Organizational Structures
3.11 STRUCTURING THE SMALL COMPANY
An almost predictable result of using the project management approach is the increase in management positions. Killian describes the results of two surveys28:
One company compared its organization and management structure as it existed before it began forming project units with the structure that existed afterward. The number of de- partments had increased from 65 to 106, while total employment remained practically the same. The number of employees for every supervisor had dropped from 13.4 to 12.8. The company concluded that a major cause of this change was the project groups [see footnote 26 for reference article].
Another company uncovered proof of its conclusion when it counted the number of sec- ond-level and higher management positions. It found that it had 11 more vice presidents and directors, 35 more managers, and 56 more second-level supervisors. Although the company attributed part of this growth to an upgrading of titles, the effect of the project organization was the creation of 60 more management positions.
Although the project organization is a specialized, task-oriented entity, it seldom, if ever, exists apart from the traditional structure of the organization.29All project manage- ment structures overlap the traditional structure. Furthermore, companies can have more than one project organizational form in existence at one time. A major steel product, for example, has a matrix structure for R&D and a product structure elsewhere.
Accepting a project management structure is a giant step from which there may be no return. The company may have to create more management positions without changing the total employment levels. In addition, incorporation of a project organization is almost al- ways accompanied by the upgrading of jobs. In any event, management must realize that whichever project management structure is selected, a dynamic state of equilibrium will be necessary.
These two questions are implicitly related. For either large, complex projects or those involving outside customers, project managers generally report to a high level in the orga- nization. For small or internal projects, the project manager reports to a middle- or lower- level manager.
Small and medium companies have been very successful in managing internal projects using departmental project management (see Figure 3–2), especially when only a few functional groups must interface with one another. Quite often, line managers are per- mitted to wear multiple hats and also act as project managers, thereby reducing the need for hiring additional project managers.
Customers external to the organization are usually favorably impressed if a small company identifies a project manager who is dedicated and committed to their project, even if only on a part-time basis. Thus outside customers, particularly through a competi- tive bidding environment, respond favorably to a matrix structure, even if the matrix struc- ture is simply eyewash for the customer. For example, consider the matrix structure shown in Figure 3–15. Both large and small companies that operate on a matrix usually develop a separate organizational chart for each customer. Figure 3–15 represents the organiza- tional chart that would be presented to Alpha Company. The Alpha Company project would be identified with bold lines and would be placed immediately below the vice pres- ident, regardless of the priority of the project. After all, if you were the Alpha Company customer, would you want your project to appear at the bottom of the list?
Structuring the Small Company 125
PRESIDENT
V.P. MARKETING V.P. ENGINEERING V.P. PRODUCTION V.P. ADMINISTRATION
ALPHA CO.
BOB RAY
IBM
BETA CO.
GAMMA CO.
DELTA CO.
FIGURE 3–15. Matrix for a small company.
Figure 3–15 also identifies two other key points that are important to small compa- nies. First, only the name of the Alpha Company project manager, Bob Ray, need be iden- tified. The reason for this is that Bob Ray may also be the project manager for one or more of the other projects, and it is usually not a good practice to let the customer know that Bob Ray will have loyalties split among several projects. Actually, the organization chart shown in Figure 3–15 is for a machine tool company employing 280 people, with five major and thirty minor projects. The company has only two full-time project managers. Bob Ray manages the projects for Alpha, Gamma, and Delta Companies; the Beta Company project has the second full-time project manager; and the IBM project is being managed person- ally by the vice president of engineering, who happens to be wearing two hats.
The second key point is that small companies generally should not identify the names of functional employees because:
● The functional employees are probably part-time.
● It is usually best in small companies for all communications to be transmitted through the project manager.
Another example of how a simple matrix structure can be used to impress customers is shown in Figure 3–16. The company identified here actually employs only thirty-eight people. Very small companies normally assign the estimating department to report directly to the president, as shown in Figure 3–16. In addition, the senior engineers, who appear to
126 ORGANIZATIONAL STRUCTURES
PRESIDENT
ESTIMATING ACCOUNTING
V.P. ENGINEERING V.P. PRODUCTION
DRAFTING START UP DESIGN
ENGINEERING
SENIOR ENGINEER
SENIOR ENGINEER
PLANT MANAGER PANELS
PLANT MANAGER METALS
FIGURE 3–16. Matrix for a small company.
be acting in the role of project managers, may simply be the department managers for drafting, startup, and/or design engineering. Yet, from an outside customer’s perspective, the company has a dedicated and committed project manager for the project.
3.12 STRATEGIC BUSINESS UNIT (SBU)