Project Management Quarterly. Vol. VIII, No.1, March 1977.

Reprinted with permission

Organizational Alternatives for Project Managers

Robert Youker There is no single, perfect organizational structure for managing projects and similar temporary organizations. But you can -- and should--assess the feasibility of the various alternatives. In the past ten years interest has grown in techniques and approaches for management of temporary projects (in contrast to ongoing operations). There has been an explosion of literature dealing with these techniques and strategies, and more recently, we have seen the beginnings of organized academic research on various aspects of project management. However, in discussions and in the literature we still seem to be confused about the exact meaning of some terms. This is particularly true in the area of alternative organizational approaches for the management of projects. Functional organizations The most prevalent organizational structure in the world today is the basic hierarchical structure (Figure 1). This is the standard pyramid with top management at the top of the chart and middle and lower management spreading out down the pyramid. The organization is usually broken down into different functional units, such as engineering, research, accounting, and administration.

Figure 1. Functional Organization

The hierarchical structure was originally based on such management theories as specialization, line and staff relations, authority and responsibility, and span of control. According to the doctrine of specialization, the major functional subunits are staffed by such disciplines as engineering and accounting. It is considered easier to manage specialists if they are grouped together and if the department head has training and experience in that particular discipline. The strength of the functional organization is in its centralization of similar resources. For example, the engineering department provides a secure and comfortable organizational arrangement with well-defined career paths for a young engineer. Mutual support is provided by physical proximity. 1

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

The functional organization also has a number of weaknesses. When it is involved in multiple projects, conflicts invariably arise over the relative priorities of these projects in the competition for resources. Also, the functional department based on a technical specialty often places more emphasis on its own specialty than on the goals of the project. Lack of motivation and inertia are other problems. However, many companies use the functional organization for their project work as well as their standard operations. The world is a complicated place. In addition to discipline and function, other nuclei for organizational structures include products, technologies, customers, and geographic location. Project organizations The opposite of the hierarchical, functional organization is the single-purpose project or vertical organization. In a projectized organization, all the resources necessary to attain a specific objective are separated from the regular functional structure and set up as a self-contained unit headed by a project manager. The project manager is given considerable authority over the project and may acquire resources from either inside or outside the overall organization. All personnel on the project are under the direct authority of the project manager for the duration of the project. In effect, a large organization sets up a smaller, temporary, special-purpose structure with a specific objective. It is interesting to note that the internal structure of the project organization is usually functional, that is, that the project team is divided into various functional areas (Figure 2).

Figure 2. Projectized Organization

Note that the term here is project organization, not project management. You can manage projects with all three types of organizational structure. The advantages of the project organization come from the singleness of purpose and the unity of command. An esprit de corps is developed through the clear understanding of, and focus on, the single objective. Informal communication is effective in a close-knit team, and the project manager has all the necessary resources under his direct control. The project organization, however, is not a perfect solution to all project management problems, as some have suggested. Setting up a new, highly visible temporary structure upsets the regular organization. Facilities are duplicated and resources are used inefficiently. Another serious problem is the question of job security upon termination of the temporary project. Personnel often lose their home in the functional structure while they are off working on a project.

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

The functional, hierarchical organization is organized around technical inputs, such as engineering and marketing. The project organization is a single-purpose structure organized around project outputs, such as a new dam or a new product. Both of these are unidimensional structures in a multidimensional world. The problem in each is to get a proper balance between the long-term objective of functional departments in building technical expertise and the short-term objectives of the project. Matrix organizations The matrix organization is a multidimensional structure that tries to maximize the strengths and minimize the weaknesses of both the project and the functional structures. It combines the standard vertical hierarchical structure with a superimposed lateral or horizontal structure of a project coordinator (Figure 3).

Figure 3. The Matrix Organization

The major benefits of the matrix organization are the balancing of objectives, the coordination across functional department lines, and the visibility of the project objectives through the project coordinators office. The major disadvantage is that the man in the middle is working for two bosses. Vertically, he reports to his functional department head. Horizontally, he reports to the project coordinator or project manager. In a conflict situation he can be caught in the middle. The project manager often feels that he has little authority with regard to the functional departments. On the other hand, the functional department head often feels that the project coordinator is interfering in his territory. The solution to this problem is to define the roles, responsibility, and authority of each of the actors clearly in a project charter. The project coordinator specifies what is to be done and the functional department is responsible for how it is done (Figure 4).

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

Figure 4. Matrix Organization Relationship of Project Management to Functional Management

Criteria for selecting an organizational structure In the field of management, zealots like to say that their particular model is best. Neophytes want a simple and unambiguous answer. Experienced and thoughtful observers, however, know that no one particular approach is perfect for all situations. The current vogue in management literature is the contingency model. This theory states that the best solution is contingent upon the key factors in the environment in which the solution will have to operate. The same is true for the choice of an organizational structure. What we need, then, is a list of key factors that will help us to choose the right organizational structure for the given conditions on a specific project with a given organization and a particular environment. A set of such factors is listed in Figure 5.

