More money invested in RD

• More information available

• Shortening of project life cycles

To satisfy the requirements imposed by these four factors, management was "forced" into organizational restructuring; the traditional organizational form that had survived for decades was inadequate for integrating activities across functional "empires."

By 1970, the environment began to change rapidly. Companies in aerospace, defense, and construction pioneered in implementing project management, and other industries soon followed, some with great reluctance. NASA and the Department of Defense "forced" subcontractors into accepting project management. The 1970s also brought much more published data on project management. As an example3:

Project teams and task forces will become more common in tackling complexity. There will be more of what some people call temporary management systems as project management systems where the men [and women] who are needed to contribute to the solution meet, make their contribution, and perhaps never become a permanent member of any fixed or permanent management group.

The definition simply states that the purpose of project management is to put together the best possible team to achieve the objective, and, at termination, the team is disbanded. Nowhere in the definition do we see the authority of the project manager or his rank, title, or salary.

Because current organizational structures are unable to accommodate the wide variety of interrelated tasks necessary for successful project completion, the need for project management has become apparent. It is usually first identified by those lower-level and middle managers who find it impossible to control their resources effectively for the diverse activities within their line organization. Quite often middle managers feel the impact of a changing environment more than upper-level executives.

Once the need for change is identified, middle management must convince upper-level management that such a change is actually warranted. If top-level executives cannot recognize the problems with resource control, then project management will not be adopted, at least formally. Informal acceptance, however, is another story.

In 1978, the author received a request from an automobile equipment manufacturer who was considering formal project management. The author was permitted to speak with several middle managers. The following comments were made:

• "Here at ABC Company (a division of XYZ Corporation), we have informal project management. By this, I mean that work flows the same as it would in formal project management except that the authority, responsibility, and accountability are implied rather than rigidly defined. We have been very successful with this structure, especially when you consider that the components we sell cost 30 percent more than our competitors, and that our growth rate has been in excess of 12

3. Reprinted from the October 17, 1970, issue of BusinessWeek by special permission, © 1970 by McGraw-Hill, Inc., New York, New York 10020. All rights reserved.

percent each year for the past six years. The secret of our success has been our quality and our ability to meet schedule dates."

• "Our informal structure works well because our department managers do not hide problems. They aren't afraid to go into another department manager's office and talk about the problems they're having controlling resources. Our success is based upon the fact that all of our department managers do this. What's going to happen if we hire just one or two people who won't go along with this approach? Will we be forced to go to formalized project management?"

• "This division is a steppingstone to greatness in our corporation. It seems that all of the middle managers who come to this division get promoted either within the division, to higher management positions in other divisions, or to a higher position at corporate headquarters."

Next the author conducted two three-day seminars on engineering project management for seventy-five of the lower-, middle-, and upper-level managers. The seminar participants were asked whether they wanted to adopt formal project management. The following concerns were raised by the participants:

• "Will I have more or less power and/or authority?"

• "How will my salary be affected?"

• "Why should I permit a project manager to share the resources in my empire?"

• "Will I get top management visibility?"

Even with these concerns, the majority of the attendees felt that formalized project management would alleviate a lot of their present problems.

Although the middle levels of the organization, where resources are actually controlled on a day-to-day basis, felt positive about project management, convincing the top levels of management was another story. If you were the chief executive officer of this division, earning a six-figure salary, and looking at a growth rate of 12 percent per year for the last five years, would you "rock the boat" simply because your middle managers want project management?

This example highlights three major points:

• The final decision for the implementation of project management does (and will always) rest with executive management.

• Executives must be willing to listen when middle management identifies a crisis in controlling resources. This is where the need for project management should first appear.

• Executives are paid to look out for the long-range interest of the corporation and should not be swayed by near-term growth rate or profitability.

Today, ABC Company is still doing business the way it was done in the past—with informal project management. The company is a classic example of how informal project management can be made to work successfully. The author agrees with the company executives that, in this case, formal project management is not necessary.

William C. Goggin, board chairman and chief executive officer of Dow Corning, describes a situation in his corporation that was quite different from the one at ABC4:

Although Dow Corning was a healthy corporation in 1967, it showed difficulties that troubled many of us in top management. These symptoms were, and still are, common ones in

U.S. business and have been described countless times in reports, audits, articles and speeches. Our symptoms took such forms as:

• Executives did not have adequate financial information and control of their operations. Marketing managers, for example, did not know how much it cost to produce a product. Prices and margins were set by division managers.

• Cumbersome communications channels existed between key functions, especially manufacturing and marketing.

• In the face of stiffening competition, the corporation remained too internalized in its thinking and organizational structure. It was insufficiently oriented to the outside world.

• Lack of communications between divisions not only created the antithesis of a corporate team effort but also was wasteful of a precious resource—people.

• Long range corporate planning was sporadic and superficial; this was leading to overstaffing, duplicated effort and inefficiency.

Once the need for project management has been defined, the next logical question is, "How long a conversion period will be necessary before a company can operate in a project management environment?" To answer this question we must first look at Figure 2-3. Technology, as expected, has the fastest rate of change, and the overall environment of a business must adapt to rapidly changing technology.

In an ideal situation, the organizational structure of a company would immediately adapt to the changing environment. In a real situation, this will not be a smooth transition but more like the erratic line shown in Figure 2-3. This erratic line is a trademark or characteristic of the traditional structure. Project management structures, however, can, and often do, adapt to a rapidly changing environment with a relatively smooth transition.

Even though an executive can change the organizational structure with the stroke of a pen, people are responsible for its implementation. However, it can be seen in Figure 2-3 that people have the slowest rate of change. Edicts, documents signed by executives, and training programs will not convince employees that a new organizational form will work. Employees will be convinced only after they see the new system in action, and this takes time.

As a general rule, it often takes two to three years to convert from a traditional structure to a project management structure. The major reason for this is that in a traditional structure the line employee has one, and only one, boss; in a project management structure the employee reports vertically to his line manager and horizontally to every project manager to whose activities he is assigned, either temporarily or full-time. This situation often

4. Reprinted by permission of Harvard Business Review. From William C. Goggin, "How the Multidimensional Structure Works at Dow Corning," Harvard Business Review, January-February 1974, p. 54. Copyright © 1973 by the Harvard Business School Publishing Corporation; 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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