chapter 2 1. 1. understand how effective project management contributes to achieving strategic...

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The Organizational Context:Strategy, Structure, and

CultureChapter 2

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

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

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

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

Learning Goals

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

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

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

8. Recognize the positive effects of a supportive organizational culture on project management practices versus those of a culture that works against project management.

Learning Goals

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Strategic management The science of formulating, implementing

and evaluating cross-functional decisions that enable an organization to achieve its objectives.

Consists of:◦ Developing vision and mission statements◦ Formulating, implementing and evaluating

business opportunities◦ Making cross functional decisions◦ Achieving objectives

Projects and Organizational Strategy

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Projects Reflect Strategy

A firm wishing to… …may have a projectredevelop products or processes to reengineer products or processes.

change 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 stones of corporate strategy.

The firm’s strategic vision is a driving force behind project development.

Some examples include:

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Relationship of Strategic Elements

Mission

Objectives

Goals ProgramsStrategy

Review Figure 2.2 page 36 for an example

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Stakeholder Management

Stakeholders are individuals or groups who have an active stake in the project and can potentially impact, either positively or negatively, its development.

Sets of project stakeholders include:

Internal Stakeholders• Top management• Accounting• Other functional managers• Project team members

External Stakeholders• Clients• Competitors• Suppliers• Environmental, political,

consumer, and other intervenor groups

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Used to record stakeholders of the project Useful to build communication plans

Stakeholder Register

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Will inform you of the interests and influence of those involved in a project change.

Should show each person or group’s interest in the change, where interests converge, the level of influence, and who will have a voice in new developments.

Can be beneficial at the beginning of new projects and when projects change direction. Displayed in a stakeholder analysis grid

Stakeholder Analysis

See World Wildlife Foundation example at: http://assets.panda.org/downloads/1_1_stakeholder_analysis_11_01_05.pdf

http://assets.panda.org/downloads/1_1_stakeholder_analysis_11_01_05.pdf

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Begin by making a list of anyone who has interest and influence over your project. i.e. investors, customers, general public, etc.

Use this list to weigh the interest and influence of each person. Create the Matrix: (example - four levels per category) 1. Draw a box divided into four equal quadrants.2. Divide each quadrant into fourths again. You should now have sixteen

boxes. 3. Label down the left side starting at the top with “Significant

Importance,” “Some Importance,” “Little Importance,” “No Importance.”4. Label across the top starting at the left with “Significant influence,”

“Some influence,” “Little influence,” “No influence.” 5. Organize your stakeholders according to importance and influence. 6. When you are done, your matrix will be a graphic display of who holds

the most importance and influence (the group in the upper left-hand corner) and who holds the least amount of influence and importance (the group in the lower right-hand corner).

Stakeholder Analysis Grid

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Project Stakeholder Relationships

ClientsProject

Manager

Other Functional Managers

External Environment

Project TeamAccountant

Top Management

Parent Organization

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Managing Stakeholders

1. Assess the environment - Is this low key or significant?

2. Identify the goals of the principal actors - What true

goals do the stakeholders have?

3. Assess your own capabilities - What are your

strengths and weaknesses?

4. Define the problem

5. Develop solutions - Try to cover as many stakeholder’s

concerns as possible (80%).

6. Test and refine the solutions – it is an iterative

process.The goal is to formulate strategies to identify and manage for positive results.

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Project Stakeholder Management Cycle

Project Management

Team

Identify Stakeholders

Gather Information on Stakeholders

Determine Stakeholder Strengths & Weaknesses

Implement Stakeholder Management

Strategy

Identify Stakeholder’s

Mission

Predict Stakeholder

Behavior

Identify Stakeholder

Strategy

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Organizational Structure

Consists of three key elements:

1. Designates formal reporting relationships◦ including the number of levels in the hierarchy◦ span of control of management

2. Groupings of:◦ individuals into departments◦ departments into the total organization

Functional? Geographic? Product type? Project based?

3. Design of systems to◦ ensure effective communication◦ coordination◦ integration of efforts across departments

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Forms of Organization Structure Functional organizations – groups people

performing similar activities into departments

Project organizations – groups people into project teams on temporary assignments

Matrix organizations – creates a dual hierarchy in which functions and projects have equal prominence

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A Functional Organizational Structure

Board of Directors

Chief Executive

Vice President ofMarketing

Vice President ofFinance

Vice President ofResearch

New ProductDevelopment

Testing

Research Labs

Quality

Market Research

Sales

After MarketSupport

Advertising

Vice President ofProduction

Logistics

Outsourcing

Distribution

Warehousing

Manufacturing

AccountingServices

Contracting

Investments

EmployeeBenefits

Board of DirectorsBoard of Directors

Chief ExecutiveChief Executive

Vice President ofMarketingVice President ofMarketing

Vice President ofFinanceVice President ofFinance

Vice President ofResearchVice President ofResearch

New ProductDevelopment

TestingTesting

Research Labs

Quality

Market Research

Sales

After MarketSupportAfter MarketSupport

AdvertisingAdvertising


Logistics

Outsourcing

Distribution

Warehousing

Manufacturing

Vice President ofProductionVice President ofProduction

Logistics

Outsourcing

Distribution

Warehousing

Manufacturing

AccountingServices

Contracting

Investments

EmployeeBenefits

Silos of work

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Functional Structure for Project Management

Strengths Weaknesses

1. Fosters development of in-depth knowledge

2. Projects are developed within the basic functional structure – no change to firms functional design

3. Project team members remain connected with their functional group

4. Standard career paths

1. Functional siloing – no collaboration

2. Lack of customer focus -self-focusing

3. Projects may take longer as tasked are routed from one department to another

4. Projects may be sub-optimized

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A Project Organization Structure

