Chapter 5: The Project in the Organizational Structure

Learning Objectives
1. Demonstrate how an organizational chart is created and used
2. Assess the importance of aligning project objectives with organizational
strategy
3. Analyze and evaluate the influence of organization structure on a project.
4. Describe the major sources of conflict during various stages of the project
life cycle
5. Explain, what a matrix structure is, and the challenges of working in a
structure

Chapter Outline
5.0 The Introduction

 Commonly, the focus of the structure is specialization of the human

elements of the group. As long as its organizational structure is sufficient to
the tasks imposed on it, the structure tends to persist.
 There are many reasons for the rapid growth of project-oriented
organizations, but most of them can be subsumed in four general areas.
o First, speed and market responsiveness have become absolute
requirements for successful competition.
o Second, the development of new products, processes, or services
regularly requires inputs from diverse areas of specialized
knowledge.
o Third, the rapid expansion of technological possibilities in almost
every area of enterprise tends to destabilize the structure of
organizations.
o Finally, TV, movies, novels, and other mythology to the contrary, a
large majority of senior managers we know rarely feel much
confidence in their understanding of and control over a great many
of the activities going on in their organizations.
 Study of the subtle impacts of the PM on project structure deserves more
attention from researchers in the behavioral sciences.

5.1 The Project as Part of the Functional Organization

 As one alternative for giving the project a “home,” we can make it a part of
one of the functional divisions of the firm.
 There are advantages and disadvantages of using functional elements of
the parent organization as the administrative home for a project, assuming
that one has chosen an appropriate function.

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 A. The Major Advantages are:
a. There is maximum flexibility in the use of staff.
b. Individual experts can be utilized by many different projects.
c. Specialists in the division can be grouped to share knowledge and
experience.
d. The functional division also serves as a base of technological
continuity.
e. Finally, and not the least important, the functional division contains
the normal path of advancement for individuals whose expertise is
in the functional area.

B. The Major Disadvantages are:

a. A primary disadvantage of this arrangement is that the client is not
the focus of activity and concern.
b. The functional division tends to be oriented toward the activities
particular to its function.
c. Occasionally in functionally organized projects, no individual is
given full responsibility for the project.
d. The same reasons that lead to lack of coordinated effort tend to
make response to client needs slow and arduous.
e. There is a tendency to sub optimize the project.
f. The motivation of people assigned to the project tends to be weak.
g. Such an organizational arrangement does not facilitate a holistic
approach to the project.

5.2 Pure Project Organization

 The project is separated from the rest of the parent system. It becomes a
self-contained unit with its own technical staff, its own administration, tied
to the parent firm by the tenuous strands of periodic progress reports and
oversight.
 Pure project is a model business where the project managers have a total
control over the project they oversee. Pure project organization might also
call “task force”.

A. The pure project has an advantages and disadvantages and the

former are:
a. The project manager has full line authority over the project. The PM
must report to a senior executive in the parent organization, that the
complete work force devoted to the project if it is done
b. All members of the project work force are directly responsible to the
PM. There are no functional division heads whose permission must

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 be sought or whose advice must be heeded before making
technological decisions.
c. When the project is removed from the functional division, the lines
of communication are shortened. The entire functional structure is
bypassed, and the PM communicates directly with senior corporate
management
d. When there are several successive projects of a similar kind, the
pure project organization can maintain a more or less permanent
cadre of experts who develop considerable skill in specific
technologies
e. The project team that has a strong and separate identity of its own
tends to develop a high level of commitment from its members.
f. Because authority is centralized, the ability to make swift decisions
is greatly enhanced. The entire project organization can react more
rapidly to the requirements of the client and the needs of senior
management.
g. Unity of command exists. While it is easy to overestimate the value
of this particular organizational principle, there is little doubt that the
quality of life for subordinates is enhanced when each subordinate
has one, and only one, boss.
h. Pure project organizations are structurally simple and flexible, which
makes them relatively easy to understand and to implement.
i. The organizational structure tends to support a holistic approach to
the project.

B. While the advantages of a pure project organization were make a

powerful argument favoring this structure, its disadvantages are
also serious:

a. When the parent organization takes on several projects, it is

common for each one to be fully staffed.
b. In fact, the need to ensure access to technological knowledge and
skills results in an attempt by the PM to stockpile equipment and
technical assistance in order to be certain that it will be available
when needed.
c. Removing the project from technical control by a functional
department has its advantages, but it also has a serious
disadvantage if the project is characterized as “high technology.”
d. Pure project groups seem to foster inconsistency in the way in which
policies and procedures are carried out.

