Organisation strategy, structure and

culture
Rashid Maqbool PhD, MPhil, MBA, B.Sc, PGCert, FHEA

Faculty of Computing, Engineering and Built Environment

School of Engineering and the Built Environment

Email: rashid.maqbool@bcu.ac.uk
Agenda
• Alignment of Projects with Organizational Strategy

• Project Management Structures

• Organizational Culture

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The Strategic Management Process:
An Overview
• Projects are increasingly viewed as “building blocks” in the
design and execution of the strategies of corporations and
governmental agencies (PMI, 2000).

• There is a strong link between strategic intent, project

conception and project selection.

• A simple comparison of the definitions of strategic planning and

project management provides an indication that the two
disciplines are compatible.
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The Strategic Management Process:
An Overview Cont’d.
• A typical definition of strategic planning is:
• “a set of decision rules which guide the company’s resource allocation
process, taking into account both the short and long term, with emphasis
on allocating resources in uncertain conditions to achieve future
objectives. [..]” (Scott,1997).

• The PMI also acknowledges a link between project management

and strategy by stating that ‘projects are implemented as a
means of achieving an organization’s strategic plan’(PMI, 2000).

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The Strategic Management Process:
An Overview
• Strategic Management
• Requires every project to be clearly linked to strategy.

• Provides theme and focus of firm’s future direction.

• Responding to changes in the external environment—
environmental scanning.

• Allocating scarce resources of the firm to improve its competitive

position—internal responses to new programs

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Strategic Management Process

Source:(Larson and Gray, 2011, p. 27).

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Four Activities of the Strategic
Management Process
1. Review and define the organizational mission.

2. Set long-range goals and objectives.

3. Analyze and formulate strategies to reach

objectives.

4. Implement strategies through projects

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Characteristics of Objectives
S Specific Be specific in targeting an objective

M Measurable Establish a measurable indicator(s) of progress

A Assignable Make the objective assignable to one person

for completion

R Realistic State what can realistically be done with

available resources

T Time related State when the objective can be achieved,

that is, duration

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Project Portfolio Management: (1/2)
• Project portfolio is a group of projects that share and compete for same
resources and are carried out under the sponsorship or management of
an organization.

• The Implementation Gap

• The lack of understanding and consensus on strategy among top management
and middle-level (functional) managers who independently implement the
strategy.

• Organization Politics
• Project selection is based on the persuasiveness and power of people advocating
the projects.

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Project Portfolio Management: (2/2)

• Resource Conflicts
• Multi-project environment creates interdependency relationships
of shared resources which results in the starting, stopping, and
restarting projects.

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Designing project portfolio system

• Classification of the project

• Selection criteria

• Ranking proposals and selections projects

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Portfolio of Projects by Type

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In class activity
You manage a hotel resort located on the South Beach on the Island of Kauai in
Hawaii. You are shifting the focus of your resort from a traditional fun-in-the-sun
destination to eco-tourism. (Eco-tourism focuses on environmental awareness and
education.) How would you classify the following projects in terms of compliance,
strategic, and operational?

a. Convert the pool heating system from electrical to solar power.

b. Build a 4-mile nature hiking trail.
c. Renovate the horse barn.
d. Launch a new promotional campaign with Hawaii Airlines.
e. Convert 12 adjacent acres into a wildlife preserve.
f. Update all the bathrooms in condos that are 10 years or older.
g. Change hotel brochures to reflect eco-tourism image.
h. Test and revise disaster response plan.
i. Introduce wireless Internet service in café and lounge areas.

How easy was it to classify these projects? What made some projects more
difficult than others?

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In class activity solution
Most students classify the projects as follows:

Compliance: f., h
Operational: a., c., i
Strategic: b., d., e., g

Most students claim it was not too difficult to classify the projects other than they
had to make judgment calls given the limited information. In real life they would
have such information. Debates occur around whether converting the heating
system to solar polar was an operational necessity or to fit the eco-friendly image.
Likewise, launching the promotional campaign with Hawaii Airlines would be
considered strategic if it promoted the eco-tourism theme, otherwise it could be
consider operational.

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Designing project portfolio system

• Classification of the project

• Selection criteria

• Ranking proposals and selections projects

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A Portfolio Management System
• Selection Criteria
• Financial models: payback, net present value (NPV)

• Non-financial models: projects of strategic importance to the

firm.

• Multi-Weighted Scoring Models

• Use several weighted selection criteria to evaluate project
proposals.

