Organizational Influence on Project Management

If you are someone who has played the role of a Project Manager in more than one company you would know that the organization has a direct influence on how projects are managed. I have worked as a Project/Program manager in a few companies and I can vouch for this fact. 

In the PMP Exam series there were 3 articles that covered this topic and I have explained in great detail about how Organizational structure & culture impact projects. 

They are: 

• Organizational Influence on Projects 
• Understanding the Organizational Structure
• Enterprise Environmental Factors and Process Assets

Trivia: Some people use terms like Cultural Norms when they talk about an Organizations Culture. 

ORGANIZATIONAL STRUCTURE

Organization structure is the hierarchical relationships of various entities within the organization that collaborate with each other for project execution. Different organizations, by virtue of their objectives and core philosophies, carry different organizational structures. The structure of an organization determines the operational model used in the organization. Organizational structure determines the responsibilities for different functions and entities. 

You could refer back to the article titled Understanding the Organizational Structure to know more details because I don't want to repeat the same details once again. 

FUNCTIONAL STRUCTURE

The structure of a functionally structured organization is based on the functions performed by each component of the organization. Such organizations would have different departments that are responsible for different functions and the Project Manager would work with all those departments to get the project done. From the view point of a Project Manager, this type of organization is the hardest to execute projects. 

PROJECTIZED STRUCTURE

The structure of a projectized organization is based simply on the projects the organization executes. It follows that project managers have complete responsibility over all projects assigned to them. They are provided complete authority to define priorities, use resources, and direct and monitor work making this the best organizational structure for us to execute projects. 

MATRIX STRUCTURE

The matrix structure effectively combines the best attributes of the functional and the projectized structures. 

In a matrix-structured organization, team members report to both their functional managers and project managers. Effective management of this dual relationship is critical to overall success of the project. Thus, matrix structures require clear cut role definition. Also, team building in a matrix-structure organization is often difficult because of the dual reporting structure.

Depending on how close the Matrix Structure is, to either the Functional style or Projectized style, it can be categorized into 3 groups: strong matrix, weak matrix, and balanced matrix 

Strong Matrix

In organizations with strong matrix structures, project managers have greater authority or right to command than functional managers. Such organizations closely resemble those with projectized structures and have full-time project managers and full-time administrative staff for projects.

Weak Matrix

In organizations with weak matrix structures, project managers do not have as much power as functional managers. In a weak matrix, the role of a project manager might be more that of a project expediter or project coordinator, and, as a matter of fact, no official designation as “project manager” exists. The project expediter acts primarily as a staff assistant and communications coordinator and is not authorized to make or enforce decisions, whereas the project coordinator has moderate decision-making powers and reports to a higher-level manager.

Balanced Matrix

In organizations with balanced matrix structures, the powers of the project manager and the functional manager are about equal and in balance. Here, although the need for project managers is recognized, the project manager is not provided full authority over the project and project funding.

COMMON SUCCESS CRITERIA FOR ORGANIZATIONAL STRUCTURES

No matter what sort of Organizational structure your company is following, certain things need to be taken care of, if you want the proposed methodology of handling projects to be successful. Some of them are:

1. High Transparency
2. Strong Management Support 
3. Continuous Monitoring
4. Clear and On-time Communications 

If an organization can take care of the above 4 aspects, chances of their projects succeeding go up considerably. 

ORGANIZATION PROCESS ASSETS

Organization process assets (OPAs) are assets of an organization involved in project implementation that can be used to influence project success. Organizational Process Assets is just a fancy term for documents & templates that your company uses as per the project management & governance structure put forth by the PMO. Read this article about OPAs as I will be skipping the details and move on to key specifics quickly. 

Updating OPAs is generally the responsibility of the project team members as only they would have the complete details of the work they do especially those related to technical artifacts.

OPAs are grouped into two categories:

1. Processes and procedures
2. Project knowledge base — knowledge repository where filled-in templates and other data are available

Examples of process assets include formal and informal plans, procedures, processes, guidelines, “lessons learnt,” and historical information. Generally, OPAs appear on an organization's intranet site, so that team members can refer the procedure or process easily. Such an intranet may also carry filled-in templates and documents from other projects for reference. 

