties of the individuals concerned. Project management is

applicable for any ad hoc (unique, one-time, one-of-a-kind) undertaking concerned with a

specific end objective. In order to complete a task, a project manager must:

Set objectives

Establish plans

Organize resources

Provide staffing

Set up controls

Issue directives

Motivate personnel

Apply innovation for alternative actions

Remain flexible

The type of project will often dictate which of these functions a project manager will be

required to perform.

4.5

Product versus Project Management:

For all practical purposes, there is no basic difference between program management and

project management. Project management and product management are similar, with one major

exception: the project manager focuses on the end date of his project, whereas the product

manager is not willing to admit that his product line will ever end. The product manager wants

his product to be as long-lived and profitable as possible. Even when the demand for the

product diminishes, the product manager will always look for spin-offs to keep his product

alive. When the project is in the Research and Development (R & D) phase, a project manager

is involved. Once the product is developed and introduced into the marketplace, control is taken

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over by the product manager. In some situations, the project manager can become the product

manager. Both product and project management can, and do, exist concurrently within

companies.

4.6

Maturity and Excellence:

Some people think that maturity and excellence in project management are the same.

Unfortunately, this is not the case. Consider the following definition:

Maturity in project management is the implementation of a standard methodology and

accompanying processes, in such a way that ensures a high likelihood of repeated

successes.

This definition is supported by the life-cycle phases. Maturity implies that the proper foundation

of tools, techniques, processes, and even culture, exists. When projects come to an end, there is

usually a debriefing with senior management to discuss how well the methodology was used

and to recommend changes. This debriefing looks at ''key performance indicators," and allows

the organization to maximize what it does right and to correct what it did wrong.

The definition of excellence can be stated as:

Organizations excellence creates an environment in which there exists a continuous stream of

successfully managed projects and where success is measured by what is in the best interest of

both the company and the project (i.e. the customer)

Excellence goes well beyond maturity. You must have maturity to achieve excellence. It may

take two years or more to reach some initial levels of maturity. Excellence, if achievable at all,

may take an additional five years or more.

4.7

Informal Project Management:

Companies today are managing projects more on an informal basis than on a formal one.

Informal project management does have some degree of formality but emphasizes managing the

project with a minimum amount of paperwork. A reasonable amount of formality still exists.

Furthermore, informal project management is based upon guidelines rather than the policies and

procedures that are the basis for formal project management. This was shown previously to be a

characteristic of a good project management methodology. Informal project management

mandates:

Effective communications

Effective cooperation

Effective teamwork

Trust

These four elements are absolutely essential for informal project management to work

effectively.

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Figure 4.6: Evolution of policies, procedures, and guidelines.

Not all companies have the luxury of using informal project management. Customers often have

a strong voice in whether formal or informal project management will be used.

4.8

Organizational Structures:

During the past thirty years there has been a so-called hidden revolution in the introduction and

development of new organizational structures. Management has come to realize that

organizations must be dynamic in nature; that is, they must be capable of rapid restructuring, if

environmental conditions so dictate. These environmental factors evolved from the increasing

competitiveness of the market, changes in technology, and a requirement for better control of

resources for multiproduct firms. More than thirty years ago, Wallace identified four major

factors that caused the onset of the organizational revolution:

· The technology revolution (complexity and variety of products, new materials and

processes, and the effects of massive research).

· Competition and the profit squeeze (saturated markets, inflation of wage and material costs,

and production efficiency).

· The high cost of marketing.

· The unpredictability of consumer demands (due to high income, wide range of choices

available, and shifting tastes).

Much has been written about how to identify and interpret those signs that indicate that a new

organizational form may be necessary. According to Grinnell and Apple, there are five general

indications that the traditional structure may not be adequate for managing projects:

· Management is satisfied with its technical skills, but projects are not meeting time, cost, and

other project requirements.

· There is a high commitment to getting project work done, but great fluctuations in how well

performance specifications are met.

· Highly talented specialists involved in the project feel exploited and misused.

· Particular technical groups or individuals constantly blame each other for failure to meet

specifications or delivery dates.

· Projects are on time and to specifications, but groups and individuals are not satisfied with

the achievement.