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 e. In pure project organizations, the project takes on a life of its own.
Team members form strong attachments to the project and to each
other. A disease known as projectitis develops.
f. Another symptom of projectitis is the worry about “life after the
project ends.” What will happen if the project is done. Will everyone
in the team can be success or can be parted forever.

5.3 The Matrix Organization

 The matrix organization is a combination of functional and pure project. A

matrix organization can take on a wide variety of specific forms. “Project” or
“strong” matrix organization most resembles the pure project organization.
The “coordination” or “functional” or “weak” matrix most resembles the
functional form. The “balanced” matrix lies in between the others.
 Rather than being a standalone organization, like the pure project, the
matrix project is not separated from the parent organization:

A. As with other organizational forms, the matrix organization has its

own unique advantages:
a. The project is the point of emphasis
b. Because the project is overlaid on the functional divisions, the
project has reasonable access to the reservoir of technology in
all areas
c. There is less anxiety about what happens when the project is
completed
d. Response to client’s needs is as rapid as in the pure project
organization
e. Matrix management gives the project access to representatives
from the administrative units of the parent firm
f. The matrix organization allows a better company-wide balance of
resources to achieve goals
g. There is a great deal of flexibility in precisely how the project is
organized within the matrix

B. There are also disadvantages to using the matrix organization;

most involve conflict between the functional and project
managers:
a. The balance of power between the project and functional areas
is very delicate
b. The movement of resources from project to project may foster
political infighting

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 c. Problems associated with shutting down projects can be as
severe as in a pure project organization
d. The division of authority and responsibility in a matrix
organization is complex, and uncomfortable for the project
manager.
e. Matrix management violates the management principle of unity of
command. Project workers have at least two bosses, their
functional heads and the project manager

I. Virtual Projects
 Virtual projects are those in which work on the project team crosses
time, space, organizational, or cultural boundaries.
 Thus, a virtual team may work in different time periods, be
geographically dispersed, work in different organizations, or work in
different cultures.
i. Only use virtual teams for projects that are challenging and
interesting. But also be sure the project is meaningful to the
company as well as the team.
ii. Solicit volunteers as much as possible—they’ll be more
enthusiastic and dedicated to the success of the project.
iii. Include a few members in the team who already know each other,
and make sure one in every six or seven are “boundary spanners”
with lots of outside contacts.
iv. Create an online resource for team members to learn about each
other (especially how they prefer to work), collaborate,
brainstorm, and draw inspiration.
v. Encourage frequent communication, but not social gatherings
(which will occur at more natural times anyway).
vi. Divide the project work into geographically independent modules
as much as possible so progress in one location isn’t hampered
by delays in other locations.

5.4 Mixed Organizational Systems

 The presentation to this chapter as we noted, divisionalization could be an

implication of isolating an expansive and solid organization into littler, more
adaptable units.
 Project might concern new manufacturing methods, and the machining
division might serve as the base for a project investigating new methods of
removing metal.
 Pure functional and pure project organizations may coexist in a firm. This
form is rarely observed with the purity we have depicted here, yet it is not
uncommon.

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  Hybridization of the mixed form leads to adaptability. It empowers the firm
to meet extraordinary issues by suitable adjustment of its organizational
structure.
 The firm sets up what appears to be a standard form of functional
organization, but it adds a staff office to administer all projects.

5.5 Choosing an Organization Form

 The choice of an organizational form for projects is addressed to the senior
management and very rarely does the PM have a choice about the way the
project interfaces with the parent organization.
 The choice is determined by the situation, but even so is partly intuitive, we
have to consider the nature of the potential project, the characteristics of
the various organizational options, the advantages and disadvantages of
each, the cultural preferences of the parent organization, and make the best
compromise we can.

A. Project structure procedure

a. Define the project with a statement of the objective(s) that
identifies the major outcomes desired.
b. Determine the key tasks associated with each objective and
locate the units in the parent organization that serve as functional
“homes” for these types of tasks.
c. Arrange the key tasks by sequence and decompose them into
work packages.
d. Determine which organizational units are required to carry out the
work packages and which units will work particularly closely with
which others.
e. List any special characteristics or assumptions associated with
the project.
f. In light of the above, and with full cognizance of the pros and cons
associated with each structural form, choose a structure.