ENTERPRISE ENVIRONMENTAL FACTORS

Enterprise environmental factors are factors that surround or influence project success – basically the environment in which the project is being executed. Of course, they may have a positive or a negative influence on project outcome. These factors are used as inputs to the planning and initiating process because a project cannot be planned without analyzing available infrastructure, tools, and software. 

An organization's structure and infrastructure are good examples of the enterprise environmental factors that would govern any project management initiatives the organization may undertake. For more info on Enterprise Environmental Factors read this article from the PMP Exam series.

That wraps up the basics of Project Management related topics. The next section would deal with basics of Agile Project Management

Understanding the Project Environment

Before we can do anything useful with respect to managing our project’s risks, it is extremely important that we understand the Project Environment thoroughly. This is because, without a proper understanding of the Project’s Environment, we will not be able to identify all risks or worse handle them appropriately. You might be wondering why I haven’t said anything about understanding the Project itself here. That is because, as the Project Manager it is imperative that we already have a good understanding of the project characteristics like Scope, Deliverables List, Due Dates etc.

What would comprise a Projects Environment?

Anything and everything that can impact or influence the Project or its outcome will be part of the Project Environment.

As Project Managers, we must know the physical, social, cultural and political aspects of the environment where our project functions in order to efficiently manage all the risks that may arise out of these areas.

Project Environment Classification

As suggested in the previous paragraph, a project’s environment includes a whole myriad of factors that can affect its outcome. So, practically speaking we can classify them into as many categories as we want. But, at a high level we can classify the Project Environment’s into two categories. They are:

1. Internal &
2. External

An Internal factor is one that is directly tied to the Project. Ex: Project Stakeholders, Company’s Org Structure etc. Anything that is not an Internal Factor can be considered External.

The following are some internal & external factors that may affect the Project and be considered as part of the Project Environment.

Internal Factors that Influence the Project:

1. Organizational Structure
2. Culture
3. Project Stakeholders
4. Consumers
5. Technologies
6. Etc.

External Factors that Influence the Project:

1. Natural Factors
2. Political
3. Legal
4. Financial & Economic
5. Industry
6. Human Health & Safety
7. Etc.

Let us take a detailed look at these factors one by one… First let us start with the internal factors.

Organizational Structure:
This is a Project Environmental factor that can have a direct bearing on the Project Outcome. As a result it is extremely vital that any good project manager, esp. the one that is in-charge of Risk Management understands them well and can identify and distinguish one from the other. There are 3 main types of Organizations based on their structure:

a. Functional Organizations – These are traditional type of organizations where departments are grouped by their respective functions. Each department has a functional manager who reports to senior management. These organizations have a very well established chain of command. In these types of organizations the PM’s authority is very limited and they report directly to the Functional Manager.
b. Projectized Organizations – These are Organizations that are the total opposite of the Functional org. Here the PM is the king and almost everything in these organizations revolved around Projects. The PM has supreme authority.
c. Matrix Organizations – These are Organizations that are a blend of both the Functional & Projectized worlds. They try to achieve the best of both worlds. In this type of organizations people report to both the PM and the Functional Manager. Matrix Organizations can be split into 3 sub-categories based on who (the FM or the PM) has more authority.

a. Weak Matrix – Cases where the Functional Manager has more authority than the PM
b. Balanced Matrix – A Strong Blend where both the FM & the PM share responsibility & authority
c. Strong Matrix – Cases where the PM has more authority than the FM

In the chapter titled Understanding the Organizational Structure on the PMP Exam Prep series we had taken a detailed look at these organizational structures and how they affect each project. You can Click Here to revisit that chapter to learn more about these. I strongly urge you to re-visit this chapter because knowing this topic clearly is vital for us to not only be better Risk Managers but also to pass the RMP Exam.

Culture:
Culture is one environmental factor that is a blanket word that includes:

a. Company Culture
b. Ethnic Culture
c. Religious Culture &
d. Economic Culture

All these factors vary from place to place and projects that involve team members from different countries/backgrounds conflicts can easily arise out of differences in any or all of the cultural parameters mentioned above.

