The performance of an organization or a project is influenced largely by how well its resources are organized. In general, structures are created within an organization to manage the input, processing, and output of resources. For example, departments or areas based on the specialized skills needed to manage a particular resource are created—i.e., accounting and finance manages the money resources, personnel manages the human resources, and information systems manages the information resource. As a result, many organizations adopt a structure based upon function. Other organizations may adopt a structure based on the products it sells or its customers. These structures may use brand management or geographical divisions.
However, the structure of an organization must fit its strategy, and since organizations may follow different strategies, it makes sense that no single structure can work well for every organization. Therefore, there are different organizational structures and ways to efficiently and effectively manage not only the organizational resources but also the work and processes involved. As long as the firm performs well, a particular structure and strategy will exist. On the other hand, when a firm performs poorly, a change in structure and/or strategy may be required.
Projects are part of an organization and can be thought of as micro organizations that require resources, processes, and structure. Moreover, these resources, processes, and structures are determined largely by the organizational structure of the supporting or parent organization, which may determine or influence the availability of resources, reporting relationships, and project roles and responsibilities. Therefore, it is important to understand how the project interfaces with the host or parent organization and how the project itself will be organized. In this section, we will focus on three formal structures that tie projects explicitly to the organization. Each structure provides distinct opportunities and challenges, and choosing and implementing the correct structure can have a major impact on both the project and the organization.
An organization's structure reveals the formal groupings and specializations of activities. Generally, these groupings and activities are documented in an organizational chart to clarify and portray the lines of authority, communication, reporting relationships, and responsibilities of individuals and groups within the organization. Although an organization's formal structure does not tell us anything about the informal lines of communication among its subunits, it does provide us with an indication of how a project will interface with the parent or supporting organization. In other words, the formal organizational structure will determine how resources are allocated, who has authority over those resources, and who is really in charge of the project.
Figure 4.1 illustrates the three most common structures—the functional, matrix, and project-based organization. Keep in mind that these organizations are not exhaustive—they represent a continuum of approaches that may evolve over time or as the result of a unique situation. An organization may choose to combine these forms any number of ways to create a hybrid organization such as a functional matrix or project matrix.
The Functional Organization The functional organizational structure may be thought of as the more traditional organizational form. This particular structure is based upon organizing resources to perform specialized tasks or activities in order to attain the goals of the organization. As Figure 4.2 illustrates, individuals and subunits (i.e., groups of individuals) perform similar functions and have similar areas of expertise. Subsequently, projects are managed within the existing functional hierarchy.
Projects in a functional organization are typically coordinated through customary channels and housed within a particular function. For example, a project to install a new machine would be a self-contained project within the manufacturing function because the expertise required for the project would reside within the manufacturing subunit. The project manager would most likely be a senior manufacturing manager, and the project team would be made up of individuals from the engineering and production areas. As a result, the manufacturing subunit would be responsible for managing the project and for supplying and coordinating all of the resources dedicated to the project.
Figure 4.1 Organizational Structures
However, a project may cross functional boundaries. In the case of an information technology project, the knowledge and expertise to design and develop an application may reside in the information systems subunit, while the domain or functional knowledge resides in one of the functional subunits. As a result, the project team may consist of individuals from two or more functional areas. There are two main issues that must be resolved at the outset of a project: Who will be responsible for the project? What resources will each subunit provide?
There are a number of advantages for projects sponsored by organizations with functional structures. These include:
• Increased flexibility—Subject matter experts and other resources can be assigned to the project as needed. In addition, an individual can be part of the project team on a full-time or part-time basis. Once the project is completed, the project team members can return to their respective functional units.
• Breadth and depth of knowledge and experience—Individuals from a par ticular subunit can bring a wealth of knowledge, expertise, and experience to the project. This knowledge can be expanded even further as a result of their experiences with the project. As a result, the project experience may lead to greater opportunities for career advancement within the subunit. If the project crosses functional areas, an opportunity exists for these individ uals to learn from each so that a less parochial solution can be developed.
