|
PROJECT MANAGEMENT METHODOLOGIES AND ORGANIZATIONAL
STRUCTURES
Broad Contents
Project driven versus non–project driven organizations
Project management methodologies
Systems, programs, and projects
Categories of projects
Product versus Project Management
Maturity and excellence
Informal Project Management
Organizational structures
Selecting the organizational form
4.1 Project driven versus Non – project driven organizations:
On the micro level, virtually all organizations are marketing,
engineering, or manufacturing
driven. But on the macro level, organizations are either
project- or non–project driven. In a
project driven organization, such as construction or aerospace,
all work is characterized through
projects, with each project as a separate cost center having its
own profit-and-loss statement.
The total profit to the corporation is simply the summation of
the profits on all projects. In a
project driven organization, everything centers on the projects.
In the non–project driven
organization, such as low technology manufacturing, profit and
loss is measured on vertical or
functional lines. In this type of organization, projects exist
merely to support the product lines
or functional lines. Priority resources are assigned to the
revenue-producing functional line
activities rather than the projects.
Project management in a non–project driven organization is
generally more difficult for these
reasons:
• Projects may be
few and far between.
• Not all
projects have the same project management requirements, and therefore, they
cannot
be managed identically. This difficulty results from poor
understanding of project
management and a reluctance of companies to invest in proper
training.
• Executives do
not have sufficient time to manage projects themselves, yet refuse to delegate
authority.
• Projects tend
to be delayed because approvals most often follow the vertical chain of
command. As a result, project work stays too long in functional
departments.
• Because project
staffing is on a "local" basis, only a portion of the organization understands
project management and sees the system in action.
• There exists
heavy dependence on subcontractors and outside agencies for project
management expertise.
Non–project driven organizations may also have a steady stream
of projects, all of which are
usually designed to enhance manufacturing operations. Some
projects may be customerrequested,
such as:
• The
introduction of statistical dimensioning concepts to improve process control.
• The
introduction of process changes to enhance the final product.
• The
introduction of process change concepts to enhance product reliability.
If these changes are not identified as specific projects, the
result can be:
• Poorly defined
responsibility areas within the organization.
• Poor
communications, both internal and external to the organization.
• Slow
implementation.
• Lack of a cost
tracking system for implementation.
• Poorly defined
performance criteria.
Figure 4.1 below shows the tip-of-the-iceberg syndrome, which
can occur in all types of
organizations but is most common in non–project driven
organizations.
The
tip-of-the-iceberg syndrome for matrix implementations.
On the surface, all we see is a lack of authority for the
project manager. But beneath the surface
we see the causes; there is excessive meddling due to lack of
understanding of project
management, which, in turn, resulted from an inability to
recognize the need for proper training.
In the previous sections we stated that project management could
be handled on either a formal
or an informal basis. Informal project management most often
appears in non–project driven
organizations. It is doubtful that informal project management
would work in a project driven
organization where the project manager has profit and loss
responsibility.
In reality, most firms that believed that they were non–project
driven were actually hybrids.
Hybrid organizations are typically non–project driven firms with
one or two divisions that are
project driven.
Historically, hybrids have functioned as though they were
non–project driven, as shown in
Figure 4.2, but today they are functioning like project driven
firms.
Project
driven versus non-project driven organizations
4.2 Project Management Methodologies:
Earlier there were no allies or alternative management
techniques that were promoting the use
of project management. The recession of 1989–1993 finally saw
the growth of project
management in the non–project driven sector. This recession was
characterized by layoffs in the
white collar/management ranks. Allies for project management
were appearing and emphasis
was being placed upon long-term solutions to problems. Project
management was now here to
stay. The allies for project management began surfacing in 1985
and continued throughout the
recession of 1989–1993.
• 1985:
Companies recognized that
they must compete on the basis of quality as well as cost.
There existed a new appreciation for
Total Quality Management (TQM).
Companies
began using the principles of project management for the
implementation of TQM. The first
ally for project management surfaced with the "marriage" of
project management and TQM.
• 1990:
During the recession of
1989–1993, companies recognized the importance of
schedule compression and being the first to market. Advocates of
concurrent engineering
began promoting the use of project management to obtain better
scheduling techniques.
Another ally for project management was born.
Figure 4.3: From
hybrid to project-driven.
• 1991–1992:
Executives realized that project management
works best if
decision-making and authority are decentralized. They further
recognized
that control could still be achieved at the top by functioning
as project sponsors.
