Why Martig Construction Decline In 1988

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Government Project Management

A major government agency is organized to monitor government subcontractors as shown in Exhibit 4-1. Below are the vital characteristics of certain project office team members:

Project manager: Directs all project activities and acts as the information focal point for the subcontractor.

• Assistant project manager: Acts as chairman of the steering committee and interfaces with both in-house functional groups and contractor.

• Department managers: Act as members of the steering committee for any projects that utilize their resources. These slots on the steering committee must be filled by the department managers themselves, not by functional employees.

• Contracts officer: Authorizes all work directed by the project office to in-house functional groups and to the customer, and ensures that all work requested is authorized by the contract. The contracts officer acts as the focal point for all contractor cost and contractual information.

1. Explain how this structure should work.

2. Explain how this structure actually works.

3. Can the project manager be a military type who is reassigned after a given tour of duty?

4. What are the advantages and disadvantages of this structure?

5. Could this be used in industry?

Exhibit 4-1. Project Team Organizational Structure

Exhibit 4-1. Project Team Organizational Structure

Robbie Case Executive Control Structures

Falls Engineering

Located in New York, Falls Engineering is a $250-million chemical and materials operation employii 900 people. The plant has two distinct manufacturing product lines: industrial chemicals and compute materials. Both divisions are controlled by one plant manager, but direction, strategic planning, and priorities are established by corporate vice presidents in Chicago. Each division has its own corporate vice president, list of projects, list of priorities, and manpower control. The chemical division has bee this location for the past twenty years. The materials division is, you might say, the tenant in the landlord-tenant relationship, with the materials division manager reporting dotted to the plant manag< and solid to the corporate vice president (see Exhibit 4-2).

The chemical division employed 3,000 people in 1968. By 1983, there were only 600 employees. In 1984, the materials division was formed and located on the chemical division site with a landlord-ten relationship. The materials division has grown from $50 million in 1985 to $120 million in 1989. Toe the materials division employs 350 people.

All projects originate in construction or engineering but usually are designed to support production. T engineering and construction departments have projects that span the entire organization directed by a project coordinator. The project coordinator is a line employee who is temporarily assigned to coordin a project in his line organization in addition to performing his line responsibilities. Assignments are made by the division managers (who report to the plant manager) and are based on technical expertise The coordinators have monitoring authority only and are not noted for being good planners or negotiators. The coordinators report to their respective line managers.

Basically, a project can start in either division with the project coordinators. The coordinators draw up large scope of work and submit it to the project engineering group, who arrange for design contractor depending on the size of the project.

Exhibit 4-2. Falls Engineering Organizational Chart

Exhibit 4-2. Falls Engineering Organizational Chart

Engineering Organization Structure

Project engineering places it on their design schedule according to priority and produces prints and specifications, and receives quotes. A construction cost estimate is then produced following 60-75 percent design completion. The estimate and project papers are prepared, and the project is circulated through the plant and in Chicago for approval and authorization. Following authorization, the design is completed, and materials are ordered. Following design, the project is transferred to either of two plant construction groups for construction. The project coordinators than arrange for the work to be accomplished in their areas with minimum interference from manufacturing forces. In all cases, the coordinators act as project managers and must take the usual constraints of time, money, and performance into account.

Falls Engineering has 300 projects listed for completion between 1993 and 1995. In the last two years, less than 10 percent of the projects were completed within time, cost, and performance constraints. Line managers find it increasingly difficult to make resource commitments because crises always seem to develop, including a number of fires.

Profits are made in manufacturing, and everyone knows it. Whenever a manufacturing crisis occurs, line managers pull resources off the projects, and, of course, the projects suffer. Project coordinators are trying, but with very little success, to put some slack onto the schedules to allow for contingencies.

The breakdown of the 300 plant projects is shown below:

Number of Projects $ Range

120 less than $50,000

80 50,000-200,000

70 250,000-750,000

20 1-3 million

10 4-8 million

Corporate realized the necessity for changing the organizational structure. A meeting was set up between the plant manager, plant executives, and corporate executives to resolve these problems once and for all. The plant manager decided to survey his employees concerning their feelings about the present organizational structure. Below are their comments:

• ''The projects we have the most trouble with are the small ones under $200,000. Can we use informal project management for the small ones and formal project management on the large ones?"

