Welcome to Project Management!
In this video, I'll talk about different types of organizational structures for project management.
Once top management approves a project, it rolls into the implementation stage.
Project implementation relies on how an organization is structured.
Three commonly used organizational structures for project management are listed here.
They are functional organization, dedicated project teams, and the matrix structure.
We will talk about them one by one.
Functional organization is a way to managing projects within the existing functional hierarchy
of the organization.
That means, once management decides to implement a project, the different segments of the project
are delegated to the respective functional units, each unit being responsible for completing
its own segment of the project.
Project coordination is maintained through normal management channels.
This structure is used when the interest of one functional area dominates the project.
This diagram is an example of a project that develops a new type of medical forehead thermometer
in a hypothetical company called Nova Digital.
At the top of this organization is the President.
Two supporting offices are human resources and the finance and administration.
There are four divisions, engineering, manufacturing, procurement, and marketing.
The design, electronics, software, and mechanical departments within the Engineering Division
are responsible for creating the specifications to meet the needs of the customers.
The production scheduling, fabrication, assembly, and testing departments within the manufacturing
division are responsible for producing the thermometers according to the design specifications.
The purchasing and receiving departments are responsible for acquiring all the materials
needed for producing the thermometers from suppliers and vendors.
The customer service, domestic and international sales departments within the Marketing division
are responsible for determining the product demand and price, identifying distribution
channels, providing customer support, and collecting customer feedback.
The marketing division manager is given the authority to coordinate the project with other
division managers because marketing dominates this project.
There are several major advantages of using functional organization to manage projects.
One is that projects are completed within the original functional structure.
So, there is no need for structural changes in the parent organization.
Another advantage is that there is maximum flexibility in the use of staff.
Appropriate specialists in different functional units can temporarily be assigned to work
on a project and then return to their normal work.
The third advantage is that this structure works great if the scope of the project is
narrow.
Since a functional unit will take the primary responsibility, in-depth expertise can be
relied on to deal with the most crucial aspects of the project.
They will also get support from a broad base of technical personnel available in other
functional divisions and departments.
Finally, people can be switched among different projects relatively easily.
While specialists can make significant contributions to projects, their functional field is still
their professional home and the focus of their career growth and advancement.
One disadvantage of using functional organization to manage projects is lack of focus.
Each functional unit has its own core routine work to do; sometimes project responsibilities
get pushed aside to meet primary obligations.
The same project has different priorities for different units.
For example, the marketing department may consider the project urgent while the manufacturing
people consider it only of secondary importance.
This could cause a great deal of tension between these two functional departments.
Another disadvantage is that there may be poor integration across functional units.
Functional specialists tend to be concerned only with their segment of the project and
not with what is best for the whole project.
The third disadvantage is that it generally takes longer to complete projects through
this project management structure.
Lastly, since one functional department is leading the project, other functional departments
that are not in charge may have a feeling of lack of ownership.
They may see this project as an additional burden that is not directly linked to their
professional development or advancement.
A dedicated project team is a way of managing projects as a separate unit in addition to
the functional divisions and departments in an organization.
A full-time project manager is designated to pull together a core group of specialists
from the relevant departments, and they all work full time on the project.
Team members could be recruited from within and outside the parent company.
Functional departments are responsible for providing support for these dedicated teams.
If projects are the dominant form of business, then an organization is called a projectized
organization.
This is an example.
One dedicated team is doing Project 1 with a full-time manager and team members selected
from different functional units who work full-time on this single project.
Another dedicated team is doing Project 2 and so on.
Functional departments are only playing the supporting role.
Lockheed Martin has been using this structure to develop next-generation jet airplanes.
It's called Lockheed Martin Skunk Works.
Skunk Works is code for a small, dedicated team assigned to a breakthrough project.
There are a series of great YouTube videos explaining what Skunk Works is from the perspectives
of their Senior Systems Engineer, Program Manager, and Portfolio Manager.
Watch these video to learn more about skunk works.
There are several major advantages of using dedicated teams to manage projects.
First, this organizational structure is relatively simple.
A dedicated team will pull resources in the form of specialists from functional units.
But other than that, the functional departments remains intact and operates independently
from the project team.
Second, projects tend to get done faster when participants devote their full attention to
the project and are not distracted by other obligations and duties.
Furthermore, response time tends to be quicker under this arrangement because most decisions
are made within the project team and are not deferred due to horizontal and then vertical
communications with other functional departments.
Third, a high level of motivation and cohesiveness often emerges within the dedicated project
team.
Participants share a common goal and personal responsibility toward the project.
Last, specialists from different functional areas work closely together and, with proper
guidance, will be committed to optimizing the whole project, not their respective segments.
One disadvantage of using a dedicated team to work on a project is that they are relatively
expensive.
The project manager and all the team members are supposed to work on a single project full
time.
All the other resources needed will be allocated to one project only.
Resource sharing within the organization with other functional departments or other project
teams is difficult.
Sometimes a dedicated project team become obsessed with their own right, and internal
strife emerges between the team and the remainder of the organization.
This divisiveness and even hostility can undermine the outcomes of the project.
In a dedicated team, technical expertise is limited somewhat to the talents and experience
of the specialists assigned to the project.
While the specialists can still consult with others in the functional division, the we–they
syndrome and the fact that such help is not formal discourage this from happening.
Dedicated teams make it difficult for post-project transition.
Because a project is temporary effort, team members will go back to their original functional
department after the project is completed.
The transition may be difficult because of their prolonged absence and the need to catch
up with recent development in their functional area.
