Haeryip Sihombing 1

Organization: Structure and Culture

Project Management

Haeryip Sihombing

Universiti Teknikal Malaysia Melaka

(UTeM)

3

BMFP 4542

ORGANIZING

• Organization is the deployment of resources to

achieve strategic goals.

• It is reflected in

–Division of labor into specific departments & jobs

–Formal lines of authority

–Mechanisms for coordinating diverse organizational tasks

Designing Adaptive Organizations

• Organizing Principles and Concepts

• Organizing the Vertical Structure

• Using Mechanisms for Horizontal Coordination

• Tailoring Various Elements of Structural Design

to Organizational Situations

ORGANIZATION STRUCTURE

Defines how tasks are divided, resources are

deployed, and departments are coordinated

●Set of formal tasks assigned

●Formal reporting relationships

The design of systems to ensure effective

coordination of employees across department

THE ORGANIZATION CHART

Visual representation

Set of formal tasks

Formal reporting relationships

Framework for vertical control

“The Home Depot is the world's largest home

improvement retailer currently operating

1,363 stores.

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ORGANIZATIONAL STRATEGY

Resources are critical to organizational strategy because they can help companies

create and sustain an advantage over competitor

Resources

The assets, capabilities, processes, information, and knowledge that an organization uses to improve its effectiveness and efficiency and to create and sustain an advantage over competitors and to fulfill a need or solve a problem

Competitive Advantage

Providing greater value for customers than competitor can

Sustainable Competitive Advantage

A competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

ORGANIZATIONAL STRATEGY

CERTAIN CONDITION

Firm’s resources are to be used to achieved a sustainable

competitive advantage :

Valuable Resources

allows companies to improve efficiency and effectiveness

Rare Resources

not controlled or possessed by many competing firms

Imperfectly Imitable Resource

impossible or extremely costly or difficult for other firms to duplicate

Non-Sustitutable Resources

without equivalent substitutes or replacements that produces value or competitive advantage

WORK SPECIALIZATIONDivision of labor concept

• Tasks are subdivided into individual jobs

• Employees perform only the tasks relevant to their

specialized function

• Jobs tend to be small, but they can be performed

efficiently

Line and Staff Authority

• Line Authority =

individuals in management positions have the

formal power to direct and control immediate

subordinates

• Staff Authority =

granted to staff specialists in their area of

expertise

Span of Management/Span of Control

• Number of employees who report to a supervisor

–Traditional view = seven subordinates per manager

–Lean organizations today = 30+ subordinates

• Supervisor Involvement

– must be closely involved with subordinates, the span

should be small

–need little involvement with subordinates, it can be large

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Factors Associated With Less Supervisor

Involvement

• Work is stable and routine

• Subordinates perform similar work tasks

• Subordinates are concentrated in a single location

• Subordinates are highly trained

• Rules and procedure defining task activities are

available

• Support systems and personnel are available for the

manager

• Little time is required in non-supervisory activities

• Managers’ preferences and styles favor a large span

Tall vs. Flat Structure

• Span of Control used in an organization determines

whether the structure is tall or flat

• Tall structure has a narrow span and more

hierarchical levels

• Flat structure has a wide span, is horizontally

dispersed and fewer hierarchical levels

• The trend has been toward wider spans of control

Centralization vs. Decentralization

• Greater change and uncertainty in the environment

are usually associated with decentralization

• The amount of centralization or decentralization

should fit the firm’s strategy

• In times of crisis or risk of company failure,

authority may be centralized at the top

DEPARTMENTALIZATIONThe basis on which individuals are grouped into departments

Vertical functional approach. People are grouped together in departments by common skills.

Divisional approach. Grouped together based on a common product, program, or geographical region.

Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses

Team-based approach. Created to accomplish specific tasks

Network approach. Small, central hub electronically connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.

Virtual approach. Brings people together temporarily to exploit specific opportunities then disbands

DEPARTMENTALIZATIONThe basis on which individuals are grouped into departments

PROJECT MANAGEMENT STRUCTURE

• Challenges to Organizing Projects

–The uniqueness and short duration of projects relative to

ongoing longer-term organizational activities

–The multidisciplinary and cross-functional nature of projects

creates authority and responsibility dilemmas.

• Choosing an Appropriate Project Management

Structure

–The best system balances

the needs of the project

with the needs of the

organization.