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Financial Models
• The Payback Model
• Measures the time the project will take to recover the project
investment.
• Uses more desirable shorter paybacks.

• Emphasizes cash flows, a key factor in business.

• Limitations of Payback:
• Ignores the time value of money.

• Assumes cash inflows for the investment period (and not beyond).

• Does not consider profitability.

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The Payback formula

• Payback period (years)= Estimated Project cost/

Annual savings

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In class activity
Two new software projects are proposed to a young, start-up
company. The Alpha project will cost £150,000 to develop and is
expected to have annual net cash flow of £40,000. The Beta project
will cost £200,000 to develop and is expected to have annual net cash
flow of £50,000. The company is very concerned about their cash
flow.

Using the payback period, which project is better from a cash

flow standpoint? Why?

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Solution
• Payback = Investment / Annual Savings

• Project Alpha: £150,000 /£40,000 = 3.75 years

• Project Beta: £200,000 / £50,000 = 4.0 years

• Project Alpha is the better payback.

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Financial Models (cont’d)
• The Net Present Value (NPV) model
• Uses management’s minimum desired rate-of-return (discount rate) to compute the present value
of all net cash inflows.

• The required rate of return is the minimum return an investor expects to achieve by investing in a
project.

• Positive NPV: project meets minimum desired rate

of return and is eligible for further consideration.

• Negative NPV: project is rejected.

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Example

• A project costs $1,000 and will provide three cash

flows of $500, $300, and $800 over the next three
years. Assume required rate of return is 8%.

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Solution

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In class activity
A five-year project has a projected net cash flow of
£15,000, £25,000, £30,000, £20,000, and £15,000 in the
next five years. It will cost £50,000 to implement the
project. If the required rate of return is 20 percent, conduct
a discounted cash flow calculation to determine the NPV.

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Solution
A B C D E F G H
1
2 Exercise 2.3
3 Net Present Value Example
4
5 Project 2.3 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
6 Investment -£50,000

7 Cash Inflows £15,000 £25,000 £30,000 £20,000 £15,000

8 Required Rate of 20%

Return
9
10 NPV = £12,895 Formula: =C6+NPV(B8,D7:H7)

Since the NPV is positive, accept project.

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Non-financial Strategic Criteria
• To capture larger market share

• To make it difficult for competitors to enter the market

• To develop an enabler product, which by its introduction will increase sales in more
profitable products

• To develop core technology that will be used in next-generation products

• To reduce dependency on unreliable suppliers

• To prevent government intervention and regulation

• To restore corporate image or enhance brand recognition

• To demonstrate its commitment to corporate citizenship and support for community

development.
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Multi-Criteria Selection Models
• Checklist Model

• Uses a list of questions to review potential projects and to determine

their acceptance or rejection.

• Fails to answer the relative importance or value of a potential project

and doesn’t allow for comparison with other potential projects.

• Multi-Weighted Scoring Model

• Uses several weighted qualitative and/or quantitative selection criteria

to evaluate project proposals.

• Allows for comparison of projects with other potential projects

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Project Screening Matrix

Source:(Larson and Gray, 2011, p. 41).

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Designing project portfolio system
• Classification of the project

• Selection criteria

• Sources and Solicitation of proposals

• Ranking proposals and selections projects

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Project Screening Process

Source:(Larson and Gray, 2011, p. 46).

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Project structures

How will the project be implemented?

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Project Management Structures
• Represents the management hierarchy:

• Reporting relationships who report to whom

• The official chain of control or authority, which deals with official activities,
such hiring, and promotion.

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Forms of organization structures
• Functional organization
• Dedicated Teams
• Matrix organization

• Best depends on goals, type of work it

supposed to do, and the environment within
which it operates.

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Functional organization
• Different segments of the project are delegated to respective
functional units.

• Coordination is maintained through normal management channels.

• Used when the interest of one functional area dominates the

project or one functional area has a dominant interest in the
project’s success.

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Functional Organizations

Source:(Larson and Gray, 2011, p. 66).

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Functional Organization of Projects
• Disadvantages
Advantages
1.
1. Lack
No structural
of focus change

2.
2. Poor
Flexibility
integration

3.
3. Slow
In-depth expertise

4.
4. Lack
Easyof
post-project
ownership transition

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Dedicated Teams
• Teams operate as separate units under the
leadership of a full-time project manager.