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Figure 4.7: Functional Organization

Figure 4.8: Project Organization

Figure 4.9: Weak Matrix Organization

Figure 4.10: Balanced Matrix Organization

Figure 4.11: Strong Matrix Organization

Figure 4.12: Composite Organization

Unfortunately, many companies do not realize the necessity for organizational change until it is

too late. Management continually looks externally (i.e., to the environment) rather than

internally for solutions to problems. A typical example would be that new product costs are

continually rising while the product life cycle may be decreasing. Should emphasis be placed on

lowering costs or developing new products?

For each of the organizational structures described in the following sections, advantages and

disadvantages are listed. Many of the disadvantages stem from possible conflicts arising from

problems in authority, responsibility, and accountability. The reader should identify these

conflicts as such.

4.8.1

Traditional (Classical) Organization:

The traditional management structure has survived for more than two centuries.

However, recent business developments, such as the rapid rate of change in technology

and position in the marketplace, as well as increased stockholder demands, have created

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strains on existing organizational forms. Fifty years ago companies could survive with

only one or perhaps two product lines. The classical management organization was

found to be satisfactory for control, and conflicts were at a minimum.

However, with the passing of time, companies found that survival depended on multiple

product lines (that is diversification) and vigorous integration of technology into the

existing organization. As organizations grew and matured, managers found that

company activities were not being integrated effectively, and that new conflicts were

arising in the well-established formal and informal channels.

Managers began searching for more innovative organizational forms that would

alleviate the integration and conflict problems. The advantages and disadvantages of

this type of organizations are listed in tables 4.1 and 4.2 respectively.

Table 4.1: Advantages of the traditional/classical organization

Table 4.2: Disadvantages of the traditional/classical organization

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4.8.2

LineStaff Organization (Project Coordinator):

It soon became obvious that control of a project must be given to personnel whose first

loyalty is directed toward the completion of the project. For this purpose, the project

management position must be separated from any controlling influence of the

functional managers. Two possible situations can exist with this form of linestaff

project control. In the first situation, the project manager serves only as the focal point

for activity control, that is, a center for information. The prime responsibility of the

project manager is to keep the division manager informed of the status of the project

and to attempt to "influence" managers into completing activities on time.

The amount of authority given to the project manager posed serious problems. Almost

all upper level and division managers were from the classical management schools and

therefore maintained serious reservations about how much authority to relinquish.

Many of these managers considered it a demotion if they had to give up any of their

long-established powers.

4.8.3

Pure Product (Projectized) Organization:

The pure product organization develops as a division within a division. As long as there

exists a continuous flow of projects, work is stable and conflicts are at a minimum. The

major advantage of this organizational flow is that one individual, the program

manager, maintains complete line authority over the entire project. Not only does he

assign work, but he also conducts merit reviews. Because each individual reports to

only one person, strong communication channels develop that result in a very rapid

reaction time.

In pure product organizations, long lead times became a thing of the past. Trade-off

studies could be conducted as fast as time would permit without the need to look at the

impact on other projects (unless, of course, identical facilities or equipment were

required). Functional managers were able to maintain qualified staffs for new product

development without sharing personnel with other programs and projects.

The responsibilities attributed to the project manager were entirely new. First of all, his

authority was now granted by the vice president and general manager. The program

manager handled all conflicts, both those within his organization and those involving

other projects. Interface management was conducted at the program manager level.

Upper-level management was now able to spend more time on executive decision

making than on conflict arbitration. Advantages and disadvantages of Projectized

organizations are listed in tables 4.3 and 4.4 respectively.

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Table 4.3: Advantages of the Projectized organization

Table 4.4: Disadvantages of the Projectized organization

4.8.4

Matrix Organizational Form:

The matrix organizational form is an attempt to combine the advantages of the pure

functional structure and the product organizational structure. This form is ideally suited

for companies, such as construction, that are "project-driven." Each project manager

reports directly to the vice president and general manager. Since each project represents

a potential profit center, the power and authority used by the project manager come

directly from the general manager. The project manager has total responsibility and

accountability for project success.

