Chapter 7



CHAPTER 13

Types of Project Organizations

LEARNING OBJECTIVES

There are various ways in which people can be organized to work on projects. In this chapter the students will become familiar with:

• the characteristics of the three types of organization structures:

1) functional

2) project

3) matrix

• the advantages and disadvantages of each

TEACHING STRATEGIES

1. Let the students know that there are many ways to structure a team within an organization.

2. Ask them to brainstorm some ways in which this could be done. Facilitate the process.

3. Describe your experience in working with different structures for projects and teams.

4. Describe how your university or organization is structured and how special projects are undertaken.

5. Invite a guest from industry to discuss their organization.

LECTURE OUTLINE

1. Real-World Examples

A. Vignette: Simple Guidelines for Great Leaders

• An effective leader:

i. Commits people to action

ii. Develops team members into leaders

iii. Acts as an agent for change

• Joni Daniels, Principal of Daniels & Associate, a consulting group

that specializes in personal and professional development, provides

these guidelines for effective leaders:

i. Make sure the team understands the mission and vision, and sticks to it.

a. Mission—how the project fits into the organization

b. Vision—how the project will help the organization

reach a desired future state

ii. Unacceptable behavior should have consequences.

iii. Make behavioral expectations clear- advocate good behavior, and do not ignore bad behavior.

iv. Make teamwork a criterion for team member’s successful

performance.

v. Focus on encouraging good behavior and producing positive actions, instead of making people fearful.

vi. Cliques are unacceptable. Clearly state that all team members must cooperate with one another.

vii. Work closely to manage and resolve conflict. This teaches

team members to handle problems together and trust one another.

viii. Don’t rush or neglect processes. Review team processes at the end of each meeting so that the team can reflect on their actions.

B. Vignette: The Chicago Police Department

• Chicago Police Department is using advanced information technology

to better protect its 3 million citizens within 228 square miles.

• The Citizen Law Enforcement Analysis and Reporting System

(CLEAR) provides quick access to shared information about crimes.

• After 3 years and $40 million, half of the CLEAR’s planned functions

have been developed and are in use. The system includes:

i. 2,000 wireless notebooks for officers on the road

ii. 3,000 desktops

iii. Access to the secured Oracle database which holds valuable

crime data

• CPD processes about 700 arrests each day. The information is entered

and stored in CLEAR, providing a central database of searchable

information for the CPD and other Illinois police departments.

• Eventually, CLEAR will allow communication between Chicago

citizens and the CPD.

• Since CLEAR was introduced, the CPD’s crime-solving rate has

increased. The rate went from 21% in 2001 to 26% in 2002.

• Ron Huberman was the project lead for CLEAR.

i. His IT staff of 142 developed the system to fit the CPD

mission, to serve and protect Chicago citizens.

ii. He used his real-life experiences as a police officer to

design CLEAR so that its functions reflected the traditional

business processes used in the CPD, while making data and

information gathering more effective.

• CPD is the second largest police force in the US with 13,600 officers

and 3,000 civilian employees. Many did not have much experience

with computer technology.

• Factors leading to the successful implementation of CLEAR:

i. Extensive user-input was collected for system planning and

design during joint application development sessions.

ii. CLEAR was developed with user-friendly interfaces that

resemble existing paper forms.

iii. Employees trained fellow employees to use the system.

• CPD won the Grand CIO Enterprise Value Award in 2004 for the

successful implementation of CLEAR.

• CLEAR transformed the CPD’s business practices into highly efficient

processes for sharing critical information.

• Through the integration of technology and the effective use of project

management, the city of Chicago is a safer place to live and work.

2. Functional Type Organization

A. Display Figure 13.1—a functional organization structure for an industrial business that sells standard electronics products.

B. This structure is typically used in businesses that primarily sell and produce standard products. For example, a company that manufactures and sells video recorders.

C. Work groups consist of individuals who perform the same function, such as engineering or manufacturing.

D. Each functional group concentrates on performing its own activities in support of the company’s business mission.

E. A company with a functional structure may periodically undertake projects, but these are typically in-house projects rather than projects for external customers. For such projects, a multifunctional project team or task force is formed.

F. Team members may be assigned to the project either full-time or part-time.

G. In most cases if an individual serves part-time on a project task force, the individual continues to perform her regular functional jobs.