Stakeholders:

Project Stakeholders are part of the Projects Environment because they can directly impact and influence the project outcome. As the PM we need to know who those Stakeholders are and their level of influence, involvement & authority so that we can handle them accordingly. Based on the Stakeholders interest level and influence on the project, how we handle them will vary. Stakeholder Management is an art and we will be covering it in greater detail in future.

Consumers:
Anyone who is going to use the end product created by our project is a consumer and you already knew that, didn’t you? Knowing what our customer wants is extremely important for the Project’s Success. As Project Managers we need to have a good understanding of the customers’ expectations so that we can try to meet or even beat them.

Technologies:
The Technologies we use, the technologies that are available for us to use and also the technologies that will be created by our project are all part of the Technological factors that might affect our project.


All of the External Factors are self-explanatory and I suppose we don’t need to explain each of them in detail like what we did with the Internal Factors.

Caution:
External factors when they occur can have significant consequences on your project. For ex: In TamilNadu there is significant power shortage and as a result the government has scheduled power-cut time slots. So, every day you will have No-Power for a few hours. If your project needs non-stop power then you must arrange for alternative sources of power or else your production will be affected.

Get the picture?

The political, legal, economic factors are in almost all cases specific to the country where the project is being executed and are of paramount importance where we have an offshore team working with us. As good Project Managers, it is our duty to ensure that we take into account all these factors that might affect our project beforehand so that we can plan ahead to handle all of them. After all, this is what risk management is all about, isn’t it?

Prev: Risk Management & PMBOK

Next: Important Risk Related Definitions

Chapter 3: Organizational Frameworks

Aim: To Explain Organizational and Environmental Factors that might affect Projects

In almost all practical cases, a project usually exists within a larger organization. Some group or organization creates each project, and the project team must operate within the larger organization’s environment. Simply put, no project exists in a vacuum. Every process within every project is affected to some degree by organizational culture and practices.

Working with Organizational Politics and Influences

In many cases, the extent to which the initiating organization derives revenue from projects affects how projects are regarded. In an organization where the primary stream of revenue comes from various projects, the project manager generally enjoys more authority and access to resources. On the other hand, organizations that create projects only due to outside demands (like regulatory or legal requirements) will likely make it more difficult for the project manager to acquire resources. If a particular resource is needed to perform both operational and project work, many functional managers will resist requests to assign that particular resource to the project.

Another factor that influences how projects operate with respect to sponsoring organizations is the level of sponsorship from the project’s origin. A project that has a sponsor who is at the director level typically encounters far less resistance than one with a sponsor who is a functional manager. The reason for this is simple: Many managers tend to protect their own resources and are not willing to share them without sufficient motivation (In most cases, orders from upstairs). The more authority a project sponsor possesses, the easier time the project manager has when requesting resources for his/her project.

In addition to the above mentioned issues, the sponsoring organization’s maturity and project orientation can have a substantial effect on each project. More mature organizations tend to have more general management practices in place that allow projects to operate in a stable environment. Projects in less mature organizations might find that they must compete for resources and management attention due to fewer established policies. There can also be many issues related to the culture of an organization, such as values, beliefs, and expectations that can affect projects.

The last major factor that has a material impact on how projects exist within the larger organization is the management style of the organization itself. Since this is probably the biggest factor that might affect a project, we will look at it in a bit more detail.

Differentiating Functional, Matrix, and Projectized Organizational Structures

Each organization approaches the relationship between operations and projects differently. The PMBOK defines three main organizational structures that affect many aspects of a project. They are:
1. Functional Organizations
2. Matrix Organizations &
3. Projectized Organizations

Each of these 3 organizations differs from one another in the following aspects:
• The project manager’s authority
• Resource availability
• Control of the project budget
• The project manager and administrative staff roles

Functional Organizational Structure

A functional organization structure is a classical hierarchy in which each employee has a single superior. Employees are then organized by specialty, and work accomplished is generally specific to that specialty. Communication with other groups generally occurs by passing information requests up the hierarchy and over to the desired group or manager. Of all the organizational structures, this one tends to be the most difficult for the project manager. The project manager lacks the authority to assign resources and must acquire people and other resources from multiple functional managers. In many cases, the project’s priority is considered to be lower than operations for which the functional manager is directly responsible. In these organizations, it is common for the project manager to escalate to the senior management to resolve resource issues.