24
• 1993:
As the recession of 1989–1993
came to an end, companies began "re-engineering"
the organization, which really amounted to elimination of
organizational "fat." The
organization was now a "lean and mean" machine. People were
asked to do more work in
less time and with fewer people; executives recognized that
being able to do this was a
benefit of project management.
Figure 4.4:
New processes supporting project management.
• 1994:
Companies recognized that a
good project cost control system (i.e., horizontal
accounting) allows for improved estimating and a firmer grasp of
the real cost of doing
work and developing products.
• 1995:
Companies recognized that
very few projects were completed within the framework
of the original objectives without scope changes. Methodologies
were created for effective
change management.
• 1996:
Companies recognized that
risk management involves more than padding an estimate
or a schedule. Risk management plans were now included in the
project plans.
• 1997-1998:
The recognition of project
management as a professional career path mandates
the consolidation of project management knowledge and a
centrally located project
management group.
Figure 4.5:
Integrated Processes (Past, present, and future)
• 1999:
Companies that recognized the
importance of concurrent engineering and rapid
product development found that it was best to have dedicated
resources for the duration of
the project. The cost of over management may be negligible
compared to risks of under
management. More and more organizations could be expected to use
collocated teams all
housed together.
25
• 2000:
Mergers and acquisitions were
creating more multinational companies. It was
believed that multinational project management will become the
major challenge for the
next decade.
The reason for the early resistance to project management was
that the necessity for project
management was customer-driven rather than internally driven,
despite the existence of allies.
Project management was being implemented, at least partially,
simply to placate customer
demands. By 1995, however, project management had become
internally driven and a necessity
for survival. Project management benchmarking was commonplace,
and companies recognized
the importance of achieving excellence in project management.
As project management continues to grow and mature, more allies
will appear. In the twentyfirst
century, second and third world nations will come to recognize
the benefits and importance
of project management. Worldwide standards for project
management will occur.
4.3 Systems, Programs, and Projects:
4.3.1 Systems:
In the preceding sections the word "systems" has been used
rather loosely. The exact
definition of a system depends on the users, environment, and
ultimate goal. Modern
business practitioners define a system as:
A group of elements, either human or nonhuman, that is organized
and arranged in
such a way that the elements can act as a whole toward achieving
some common
goal, objective, or end.
Systems are collections of interacting subsystems that either
span or interconnect all
schools of management. Systems, if properly organized, can
provide a synergistic
output. Systems are characterized by their boundaries or
interface conditions. For
example, if the business firm system were completely isolated
from the environmental
system, then a
close system would
exist, in which case management would have
complete control over all system components. If the business
system does in fact react
with the environment, then the system is referred to as
open.
All social systems, for
example, are categorized as open systems. Open systems must have
permeable
boundaries.
4.3.2 Programs:
Programs can be explained as the necessary first-level elements
of a system. Two
representative definitions of programs are given below:
• Air Force
Definition: The
integrated, time-phased tasks necessary to accomplish a
particular purpose.
• NASA
Definition: A relative
series of undertakings that continue over a period of
time (normally years) and that are designed to accomplish a
broad, scientific or
technical goal in the NASA long range plan (lunar and planetary
exploration,
manned spacecraft systems). Programs can be regarded as
subsystems. However,
programs are generally defined as time-phased efforts, whereas
systems exist on a
continuous basis.
4.3.3 Projects:
Projects are also time-phased efforts (much shorter than
programs) and are the first
level of breakdown of a program. A typical definition would be:
• NASA/Air
Force Definition: A
project is within a program as an undertaking that
has a scheduled beginning and end, and that normally involves
some primary
26
purpose. The majority of the industrial sector, on the other
hand, prefers to describe
efforts as projects, headed by a project manager. Whether we
call our undertaking
project management or program management is inconsequential
because the same
policies, procedures, and guidelines that regulate programs most
often apply to
projects also. For the remainder of this text, programs and
projects will be discussed
interchangeably. However, the reader should be aware that
projects are normally
the first-level subdivision of a program.
4.4 Categories of Projects:
Once a group of tasks is selected and considered to be a
project, the next step is to define the
kinds of project units. There are four categories of projects:
1. Individual
projects: These are
short-duration projects normally assigned to a single
individual who may be acting as both a project manager and a
functional manager.
2. Staff
projects: These are
projects that can be accomplished by one organizational unit, say a
department.