• In a projectized organization where projects

are the dominant form of business, functional
departments are responsible for providing
support for its teams.
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Dedicated Project Team

Source:(Larson and Gray, 2011, p. 68).

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Dedicated Team
• Advantages • Disadvantages

1. Simple 1. Expensive

2. Fast 2. Internal Strife

3. Cohesive 3. Limited Technical Expertise

4. Cross-Functional 4. Difficult Post-Project Transition

Integration

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Projectized Organizational Structure

Source:(Larson and Gray, 2011, p. 71).

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Matrix Structure
• Hybrid organizational structure (matrix) is overlaid on the
normal functional structure.
• Two chains of command (functional and project)

• Project participants report simultaneously to both functional and project

managers.

• Matrix structure optimizes the use of resources.

• Allows for participation on multiple projects while performing normal
functional duties.

• Achieves a greater integration of expertise and project requirements.

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Matrix Organization Structure

Source:(Larson and Gray, 2011, p. 74).

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Different Matrix Forms
• Weak Form

• The authority of the functional manager predominates and the

project manager has indirect authority.

• Balanced Form

• The project manager sets the overall plan and the functional
manager determines how work to be done.

• Strong Form

• The project manager has broader control and functional

departments act as subcontractors to the project.
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Division of Project Manager and
Functional Manager Responsibilities in
a Matrix Structure
Project Manager Negotiated Issues Functional Manager

What has to be done? Who will do the task? How will it be done?

When should the task be done? Where will the task be done?

How much money is available Why will the task be done? How will the project involvement
to do the task? impact normal functional activities?

How well has the total project Is the task satisfactorily How well has the functional
been done? completed? input been integrated?

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Matrix Form

• Advantages • Disadvantages
1. Efficient
1. Dysfunctional Conflict
2. Strong Project Focus
2. Infighting
3. Easier Post-Project Transition
3. Stressful
4. Flexible
4. Slow

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What Is the Right Project
Management Structure?
• Organization (Form) Considerations
• How important is the project to the firm’s
success?
• What percentage of core work involves
projects?
• What level of resources (human and
physical) are available?

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Project Considerations:

• Size of project

• Strategic importance

• Novelty and need for innovation

• Need for integration (number of departments involved)

• Environmental complexity (number of external interfaces)

• Budget and time constraints

• Stability of resource requirements

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Organizational Culture
• Organizational Culture

• A system of shared norms, beliefs, values, and assumptions

which bind people together, thereby creating shared meanings.

• The “personality” of the organization that sets it

apart from other organizations.
• Provides a sense of identity to its members.

• Helps legitimize the management system of the organization.

• Clarifies and reinforces standards of behavior.

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Identifying Cultural Characteristics
• Study the physical characteristics of an
organization.

• Read about the organization.

• Observe how people interact within the

organization.

• Interpret stories and folklore surrounding

the organization.

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Organizational Culture Diagnosis
Worksheet
Power Corp.
I. Physical Characteristics:
Architecture, office layout, décor, attire
Corporate HQ is 20 Story modern building—president on top floor. Offices are bigger
in the top floors than lower floors. Formal business attire (white shirts, ties, power
suits, . . . ) Power appears to increase the higher up you are.
II. Public Documents:
Annual reports, internal newsletters, vision statements
At the heart of the Power Corp. Way is our vision . . . to be the global energy
company most admired for its people, partnership and performance. Integrity. We
are honest with others and ourselves. We meet the highest ethical standards in all
business dealings. We do what we say we will do.

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Organizational Culture Diagnosis
Worksheet
Power Corp.
III. Behavior:
Pace, language, meetings, issues discussed, decision-making style, communication patterns,
rituals
Hierarchical decision-making, pace brisk but orderly, meetings start on time and end on time,
subordinates choose their words very carefully when talking to superiors, people rarely work
past 6:00 P.M., president takes top performing unit on a boat cruise each year . . .
IV. Folklore:
Stories, anecdotes, heroines, heroes, villains
Young project manager was fired after going over his boss’s head to ask for additional funds.
Stephanie C. considered a hero for taking complete responsibility for a technical error.
Jack S. was labeled a traitor for joining chief competitor after working for Power Corp. for 15
years.

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Implications of Organizational Culture
for Organizing Projects
• Challenges for Project Managers
in Navigating Organizational Cultures
• Interacting with the culture and subcultures of
the parent organization

• Interacting with the project’s clients or

customer organizations

• Interacting with other organizations connected

to the project

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