Chapter 4
The Project in the
Organizational Structure
Copyright 2009 John Wiley & Sons, Inc.
Organizational Issues Related to
Projects
1. How to tie project to parent
organization
2. How to organize the project
3. How to organize activities common to
multiple projects
Organizational Structure
An organization’s structure determines the way employees
and jobs are arranged to meet its needs and objectives.
It consists of activities such as task allocation, coordination
and supervision, which are directed towards the
achievement of organizational goals.
Organizational structure affects organizational action in two
ways.
– First, it provides the foundation on which standard operating
procedures and routines rest.
– Second, it determines which individuals get to participate in
which decision-making processes, and thus to what extent their
views shape the organization’s actions.
Traditional Forms of Organization
1. Functional
2. Pure project
3. Matrix
4. Mixed
The Project as Part of the Functional
Organization
Organization is divided into functional
sub-units called departments
– Each of which addresses a function
– Integration between sub-units handled by
rules, procedures
– Management chain handles problems
The Functional Structure
Advantages
1. Flexible use of staff
– Experts assigned to functional units
– Assigned to projects as needed
2. Staff can easily be assigned to multiple
projects
– Experts can be switched between projects easily
– Functional manager picks best expert for each
project
Advantages Continued
3. Specialists can share knowledge and
experience
4. Functional areas provide for a career
path within a knowledge area
– Engineers can become supervisors or
VP’s
Disadvantages
1. Client is not the focus
– Function unit has its own work outside the
project
– Functional manager not likely to be accountable
for project and therefore client
2. Functional units not focused on project
– Function unit sees success in its area as most
important
– Project seen as secondary, or worse, an
interruption
Disadvantages Continued
3. Project manager may not have adequate
authority
– Must share authority with functional managers
– May be several managers responsible for
various parts of project
– Client may not have a single point of contact at
project
– This can make response to the client slow or
non-existent
Disadvantages Continued
4. Tendency to sub optimize
– Project issues that are directly within the interest area of
functional home are dealt carefully
5. Motivation is weak
– Project is not the worker’s “home”
– Project manager most likely does not do their performance
evaluations
– May not receive additional pay for difficulties of working on
project
Pure Project Organization
Figure 5-2
Advantages
1. Project manager has full authority
– Will typically report to senior
management (project sponsor)
– This gives project manager access to
managerial advice
– This centralizes authority and makes for
rapid decision making / response to
client
Advantages Continued
2. Everyone reports to the project
manager
– This gives the project manager the ability
to make quick decisions
– Makes it easier for project manager to
motivate and reward members
3. Shorter communications lines
Advantages Continued
4. Can maintain project management skills
– Permanent cadre of experts
– It pays to hire, train, and promote skilled project
managers
5. Project team has its own identity
– Project members work for the “project” not the
functional unit
– High motivation
– This can significantly improve performance
Advantages Continued
6. Unity of command
– Each worker reports to one, and-only-
one, manager
– Project has a simple structure
7. Holistic approach
– Everyone on project is concerned about
project, not their functional unit
Disadvantages
1. staffing
– Each project has a full staff
– This leads to overstaffing
2. Stockpiling
– Project managers tend to stockpile resources so
they are available when needed
– They also tend to keep those resources longer
than needed just-in-case
Disadvantages Continued
3. Experts falling behind in other areas
– Experts on a project will focus on the areas
essential to the project
– This can lead to them falling behind in other areas
– It can also be difficult to feed their developing
expertise back into the organization
4. Life after the project ends
• Lots of uncertainty
• Will there be layoffs
• Rusty skills
The Matrix Organization
Figure 5-3
The Matrix Organization
Functional part provides home for workers
after project
Functional part helps maintain expertise
A Business School as a Matrix
Organization
Dean
Associate Dean for Associate Dean Director of
Undergraduate for MBA Doctoral
Program Programs Program
Accounting
Department Chair Larry Zelda Diane
Marketing Curly Bob Barby
Department Chair
Finance Moe Gloria Leslie
Department Chair
Advantages
1. The project is the focus
– That remains the project manager’s
responsibility
2. The project has access to entire
organization for labor and technology
– Projects draw from functional
organizations as required
Advantages Continued
3. Less anxiety about the end of the project
– Project members return to their functional
organizations
4. Response to client is rapid
– That remains the project manager’s
responsibility
– With much remaining within parent organization,
response to parent is also rapid
Advantages Continued
5. Consistent policies
– Representatives from administrative units
– Project creditability
6. Easier to balance organizational resources
7. Flexibility
– Many different possible structures between
strong and weak
– Different structures can be used for different
projects
Disadvantages
1. Functional units make many
decisions, including technology ones
– Project manager has less control than in
a pure project
– Project manager’s control is balanced
against that of the functional manager
– If they disagree, it can be hard to resolve
– Negotiation is the key to project success
Disadvantages Continued
2. Projects compete for resources
– This is especially true when there are
several large projects
– Someone above project managers must
set and enforce priorities
– Multiple schedules will add stress to
functional managers
Disadvantages Continued
3. Workers do not have a single manager
– This splits loyalty
– Makes performance appraisal difficult
– Information flow is difficult
Mixed Organizational Systems
•Pure functional and pure project organizations may coexist in a firm
Figure 5-4
Mixed Organizational Systems
Advantages of a mixed organization:
– The hybridization of the mixed form leads to flexibility
– The firm is able to meet special problems by
appropriate adaptation of its organizational structure
Disadvantages include:
– Conditions still exist that result in conflict between
functional and project managers
Mixed Organization Structure example
CEO
Vice President Vice President Vice President
Desktop Printers Palm-Size
Computers Computers
Marketing Operations Human
and Resources
Sales
International Domestic Manufacturing Logistics Compensation Training
and Development
Selecting an Organizational Form
Firms typically do not set out to “pick”
an organizational form
Rather, the structure evolves over time
The structure is not static
Rather, it changes as the organization,
its goals, and its environment changes
Functional Form Best for…
In-depth application of a technology
Large capital investment, especially
when that investment is concentrated in
one functional area
Project Form Best for…
Handling a large number of similar
projects
Handling a one-time project that
requires much control but is not
focused on one functional area
Matrix Form Best for…
Projects that require inputs from
several functional areas
Projects that use technology from
several functional areas
The Project Office
All projects should have an office
dedicated to that project
– Often called the war room
In addition to providing a place to work,
this helps built a feeling of team among
the workers
