FIGURE 3-14. The range of alternatives. Source: Jay R. Galbraith, "Matrix Organization Designs." Reprinted with permission from Business Horizons, February 1971 (p. 37). Copyright © 1971 by the Board of Trustees at Indiana University.

point of view, organizational forms are often selected based on how much authority top management wishes to delegate or surrender.

Integration of activities across functional boundaries can also be accomplished by influence. Influence includes such factors as participation in budget planning and approval, design changes, location and size of offices, salaries, and so on. Influence can also cut administrative red tape and develop a much more unified informal organization.

Matrix structures are characterized as strong or weak based on the relative influence that the project manager possesses over the assigned functional resources. When the project manager has more "relative influence" over the performance of the assigned resources than does the line manager, the matrix structure is a strong matrix. In this case, the project manager usually has the knowledge to provide technical direction, assign responsibilities, and may even have a strong input into the performance evaluation of the assigned personnel. If the balance of influence tilts in favor of the line manager, then the matrix is referred to as a weak matrix.

Information systems also play an important role. Previously we stated that one of the advantages of several project management structures is the ability to make both rapid and timely decisions with almost immediate response to environmental changes. Information systems are designed to get the right information to the right person at the right time in a cost-effective manner. Organizational functions must facilitate the flow of information through the management network.

Galbraith has described additional factors that can influence organizational selection. These factors are24:

• Diversity of product lines

• Rate of change of the product lines

• Interdependencies among subunits

• Level of technology

• Presence of economies of scale

• Organizational size

A diversity of project lines requires both top-level and functional managers to maintain knowledge in all areas. Diversity makes it more difficult for managers to make realistic estimates concerning resource allocations and the control of time, cost, schedules, and technology. The systems approach to management requires sufficient information and alternatives to be available so that effective trade-offs can be established. For diversity in a high-technology environment, the organizational choice might, in fact, be a trade-off between the flow of work and the flow of information. Diversity tends toward strong product authority and control.

Many functional organizations consider themselves companies within a company and pride themselves on their independence. This attitude poses a severe problem in trying to develop a synergistic atmosphere. Successful project management requires that functional units recognize the interdependence that must exist in order for technology to be shared and schedule dates to be met. Interdependency is also required in order to develop strong communication channels and coordination.

The use of new technologies poses a serious problem in that technical expertise must be established in all specialties, including engineering, production, material control, and safety. Maintaining technical expertise works best in strong functional disciplines, provided the information is not purchased outside the organization. The main problem, however, is how to communicate this expertise across functional lines. Independent R&D units can be established, as opposed to integrating R&D into each functional department's routine efforts. Organizational control requirements are much more difficult in high-technology industries with ongoing research and development than with pure production groups.

Economies of scale and size can also affect organizational selection. The economies of scale are most often controlled by the amount of physical resources that a company has available. For example, a company with limited facilities and resources might find it impossible to compete with other companies on production or competitive bidding for larger dollar-volume products. Such a company must rely heavily on maintaining multiple projects (or products), each of low cost or volume, whereas a larger organization may need only three or four projects large enough to sustain the organization. The larger the economies of scale, the more the organization tends to favor pure functional management.

The size of the organization is important in that it can limit the amount of technical expertise in the economies of scale. While size may have little effect on the organizational structure, it does have a severe impact on the economies of scale. Small companies, for

24. Jay R. Galbraith, "Matrix Organization Designs." Reprinted with permission from Business Horizons, February 1971, pp. 29-40. Copyright © 1971 by the Board of Trustees at Indiana University.

example, cannot maintain large specialist staffs and, therefore, incur a larger cost for lost specialization and lost economies of scale.

The four factors described above for organizational form selections together with the six alternatives of Galbraith can be regarded as universal. Beyond these universal factors, we must look at the company in terms of its product, business base, and personnel. Goodman has defined a set of subfactors related to R&D groups25:

• Clear location of responsibility

• Ease and accuracy of communication

• Effective cost control

• Ability to provide good technical supervision

• Flexibility of staffing

• Importance to the company

• Quick reaction capability to sudden changes in the project

• Complexity of the project

• Size of the project with relation to other work in-house

• Form desired by customer

• Ability to provide a clear path for individual promotion

Goodman asked general managers and project managers to select from the above list and rank the factors from most important to least important in designing an organization. With one exception—flexibility of staffing—the response from both groups correlated to a coefficient of 0.811. Clear location of responsibility was seen as the most important factor, and a path for promotion the least important.

Middleton conducted a mail survey of aerospace firms in an attempt to determine how well the companies using project management met their objectives. Forty-seven responses were received. Tables 3-8 and 3-9 identify the results. Middleton stated, "In evaluating the results of the survey, it appears that a company taking the project organization approach can be reasonably certain that it will improve controls and customer (out-of-company) relations, but internal operations will be more complex.26

The way in which companies operate their project organization is bound to affect the organization, both during the operation of the project and after the project has been completed and personnel have been disbanded. The overall effects on the company must be looked at from a personnel and cost control standpoint. This will be accomplished, in depth, in later chapters. Although project management is growing, the creation of a project organization does not necessarily ensure that an assigned objective will be accomplished successfully. Furthermore, weaknesses can develop in the areas of maintaining capability and structural changes.

Project management structures have been known to go out of control27:

25. Richard A. Goodman, "Organizational Preference in Research and Development," Human Relations, Vol. 3, No. 4, 1970, pp. 279-298.

26. Reprinted with permission of Harvard Business Review. From C. J. Middleton, "How to Set Up a Project Organization," Harvard Business Review, March-April 1967, pp. 73-82. Copyright © 1967 by the Harvard Business School Publishing Corporation; all rights reserved.

27. Adapted from L. E. Greiner and V. E. Schein, "The Paradox of Managing a Project-Oriented Matrix: Establishing Coherence within Chaos," MIT Sloan Management Review, Winter 1981, p. 17, by permission of the publisher. Copyright © 1981 by Massachusetts Institute of Technology. All rights reserved.

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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