3. Special
projects: Very often
special projects occur that require certain primary functions
and/or authority to be assigned temporarily to other individuals
or units. This works best for
short-duration projects. Long-term projects can lead to severe
conflicts under this
arrangement.
4. Matrix or
Aggregate projects: These
require input from a large number of functional units
and usually control vast resources. Each of these categories of
projects can require different
responsibilities, job descriptions, policies, and procedures.
Project management may now be
defined as the process of achieving project objectives through
the traditional organizational
structure and over the specialties of the individuals concerned.
Project management is
applicable for any ad hoc (unique, one-time, one-of-a-kind)
undertaking concerned with a
specific end objective. In order to complete a task, a project
manager must:
- Set objectives
- Establish plans
- Organize
resources
- Provide
staffing
- Set up controls
- Issue
directives
- Motivate
personnel
- Apply
innovation for alternative actions
- Remain flexible
The type of project will often dictate which of these functions
a project manager will be
required to perform.
4.5 Product versus Project Management:
For all practical purposes, there is no basic difference between
program management and
project management. Project management and product management
are similar, with one major
exception: the
project manager focuses on the end date of his project, whereas the product
manager is not willing to admit that his product line will ever
end. The product manager
wants
his product to be as long-lived and profitable as possible. Even
when the demand for the
product diminishes, the product manager will always look for
spin-offs to keep his product
alive. When the project is in the Research and Development (R &
D) phase, a project manager
is involved. Once the product is developed and introduced into
the marketplace, control is taken
27
over by the product manager. In some situations, the project
manager can become the product
manager. Both product and project management can, and do, exist
concurrently within
companies.
4.6 Maturity and Excellence:
Some people think that maturity and excellence in project
management are the same.
Unfortunately, this is not the case. Consider the following
definition:
Maturity in project management is the implementation of a
standard methodology and
accompanying processes, in such a way that ensures a high
likelihood of repeated
successes.
This definition is supported by the life-cycle phases. Maturity
implies that the proper foundation
of tools, techniques, processes, and even culture, exists. When
projects come to an end, there is
usually a debriefing with senior management to discuss how well
the methodology was used
and to recommend changes. This debriefing looks at ''key
performance indicators," and allows
the organization to maximize what it does right and to correct
what it did wrong.
The definition of excellence can be stated as:
Organizations excellence creates an environment in which there
exists a continuous stream of
successfully managed projects and where success is measured by
what is in the best interest of
both the company and the project (i.e. the customer)
Excellence goes well beyond maturity. You must have maturity to
achieve excellence. It may
take two years or more to reach some initial levels of maturity.
Excellence, if achievable at all,
may take an additional five years or more.
4.7 Informal Project Management:
Companies today are managing projects more on an informal basis
than on a formal one.
Informal project management does have some degree of formality
but emphasizes managing the
project with a minimum amount of paperwork. A reasonable amount
of formality still exists.
Furthermore, informal project management is based upon
guidelines rather than the policies and
procedures that are the basis for formal project management.
This was shown previously to be a
characteristic of a good project management methodology.
Informal project management
mandates:
- Effective
communications
- Effective
cooperation
- Effective
teamwork
- Trust
These four elements are absolutely essential for informal
project management to work
effectively.
28
Figure 4.6:
Evolution of policies, procedures, and guidelines.
Not all companies have the luxury of using informal project
management. Customers often have
a strong voice in whether formal or informal project management
will be used.
4.8 Organizational Structures:
During the past thirty years there has been a so-called hidden
revolution in the introduction and
development of new organizational structures. Management has
come to realize that
organizations must be dynamic in nature; that is, they must be
capable of rapid restructuring, if
environmental conditions so dictate. These environmental factors
evolved from the increasing
competitiveness of the market, changes in technology, and a
requirement for better control of
resources for multiproduct firms. More than thirty years ago,
Wallace identified four major
factors that caused the onset of the organizational revolution:
• The technology
revolution (complexity and variety of products, new materials and
processes, and the effects of massive research).
• Competition and
the profit squeeze (saturated markets, inflation of wage and material costs,
and production efficiency).
• The high cost
of marketing.
• The
unpredictability of consumer demands (due to high income, wide range of choices
available, and shifting tastes).
Much has been written about how to identify and interpret those
signs that indicate that a new
organizational form may be necessary. According to Grinnell and
Apple, there are five general
indications that the traditional structure may not be adequate
for managing projects:
• Management is
satisfied with its technical skills, but projects are not meeting time, cost,
and
other project requirements.
