How Organizational Structures Affect Projects and Project Management

It is true that the structure of an organization can have a major impact on project management.

Think about your own experience. Is it difficult to get traction on your projects? Are there numerous layers of authority that you have to navigate to get approvals for basic tasks? Does your budget get cut because of competition for limited funding? Do your projects lose out in favor of day-to-day routine operations? And you thought it was something you were doing, or failing to do! Well it may have been, but it’s more likely that you are feeling the effects of the organizational structure within which you work. Understanding your working environment better will help you to rise above organizational issues and smooth the way to successful project management.

By looking at three different organizational structures – functional, matrix and projectised – we will discover how each distinct organizational style affects project management.

  1. Functional Organizational Structure. These firms are organized into functional divisions based on primary functions such as engineering, human resources, finance, IT, planning and policy. Each different functional division operates independently and isolated groups of workers in a division report to a functional manager. The functional manager generally both allocates and monitors the work and carries out tasks such as performance evaluation and setting payment levels. In this model project managers have very limited authority. Functional organizations are set up for ongoing operations rather than projects and so this organizational structure is often found in firms whose primary purpose is to produce standardized goods and services.
  2. Matrix Organizational Structure. In a matrix organization control is shared. The project manager shares responsibility for the project with a number of individual functional managers. Shared responsibilities can include assigning priorities and tasks to individual team members. But functional managers still make the final decisions on who will work on projects and are still responsible for administration. Project managers take charge of allocating and organizing the work for the designated project team. In this type of structure there is a balance between ongoing operations and projects, so it is a common structure for organizations that have these dual roles. For instance, local body organizations that are responsible for both maintaining existing infrastructure (ongoing operations) and commissioning the construction of new infrastructure (projects) often have matrix structures.
  3. Projectised Organizational Structure. In a projectised organization the project manager has full authority over the project. This includes the authority to set priorities, apply resources, and to direct the work of the project team. All members of the team report directly to the project manager and everybody is assigned to a project. After completion of the project, resources will be re-assigned to another project. This type of structure is common in firms that work on size-able, long-term projects, such as in the construction industry.

Take a moment to reflect on which type of organizational structure you work in before we move on to discuss how these organizational structures affect projects. Then see if you recognize any of the issues raised.

So what are the implications for project management?

In a functional organization, projects that exist within a single functional division generate no particular organizational issues, but projects that cut across functional divisions can be challenging to manage. Why? Because the project manager has no direct functional authority and must obtain continual cooperation and support from functional managers of other divisions in order to meet project objectives. This can get complicated.

Because the matrix structure gives authority to both project managers and functional managers the outcome is to provide a more seamless division of labor and ultimately to build a stronger team culture. However, the potential for conflict between functional managers and project managers still exists because there is still resource conflict. Everyone who is on a project team has two bosses – their functional manager as well as their project manager.

In a projectised organization authority is centralized. Because projects are removed from functional divisions the lines of communication are shortened. Both these factors enhance the ability to make swift decisions. Project teams develop a strong sense of identity which in turn creates a high level of commitment from team members. Due to their involvement in consecutive projects of a similar nature projectised organizations can develop and maintain a long-term body of experience and skills in specialized areas.

It is clear that projectised organizations make it easier to run projects because the entire structure is set up for that purpose. But if you are managing a project within other organizational structures, then recognizing and understanding the impacts will raise your awareness of the potential project management pitfalls, so that you can be proactive about resolving them. Communication, conflict resolution and team building will be key to your success.

How to Create a Successful Services Business Via a Project Management Office

A project management office is often associated with just the management of projects, but in this article the case will be made to broaden the scope of a Project Management Office to encapsulate the entire services business and will explain the reasons such a structure is necessary.

How a Project Management Office is commonly Defined

Historically, the purpose of a Project Management Office (PMO) is to deliver a project on-time and on-budget through the use of project management best practices. A PMO manages all aspects of a project including budget and resources. Organizations that don’t use PMOs will often find variability in how projects are managed and a lack of consistency in the delivery of quality projects. Often PMOs come into existence through organizational frustration with current project success.

Why a PMO needs a different organizational structure

When organizations are looking to implement a PMO a common question is: Should we establish the PMO and place various technical resources in that PMO and thus creating a new services organization? Or should technical resources stay within their current functional organization and only have the project managers housed in the PMO? In other words just set up a project department.