• Less duplication—Coordination of resources and activities can lead to less duplication of resources across projects since specialization of skills and
resources are housed within a functional area. The project also tends to be more focused because a primary functional area is responsible for and ultimately takes ownership of the project.
There are, however, several disadvantages associated with projects sponsored by organizations with functional structures. These include:
• Determining authority and responsibility—As was mentioned previously, determining who has authority and responsibility for a project must be resolved at the outset, especially when the project involves more than one functional area. For example, in an IT project, will the project manager be from the IS department or from the functional area? A project manager from the IS area may have knowledge and expertise with respect to the technology, but lack critical knowledge about the business. On the other hand, a project manager from the functional area may understand the business, but lack an understanding of the technology. Furthermore, there is a
According to Allen Alter, the reason the IS function sometimes has a poor reputation in an organization may be due to strong in-group loyalty he calls tribalism. Alter contends that the typical IS department, made up of support centers, data centers, programmers, and network administration, is really several clans that tend to stick together with others of "similar backgrounds or status." As a result, some tribes "regularly knock heads" because of conflicting interests or because they do not communicate well with each other. Often when a project is in trouble, one tribe will not go out of its way to help another. Then, the business suffers because this indifference results in delays and wasted time. Ideas and suggestions for IT initiatives are also held back or fail globally because no one is able to see and understand the big picture. Alter suggests that tribes should not
According to Allen Alter, the reason the IS function sometimes has a poor reputation in an organization may be due to strong in-group loyalty he calls tribalism. Alter contends that the typical IS department, made up of support centers, data centers, programmers, and network administration, is really several clans that tend to stick together with others of "similar backgrounds or status." As a result, some tribes "regularly knock heads" because of conflicting interests or because they do not communicate well with each other. Often when a project is in trouble, one tribe will not go out of its way to help another. Then, the business suffers because this indifference results in delays and wasted time. Ideas and suggestions for IT initiatives are also held back or fail globally because no one is able to see and understand the big picture. Alter suggests that tribes should not be abolished because highly skilled and specialized individuals are comfortable working this way. It is, however, important that communication form a bridge between groups. Communication can be helped by bringing the whole function together in meetings and social events. But, it is imperative to pick a manager who can encourage people from different groups to communicate. Alter also suggests that unless IS tribes communicate effectively with each other, they will have even more difficulty working with another important tribe—the users.
SOURCE: Adapted from Allen E. Alter, Think Tribally, Fail Globally, Computer-world, November 17, 1997, http://www.computerworld .com/news/1997/story/0,11280,11174,00.html.
chance that the project manager will have an insular view of the project— that is, the project manager's allegiance and loyalty to a particular functional area may lead her or him to focus primarily on the interests of that area. The likelihood of this happening increases when the project expands across several functional boundaries. Other functional areas may begin to ask if there is anything in it for them and withhold resources unless their needs and expectations are met. The project manager may not have the authority for acquiring and providing the resources, but she or he will certainly be accountable for the failure of the project.
Poor response time—The normal lines of authority and communication delineated by the functional structure determine who makes specific decisions. Projects may take longer if important decisions have to pass through several layers of management and across several functional areas. Unfortunately, what's important to you may not be important to me if a particular functional unit has a dominant role or interest in a project. Due to the potential for parochial interests, problem resolution may break down because of finger pointing, trying to place blame for the problem rather than focusing on problem resolution.
Poor integration—The culture of the organization may encourage functional areas to insulate themselves from the rest of the organization as a way to avoid many of these parochial issues. However, this can result in two problems: First, the individuals in a functional area may act in their own best interests instead of taking a holistic or organizational view of the project. Second, the functional area may attempt to become self-sufficient by acquiring knowledge, expertise, and technology outside of its normal area of specialization. While specialization of skills and resources can reduce duplication of activities and resources, the functional structure can also increase this duplication. It may lead to an organization of warring tribes as functional areas compete for resources and blur lines of responsibility.