H. One of the team members is designated as the project leader or manager.

I. In a functional-type organization, the project manager does not have complete authority over the project team, since administratively the members still work for their respective functional managers.

J. The project manager also needs to take the time to regularly update the other functional managers in the company on the status of the project and thank them for the support of their people assigned to the task force.

3. Project-Type Organization

A. Display Figure 13.2—a project organization structure for a business that sells rapid transit projects to cities and counties.

B. Companies with this organization are in the projects business; they do not produce standard products.

C. They work on multiple projects at any given time.

D. As projects wind down and are completed, the company hopes to get contracts for new projects.

E. Each project team is dedicated to only one project.

F. In the project-type organization, each project is operated like a mini-company.

G. All the resources needed to accomplish each project are assigned full-time to work on that project.

H. A full-time project manager has complete project and administrative authority over the project team.

I. A project-type organization can be cost-inefficient both for individual projects and for the company. Each project must pay the salaries of its dedicated project team, even during parts of the project when they are not busy.

J. There is little opportunity for members of different project teams to share knowledge or technical expertise, since each project team tends to be isolated.

K. Project organization structures are found primarily in companies that are involved in very large projects.

L. Such projects can be of high (multimillion) dollar value and long (several years) duration.

M. Project organization structures are prevalent in the construction and aerospace industries.

N. They are also used in the nonbusiness environment, such as for volunteer-managed projects.

4. Matrix-Type Organization

A. Display Figure 13.3—a matrix organization structure for a business that sells custom computer-based automation systems.

B. With this structure, multiple projects are worked on at any one time, and these projects vary in size and complexity.

C. Projects are continually being completed and started.

D. The matrix-type organization is kind of a hybrid—a mix of both the functional and project organization structures.

E. It provides the project and customer focus of the project structure, but it retains the functional expertise of the functional structure.

F. The project manager is responsible for the project results, while the functional managers are responsible for providing the resources needed to achieve the results.

G. The matrix-type organization provides for effective utilization of company resources.

H. Project managers come under the projects component of the organization.

I. When the company receives an order for a new system, the vice president of projects assigns a project manager to the project.

J. A small project may be assigned to a project manager who is already managing several other small projects.

K. A large project may be assigned a full-time project manager.

L. Individuals are assigned to the project for the length of time they are needed.

M. Some individuals may be assigned to the project full-time, while others may be assigned only part-time.

N. Some people may be assigned to a project for its entire duration; others may work on only one part of the project.

O. Sharing of individuals’ time among several projects results in effective utilization of resources and minimizes overall costs for each project.

P. The objective is to maximize the number of functional person-hours applied to work on projects and minimize the unapplied time.

Q. The company always needs to have new projects coming in as other projects are completed, in order to maintain a high applied-time rate for the functional staff.

R. Individuals can pursue career development through assignment to various types of projects. As they broaden their experience, individuals become more valuable for future assignments.

S. Each member of a project team has a dual reporting relationship; in a sense, each member has two managers—a (temporary) project manager and a (permanent) functional manager.

T. The project manager is the intermediary between the company and the customer.

U. She or he is responsible for leading the development of the project plan, establishing the project schedule and budget, and allocating specific tasks and budgets.

V. Each functional manager in a matrix organization structure is responsible for how the assigned work tasks will be accomplished and who (which specific people) will do each task.

W. The matrix-type organization provides checks-and-balances and a fast response upon problem identification because it has both a horizontal (project) and a vertical (functional) path for the flow of information.

5. Advantages and Disadvantages

A. Functional Organization Structure

1. Advantages:

(a) A functional-type organization reduces duplication and overlap of activities.

(b) It provides the benefits associated with specialization and functional excellence.

2. Disadvantages:

(a) Functional-type organizations can be insular with each component concerned about only its own performance.

(b) Teamwork is not emphasized.

(c) Decisions may be parochial rather than in the best interests of the overall project.

(d) The hierarchical structure causes communication, problem resolution, and decision making to be slow.

(e) There is a lack of customer focus.

(f) There is a stronger allegiance to the function than to the project or the customer.

B. Project Organization Structure

1. Advantages:

(a) The project team has full control over the resources, including authority over how the work gets done and by whom.

(b) The project organization is highly responsive to the customer.

2. Disadvantages:

(a) This structure can be cost-inefficient because of underutilization of resources.