The functional organization and the dedicated teams are at two extremes of organizational
structure for project management.
The matrix structure is a hybrid of the two.
In a matrix system, there are usually two chains of command, one along the vertical
functional lines and the other along the horizontal project lines.
Project participants report simultaneously to both functional and project managers.
Matrix structure optimizes the use of resources.
It allows for participation on multiple projects while performing normal functional duties.
This is a hypothetical example of a matrix structure.
The top of this diagram shows the functional organization of the company.
There is a special division called Director of projects in addition to other functional
divisions like engineering, manufacturing, and marketing.
The bottom of this diagram shows the ongoing projects 1 through n.
All these project managers report to the director, who supervises all projects.
Each project has one administrative assistant to help the project manager, and the one for
project n is only part time.
That is why there is a 0.5 in the circle.
Project 1 involves the development of a new product.
It requires heavy participation of people from engineering, manufacturing, and marketing.
It has been assigned 2 designers, 1 electronics engineer, 3 software engineers, 4 assembly
engineers, 1 testing engineer, and 1 sales representative.
So, there are a total of 14 people on the team.
Project n involves getting customers' feedback on a new software interface for an existing
product.
It only needs involvement of 1 designer, 2 software engineers, and 1 customer service
specialist.
In a matrix structure, project managers and functional managers have different responsibilities.
A project manager's responsibilities include determining what has to be done, when should
a task be completed, how much money is available to do the task, how well should the task be
done, and so on.
A functional manager in a matrix structure will decide how a task will be done technically,
how the project involvement will impact normal functional activities, and how well the functional
input will be integrated.
It's the project manager and the functional manger's joint responsibilities to negotiate
and find out the answers to these questions like who exactly will be assigned to do a
specific task, where will the task be conducted, is the task satisfactorily completed, and
so on.
The matrix structure can be further divided into three different forms, depending on the
relative authority of the project and functional managers
The weak matrix form is very similar to a functional structure with the exception that
there is a formally designated project manager.
The authority of the functional managers predominates, and the project manager has indirect authority
and plays a supporting role to facilitate project completion.
In the balanced matrix form, the project manager sets the overall plan for the project and
the functional manager determines how work should be done technically.
The strong matrix form attempts to create the feel of a dedicated project team within
a matrix environment.
The project manager has a broader control of most aspects of the project, and functional
departments are supporting like subcontractors to the project.
There are several advantages of using the matrix structure to manage projects.
First, the matrix structure encourages resource sharing.
Resources can be efficiently and flexibly shared across multiple projects.
Individuals can divide their energy across multiple projects as needed.
Compared to the functional structure, the matrix structure has a relatively strong project
focus by having a formally designated project manager, who is responsible for coordinating
and integrating contributions of different units.
Compared to the dedicated teams, the matrix structure makes it relatively easy for post-project
transition.
Specialists still maintain ties with their functional group, so they have a home to return
to once the project is completed.
One disadvantage of using a matrix structure is that the matrix approach may create tension
or conflicts between functional managers and project managers.
Such tension is necessary for achieving an appropriate balance between complex technical
issues and unique project requirements.
But sometimes the tension could degenerate into dysfunctional conflicts like heated arguments
that put the whole project at risk.
Resource sharing is the nature of the matrix structure.
Infighting can occur among project managers, who are primarily interested in what is best
for their own projects when they have to compete for limited resources like equipment, space,
finance, and people, which are being shared across projects and functional activities.
Also, matrix management violates the management principle of unity of command.
Project participants have at least two bosses, their functional manager and one or more project
managers.
Working in a matrix environment can be stressful because orders from the bosses may conflict
with each other.
Lastly, matrix management can be slow because agreements must be achieved among multiple
functional groups, and project scheduling depends on the availability of resources that
are shared with other projects.
We have talked about these three project management structures as well as their advantages and
disadvantages.
Then, what is the right structure for an organization?
To answer this question, we really need to determine how important the projects are to
the organization’s success.
If they are really really important and the organization cannot afford to fail, then a
strong matrix structure or dedicated teams are the best choice.
We also need to determine what percentage of core business involves projects.
If over 75% of work involves projects, then an organization should consider a fully projectized
structure with lots of dedicated teams.
If an organization has both projects and standard routine production activities, then a balanced
matrix structure would be appropriate.
If an organization has very few projects, then a less formal arrangement like the functional
structure is probably the best.
The level of available human and physical resources in an organization should also be
considered before determining the best project management structure.
If the need for sharing resources is high, the matrix structure is the best way to go
because it makes it easy to share resources across multiple projects and functional domains.
Another question is what is the right structure for a specific project?
It depends on a lot of factors like the size of the project, the strategic importance,
novelty and need for innovation, the number of departments involved, the amount of external
interactions, the budget and time constraints, and stability of resource requirements.
The higher the levels of these seven factors, the more authority and control the project
manager needs to be successful.
Therefore, a strong matrix structure or a dedicated project team should be used for
large projects that are strategically critical and are new to the company, thus requiring
more innovation.
A strong matrix structure or a dedicated project team would also be appropriate for complex,
multidisciplinary projects that require input from many departments, as well as for projects
that require constant interactions with customers, suppliers, vendors, and subcontractors.
A strong matrix structure or a dedicated project team should also be used for urgent projects
with a tight budget, and for projects that requires high availability of resources when
they are needed.
Okay, in this video, we identified different project management structures including functional
organization, dedicated project teams, and matrix structures.
We talked about their advantages and disadvantages.
We further identified three different types of matrix structures.
This is Yong Wang, and I'll see you in the next video.