• There is a high
commitment to getting project work done, but great fluctuations in how well
performance specifications are met.
• Highly talented
specialists involved in the project feel exploited and misused.
• Particular
technical groups or individuals constantly blame each other for failure to meet
specifications or delivery dates.
• Projects are on
time and to specifications, but groups and individuals are not satisfied with
the achievement.
Unfortunately, many companies do not realize the necessity for
organizational change until it is
too late. Management continually looks externally (i.e., to the
environment) rather than
internally for solutions to problems. A typical example would be
that new product costs are
continually rising while the product life cycle may be
decreasing. Should emphasis be placed on
lowering costs or developing new products?
For each of the organizational structures described in the
following sections, advantages and
disadvantages are listed. Many of the disadvantages stem from
possible conflicts arising from
problems in authority, responsibility, and accountability. The
reader should identify these
conflicts as such.
4.8.1 Traditional (Classical) Organization:
The traditional management structure has survived for more than
two centuries.
However, recent business developments, such as the rapid rate of
change in technology
and position in the marketplace, as well as increased
stockholder demands, have created
30
strains on existing organizational forms. Fifty years ago
companies could survive with
only one or perhaps two product lines. The classical management
organization was
found to be satisfactory for control, and conflicts were at a
minimum.
However, with the passing of time, companies found that survival
depended on multiple
product lines (that is diversification) and vigorous integration
of technology into the
existing organization. As organizations grew and matured,
managers found that
company activities were not being integrated effectively, and
that new conflicts were
arising in the well-established formal and informal channels.
Managers began searching for more innovative organizational
forms that would
alleviate the integration and conflict problems. The advantages
and disadvantages of
this type of organizations are listed in tables 4.1 and 4.2
respectively.
Table 4.1:
Advantages of the traditional/classical organization
Table 4.2:
Disadvantages of the traditional/classical organization
31
4.8.2 Line–Staff Organization (Project Coordinator):
It soon became obvious that control of a project must be given
to personnel whose first
loyalty is directed toward the completion of the project. For
this purpose, the project
management position must be separated from any controlling
influence of the
functional managers. Two possible situations can exist with this
form of line–staff
project control. In the first situation, the project manager
serves only as the focal point
for activity control, that is, a center for information. The
prime responsibility of the
project manager is to keep the division manager informed of the
status of the project
and to attempt to "influence" managers into completing
activities on time.
The amount of authority given to the project manager posed
serious problems. Almost
all upper level and division managers were from the classical
management schools and
therefore maintained serious reservations about how much
authority to relinquish.
Many of these managers considered it a demotion if they had to
give up any of their
long-established powers.
4.8.3 Pure Product (Projectized) Organization:
The pure product organization develops as a division within a
division. As long as there
exists a continuous flow of projects, work is stable and
conflicts are at a minimum. The
major advantage of this organizational flow is that one
individual, the program
manager, maintains complete line authority over the entire
project. Not only does he
assign work, but he also conducts merit reviews. Because each
individual reports to
only one person, strong communication channels develop that
result in a very rapid
reaction time.
In pure product organizations, long lead times became a thing of
the past. Trade-off
studies could be conducted as fast as time would permit without
the need to look at the
impact on other projects (unless, of course, identical
facilities or equipment were
required). Functional managers were able to maintain qualified
staffs for new product
development without sharing personnel with other programs and
projects.
The responsibilities attributed to the project manager were
entirely new. First of all, his
authority was now granted by the vice president and general
manager. The program
manager handled all conflicts, both those within his
organization and those involving
other projects. Interface management was conducted at the
program manager level.
Upper-level management was now able to spend more time on
executive decision
making than on conflict arbitration. Advantages and
disadvantages of Projectized
organizations are listed in tables 4.3 and 4.4 respectively.
32
Table 4.3:
Advantages of the Projectized organization
Table 4.4:
Disadvantages of the Projectized organization
4.8.4 Matrix Organizational Form:
The matrix organizational form is an attempt to combine the
advantages of the pure
functional structure and the product organizational structure.
This form is ideally suited
for companies, such as construction, that are "project-driven."
Each project manager
reports directly to the vice president and general manager.
Since each project represents
a potential profit center, the power and authority used by the
project manager come
directly from the general manager. The project manager has total
responsibility and
accountability for project success.