• Why do we persist in using computer programming to control our resources? These sophisticated packages are useless because they do not account for firefighting."

• "Project coordinators need access to various levels of management, in both divisions."

• "Our line managers do not realize the necessity for effective planning of resources. Resources are assigned based on emotions and not need."

• "Sometimes a line manager gives a commitment but the project coordinator cannot force him to keep it."

• "Line managers always find fault with project coordinators who try to develop detailed schedules themselves."

• "If we continuously have to 'crash' project time, doesn't that indicate poor planning?"

• "We need a career path in project coordination so that we can develop a body of good planners, communicators, and integrators."

• "I've seen project coordinators we have no interest in the job, cannot work with diverse functional disciplines, and cannot communicate. Yet, someone assigned them as a project coordinator."

• "Any organizational system we come up with has to be better than the one we have now."

• "Somebody has to have total accountability. Our people are working on projects and, at the same time, do not know the project status, the current cost, the risks, and the end date."

• "One of these days I'm going to kill an executive while he's meddling in my project."

• "Recently, management made changes requiring more paperwork for the project coordinators. How many hours a week do they expect me to work?"

• "I've yet to see any documentation describing the job description of the project coordinator."

• "I have absolutely no knowledge about who is assigned as the project coordinator until work has to be coordinated in my group. Somehow, I'm not sure that this is the way the system should work."

• "I know that we line managers are supposed to be flexible, but changing the priorities every week isn't exactly my idea of fun."

• "If the projects start out with poor planning, then management does not have the right to expect the line managers always to come to the rescue."

• "Why is it the line managers always get blamed for schedule delays, even if it's the result of poor planning up front?"

• "If management doesn't want to hire additional resources, then why should the line managers be made to suffer? Perhaps we should cut out some of these useless projects. Sometimes I think management dreams up some of these projects simply to spend the allocated funds."

• "I have yet to see a project I felt had a realistic deadline."

After preparing alternatives and recommendations as plant manager, try to do some role playing by putting yourself in the shoes of the corporate executives. Would you, as a corporate executive, approve the recommendation? Where does profitability, sales, return on investment, and so on enter in your decision?

White Manufacturing

In 1985, White Manufacturing realized the necessity for project management in the manufacturing group. A three-man project management staff was formed. Although the staff was shown on the organizational chart as reporting to the manufacturing operations manager, they actually worked for the vice president and had sufficient authority to integrate work across all departments and divisions. As in the past, the vice president's position was filled by the manufacturing operations manager. Manufacturing operations was directed by the former manufacturing manager who came from manufacturing engineering (see Exhibit 4-3).

In 1988, the manufacturing manager created a matrix in the manufacturing department with the manufacturing engineers acting as departmental project managers.

Exhibit 4-3. White Manufacturing Organizational Structure

Exhibit 4-3. White Manufacturing Organizational Structure

Chrysipe Mythologie Grecque Images

This benefited both the manufacturing manager and the group project managers since all information could be obtained from one source. Work was flowing very smoothly.

In January 1989, the manufacturing manager resigned his position effective March, and the manufacturing engineering manager began packing his bags ready to move up to the vacated position February, the vice president announced that the position would be filled from outside. He said also th there would be an organizational restructuring and that the three project managers would now be staff the manufacturing manager. When the three project managers confronted the manufacturing operation manager, he said, "We've hired the new man in at a very high salary. In order to justify this salary, w< have to give him more responsibility."

In March 1989, the new manager took over and immediately made the following declarations:

1. The project managers will never go "upstairs" without first going through him.

2. The departmental matrix will be dissolved and he (the department manager) will handle all of the integration.

How do you account for the actions of the new department manager? What would you do if you were one of the project managers?

Martig Construction Company

Martig Construction was a family-owned mechanical subcontractor business that had grown from $5 million in 1986 to $25 million in 1988. Although the gross profit had increased sharply, the profit as < percentage of sales declined drastically. The question was, "Why the decline?" The following observations were made:

1. Since Martig senior died in July of 1988, Martig junior has tried unsuccessfully to convince the far to let him sell the business. Martig junior, as company president, has taken an average of eight days o vacation per month for the past year. Although the project managers are supposed to report to Martig, they ap pear to be calling their own shots and are in a continuous struggle for power.