Board of Directors

Chief Executive





Vice President ofProjects

ProjectAlpha

ProjectBeta







Vice President ofProjectsVice President ofProjects

ProjectAlphaProjectAlpha

ProjectBetaProjectBeta

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Project Structure for Project Management


1. Project manager sole authority

2. Improved communication across the organization

3. Rapid decision-making

4. Promotes the creation of project management experts

5. Flexible and 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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Seeks a balance between the functional and project organizations

A Matrix Organization Structure

Board of Directors

Chief Executive





Vice President ofProjects

ProjectAlpha

ProjectBeta

2 resources 1 resource

1 resource

1.5 resources

2 resources 2 resources

3 resources

2.5 resources







Vice President ofProjectsVice President ofProjects

ProjectAlphaProjectAlpha

ProjectBetaProjectBeta

2 resources 1 resource

1 resource

1.5 resources

2 resources

1.5 resources

2 resources 2 resources

3 resources

2.5 resources

3 resources

2.5 resources

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Matrix Structures for Project Management


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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Organizational Structure Influences on Projects

-PMBok 2004

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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

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Centralized units that oversee or improve the management of projects

Resource centers for:◦ Support with technical details◦ Expertise◦ Central repository for lessons learned◦ Center for excellence

Project Management Offices (PMO)

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Forms of PMOs Weather station

◦ used only to monitor and track projects

Resource pool ◦ maintain and provide a group of skilled project

professionals

Control tower ◦ project management is a skill to be protected and

supported◦ focuses on establishing standards, consulting/enforcing,

and improving project management skills

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Organizational Culture

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

Key factors that affect culture development◦ Technology level◦ Business environment◦ Geographical location◦ Reward systems◦ Rules and procedures◦ Key organizational members◦ Critical incidents

Have you heard of “The Toyota Way?”

Key Factors That Affect Culture Development

Technology

Environment

Geographical location

Reward systemsRules and procedures

Key organizational

members

Critical incidents

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Culture Affects Project Management Success

Departmental interaction

Employee commitment to goals

Project planning

Performance evaluation

Attitudes

Start with a cage containing five apes.

In the cage, hang a banana on a string and put stairs under it. Before long, an ape will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the apes with cold water. After a while, another ape makes an attempt with the same result - all the apes are sprayed with cold water. This continues through several more attempts.

Pretty soon, when another ape tries to climb the stairs, the other apes all try to prevent it. Now, turn off the cold water. Remove one ape from the cage and replace it with a new one. The new ape sees the banana and wants to climb the stairs. To his horror, all of the other apes attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.

Next, remove another of the original five apes and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm. Again, replace a third original ape with a new one. The new one makes it to the stairs and is attacked as well. Two of the four apes that beat him have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest ape.

After replacing the fourth and fifth original apes, all the apes, which have been sprayed with cold water, have been replaced. Nevertheless, no ape ever again approaches the stairs. Why not? Because that's the way they've always done it and that's the way it's always been around here.

And that's how company policy begins....

TRADITION

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1. The chapter suggests that a definition of strategic management includes four components:

a. Developing a strategic vision and sense of missionb. Formulating, implementing, and evaluatingc. Cross-functional decisionsd. Achieving its objectives

Discuss how each of these four elements are important to understanding the challenge of strategic project management. How do projects serve to allow an organization to realize each of these three components of strategic management?

2. Discuss the difference between organizational objectives and strategies.

3. Your company is planning to construct a nuclear power plant in Oregon. Why is stakeholder analysis important as a precondition of the decision whether or not to follow through with such a plan?

4. Consider a medium-sized company that has decided to begin using project management in a wide variety of its operations. As part of their operational shift, they are going to adopt a project management office (PMO) somewhere within their organization. Make an argument for the type of PMO they should be adopting (weather station, control tower, or resource pool). What are some of the key decision criteria that will help them determine which model makes the most sense?

Chapter 2 Review and Discussion

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5. What are some of the key organizational elements that can affect the development and maintenance of a supportive organizational culture? As a consultant, what advice would you give to a functional organization that was seeking to move from an old, adversarial culture, where the various departments actively resisted helping each other, to one that encourages “project thinking” and cross-functional cooperation?

6. You are a member of the senior management staff at XYZ Corporation. You have historically been using a functional structure set up with five departments: finance, human resources, marketing, production, and engineering.

a. Create a drawing of your simplified functional structure, identifying the five departments.

b. Assume you have decided to move to a project structure. What might be some of the environmental pressures that would contribute to your belief that it is necessary to alter the structure?

c. With the project structure, you have four projects currently ongoing: stereo equipment, instrumentation and testing equipment, optical scanners, and defense communications. Draw the new structure that creates these four projects as part of the organizational chart.

Chapter 2 Review and Discussion

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Your task:1. In your groups, prepare a two-minute briefing for

the class to identify the project and what you see as the key elements your project will have to address. Include a discussion of aspects of Good Answers’ operations that would not be part of the project but rather are part of Good Answers’ general procedures.

2. Specifically, address the following questions:◦ What is the project in this scenario?◦ Who are the stakeholders? Create a stakeholder matrix.◦ What are some of the main issues that you will need to

address in this project?

In-class exercise: “Good Answers” is Growing

chapter 2 1. 1. understand how effective project management contributes to achieving strategic...

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project change

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critical project stakeholders

context of project development

strategic management

management accounting

strategic objectives

internal stakeholders