Project work, such as in the IT services business, especially projects for outside customers, is much different from standard IT work. First, internal projects often have a definitive delivery schedule but often the deadline is flexible, depending on when resources are available and unlike external projects, there are no contractual obligations for an on-time project completion. Second, internal projects, if using internal resources, will be of a size and scope that internal resources can handle. External projects, on the other hand, can be quite large in size and may require many resources

In order for a PMO to work effectively management at the executive level has to make a decision to shift power and authority from functional management and create a service organization with decision making authority given to project leaders. To place a PMO within the current management structure can and will cause conflicts. The resources need to be available to do work on a project as the PM sees fit and not negotiate with the functional manager every time the resource is needed. By using a functional management, bottlenecks can often occur (e.g. having the same engineer work on multiple projects), versus an engineer that is assigned to a project in a PMO and only that project. The financial penalties and the assigning and managing of resources variable size projects dictate a project structure is enacted.

How to Design a PMO

The creation of a PMO starts with a holistic approach to the services business covering all aspects from sales to project delivery to operation. There needs to be a high-level person in charge of putting together the entire process and aligning personnel (responsibility/accountability) to the project structure. Someone of a lower stature would be ignored.

The first step is to set objectives that transcend individual functional areas. Joint ownership in project success is required whether the participant is from sales, the delivery organization or operations. Everyone has to have a vested interest in the project being sold, delivered and managed profitably.

Let’s talk about the organizational structure and use the example of a company is in the services business of designing and deploying voice/data networks. It will need engineers with Cisco, Avaya and Microsoft certifications and expertise and these engineers will be categorized into broad pay scale bands based on their expertise and accreditations. These engineers are placed in a pool and are assigned to a project as needed by the project manager. Assigning means they are attached to the project and are not available to be used on other projects, unless the PM agrees. The project manager directs all the activities that need to be done by the engineer for the project.

However, administrative issues (vacation, reviews, and sick days), will still need to be addressed. In order to not take time away from the PM (and thereby take away time from the project) an administrative manager is used. Often this administrative manager (also called a resource manager) will support a group as large as 100-150 engineers. This resource manager will track vacations, sick days, time entry, etc. In addition, there are three main areas besides administrative the resource manager addresses and this where they really add value to the organization. 1) Is determining when additional resources need to be added to the team and 2) when skills of existing resources need to be upgraded and 3) when new skills need to be added (e.g. social media consultants/engineers) to the current set of resources. The resource manager forecasts resource requirements based on current project load and sales that are in progress to determine when additional people are needed. The second area is addressed when the resource manager solicits feedback from the project managers and sales teams to determine if the skills set of the current engineers are adequate for the current projects and expected future projects. This feedback is used collectively to analysis the skills set of a particular type of engineer and is not used to evaluate individuals. Skill set evaluations will identify those set of engineers that need additional training classes to keep their skills current (or required certifications current). If skill sets need to be upgraded for that type of engineer, then the resource manager will work with the internal training department or a training organization, to craft education to fill this void. In addition the resource manager will determine, based on discussion with the sales and delivery teams, if new skills need to be acquired for the team to meet new project requirements or to have the talent available for new projects (i.e. new service offerings that require skills not in the current talent base).

How to Avoid Unprofitable Projects

The project management office determines the entire process for selling and managing of projects. Before a single project is sold, the services organization creates a business case for the service, defines the scope of the service, the type of skills needed to deliver the service and the activities contained within the service. In addition, the deliverables of the service are created and responsibility for the individual deliverables is determined (i.e. engineering, project manager, operations, etc.). Templates are created for each of the deliverables.

The sales and delivery process for a service organization would be established as follows: The sales team identifies an opportunity and as the deal is qualified, brings in a person that has delivery responsibility for that type of project. This person would be responsible for signing the contract along with revenue responsibility and project Profit and Loss (P&L). They are responsible for the entire project. Often in organizations this person is known as a Practice Manager or a Principal. But the sales team doesn’t just hand off the opportunity to a Practice Manager. Jointly sales and delivery make the sale. The sales team has be integrated with the delivery team with clear lines of the responsibility so the SOW gets created in a timely manner and all the necessary areas are addressed. Every resource needs to be aligned to and have ownership in success of a project.