5.6 Two Special Cases—Risk Management and the Project Office

 Thus far in this chapter it has been tacitly assumed that however the project
has been organized, it has, or has access to, sufficient skill, knowledge, and
resources to accomplish any activities that may be required.
 A primary task of the PM is to acquire the resources, technical skills,
knowledge, and whatever is needed by the project. While this may be
difficult, acquisition of the project’s technical resources is mainly dependent
on the PM’s skill in negotiation

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 A. Even if the PM has all the resources needed, two problems remain.
a. First, in the entire history of projects from the beginning of time until
the day after tomorrow, no project has ever been completed precisely
as it was planned. Uncertainty is a way of life for PMs and their
projects.
b. Second, the successful execution of a project is a complex
managerial task and requires the use of planning, budgeting,
scheduling, and control tools with which the neophyte PM may not
be completely familiar.
c. In addition, there are contractual, administrative, and reporting
duties that must be performed in accord with the law, the wishes of
the client, and the rules of the organizational home of the project.

I. Risk Management
 Dealing with uncertainties has come to be known as risk management.

A. A seventh sub process

a. Risk Management Planning—deciding how to approach
and plan the risk management activities for a project.
b. Risk Identification—determining which risks might affect
the project and documenting their characteristics.
c. Risk Analysis—performing a qualitative analysis of risks
and conditions to prioritize their impacts on project
objectives.
d. Risk Analysis—estimating the probability and
consequences of risks and estimating the implications for
project objectives.
e. Response Planning—developing procedures and
techniques to enhance opportunities and reduce threats to
the project’s objectives.
f. Monitoring and Control—monitoring residual risks,
identifying new risks, executing risk reduction plans, and
evaluating their effectiveness throughout the project life
cycle. Before proceeding, we must add a seventh sub
process, which is our addition, not the PMBOK’s.
g. Create and Maintain a Risk Management Data Bank—a
permanent record of identified risks, methods used to
mitigate or resolve them, and the results of all risk
management activities.

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  Ward (1999) defines a straightforward method for conducting PMBOK’s
six sub processes that includes a written report on risk management, if
not the creation of a risk database.

B. Risk Identification through Failure Mode and Effect Analysis (FMEA)

 FMEA (Stamatis, 2003) is the application of a scoring model such as
those used for project selection in Chapter 2. It is easily applied to risk
by using six steps.
i. List possible ways a project might fail.
ii. the severity (S) of the consequences of each type of failure on
a 10-point scale where “1” is “no effect” and “10” is “very severe.”
iii. each cause of failure, estimate the likelihood (L) of its
occurrence on a 10-point scale where “1” is “remote” and 10 is
“almost certain.”
iv. the ability to detect (D) a failure associated with each cause.
Using a 10-point scale, “1” means detectability is almost certain
using normal monitoring/control systems and “10” means it is
practically certain that failure will not be detected in time to avoid
or mitigate it.
v. Find the Risk Priority Number (RPN) where RPN = S × L × D.
vi. Consider ways to reduce the S, L, and D for each cause of failure
with a significantly high RPN.

C. An Added Note on Risk Identification

 The risks faced by a project are dependent on the technological nature
of the project, as well as on the many environments in which the project
exists.
 Indeed, the manner in which the process of risk management is
conducted depends on how one or more environments impact the
project.
D. Organizing for Risk Management
 The mere existence of a set of activities that must be undertaken in
order to manage risk implies that some sort of organization is required
to do the work of risk management.
 The specific membership of this group depends on the nature of the
project. If the project’s objective is to develop a new product (or product
line).
E. Dealing with Disaster
 We have dealt with these risks by using an “expected value” approach
to a cost/benefit t analysis.

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  We might also compare the expected loss associated with a risk to the
associated expected cost of mitigating or preventing the loss
associated with the risk.

II. Project Management Office

 The Project Management office engaged a team leader, a master
scheduler, master financial manager, a procurement specialist, a civil
engineer and other specialists to manage the multiple facets of the
construction project.
 The PMOs is the best for business to run like doing a Business plan,
focused, emphasis on results for offering the best project leadership in
the organization and being future-oriented learning organization.
A. Purpose of the Project Management Office
a. To eliminate project delays, eliminate cost overruns and reduce
customer dissatisfaction.
b. To set specific goal and strategic to improve project
management and project performance.
B. Task of the Project Management Office
a. Enforce good project management processes such as
procedures for bidding, risk analysis, project selection, progress
reports, executing contracts, and selecting software.
b. Develop and improve an enterprise project management
maturity.
c. Maintain a stable of competent candidates.
d. The project manager should help with Administrative details
such as status reports.
C. Forms of Project Management Office
a. Supportive PMOs to encouraging or enforcing the use of those
standards and processes. It is consultative role to projects by
supplying templates, best practices, training, access to
information and lessons learned from other projects.
b. Controlling PMOs is a moderate to adopting project
management framework or methodologies, using specific
templates, forms and tools or conformance to governance.
c. Directive PMOs to take control of projects by directly managing
them. The degree of control provided by the PMO is high.

