Lecture 2

Organizational Structures
 The technology revolution (complexity and
variety of products, new materials and
processes, and the effects of massive research)

Competition and the profit squeeze (saturated

Restructuring
markets, inflation of wage and material costs,
and production efficiency)

Necessity
The high cost of marketing

The unpredictability of consumer demands

(due to high income, wide range of choices
available, and shifting tastes)
 • 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
Traditional done, but great fluctuations
in how well performance
Weaknesses specifications are met.
• Highly talented specialists
involved in the project feel
exploited and misused.
Traditional Weaknesses
(Continued)

Particular technical groups or Projects are on time and to

individuals constantly blame specifications, but groups and
each other for failure to meet individuals aren’t satisfied with
specifications or delivery dates. the achievement.
Which Structure Is Best for
Project Management?
 The Classical Management Structure
General
Manager

Adminis-
Director Level Engineering Production Sales Marketing Admin.
tration

Division Level

Department Level

Section Level Functional Responsibility

Functional Project Organization

Figure 2-3
 Departmental Project Management

Division Manager

Department X Department Y Department Z

Project Leaders Project Leaders Project Leaders

Section Level Section Level Section Level

Project Coordinator-continue slide 8

DIVISION MGR.
LEGEND
FORMAL FLOW
PROJECT MGR.
INFORMAL FLOW

DEPT. MANAGER DEPT. MANAGER

 Project Coordinator
Weaknesses
Upper-level management was not ready to cope with the problems arising from
shared authority.

Upper-level management was reluctant to relinquish any of its power and authority
to project managers.

Line-staff project managers who reported to a division head did not have any
authority or control over those portions of a project in other divisions; that is, the
project manager in the engineering division could not direct activities in the
manufacturing division.
 Pure Project Structure-
independent
General Manager

Project A Project B Project C

Manager Manager Manager

ENG. MFG. ENG. MFG. ENG. MFG.

Pure Project Organization

Figure 2-2
The Matrix Management Structure
General
Manager

Engineering Operations Finance Others

Project Responsibility
Functional Responsibility
Project Mgr.
X

Project Mgr.
Y
Project Mgr.
Z
The Matrix Management Structure
(With a Director of Project Management)
General Manager

Director: Director: Director: Director:

Project Mgmt. Engineering Manufacturing Finance/Admin.

Project Mgr. X

Project Mgr. Y

Project Mgr. Z
Matrix Project Organization

Figure 2-4
 THE OUT-OF-CONTROL MATRIX
When a matrix appears to be out of control
executives tend to revert to classical management.
This results in:
 Reduced authority for the project manager
 All project decision-making performed at executive levels
 Increase in executive meddling in projects
 Creation of endless job description manuals

This can often be prevented by asking for

authority/responsibility clarification and using a
responsibility assignment matrix (RAM).
 Balancing Technical and Human Skills

Technical Skills
High

Low
Human Skills

Junior Senior Supervisor Middle Senior President

Team Member Team Member Manager Officer
 The Multidimensional Matrix

Time, Dimension, or Space

Note: Each slice could be a different country.

 Project vs. Functional Influences

Project Influence
Relative Influence

in Decision Making

Functional Influence Dual Influence

In Decision Making

Functional Matrix Project

Organization Organization Organization
Factors for Selecting an Organizational Form

PROJECT SIZE PROJECT LENGTH PROJECT PHILOSOPHY AND

MANAGEMENT VISIBILITY OF
EXPERIENCE EXECUTIVES

PROJECT LOCATION AVAILABLE UNIQUE ASPECTS OF

RESOURCES THE PROJECT
 Strategic Business Unit
Project Management
SBU
SBU SBU
SBU SBU
SBU
Ford
Ford GM
GM Chrysler
Chrysler
Programs
Programs Programs
Programs Programs
Programs

Program
Managers
 SBU Project Management
Using Platform Management

SBU
SBU SBU
SBU SBU
SBU
SBU
Platform Program
Project Managers
Management

Platform
Platform

Platform
Platform

Platform
Platform