Advantage: The FM holds accountability for the project.
Disadvantage: The PM holds little or no authority.

Matrix Organizational Structure

A matrix organization is a blended organizational structure. Although a functional hierarchy is still in place, the project manager is recognized as a valuable position and is given more authority to manage the project and assign resources. Matrix organizations can be further divided into weak, balanced, and strong matrix organizations. The difference between the three is the level of authority given to the project manager (PM). A weak matrix gives more authority to the functional manager (FM), whereas the strong matrix gives more power to the PM. As the name suggests, the balanced matrix balances power between the FM and the PM.

Advantage: The PM and FM share the responsibility of the project
Disadvantage: The PM and FM can see each other as a threat and cause conflicts. In some cases, they may even be confused as to who manages what.

Projectized Organizational Structure

In a projectized organization, there is no defined hierarchy. Resources are brought together specifically for the purpose of a project. The necessary resources are acquired for the project, and the people assigned to the project work only for the PM for the duration of the project. At the end of each project, resources are either reassigned to another project or returned to a resource pool. Most IT companies work in such a Projectized Org Structure.

Advantage: The PM has full, or almost full, authority to staff and manage the project.
Disadvantage: The PM holds accountability for the project.

There are many subtle differences between each type of structure. You can visit the chapter on Organizational Structure to understand each of these better by Clicking Here.

Understanding Enterprise Environmental Factors

It is the responsibility of the project manager to understand the project environment. All projects operate within a specific environment or blend of environments. In addition to understanding the organizational structure, a project manager needs to understand the effects enterprise environmental factors may have on projects. The most obvious enterprise environmental factors for projects are
• Organizational culture and structure
• Human resources currently in the company
• Political climate in the country where the project is executed
• Government or industry standards and regulations
• Infrastructure facilities available
• Marketplace conditions
• Stakeholder risk tolerances

Organizational Process Assets

Two of the goals of project management are to make projects repeatable and to do a better job with each new project. To do this, organizations that are committed to effective project management develop shared, and often standardized, resources to help project managers do their jobs well. These resources are called organizational process assets and include formal and informal plans, policies, procedures and guidelines that might help the PM during the course of the project.

These assets could be as simple as a spreadsheet to a fully descriptive document that elaborates on various facts and processes. As these assets are put to use, they tend to be altered and refined. New documents often become necessary or useful as well. All lessons learned from previous projects should be examined to apply any necessary changes to the process assets. This continuous process of improvement encourages the base of assets to become a critical core of resources for any project. You will see organizational process assets mentioned in many of the project management processes. The assets can include many types of documents, including
• Organizational policies
• Operational guidelines
• Templates used to create many project process outputs
• Project closure procedures
• Communication requirements and procedures
• Change control procedures
• Financial control procedures
• Quality control procedures
• Project historical files
• Pertinent organizational knowledge bases

You can learn more about Enterprise Environmental Factors & Organizational Process Assets by Clicking Here

Exam Watch:
Organizational Process Assets are an input to many of the project management processes. Remember that this simply refers to any organization’s central repository of plans, policies, procedures, and guidelines that a project manager can use during his job of managing the project.

Prev: Chapter 2

Next: Chapter 4

Chapter 11: Understanding the Organizational Structure

In the previous chapter, we saw that an organizations policies and culture can have a significant impact on a project. Towards the end we also saw that, an organizations structure too would have an impact on a project. In this chapter, we are going to look closely at the organizational structure.

So, lets get started!!!

Organizational Structure

To do your job efficiently and effectively, you must figure out what kind of organizational structure you are in. Excepting the hand full of people who own the companies, the rest of us are all working class. We work for some company and get paid. Every individual must understand his/her organizations structure in order to blend into the organization as well as to carry out his/her duties without any issues.

Now, you as the project manager too are part of some organization and your organizations structure has a direct bearing on the project that you manage. So it is imperative that, you as the project manager understand the various structures an organization could take.

From the perspective of structure, organizations fall into three categories:
1. Functional organizations
2. Projectized organizations and
3. Matrix organizations.

