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The Organizational Context:

Strategy, Structure, and Culture

Chapter 2 Learning Objectives

After completing this chapter, students will be able to:

Understand how effective project management contributes to achieving strategic objectives.

Recognize three components of the corporate strategy model: formulation, implementation, and evaluation.

See the importance of identifying critical project stakeholders and managing them within the context of project development.

Recognize the strengths and weaknesses of three basic forms of organizational structure and their implications for managing projects.

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Chapter 2 Learning Objectives

After completing this chapter, students will be able to:

Understand how companies can change their structure into a “heavyweight project organization” structure to facilitate effective project management practices.

Identify the characteristics of three forms of project management office (PMO).

Understand key concepts of corporate culture and how cultures are formed.

Recognize the positive effects of a supportive

organizational culture on project management practices versus those of a culture that works against project management.

Projects and Organizational Strategy

Strategic management – the science of formulating, implementing and evaluating cross-functional decisionsthat enable an organizationto achieve its objectives.

Consists of:

Developing vision and mission statements

Formulating, implementing and evaluating

Making cross functional decisions

Achieving objectives

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Projects Reflect Strategy

A firm wishing to… …may have a project

redevelop products or processes to reengineer products or processes.

changes strategic direction or product portfolio configuration

to create new product lines.

improve cross-organizational communication & efficiency

to install an enterprise IT system.

Projects are stepping stonesof corporate strategy The firm’s strategic development is a driving force behind project development

Some examples include:

Relationship of Strategic Elements

Mission

Objectives

Strategy Goals Programs

Figure 2.2 _02-06

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“… the business of supplying system components to a world- wide nonresidential air conditioner market.”

Objectives a. 14.5% ROI b. Non-decreasing dividends c. Socially-conscious image

Strategies a. Existing products in existing

markets with image maintenance b. Existing products in new

markets (foreign, restricted) c. New products in existing

markets (significantly improve image)

Goals Year 1: 8% ROI, $1 dividend,

maintain image, unit cost down 5%

Year 2: 9% ROI, $1 dividend, improve image Year 3: 12% ROI, $1 dividend,

improve image Year 4: 14% ROI, $1.10 dividend

Programs 1. Product Cost Improvement

Program (PCIP) 2. Image Assessment Program

(IAP)

3. Product Redesign Program (PRP)

4. Product Development Program (PDP)

Alignment Between Strategic Elements and Projects

Stakeholder Management

Stakeholders are all individuals or groupswho have an active stakein the project and can potentially impact, either positively or negatively, its development. Sets of project stakeholders include:

Internal Stakeholders

• Top management

• Accountant

• Other functional managers

• Project team members

External Stakeholders

• Clients

• Competitors

• Suppliers

• Environmental, political, consumer, and other intervener groups

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Project Stakeholder Relationships

Figure 2.4

Managing Stakeholders

1. Assess the environment

2. Identify the goals of the principal actors 3. Assess your own capabilities

4. Define the problem 5. Develop solutions

6. Test and refine the solutions

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Project Stakeholder Management Cycle

2. Gather information on stakeholders 7. Implement

stakeholder management strategy

4. Determine stakeholder strengths and weaknesses 5. Identify

stakeholder strategy 6. Predict

stakeholder behavior

3. Identify stakeholders’

mission 1. Identify

Stakeholders

Figure 2.5

Organizational Structure

Consists of three key elements:

1. Designates formal reporting relationships

 number of levels in the hierarchy

 span of control 2. Identifies groupings of:

 individuals into departments

 departments into the total organization 3. Design of systems for

 effective communication

 coordination

 integration across departments

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Forms of Organization Structure

Functional organizations – group people performing similar activities into departments

Project organizations – group people intoproject teamson temporary assignments

Matrix organizations – create a dual hierarchy in which functions and projectshave equal prominence

Functional Organizational Structure

02-14 Figure 2.6

Functional Structures

Strengths Weaknesses 1. Firm’s design maintained

2. Fosters development of in-depth knowledge 3. Standard career paths

4. Project team members remain connected with their functional group

1. Functional siloing 2. Lack of customer focus

3. Projects may take longer

4. Projects may be sub- optimized

Silo Effect Found in Functional Structures

02-16 Figure 2.7

Project Organizational Structure

02-17 Figure 2.8

Project Structures

Strengths Weaknesses 1. Project manager sole

authority

2. Improved communication 3. Effective decision-making

4. Creation of project management experts 5. Rapid response

1. Expensive to set up and maintain teams

2. Chance of loyalty to the project rather than the firm

3. No pool of specific knowledge

4. Workers unassigned at project end

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Matrix Organizational Structure

02-19 Figure 2.9

Matrix Structures

Strengths Weaknesses

1. Suited to dynamic environments 2. Equal emphasis on

project management and functional efficiency 3. Promotes coordination

across functional units 4. Maximizes scarce

resources

1. Dual hierarchies mean two bosses

2. Negotiation required in order to share resources 3. Workers caught between

competing project &

functional demands

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Heavyweight Project Organizations

Organizations can sometimes gain tremendous benefit from creating a fully-dedicated project organization Lockheed Corporation’s “Skunkworks”

Project manager authority expanded

Functional alignment abandoned in favor of market opportunism

Focus on external customer

Manager’s Perceptions of Effectiveness of Various Structures on Project Success

02-22 Figure 2.10

Project Management Offices

Centralized units that oversee or improve the management of projects

Resource centers for:



Technical details



Expertise



Repository



Center for excellence

Forms of PMOs



Weather station – monitoring and tracking



Control tower – project management is a skill to be protected and supported



Resource pool – maintain and provide a cadre of skilled project professionals

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PMO Control Tower



Performs four functions:



Establishes standards for managing projects



Consults on how to follow these standards



Enforces the standards



Improves the standards

Alternative Levels of Project Offices

02-26 Figure 2.11

Organizational Culture

The unwritten rules of behavior, or norms that are used to shape and guide behavior,is shared by some subset of organizationmembers and is taught to all new members of the company.

Unwritten

Rules of behavior

Held by some subset of the organization

Taught to all new members

Key Factors That Affect Culture Development



Technology



Environment



Geographical location



Reward systems



Rules and procedures



Key organizational members



Critical incidents

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Culture Affects Project Management

Departmental interaction

Employee commitment to goals

Project planning

Performance evaluation

Summary