(b) When things are slow, individuals have a tendency to stretch out their work to fill up the time available or if they do not have any tasks to do for temporary periods, their unapplied time is still a cost to the company.

(c) Potential for duplication of activities on several concurrent projects.

(d) There is a low level of knowledge transfer among projects.

(e) Individuals are dedicated to working on one project.

(f) They do not have a functional “home.”

(g) At the end of a project, people may be laid off if there is not a new project to which they can be assigned leading to team members experiencing high anxiety about reassignment.

C. Matrix Organization Structure

1. Advantages:

(a) It allows efficient utilization of resources by having individuals from various functions assigned to work on specific projects.

(b) Because they have a functional home, individuals can be moved among projects.

(c) It provides a core of functional expertise that is available to all projects.

(d) Knowledge stays with the company, ready to be used on future projects.

(e) People experience greater learning and growth, and their knowledge and skills are transferred from project to project.

(f) The matrix structure also facilitates information flow.

(g) Project team members can inform the project manager and the functional manager.

(h) The matrix organization is customer focused.

2. Disadvantages:

(a) Members of a project team in a matrix organization structure have a dual reporting relationship, which can cause anxiety and conflict over work priorities.

(b) A company that uses a matrix organization structure must establish operating guidelines to assure a proper balance of power between project managers and functional managers.

(c) Conflicts will arise between project managers and functional managers regarding priorities.

QUESTIONS

1. Describe what a functional-type organization is. Make sure you discuss the advantages and disadvantages of this structure.

Functional organizations are businesses that primarily sell and produce standard products; for example, a company that manufactures and sells video recorders. Groups consist of individuals who perform the same function, such as engineering or manufacturing. Each group concentrates on performing its own activities in support of the company’s business mission. A company with a functional structure may periodically undertake an in-house project, but not one for external customers. The advantages are that activities are not duplicated and it provides the benefits associated with specialization and functional excellence. The disadvantages are that this type of structure tends to be insular, there is a slow response time and there is a lack of customer focus.

2. Describe what a project-type organization is. Make sure you discuss the advantages and disadvantages of this structure.

A project-type organization is a company that is in the project business. It does not produce standard products. It works on multiple projects at a time. Each project team is dedicated to only one project. The advantages of this structure include having control over resources and a high degree of responsiveness to customers. The disadvantages are that there can be cost-inefficiency and a low level of knowledge transfer among projects.

3. Describe what a matrix-type organization is. Make sure you discuss the advantages and disadvantages of this structure.

A matrix-type organization works on multiple projects at any one time. Projects are continually being completed and started. It has many advantages, including: an efficient utilization of resources, functional expertise that is available to all projects, an increased learning and knowledge transfer, a high degree of responsiveness and customer focus. The disadvantages of this structure are that there are dual reporting relationships and a need for a balance of power.

4. Which type of organization structure is often used by companies that produce standard products? Why?

The functional organization structure is often used by companies that produce standard products because the focus is on the technical excellence and cost competitiveness of the company’s products, as well as the importance of each functional component’s contribution of expertise to the company’s products.

5. Discuss some of the problems that might be encountered when a functional-type organization develops new products.

Because the team members view their contribution to the project (developing a new product) in terms of their technical expertise, their allegiance remains to their functional managers. If there is conflict among the team members, it usually works its way through the organization hierarchy to be resolved, slowing down the project effort. In addition, decisions might reflect the interests of the project manager’s own functional component rather than the best interests of the overall project.

6. Why is a project-type organization considered to be like a mini-company?

It is like a mini-company because all the resources needed to accomplish each project are assigned full-time to work on that project. A full-time project manager has complete project and administrative authority over the project team.

7. Why is a project-type organization sometimes considered to be expensive?

A project-type organization can be considered expensive because each project must pay the salaries of its dedicated project team, even during parts of the project when they are not busy. Also, resources or tasks may be duplicated on several concurrent projects.

8. Which organization structure is considered to be a hybrid? How so?

The matrix structure is a hybrid—a mix of both functional and project organization structures. It provides the project and customer focus of the project structure but retains the functional expertise of the functional structure.

9. How does a matrix-type organization provide for career development?

A matrix-type organization provides for career development by assigning individuals to various types of projects. As they broaden their experience, individuals become more valuable for future assignments.

