Company Business



FIGURE 2-3. Systems in a changing environment.

FIGURE 2-3. Systems in a changing environment.

leads to a culture-shock condition. Employees will perform in a new system because they are directed to do so but will not have confidence in it or become dedicated until they have been involved in several different projects and believe that they can effectively report to more than one boss.

When an employee is told that he will be working horizontally as well as vertically, his first concern is his take-home pay. Employees always question whether they can be evaluated fairly if they report to several managers during the same time period. One of the major reasons why project management fails is that top-level executives neglect to consider that any organizational change must be explained in terms of the wage and salary administration program.5 This must occur before change is made. If change comes first, and employees are not convinced that they can be evaluated correctly, they may try to sabotage the whole effort. From then on, it will probably be a difficult, if not impossible, task to rectify the situation. However, once the employees accept project management and the procedure of reporting in two directions, the company can effectively and efficiently convert from one project management organizational form to another. After all, weren't most of us educated throughout our childhood on how to report to two bosses—a mother and a father?

Not all companies need two to three years to convert to project management. The ABC Company described earlier would probably have very little trouble in converting because informal project management is well accepted. In the early 1960s, TRW was forced to convert to a project management structure almost overnight. The company was highly successful in this, mainly because of the loyalty and dedication of the employees. The TRW employees were willing to give the system a chance. Any organizational structure,

5. The mechanisms for employee evaluation in a project environment are discussed further in Section 8.1.

no matter how bad, will work if the employees are willing to make it work. Yet other companies can spend three to five years trying to implement change and fail. The literature describes many cases where project management has failed because:

• There was no need for project management.

• Employees were not informed about how project management should work.

• Executives did not select the appropriate projects or project managers for the first few projects.

• There was no attempt to explain the effect of the project management organizational form on the wage and salary administration program.

• Employees were not convinced that executives totally supported the change.

Some companies (and executives) are forced into project management before they realize what has happened, and chaos ensues. As an example, consider a highly traditional company that purchased its first computer. The company had five divisions: engineering, finance, manufacturing, marketing, and human resources. Not knowing where to put the computer, the chief executive officer created an electronic data processing (EDP) department and placed it under finance and accounting. The executive's rationale was that since the reason for buying the computer was to eliminate repetitive tasks and the majority of these were in accounting and finance, that was where EDP belonged. The vice president for accounting and finance might not be qualified to manage the EDP department, but that seemed beside the point.

The EDP department had a staff of scientific and business computer programmers and systems analysts. The scientific programmers spent almost all their time working in the engineering division writing engineering programs; they had to learn engineering in order to do this. In this company, the engineer did not consider himself to be a computer programmer, but did the computer programmer consider himself to be an engineer?

The company's policy was that merit and cost-of-living increases were given out in July of each year. This year the average salary increase would be 7 percent. However, the president wanted the increase given according to merit, and not as a flat rate across the board. After long hours of deliberation, it was decided that engineering, manufacturing, and marketing would receive 8 percent raises, and finance and personnel 5.5 percent.

After announcing the salary increases, the scientific programmers began to complain because they felt they were doing engineering-type work and should therefore be paid according to the engineering pay scale. Management tried to resolve this problem by giving each division its own computer and personnel. However, this resulted in duplication of effort and inefficient use of personnel.

With the rapid advancements in computer technology, management realized the need for timely access to information for executive decision-making. In a rather bold move, executives created a new division called management information systems (MIS). The MIS division now had full control of all computer operations and the EDP personnel had the opportunity to show that they actually contributed to corporate profits.

Elevating the computer to the top levels of the organization was a significant step toward project management. Unfortunately, many executives did not fully realize what had happened. Because of the need for a rapid information retrieval system that could integrate data from a variety of line organizations, the MIS personnel soon found that they were working horizontally, not vertically. Today, MIS packages cut across every division of the company. Thus, the project management concept for handling a horizontal flow of work emerged.

With the emergence of data processing project management, executives were forced to find immediate answers to such questions as:

• Can we have project management strictly for data processing projects?

