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CS615 - Software Project Management - Lecture Handout 27

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Basic Definition

Basically, an organization is a group of people intentionally organized to accomplish an overall, common goal or set of goals. Business organizations can range in size from two people to tens of thousands.

How you interpret each of the above major parts of an organization depends very much on your values and your nature. People can view organizations as machines, organisms, families, groups, etc.

People are managed through an organizational structure. This hierarchical structure is based on the four cornerstones of management:

  • Delegation
  • Authority
  • Responsibility
  • Supervision.

Delegation bestows authority, and authority produces (and requires) responsibility. Both authority and responsibility require supervision, and effective supervision requires a suitable organizational structure:

Most projects are organized as teams, with each team assigned specific functions within the project.

Different types of project require different types of team structure, as for example a team of junior programmers requires a technical team leader while a team of experts may require only an administrative team leader.

It is the project manager's responsibility to select the structure best suited for the project.

Basically an organization is a group of people intentionally organized to accomplish an overall, common goal or set of goals. Business organizations can range in size from two people to tens of thousands.

How you interpret each of the above major parts of an organization depends very much on your values and your nature. People can view organizations as machines, organisms, families, groups, etc.

Organization as a System

It helps to think of organizations are systems.

Simply put, a system is an organized collection of parts that are highly integrated in order to accomplish an overall goal.

The system has various inputs which are processed to produce certain outputs, which together, accomplish the overall goal desired by the organization.

There is ongoing feedback among these various parts to ensure they remain aligned to accomplish the overall goal of the organization. There are several classes of systems, ranging from very simple frameworks all the way to social systems, which are the most complex. Organizations are, of course, social systems.

Systems have inputs, processes, outputs and outcomes. To explain, inputs to the system include resources such as raw materials, money, technologies and people.

These inputs go through a process where they're aligned, moved along and carefully coordinated, ultimately to achieve the goals set for the system. Outputs are tangible results produced by processes in the system, such as products or services for consumers.

Another kind of result is outcomes, or benefits for consumers, e.g., jobs for workers, enhanced quality of life for customers, etc. Systems can be the entire organization, or its departments, groups, processes, etc.

Feedback comes from, e.g., employees who carry out processes in the organization, customers/clients using the products and services, etc.

Feedback also comes from the larger environment of the organization, e.g., influences from government, society, economics, and technologies.

Each organization has numerous subsystems, as well. Each subsystem has its own boundaries of sorts, and includes various inputs, processes, outputs and outcomes geared to accomplish an overall goal for the subsystem.

Common examples of subsystems are departments, programs, projects, teams and processes to produce products or services, etc.

Organizations are made up of people - who are also systems of systems of systems - and on it goes. Subsystems are organized in a hierarchy needed to accomplish the overall goal of the overall system.

The organizational system is defined by, e.g., its legal documents (articles of incorporation, by laws, roles of officers, etc.), mission, goals and strategies, policies and procedures, operating manuals, etc.

The organization is depicted by its organizational charts, job descriptions, marketing materials, etc.

The organizational system is also maintained or controlled by policies and procedures, budgets, information management systems, quality management systems, performance review systems, etc.

Structural Dimensions

The organization's structure, or design, is the overall arrangement of the organization's various roles, processes and their relationships in the organization.
The design of an organization is a means to accomplishing the organization's overall goal - the structure is not an end in itself.

In systems theory terms, the design ensures that the appropriate inputs go through the necessary processes to produce the required outputs to produce the intended outcomes.

  • Centralization -the extent to which functions are dispersed in the organization, either in terms of integration with other functions or geographically
  • Formalization - regarding the extent of policies and procedures in the organization
  • Hierarchy - regarding the extent and configuration of levels in the structure
  • Routinization - regarding the extent that organizational processes are standardized
  • Specialization - regarding the extent to which activities are refined
  • Training - regarding the extent of activities to equip organization members with knowledge and skills to carry out their roles.

Organizational Systems

Project-based organizations are those whose operations consist primarily of projects. These organizations fall into two categories:

  • Organizations that derive their revenue primarily from performing projects for others—architectural firms, engineering firms, consultants, construction contractors, government contractors, nongovernmental organizations, etc
  • Organizations that have adopted management by projects, these organizations tend to have management systems in place to facilitate project management.
    For example, their financial systems are often specifically designed for accounting, tracking, and reporting on multiple simultaneous projects.

Non project-based organizations often lack management systems designed to support project needs efficiently and effectively.

The absence of project-oriented systems usually makes project management more difficult.

In some cases, non project-based organizations will have departments or other subunits that operate as project-based organizations with systems to match.

The project management team should be acutely aware of how the organization’s systems affect the project.

For example, if the organization rewards its functional managers for charging staff time to projects, then the project management team may need to implement controls to ensure that assigned staff members are being used effectively on the project.

Organizational Cultures and Styles

Most organizations have developed unique and describable cultures. These cultures are reflected in their:

  • Shared values,
  • Norms,
  • Beliefs
  • Expectations
  • Policies and
  • Procedures
  • View of authority relationships and numerous other factors

Organizational cultures often have a direct influence on the project.