Compensation for all involved parties has to be tied to successful completion/operation of a project, which means the project is profitable. The compensation package for sales cannot be based strictly commission on the sale of a service. A large part of the compensation has to be successful delivery of the service, whether the project is a 3 month deployment or a 3 year outsourcing deal. By paying compensation over the duration of the project, the sales person will try very hard to sign a profitable deal. The sales team may balk as such a type of incentive package with the argument “I’m not responsible for the delivery team and have no control over their success or failure.” A valid argument, however, sales needs to see it from the other side. How does the delivery team know that there have been sufficient hours written into the statement of work for all the delivery areas? How can the delivery team ensure that all the requirements have been gathered from the customer? Delivery can provide detailed input to the Statement of Work (SOW) and make sure the assumptions and project requirements are in sufficient detail for a well-defined scope, which can help mitigate risk. Without successful project completion incentives, there is no incentive for sales to close deals that can be profitably delivered. There are many valid reasons the delivery team needs to have joint responsibility in the creation of the SOW.

Conclusion

In creating a services business it is important to take a project approach in building and compensating the organization. By designing the service prior to selling it and thereby determining the deliverables and the associated costs, an organization has a much better chance of selling and delivering profitable projects.

The Accidental Project Manager: A Threat or an Opportunity?

Good Day All

Are you an accidental project manager?

We hope that no one get offended by this term since the use of this term in our view is not offensive at all, rather it reflects a common reality. However, in case anyone object to the term, we truly apologize in advance and humbly ask you to read on and you might find out that our intentions are good-hearted.

Definition

So what is the accidental project manager? Is it someone who is clumsy and stumbles into too many accidents? Absolutely not!

It is a term that somewhat common to use. It typically refers to a professional who is educated, experienced, and practicing in one function or domain, such as: engineering, programming, marketing, human resources, finance, general business, art, and healthcare, among many other fields. This professional, at one time or another, is tasked with managing a project related to their function or department, such as an engineering related project, learning and development project, a media project, or any other project. Now, the challenge is that more often than none, this professional might not have any experience or education or training in project management yet they are still asked to manage a project.

In other words, the professional is accidentally, or by chance/coincidence, get to manage a project although that was not likely a preferred career choice. Managing the project can be on a part-time or full-time basis. Once the project is complete, the professional resume his or her normal functional duties and maybe never manage a project again.

The Opportunity

For many professionals the above bring about a great opportunity. An opportunity to take on a new challenge, and acquire new and highly valuable skills; management skills. These skills are in demand in today’s economy and life and are transferable to many domains, including managing personal non-work initiatives.

If the person does a good job in managing the first project, she/he might be given an opportunity to manage another, and another, and maybe shift totally into project management and become a career project manager. A career PM is someone who chose project management as a career choice and shifted from whatever career they were in before. The transition might not be easy but would be quite rewarding.

The Threats

The threat to the professional and the organization is that the accidental PM might not be ready to manage a project and as a result they might not do well on the first project. If the project has a significant degree of complexity, then the project might even fail and we are likely to blame the project manager. Could this be the error of the accidental PM? Basically, the professional is given a new “challenge” as the boss might have said, yet this professional who is given the challenge might not have the characteristics that is necessary for a good career project manager. Further, this person might not have been given the necessary education or know how to manage the projects and would not be fair to blame her/him.

Therefore, the threat in this case is double edge: on the personal aspects, the accidental project manager is likely to feel responsible for the failure and this situation might hurt them professionally and personally. In some cases the consequences could be severe and detrimental to the person’s career. The other aspect for this situation is the organizational aspect. Here we have a failed project with cost and schedule impact – at least. If the project is for a client, the damage could be significant.

In short, all involved lose in this scenario.

The Solution

One solution is to have all project managers educated and trained in project management but we do not believe this is necessary for all type of projects. For major capital investment projects, and projects that are very important for an organization we need the necessary preparation before we should put a project manager in charge.

However, many projects, especially those in our day-to-day life and business, can be managed effectively with accidental project managers with some preparation. But we should not throw the person into the ocean and expect them to reach the shores safely if they do not know how to swim. We need to teach them the necessary to survive, maybe in a large pool and not the ocean; for the ocean we need an expert swimmer.

How can we do that? Have the professional works on projects to see what it is like. Provide some basic project management learning opportunities. Have the person work as an assistant project manager under the supervision of a more experienced professional. All of these actions will enhance the chance of success and minimize the chance of failure. This way, we would have effectively managed the risk of the accidental project manager and the professional gain new skills while the organization enjoys the benefits of a new service or product.

For all professionals out in the world, welcome the opportunity to manage a project and it may change your life. If the organization gives you the task without getting you ready, prepare on your own – seek the new knowledge and best of all learn how to apply it.

We wish you an enjoyable and exciting journey of learning and growth.

By the way, the author started his career as an engineer and then moved to projects.