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How do I Organize for Project Management?

Projects work best in a balanced matrix type of organization. This is because the resources of the company are permanent and projects are not. We remember that the definition of a project is "… a temporary endeavor…." Project teams are formed for the life of a project. This means that we are able to bring the right resources together for a project and use them for the amount of time they are needed. But where do they come from?

As we try to answer this question, we start thinking about the most efficient type of organization for managing projects. To do that, we first have to take a look at the types of organizations developed through history as people learned how to manage their businesses best.

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There are really only three ways to organize to accomplish work. Nearly every organization fits one of these types or is a combination of them. These are the pure project organization, the functional organization, and the matrix organization. The pure project organization and the functional organization have been around for hundreds, perhaps thousands, of years; the matrix organization is a rather recent development.

In the pure project organization, shown in Project Organization, the project manager is the supreme authority. He or she is the ultimate decisionmaker for the project and is not subject to any but the highest level of review. This review is generally at the project level for the budget, schedule, and deliverables. These projects are usually quite large and are done in a remote location. Building dams or remote power plants in Third World countries would be typical applications for the pure project organization. The pyramids at Giza in Egypt were probably built with this kind of organization.

The pure project organization probably developed out of necessity. In a large remote project, communications issues make it necessary to have a single person on site who has the authority to make decisions. This person is the project manager. Even in modern times, it is difficult to communicate about what is really happening in the jungles of Botswana where the project is to build a nuclear power plant.

When the project organization is used, certain common characteristics are generally observed. The organization, though large, has a single focal point that everyone understands. In our example of the power plant project in Botswana, everyone understands that the goal of the project is to generate 900 megawatts of electricity by a certain date. People in the organization are not easily distracted to work on other projects. Because there are clear understandable goals and objectives and because the project manager is on-site and accessible and can make decisions, the project team generally has good morale.

These organizations are inefficient, however, especially when they are not very large. Because of the remote location of such projects, when resources are needed, they have to be obtained exclusively for the use of one project. This means that if a person of a specific skill is needed for the project, she cannot be shared by another project.

An example of this would be if the project needs a metallurgist to analyze the steel used in the reactor vessel. The metallurgist will take twenty hours each week to do the work. What will we do with the metallurgist the rest of the time? It would not be practical to send her back to the United States every week. It would make more sense to keep the metallurgist in Botswana and use her in whatever other skill we could when she is not doing metallurgical work. Of course this means that she will be working outside of her skill for half the week but will still draw the pay of a skilled metallurgist.

The real problem with the pure project organization is what to do with the project team when the project is finished. You can picture the project team in our Botswana project. They are driving to a goal of generating 900 megawatts of power by a certain date. They achieve the goal. The project is on time and on budget, and the customer is satisfied. Everyone celebrates while they are handing out the termination notices.

Thus, although it may seem that the project organization should be the best type of organization for managing projects, in reality it is not. Or to put it differently, it may be good for carrying out a single unique project, but it is not good for a project-oriented organization in which projects are the major part of its long-term activities.

The functional organization, illustrated in Functional Organization, has been around since long before the industrial revolution and was the preferable type for commercial enterprises in the beginning and middle of the twentieth century. The functional organization is organized on the basis of skills. A typical company sets up departments within the company, and each of these departments will have persons of similar skills within it. In truth this type of organization is not strictly organized by skills. In the mechanical engineering department, for example, there may be a few engineers with different skills such as electrical engineers or computer engineers.

This type of organization is very efficient in its use of people. Since the people in the organization have similar skills, the supervisor of the department is probably a person with those skills as well. As such, that person probably knows what is best for the people in the department as far as salary administration, evaluations, training, and work assignments are concerned. The work assignments can be given to the people who are best at that particular kind of work, and the workload can be distributed efficiently.

The functional organization is also very stable. In fact, that is the problem with it. Let’s look at how work is done in a company like this. Typically someone in the sales department finds a customer who needs work done by our company. Senior management decides whether to accept this type of work or not. If a decision is made to do the work, it is portioned out to the departments in the company according to the skills required. The department supervisor decides who in the department should do the work, and the work assignment is made. The people who are best at any particular kind of work are generally given the assignments that properly utilize their skills.

Suppose we have a company that builds products that use motor brackets, which are things you mount a motor on. Suppose further that they have someone in the mechanical engineering department called Sally. Sally is the best motor bracket designer in the company. She has been designing motor brackets for the past ten years, and she is good at it. When the company needs a good motor bracket design, they come to Sally. Sally works on a routine basis. She has an inbox and an outbox. Requests for motor bracket designs come to her inbox. She works on them and puts finished requests in her outbox. Life goes on in a regular way.

One day the company is trying to get new business, which involves making a motor bracket out of titanium. Sally has designed motor brackets using all kinds of materials but never titanium. It should be noted that Sally’s performance appraisal depends on how many good motor bracket designs she does in a given year. She knows that if she takes the time to learn all that she needs to know about designing motor brackets in titanium, it will take her far longer than it would if she did it with mild steel or one of the materials she is familiar with. So she moves the titanium motor bracket design request to the bottom of her inbox.

Eventually she will have to design the motor bracket if she can’t pass the design request off to a junior motor bracket designer. When she does, it will already be late, it will become a rush job, and it is likely to be done poorly.

This is the difficulty with a functional organization: It does not work well with new things. As long as the organization continues to do what it does without very much change, it works with great efficiency. When companies try to innovate and create new and different products for new customers, they create problems for a functional organization.

Notice that in this type of organization there is also little concern for the customer. In fact, in our example, Sally did not know who the customer was or where the motor bracket would be installed. Having a weak or nonexistent customer focus is a sure way to deliver products to the customers that are not what they want. In a market environment it means that we will be selling buggy whips when people want to buy cars.

The growing need for organizations to successfully implement projects and to be able to stay responsive to a changing market became one of the main reasons that many functional organizations put more flexibility into their functional structure. Many times this was done through a number of intermediate stages that led to developing a new organizational approach—the matrix organization.

The matrix organization, illustrated in Matrix Organization, is a mixture of the pure project organization and the functional organization. It is the one that will allow project management to work best. In the matrix organization we try to have the best of both organizations without the negative aspects of each. We try to have an organization that has a manager with authority who can be reached easily, an organization with a lot of flexibility, and customer focus. It should be an organization that can quickly bring the proper skills together on a temporary basis for the duration of a project. Resources in this organization are shared.

The matrix organization does these things. In the matrix organization we have a group of project managers as well as a group of functional managers. The project managers manage most of the organization’s work, which is done in the form of projects. The functional managers are the home office for the people who work on projects.

When a new project begins, the project plans are taken to the functional managers by the project manager. Together they decide which people are most appropriate for the job to be done, and these people are assigned to the project team at the appropriate time. They are assigned to the project only temporarily, and they are permanently assigned to the functional manager based on their skills. The project manager has similar meetings with the other functional managers.

The functional manager has the responsibility of providing appropriate training, salary administration, and other administrative functions to the people in the department. The functional manager is also responsible for the assignment of work that takes place in the functional department.