The functional departments, on the other hand, have functional
responsibility to
maintain technical excellence on the project. Each functional
unit is headed by a
department manager whose prime responsibility is to ensure that
a unified technical
base is maintained and that all available information can be
exchanged for each project.
Department managers must also keep their people aware of the
latest technical
accomplishments in the industry.
Project management is a "coordinative" function, whereas matrix
management is a
collaborative function division of project management. In the
coordinative or project
organization, work is generally assigned to specific people or
units who "do their own
thing." In the collaborative or matrix organization, information
sharing may be
mandatory, and several people may be required for the same piece
of work. In a project
organization, authority for decision making and direction rests
with the project leader,
whereas in a matrix it rests with the team.
Certain ground rules exist for matrix development. These are:
- Participants
must spend full time on the project; this ensures a degree of loyalty.
- Horizontal as
well as vertical channels must exist for making commitments.
- There must be
quick and effective methods for conflict resolution.
- There must be
good communication channels and free access between managers.
- All managers
must have input into the planning process.
- Both
horizontally and vertically oriented managers must be willing to negotiate for resources.
- The horizontal
line must be permitted to operate as a separate entity except for administrative purposes.
These ground rules simply state some of the ideal conditions
that matrix structures
should possess. Each ground rule brings with it advantages and
disadvantages that are
described in tables 4.5 and 4.6 respectively.
33
Table 4.5:
Advantages of the Matrix organization
Table 4.6:
Disadvantages of the Matrix organization
4.8.4.1 Modification of Matrix Structures:
The matrix structure can take many forms, but there are
basically three common varieties. Each
type represents a different degree of authority attributed to
the program manager and indirectly
identifies the relative size of the company. This type of
arrangement works best for small
companies that have a minimum number of projects and assume that
the general manager has
sufficient time to coordinate activities between his project
managers. In this type of
arrangement, all conflicts between projects are hierarchically
referred to the general manager for
resolution.
As companies grew in size and the number of projects, the
general manager found it
increasingly difficult to act as the focal point for all
projects. A new position was created, that
of director of programs, or manager of programs or projects. The
director of programs was
responsible for all program management. This freed the general
manager from the daily routine
of having to monitor all programs himself.
The desired span of control, of course, will vary from company
to company and must take the
following into account:
- The demands
imposed on the organization by task complexity
- Available
technology
- The external
environment
- The needs of
the organizational membership
- The types of
customers and/or products
- These variables influence the internal functioning of the
company. Executives must realize that
there is no one best way to organize under all conditions. This
includes the span of control.
4.9 Selecting the Organizational Form:
Project management has matured as an outgrowth of the need to
develop and produce complex
and/or large projects in the shortest possible time, within
anticipated cost, with required
reliability and performance, and (when applicable) to realize a
profit. Granted that modern
organizations have become so complex that traditional
organizational structures and
relationships no longer allow for effective management, how can
executives determine which
organizational form is best, especially since some projects last
for only a few weeks or months
while others may take years?
To answer such a question, we must first determine whether the
necessary characteristics exist
to warrant a project management organizational form. Generally
speaking, the project
management approach can be effectively applied to a one-time
undertaking that is:
- Definable in
terms of a specific goal
- Infrequent,
unique, or unfamiliar to the present organization
- Complex with
respect to interdependence of detailed tasks
- Critical to the
company
Once a group of tasks is selected and considered to be a
project, the next step is to define the
kinds of projects. These include individual, staff, special, and
matrix or aggregate projects.
Unfortunately, many companies do not have a clear definition of
what a project is. As a result,
large project teams are often constructed for small projects
when they could be handled more
quickly and effectively by some other structural form.
35
Figure 4.13:
Project Organizational Structure Influences on Projects
All structural forms have their advantages and disadvantages,
but the project management
approach appears to be the best possible alternative.
The basic factors that influence the selection of a project
organizational form are:
- Project size
- Project length
- Experience with
project management organization
- Philosophy and
visibility of upper-level management
- Project
location
- Available
resources
- Unique aspects
of the project
This last item requires further comment. Project management
(especially with a matrix) usually
works best for the control of human resources and thus, may be
more applicable to laborintensive
projects rather than capital-intensive projects. Labor-intensive
organizations have
formal project management, whereas capital-intensive
organizations may use informal project
management.
Four fundamental parameters must be analyzed when considering
implementation of a project
organizational form:
- Integrating
devices
- Authority
structure
- Influence
distribution
- Information
system
|