Project A Project manager
Project B Project manager
Project C Project manager
The Project Organization At the other end of the spectrum from the functional organization is the project organization (see Figure 4.3). Sometimes referred to as the pure project organization, this organizational structure supports projects as the dominant form of business. Typically, a project organization will support multiple projects at one time and integrate project management tools and techniques throughout the organization. Each project is treated as a separate and relatively independent unit within the organization. The project manager has sole authority over and responsibility for the project and its resources, while the parent or supporting organization provides financial and administrative controls. Both the project manager and the project team are typically assigned to a particular project on a full-time basis. There are advantages and disadvantages associated with projects supported by the project organization. Advantages include:
*Clear authority and responsibility— Unlike the projects in a functional organi zation, the project manager here is fully in charge. Although he or she must provide progress reports and is ultimately respon sible to someone who has authority over all the projects (e.g., a program manager), the project manager has full authority over and responsibility for the assigned project. Moreover, the project team reports directly to the project manager, thus providing clear unity of command. This structure may allow the project team to better concentrate on the project.
*Improved communication—A clear line of authority results in more effective and efficient communication. In addition, lines of communication are shortened because the project manager is able to bypass the normal channels of distribu tion associated with the functional orga nizational structure. This structure thus results in more efficient communication and fewer communication problems.
*High level of integration—Since commu nication across the organization is increased, the potential for a higher level of cross integration across the organiza tion exists. For example, the project team may include experts with technical skills or knowledge of the business. Fewer con flicts over resources arise since each proj ect has resources dedicated solely to it.
Project A Project manager
Project B Project manager
Project C Project manager
Projects supported by project organization structures face several disadvantages. These disadvantages include:
• Project isolation—Since each project may be thought of as a self-contained unit, there is the potential for each project to become isolated from other projects in the organization. Unless a project management office or pro gram manager oversees each project, inconsistencies in policies and project management approaches may occur across projects. In addition, project managers and project teams may have little opportunity to share ideas and experiences with other project managers and project teams, thus hindering learning throughout the organization.
• Duplication of effort—While the potential for conflicts over resources is reduced, various projects may require resources that are duplicated on other projects. Project managers may try to stockpile the best people and other resources that could be shared with other projects. Each project must then support the salaries of people who are part of the dedicated project team but whose services are not needed at all times. There is then the problem of what to do with these people when the project is completed and they have not been assigned to another project. Many consulting firms, for example, refer to people who are between projects as being on the beach or on the bench. While awaiting the next assignment, consultants are often sent to training in order to make the most of their idle time.
• Projectitis—Projectitis sometimes occurs when the project manager and project team develop a strong attachment to the project and to each other. As a result, these individuals may have a difficult time letting go, and the proj ect begins to take on a life of its own with no real end in sight (Meredith and Mantel 2000). The program manager or project office must ensure that proper controls are in place to reduce the likelihood of this happening.
The Matrix Organization The third type of organizational form is the matrix structure. The matrix organization is a combination of the vertical functional structure and the horizontal project structure (see Figure 4.4). As a result, the matrix organization provides many of the opportunities and challenges associated with the functional and project organizations.
The main feature of the matrix organization is the ability to integrate areas and resources throughout an organization. Moreover, people with specialized skills can be assigned to the project either on a part-time or on a more permanent basis. Unfortunately, unity of command is violated since each project team member will have more than one boss, leading to the possibility of confusion, frustration, conflict, and mixed loyalties. The functional manager will be responsible for providing many of the people and other resources to the project, while the project manager is responsible for coordinating these resources. In short, the project manager coordinates all the project activities for the functional areas, while the functional areas provide the wherewithal to carry out those activities.
The matrix organization can take on various forms that can create hybrid organizations. The most common forms include:
• Balanced matrix—In the balanced matrix form, the project manager focuses on defining all of the activities of the project, while the functional managers determine how those activities will be carried out.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.