Functional Organizations

A functional organization has a traditional organizational structure in which each functional department, such as engineering, marketing, and sales, is a separate entity. Look at the pictorial representation below:

As you can see, there are distinct departments and each has a manager and a set of staff who work for him. Each of these managers in turn report to someone higher up in the ladder, for ex: The CEO.

Depending on the size of the organization, there could be a hierarchy within these manager and other designations like director, managing director etc could be available who in turn report up to the CEO or the owner of the company.

The scope of a project in a functional organization is usually limited to the boundaries of the functional department. Therefore, each department runs its projects largely independent of other departments. When a communication needs to occur between two departments, it is carried through the hierarchy of functional managers.

For Ex: If someone from the Sales team needs to communicate with someone in the Marketing team, he would route it through the Sales Manager who in turn will route the information through the Marketing Manager.

All the managerial power or authority in simple terms, in a functional organization is vested in the functional managers, who control the team members’ performance evaluations, salaries, bonuses, hiring, and firing.

The Project Managers are held responsible for the project results even though they have little say over resource assignments and holding team members accountable for their work. (Because the power lies with the functional manager) As a result, project managers in a functional organization are often frustrated. Their work is, at best, challenging. You, as a project manager in a functional organization, can benefit greatly from your good relationships with functional managers and team members. Networking and leadership are the key points to your success in a functional organization.

A project manager in a functional organization has the following attributes:

• The project manager’s role and the project team are part-time.
• There is little or no authority over anything: resource assignments, team members, and so on.
• The project manager reports directly to a functional manager.
• There is little or no administrative staff to help with the project.

Projectized Organization

A projectized organization’s structure is organized around projects. Most of the organization’s resources are devoted to the projects. Look at the pictorial representation below:

As you can see, the project team members report directly to the project manager who has a great deal of independence and authority (Imagine the structure in the Functional Organization) He reports directly to the CEO and has great control over his team and especially on what happens to his team members (Unlike the functional structure where the team is at the mercy of the functional manager)

Along with the responsibility comes the high level of autonomy over the projects. The projects managers are a happy bunch of people in a Projectized organization. The functional and projectized organizations are like north and south poles of a magnet.

A project manager in a projectized organization has the following attributes:

• The project manager is full-time.
• The project manager has full authority over the project team.
• There is full-time administrative staff to help with the project.

Matrix Organization

A matrix organization is organized into functional departments, but a project is run by a project team, with members coming from different functional departments. Look at the pictorial representation below:

As you can see the project managers are a separate group and do not have any clash of interests like in a functional organization with the functional managers.
On the spectrum of a project manager’s authority, matrix organizations are in the middle of two extremes: functional and projectized organizations.

The matrix organizations are generally categorized into a strong matrix, which is closer to projectized structure; a weak matrix, which is closer to functional structure; and a balanced matrix, which is in the middle of strong and weak.


Let us Summarize the influences of the different organizational structures on a Project.

Influences of Organizational Structures on Projects

Project Characteristic	Functional	Matrix	Projectized
Project manager’s authority	None to little	Limited to high	High to full
Project manager’s role	Part-time	Part-time to full-time	Full-time
Project management administrative staff	None to part-time	Part-time to full-time	Full-time
Project budget controlled by	Functional manager	Functional manager, project manager, or both	Project manager
Resource availability	None to little	Limited to high	High to full

Let us wrap up this chapter by Summarizing the influence of various types of matrix organizations on a project.

Influences of Matrix Organizational Structures on Projects

Project Characteristic	Weak	Balanced	Strong
Project manager’s authority	Limited	Low to moderate	Moderate to high
Project manager’s role	Part-time	Full-time	Full-time
Project management administrative staff	Part-time	Part-time	Full-time
Project budget controlled by	Functional manager	Functional manager, project manager, or both	Project manager
Resource availability	Little	Low to moderate	Moderate to high

We have explored the three basic organizational structures. In the real world, some organizations use a hybrid (mix) of these structures to meet their varied needs. For example, a functional organization may run a specific project just like it would be run in a projectized organization. Such organizations are called composite organizations.

Obviously, organizational structure and organizational culture heavily determine the project environment. Two other important factors that influence the project environment are enterprise environmental factors and organizational process assets. We will be looking at these in the next chapter.

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