• Should the project manager be the programmer or the user?

• How much authority should be delegated to the project manager, and will this delegated authority cause a shift in the organizational equilibrium?

The answers to these questions have not been and still are not easy to solve. Today, IBM provides its customers with the opportunity to hire IBM as the in-house data processing project management team. This partially eliminates the necessity for establishing internal project management relationships that could easily become permanent.

In TRW Nelson Division,6 data processing project management began with MIS personnel acting as the project leaders. However, after two years, the company felt that the people best qualified to be the project leaders were the technical experts (i.e., users). Therefore, the MIS personnel now act as team members and resource personnel rather than as the project managers.

There are many different types of projects. Each of these projects can have its own organizational form and can operate concurrently with other active projects. This diversity of projects has contributed to the implementation of full project management in several industries.

J. Robert Fluor, chairman, chief executive officer, and president of the Fluor Corporation, commented on twenty years of operations in a project environment7:

The need for flexibility has become apparent since no two projects are ever alike from a project management point of view. There are always differences in technology; in the geographical locations; in the client approach; in the contract terms and conditions; in the schedule; in the financial approach to the project; and in a broad range of international factors, all of which require a different and flexible approach to managing each project. We found the task force concept, with maximum authority and accountability resting with the project manager, to be the most effective means of realizing project objectives. And while basic project management principles do exist at Fluor, there is no single standard project organization or project procedure yet devised that can be rigidly applied to more than one project.

Today, our company and others and their project managers are being challenged as never before to achieve what earlier would have been classified as "unachievable" project objectives. Major projects often involve the resources of a large number of organizations located on different continents. The efforts of each must be directed and coordinated toward

6. The TRW Nelson case study is found in the case studies section of the accompanying workbook.

7. J. Robert Fluor, "Development of Project Managers—Twenty Years' Study at Fluor," keynote address to the Project Management Institute, Eighth International Seminar Symposium, Chicago, Illinois, October 24, 1977.

a common set of project objectives of quality performance, cost and time of completion as well as many other considerations.

As project management developed, some essential factors in its successful implementation were recognized. The major factor was the role of the project manager, which became the focal point of integrative responsibility. The need for integrative responsibility was first identified in research and development activities8:

Recently, R&D technology has broken down the boundaries that used to exist between industries. Once-stable markets and distribution channels are now in a state of flux. The industrial environment is turbulent and increasingly hard to predict. Many complex facts about markets, production methods, costs and scientific potentials are related to investment decisions.

All of these factors have combined to produce a king-size managerial headache. There are just too many crucial decisions to have them all processed and resolved through regular line hierarchy at the top of the organization. They must be integrated in some other way.

Providing the project manager with integrative responsibility resulted in:

• Total accountability assumed by a single person

• Project rather than functional dedication

• A requirement for coordination across functional interfaces

• Proper utilization of integrated planning and control

Without project management, these four elements have to be accomplished by executives, and it is questionable whether these activities should be part of an executive's job description. An executive in a Fortune 500 corporation stated that he was spending seventy hours a week acting as an executive and as a project manager, and he did not feel that he was performing either job to the best of his abilities. During a presentation to the staff, the executive stated what he expected of the organization after project management implementation:

• Push decision-making down in the organization

• Eliminate the need for committee solutions

• Trust the decisions of peers

Those executives who chose to accept project management soon found the advantages of the new technique:

• Easy adaptation to an ever-changing environment

• Ability to handle a multidisciplinary activity within a specified period of time

8. Reprinted by permission of Harvard Business Review. From Paul R. Lawrence and Jay W. Lorsch, "New Management Job: The Integrator," Harvard Business Review, November-December 1967, p. 142. Copyright © 1967 by the Harvard Business School Publishing Corporation; all rights reserved.

• Horizontal as well as vertical work flow

• Better orientation toward customer problems

• Easier identification of activity responsibilities

• A multidisciplinary decision-making process

• Innovation in organizational design

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Project Management Made Easy

Project Management Made Easy

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.

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