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• Organizing Projects: 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.

PROJECT MANAGEMENT STRUCTURE Functional Organizations

Functional Organization of Projects

• Advantages

–No Structural Change

–Flexibility

–In-Depth Expertise

–Easy Post-Project

Transition

• Disadvantages

–Lack of Focus

–Poor Integration

–Slow

–Lack of Ownership

22

Efficient use of resources

Skill specialization development

Top management control

Excellent coordination

Quality technical problem solving

DIVISIONAL STRUCTURE ADVANTAGES

23

Poor communications

Slow response to external changes

Decisions concentrated at top

Pin pointing responsibility is difficult

Limited view of organizational goals by employees

DIVISIONAL STRUCTURE DISADVANTAGES

• Organizing Projects: 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.

PROJECT MANAGEMENT STRUCTURE

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Dedicated Project Team Project Organization: Dedicated Team

• Advantages

–Simple

–Fast

–Cohesive

–Cross-Functional

Integration

• Disadvantages

–Expensive

–Internal Strife

–Limited Technological

Expertise

–Difficult Post-Project

Transition

Project Organizational Structure

28

Same advantages as functional structure

Reduced barriers among departments

Quicker response time

Better morale

Reduced administrative overhead

TEAM ADVANTAGES

29

Dual loyalties and conflict

Time and resources spent on meetings

Unplanned decentralization

TEAM DISADVANTAGES

• Organizing Projects: 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.

PROJECT MANAGEMENT STRUCTURE

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Matrix Organization Structure 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 to Why will the task be done? How will the project involvement

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?

Different Matrix Forms

• Functional (also Weak or Lightweight) Form

–Matrices in which the authority of the functional

manager predominates and the project manager has

indirect authority.

• Balance (or Middleweight) Form

–The traditional matrix form in which the project

manager sets the overall plan and the functional

manager determines how work to be done.

• Strong (Heavyweight) Form

–Resembles a project team in which the project

manager has broader control and functional

departments act as subcontractors to the project.

Project Organization: Matrix Form

• Advantages

–Efficient

–Strong Project Focus

–Easier Post-Project

Transition

–Flexible

• Disadvantages

–Dysfunctional Conflict

–Infighting

–Stressful

–Slow

35

More efficient use of resources than single hierarchy

Adaptable to changing environment

Development of both general and specialists management skills

Expertise available to all divisions

Enlarged tasks for employees

Horizontal Matrix Advantages

36

Dual Authority Structure in a Matrix Organization

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37

Dual chain of command

High conflict between two sides of matrix

Many meetings to coordinate activities

Need for human relations training

Power domination by one side of matrix

Horizontal Matrix Disadvantages

• Organizing Projects: Network Organizations

–An alliance of several organizations for the purpose of

creating products or services.

• A “hub” or “core” firm with strong core competencies outsources key activities to a collaborative cluster of satellite organizations.

PROJECT MANAGEMENT STRUCTURE

Mountain Bicycle Network Project Project Organization: Network Form

• Advantages

–Cost Reduction

–High Level of

Expertise

–Flexible

• Disadvantages

–Coordination of

Breakdowns

–Loss of Control

–Conflict

41

Global competitiveness

Work force flexibility

Reduced administrative overhead

NETWORK APPROACH ADVANTAGES

42

No hands-on control

Loss of part of the organization severely impacts remainder of organization

Employee loyalty weakened

NETWORK APPROACH DISADVANTAGES

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Rated Effectiveness of Different Project

Structures by Type of Project

Source: Larson, E. W., and Gobeli, D. H., “Matrix Management: Contradictions and

Insights,” California Management Review, vol. 29, no. 4 (Summer 1987), p. 137.

Choosing the Appropriate

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?

• 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

Choosing the Appropriate

PROJECT MANAGEMENT STRUCTURE

ORGANIZATIONAL CULTURE

• Organizational Culture Defined

–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 identify to its members.

• Helps legitimize the management system of the organization.

• Clarifies and reinforces standards of behavior.

Key Dimensions Defining an Organization’s Culture 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 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

Cultural Dimensions of an Organization Supportive

of Project Management

DISCUSSION

THE END

Organization of Product Development Projects at ORION Traditional Master Plan at ORION

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Proposed Project Organization for the Jaguar Project Jaguar Master Plan

Mechanisms for Sustaining Organizational Culture