10. What are the responsibilities of the project manager in a matrix-type organization?

The project manager is the intermediary between the company and the customer. She or he is responsible for leading the development of the project plan, establishing the project schedule and budget, and allocating specific tasks and budgets to the various functional components of the company organization.

11. What are the responsibilities of the functional manager in a matrix-type organization?

Each functional manager in a matrix organization structure is responsible for how the assigned work tasks will be accomplished and who (which specific people) will do each task.

12. What are the responsibilities of the vice president of projects in a matrix-type organization?

The vice president of projects can resolve priority conflicts between two or more projects within the organization.

WORLD WIDE WEB EXERCISES

Assign the World Wide Web Exercises to your students as homework or complete them together in a computer lab.

CASE STUDY #1 MULTI PROJECTS

This case study is about a company called Multi Projects, Inc. that is a well-established, rapidly growing consulting firm that has grown from 300 to 400 employees over the past two years. Multi Projects has a matrix organization structure. As new projects come in, a project manager is assigned. Multi Projects just got a call from Growin Corporation, which wants to go forward with a project that Multi Projects proposed nearly six months ago. Jeff Armstrong has been assigned as project manager for the Growin Corporation project and desperately wants to have Tyler Bonilla assigned to his project; however, Tyler is working full-time on a project run by Julie Capriolo for Goodold Company.

Answers to Case Questions

1. Why is Jeff so anxious to get started on the Growin project?

Jeff has been assigned as project manager for the Growin Corporation project. He has been with Multi Projects for about a year and has been anxious to get a challenging project to manage. He also worked on the proposal for the Growin project.

2. What is wrong with Jeff’s approach to handling this situation?

Jeff appears to think the whole world revolves around him and his new project. He also has twisted several people’s words and has attempted to make Julia think that Tyler is definitely being reassigned by telling Julia that he has already spoken to Tyler and Jennifer about the reassignment (although no real decisions have been made).

3. What should Jennifer do to resolve this situation?

Jennifer needs to make some serious decisions about the assignment of Tyler on these two projects. She should start be sitting down with everyone involved (individually and as a group) to discuss the situation.

4. What advantages of the matrix-type organization are apparent from this story?

a) Because they have a functional home, individuals can be moved among projects.

b) It provides a core of functional expertise that is available to all projects.

c) People can experience greater learning and growth, and their knowledge and skills are transferred from project to project.

What disadvantages of the matrix-type organization are apparent from this story?

a) Members of a project team in a matrix organization structure have a dual reporting relationship, which can cause anxiety and conflict over work priorities.

(b) A company that uses a matrix organization structure must establish operating guidelines to assure a proper balance of power between project managers and functional managers.

(c) Conflicts will arise between project managers and functional managers

regarding priorities.

Group Activity

Break the course participants into teams of three or four to discuss

• What should Jennifer do next?

• What should Tyler do?

• What could have been done to prevent this situation?

• How could each of the four individuals have handled the situation better?

After the small groups discuss the questions, have an open discussion among course participants.

CASE STUDY #2 MANUFACTURING DIVISIONS

This case study involved a multidivision manufacturing company with a diversified product line. The medical instruments division is not growing as fast as the rest of the divisions in the company.

Answers to Case Questions

1. How would you initiate your assignment with Kareem and the department managers?

Open communications and clear objectives and guidelines will be important upfront.

2. Develop a list of questions you would ask.

Answers will vary among students.

3. Assuming the department managers tell you the same things they told Kareem, what recommendations would you make to the CEO, including any changes to the organization structure, to improve the management of product development projects?

Let the class debate this topic and then lead them through an active discussion.

4. What guidelines would you recommend for how the departments and/or new functions should work together on product development projects?

First let the students develop their own lists individually. Next, let them work in teams of four to expand their lists. When they are finished lead the class through an interactive discussion and create a “class” list of guidelines and recommendations.

Group Activity

Have participants in the class act out this scenario. Immediately afterward, have a class discussion that addresses the questions above.

HOMEWORK

1. Have them read the real-world vignettes.

2. Have each student interview someone working in business who is involved in a project. Get them to summarize the project and provide a discussion of the specific organizational structure that is used.

3. Have them read the chapter and answer all of the Reinforce Your Learning questions and the questions at the end of the chapter.

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