The functional departments, on the other hand, have functional responsibility to

maintain technical excellence on the project. Each functional unit is headed by a

department manager whose prime responsibility is to ensure that a unified technical

base is maintained and that all available information can be exchanged for each project.

Department managers must also keep their people aware of the latest technical

accomplishments in the industry.

Project management is a "coordinative" function, whereas matrix management is a

collaborative function division of project management. In the coordinative or project

organization, work is generally assigned to specific people or units who "do their own

thing." In the collaborative or matrix organization, information sharing may be

mandatory, and several people may be required for the same piece of work. In a project

organization, authority for decision making and direction rests with the project leader,

whereas in a matrix it rests with the team.

Certain ground rules exist for matrix development. These are:

Participants must spend full time on the project; this ensures a degree of loyalty.

Horizontal as well as vertical channels must exist for making commitments.

There must be quick and effective methods for conflict resolution.

There must be good communication channels and free access between managers.

All managers must have input into the planning process.

Both horizontally and vertically oriented managers must be willing to negotiate for

resources.

The horizontal line must be permitted to operate as a separate entity except for

administrative purposes.

These ground rules simply state some of the ideal conditions that matrix structures

should possess. Each ground rule brings with it advantages and disadvantages that are

described in tables 4.5 and 4.6 respectively.

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Table 4.5: Advantages of the Matrix organization

Table 4.6: Disadvantages of the Matrix organization

4.8.4.1 Modification of Matrix Structures:

The matrix structure can take many forms, but there are basically three common varieties. Each

type represents a different degree of authority attributed to the program manager and indirectly

identifies the relative size of the company. This type of arrangement works best for small

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companies that have a minimum number of projects and assume that the general manager has

sufficient time to coordinate activities between his project managers. In this type of

arrangement, all conflicts between projects are hierarchically referred to the general manager for

resolution.

As companies grew in size and the number of projects, the general manager found it

increasingly difficult to act as the focal point for all projects. A new position was created, that

of director of programs, or manager of programs or projects. The director of programs was

responsible for all program management. This freed the general manager from the daily routine

of having to monitor all programs himself.

The desired span of control, of course, will vary from company to company and must take the

following into account:

· The demands imposed on the organization by task complexity

· Available technology

· The external environment

· The needs of the organizational membership

· The types of customers and/or products

These variables influence the internal functioning of the company. Executives must realize that

there is no one best way to organize under all conditions. This includes the span of control.

4.9

Selecting the Organizational Form:

Project management has matured as an outgrowth of the need to develop and produce complex

and/or large projects in the shortest possible time, within anticipated cost, with required

reliability and performance, and (when applicable) to realize a profit. Granted that modern

organizations have become so complex that traditional organizational structures and

relationships no longer allow for effective management, how can executives determine which

organizational form is best, especially since some projects last for only a few weeks or months

while others may take years?

To answer such a question, we must first determine whether the necessary characteristics exist

to warrant a project management organizational form. Generally speaking, the project

management approach can be effectively applied to a one-time undertaking that is:

Definable in terms of a specific goal

Infrequent, unique, or unfamiliar to the present organization

Complex with respect to interdependence of detailed tasks

Critical to the company

Once a group of tasks is selected and considered to be a project, the next step is to define the

kinds of projects. These include individual, staff, special, and matrix or aggregate projects.

Unfortunately, many companies do not have a clear definition of what a project is. As a result,

large project teams are often constructed for small projects when they could be handled more

quickly and effectively by some other structural form.

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Figure 4.13: Project Organizational Structure Influences on Projects

All structural forms have their advantages and disadvantages, but the project management

approach appears to be the best possible alternative.

The basic factors that influence the selection of a project organizational form are:

· Project size

· Project length

· Experience with project management organization

· Philosophy and visibility of upper-level management

· Project location

· Available resources

· Unique aspects of the project

This last item requires further comment. Project management (especially with a matrix) usually

works best for the control of human resources and thus, may be more applicable to labor-

intensive projects rather than capital-intensive projects. Labor-intensive organizations have

formal project management, whereas capital-intensive organizations may use informal project

management.

Four fundamental parameters must be analyzed when considering implementation of a project

organizational form:

· Integrating devices

· Authority structure

· Influence distribution

· Information system

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