  • A team proposing an unusual or high-risk approach is more likely to secure approval in an aggressive or entrepreneurial organization.
  • A project manager with a highly participative style is apt to encounter problems in a rigidly hierarchical organization, while a project manager with an authoritarian style will be equally challenged in a participative organization.

The structure of the performing organization often constrains the availability of or terms under which resources become available to the project.

Organizational structures can be characterized as spanning a spectrum from functional to projectized, with a variety of matrix structures in between.

The following table shows key project related characteristics of the major types of enterprise organizational structures:

Table: Organizational Structure Influences on Projects

Functional Matrix Projectized
Weak Balanced Strong
Project Manager’s Authority Little or non Limited Low to
to High
High to
almost Total
Percent of Performing
Organization’s Personnel assigned
Full time to Project work
0-25% 15-60% 50-95% 85-100%
Project Manager’s Role Part-time Part time Full-time Full-time Full-time
Common Titles for Project
Manager’s Role
r/ Project
Project Management
Administrative Staff
Part-time Part-time Part-time Full-time Full-time

Traditional Structures of Business Organization

Functional Structure

Most business organizations start out with a functional structure, or a small variation of this structure. This is the basic "building block" for other structures. In this structure, there is a central office which oversees various departments or major functions, e.g., human resources, finances, sales, marketing, engineering, etc.

Think of a picture that has a box at the top labeled "Central Office". Think of a row of boxes underneath the top box. Each box is labeled, e.g., sales, engineering, human resources, etc.

Connect the boxes with lines coming down from the top box to each of the boxes below. Use functional structures when the organization is small, geographically centralized, and provides few goods and services.
When the organization experiences bottlenecks in decision making and difficulties in coordination, it has outgrown its functional structure.

The classic functional organization is a hierarchy where each employee has one clear superior. Staff members are grouped by specialty, such as production, marketing, engineering, and accounting at the top level, with engineering further
subdivided into functional organizations that support the business of the larger organization (e.g., mechanical and electrical).

Functional organizations still have projects, but the perceived scope of the project is limited to the boundaries of the function: the engineering department in a functional organization will do its work independent of the manufacturing or
marketing departments.

For example, when a new product development is undertaken in a purely functional organization, the design phase is often called a design project and includes only engineering department staff. If questions about manufacturing arise, they are passed up the hierarchy to the department head, who consults with the head of the manufacturing department. The engineering department head then passes the answer back down the hierarchy to the engineering project manager.

Projectized Structure

In this structure, there is a centralized corporate office and under it, are various divisions each of which is dedicated to producing and / or selling a certain type of business or product, e.g., product 1, product 2, etc.

Each division that is dedicated to a certain business or product is, in turn, is organized as its own functional structure

So, for example, the division dedicated to making product 1 has its own sales department, human resources, etc. Basically, project structure is a bunch of functional structures each of which reports to one central office.

Use a divisional structure when the organization is relatively large, geographically dispersed, and/or produces wide range of goods/services.

In a projectized organization, team members are often collocated. Most of the organization’s resources are involved in project work, and project managers have a great deal of independence and authority.

Projectized organizations often have organizational units called departments, but these groups either report directly to the project manager or provide support services to the various projects

Matrix Structure

Think of the functional structure. Imagine if you took someone from each of the major functions in the functional structure (the boxes along the bottom of the organization chart), e.g., people from sales, engineering, etc., and organized them into a separate group intended to produce and sell one certain kind of product or service.

Members of this group stay together until that product is produced or they continue to sell and service it. This overall structure (made up of a functional structure that also has groups assigned to products) is a matrix structure.

This structure is useful because it focuses highly skilled people from across the organization to work on a complex product or service.

It can be difficult, though, because each person essentially reports to two supervisors: the supervisor of the functional area (e.g., engineering) and the product manager, as well

When the organization needs constant coordination of its functional activities, then lateral relations do not provide sufficient integration. Consider the matrix structure.

To adopt the matrix structure effectively, the organization should modify many traditional management practices.

Matrix organizations are a blend of functional and projectized characteristics.

Weak matrices maintain many of the characteristics of a functional organization, and the project manager role is more that of a coordinator or expediter than that of a manager.

In similar fashion, strong matrices have many of the characteristics of the projectized organization—full-time project managers with considerable authority and full-time project administrative staff.

Weak Matrix Organization

Balanced Matrix Organization

Strong Matrix Organization

Project Office

There is a range of uses for what constitutes a project office. A project office may operate on a continuum from providing support functions to project managers in the form of training, software, templates, etc. to actually being responsible for the results of the project.

Most modern organizations involve all these structures at various levels. For example, even a fundamentally functional organization may create a special project team to handle a critical project.

Such a team may have many of the characteristics of a project in a projectized organization

The team may include full-time staff from different functional departments, it may develop its own set of operating procedures, and it may operate outside the standard, formalized reporting structure.