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 D. Implementing Project Management Office
a. Establish the role, scope and outcomes. The role of the PMO will
be different in every organization.
b. The PMO is not a quick fix for saving projects that are failing; its
primary objective is to improve project management processes
over the long run.

5.7 The Project Team

 The following key team members might be needed, plus an appropriate
number of systems architects, engineers, testers, clerks, and the like.
A. Systems Architect
 In charge of the basic product design and development.
Responsible for;
a. Functional analysis
b. Specifications
c. Drawings
d. Cost estimates
e. Documentation
B. Development Engineer
 Their task is the efficient production of:
a. The product or the process the project engineer designed.
b. Responsibility for manufacturing design.
c. Design and production of code.
d. Unit testing
e. Production scheduling
C. Test Engineer
 He is responsible for:
a. Installation
b. Testing
c. Support of the product once the engineering is done.
D. Contract Administrator
a. In charge of all official paperwork.
b. Serves as the project historian and archivist.
c. Tracks the standard compliance.
d. Costumer changes
e. Billings
f. Questions
g. Complaints
h. Legal aspects
i. Costs and negotiations

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 E. Project Controller
a. Manages the daily account of budgets;
b. Cost variances,
c. Labor charges,
d. Project supplies,
e. And capital equipment status.
f. They also make regular reports.
g. They keep close in touch to the project manager and the
company controller.
h. They can also be a historian if the administrator did not provide
one.
F. Support Services Manager
a. In charge of product support,
b. Subcontractors
c. Data processing
d. Purchasing
e. Contract negotiation
f. and general management

5.8 Human Factors and the Project Team

 One of the technical problem of the PM are meeting schedule and cost goal
without compromising.
 Frederick Herzberg contend that recognition, achievement, the work itself,
responsibility, advancement, and the chance to learn new skills are
motivators for engineers, scientists, and professionals on a project team.
A. Advantage of empowerment for project teams are:
a. It harnesses the ability of the team members to manipulate task so
that project objectives are met.
b. Professionals do not like being micromanaged. Participative
management does not tell them how to work but, given a goal, allows
them to design their own methods (usually within some constraints
on their authority).
c. The team members no they are responsible and accountable for
achieving the project deliverables.
d. There is a good chance that synergetic solution will result from team
interaction.
e. Team members get timely feedback on their performance.
f. PM is provided a tool for evaluating the team's performance.

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Chapter Summary
 A project organization is a structure that facilitates the coordination and
implementation of project activities. Its main reason is to create an
environment that fosters interactions among the team members with a
minimum number of disruptions, overlaps and conflict.
 The rapid growth of of project-oriented organization. First, speed and
market responsiveness, second development of new products, process and
service. Third, the rapid expansion of technology. Lastly, the activity the
organization.
 Pure project organizations are structurally simple and flexible, which makes
them relatively easy to understand and to implement.
 Matrix Organization is a combination of pure project and functional
organization structures. A matrix organization can take on a wide variety of
specific forms, depending on which of the two extremes (functional or pure
project) it most resembles.
 A project management office (PMO) is a group or department within a
business, government agency, or enterprise that defines and maintains
standards for project management within the organization. The PMO strives
to standardize and introduce economies of repetition in the execution of
projects.
 Success through teamwork is when there's rules that were stablished and
when there's special effort directed toward making the project team strive
to reduce time on the project.
 Conflict avoiders do not make successful project managers.
 In virtual project, developing trust is the greatest challenge to the remote
project manager because it's difficult for distant members to get to know
each other well where they tend to communicate poorly.
 Internet provides a means for communicating quickly and extensively in the
use of email, teleconferencing and video conferencing.

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Assessment
A. Fill in the blanks.
1. The _______ is a method of organizing that maintains both functional
supervisors as well as project supervisors.
2. To staff a project, the _______ works from a forecast of personnel needs
over the life cycle of the project.
3. Determine which _______ are required to carry out the work packages and
which units will work particularly closely with others.
4. A _______ is a basic project document that describes all the work that must
be done to complete the project and forms the basis for costing, scheduling,
and work responsibility.
5. Selecting the appropriate project organizational form is critical to the
_______ of the project.

B. Write TRUE if the statement is correct but if it’s false, change the
underlined word to make the whole statement true.
1. “When the project is removed from the functional division, the lines of
communication are shortened” is one of the advantages of pure project
organization.
2. A majority of senior managers often feel much confidence in their
understanding and control of the activities in their areas.
3. The matrix organization is a combination of non-functional and pure project.
4. Define the project with a statement of the objective(s) that identifies the
major outcomes desired.
5. Selecting the organizational interface between the project and the firm is an
easy task.

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