2. The estimating department consists of one man, John, who estimates all jobs. Martig wins one job in seven. Once a job is won, a project manager is selected and is told that he must perform the job within the proposal estimates. Project managers are not involved in proposal estimates. They are required, however, to provide feedback to the estimator so that standards can be updated. This very seldom happens because of the struggle for power. The project managers are afraid that the estimator might be next in line for executive promotion since he is a good friend of Martig.

3. The procurement function reports to Martig. Once the items are ordered, the project manager assumes procurement responsibility. Several times in the past, the project manager has been forced to spend hour after hour trying to overcome shortages or simply to track down raw materials. Most project managers estimate that approximately 35 percent of their time involves procurement.

4. Site superintendents believe they are the true project managers, or at least at the same level. The superintendents are very unhappy about not being involved in the procurement function and, therefore, look for ways to annoy the project managers. It appears that the more time the project manager spends at the site, the longer the work takes; the feedback of information to the home office is also distorted.

The Carlson Project

"I sympathize with your problems, Frank," stated Joe McGee, Manager of Project Managers. "You know as well as I do that I'm supposed to resolve conflicts and coordinate efforts among all projects. Staffing problems are your responsibility."

Frank: "Royce Williams has a resume that would choke a horse. I don't understand why he performs with a lazy, I-don't-care attitude. He has fifteen years of experience in a project organizational structure, with ten of those years being in project offices. He knows the work that has to be done."

McGee: "I don't think that it has anything to do with you personally. This happens to some of our best workers sooner or later. You can't expect guys to give 120 percent all of the time. Royce is at the top of his pay grade, and being an exempt employee, he doesn't get paid for overtime. He'll snap out of it sooner or later."

Frank: "I have deadlines to meet on the Carlson Project. Fortunately, the Carlson Project is big enough that I can maintain a full-time project office staff of eight employees, not counting myself.

"I like to have all project office employees assigned full-time and qualified in two or three project office areas. It's a good thing that I have someone else checked out in Royce's area. But I just can't keep asking this other guy to do his own work and that of Royce's. This poor guy has been working sixty to seventy hours a week and Royce has been doing only forty. That seems unfair to me."

McGee: "Look, Frank, I have the authority to fire him, but I'm not going to. It doesn't look good if we fire somebody because they won't work free overtime. Last year we had a case similar to this, where an employee refused to work on Monday and Wednesday evenings because it interfered with his MBA classes. Everyone knew he was going to resign the instant he finished his degree, and yet there was nothing that I could do."

Frank: "There must be other alternatives for Royce Williams. I've talked to him as well as to other project office members. Royce's attitude doesn't appear to be demoralizing the other members, but it easily could in a short period of time."

McGee: "We can reassign him to another project, as soon as one comes along. I'm not going to put him on my overhead budget. Your project can support him for the time being. You know, Frank, the grapevine will know the reason for his transfer. This might affect your ability to get qualified people to volunteer to work with you on future projects. Give Royce a little time and see if you can work it out with him. What about this guy, Harlan Green, from one of the functional groups?"

Frank: "Two months ago, we hired Gus Johnson, a man with ten years of experience. For the first two weeks that he was assigned to my project, he worked like hell and got the work done ahead of schedule. His work was flawless. That was the main reason why I wanted him. I know him personally, and he's one great worker.

"During weeks three and four, his work slowed down considerably. I chatted with him and he said that Harlan Green refused to work with him if he kept up that pace."

McGee: "Did you ask him why?"

Frank: "Yes. First of all, you should know that for safety reasons, all men in that department must work in two- or three-men crews. Therefore, Gus was not allowed to work alone. Harlan did not want to change the standards of performance for fear that some of the other employees would be laid off.

By the end of the first week, nobody in the department would talk to Gus. As a matter of fact, they wouldn't even sit with him in the cafeteria. So, Gus had to either conform to the group or remain an outcast. I feel partially responsible for what has happened, since I'm the one who brought him here.

"I know that has happened before, in the same department. I haven't had a chance to talk to the department manager as yet. I have an appointment to see him next week."

McGee: "There are solutions to the problem, simple ones at that. But, again, it's not my responsibility. You can work it out with the department manager."

"Yeah," thought Frank. "But what if we can't agree?"

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  • macaria
    Why martig construction decline in 1988?
    5 years ago

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