Figure 5. Criteria for Organization Design Decisions

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

For example, an organization developing many new but small projects with standard technology would most likely find a functional structure best. On the other hand, a company with a long, large, complex, and important project should favor the project organizational structure. A firm in the pharmaceutical business with many complicated technologies would probably go to a matrix structure. It is possible to use all three structures in the same company on different projects. All three structures might also be used on the same project at different levels--for example, an overall matrix structure for the project with a functional substructure in engineering and a project organization in another functional sub-area. Before we can make a final choice, however, we must consider the following additional factors: 1. What is the relationship between organizational design, the skills of the project manager, and the project planning and reporting system? 2. Are there ways we can improve coordination and commitment in the functional structure without moving to a project or matrix structure? 3. What variations exist in the matrix structure and what are the advantages of each variation? Project managers and organizational design It is not possible to decide on the organizational design without also deciding whom to select as the project manager and what kind of design you want for the planning and reporting systems. These decisions are closely interrelated. For example, a successful project organization requires a project manager with the broad skills of a general manager. He must combine technical knowledge of the subject matter with management abilities before he can lead the entire project team. It makes no sense to select a project organization form if such a project manager is not available. The planning and reporting system in a project organization can be fairly simple because the team is in close proximity. The opposite is true in the management of projects through a functional organization. Information in the form of plans, schedules, budgets, and reports is the key medium for integrating a functional organization. Therefore, a more sophisticated planning and reporting system is required in a functional organization than in a project organization. Improving lateral communications in the functional structure Organizations typically turn to a project organization or a matrix organization because the normal functional structure has failed on a series of projects. It is not necessary, however, to throw the baby out with the bath water. Before giving up on the functional organization, analyze the real problems and see if steps can be taken short of reorganization. Some results of a reorganization may be favorable, but other unintended but logical consequences are certain to be unfavorable. Methods of lateral or horizontal communication need to be developed across functional department boundaries. Alternative approaches for lateral communication include: 1. Such procedures as plans, budgets, schedules, and review meetings. 2. Direct contact between managers. 3. Informal liaison roles. 4. Teams. These are integrating mechanisms short of the establishment of a matrix organization. They help to break down the barriers that seem to separate different disciplines, departments, and geographic locations. Weak to strong matrix--a continuum

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

The three major organizational forms--functional, matrix, and project--may be presented as a continuum ranging from functional at one end to project at the other end (Figure 6). The matrix form falls in between and includes a wide variety of structures, from a weak matrix near functional to a strong matrix near project. The continuum in Figure 6 is based on the percentage of personnel who work in their own functional department versus the percentage of personnel who are full-time members of the project team. Note that in a functional organization the project team has no personnel of its own. The dividing line between functional and matrix is the point at which an individual is appointed with part-time responsibility for coordination across functional department lines. The bottom line of Figure 6 shows that a weak matrix has a part-time coordinator. The matrix gets stronger as you move from full-time coordinator to full-time project manager and finally to a project office that includes such personnel as systems engineers, cost analysts, and schedule analysts. The difference between a coordinator and a manager is the difference between mere integration and actual decisionmaking.

Figure 6. Organizational Continuum

On the far right we have the project organization. Ordinarily, there is a clear distinction between a strong matrix in which most of the work is still being performed in the functional departments and a project organization in which the majority of the personnel are on the project team. It is rare for a project organization to have all the personnel on its team. Usually some functions, such as accounting or maintenance, would still be performed by the functional structure. Some persons have taken issue with the use of the term strong matrix. They say that a strong matrix comes from an even balance of power between the functional departments and the project office. That may be true in some instances, but not always. Strong and weak are not used in the sense of good and bad. Rather, they refer to the relative size and power of the integrative function in the matrix. Measuring authority: Functional vs. project staff Another way to differentiate between a strong matrix and a weak matrix is to analyze the relative degree of power between the functional departments and the project staff. We could construct another continuum with function on the left and project on the right. For a given project we would decide where the power rests on the continuum for decisions over project objectives, budgets, cost control, quality, time schedule, resources, personnel selection, and liaison with top management. On any given project the power will be strongly functional for some factors and strongly project for others. However, a profile line can be drawn from top to bottom that would indicate whether the trend is to the left (weak) or to the right (strong). Making matrix management work Matrix management is a controversial concept. Some people have had bad experiences operating in a matrix. Others have had a great deal of success. It does require careful definition of authority and responsibility as well as strenuous efforts toward coordination and diplomacy. 6

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

The matrix is basically a balance of power between the goals of the functional structure and of a specific project.

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

Overloaded functional departments One key problem with matrix organizations is that they tend to overload the functional departments with work. If a functional department makes a commitment to work more man-hours on projects than it has available, conflicts over priorities between projects are inevitable. This problem can be alleviated, if not solved, by better planning. A matrix organization will not work effectively unless a matrix strategic plan setting priorities on objectives and a matrix budget allocating resources also exist. For example, in Figure 7, the project manager for Project A will add horizontally across functional departments to get his total budget. In a similar manner, the vice-president of manufacturing must add vertically across all the projects for which he has committed funds and resources as well as his strictly departmental efforts. The matrix budget must add up to 100 percent in both directions. The usual picture is that the functional departments are overcommitted and show required man-hours of perhaps 120 percent of actual man-hours available. When this happens, politics and disappointment become inevitable.

Figure 7. Matrix Organization and Matrix Budget

The golden rule in matrix management states, He who has the gold makes the rules. If a project manager does not control the budget, he can only beg for handouts from the functional departments. A matrix budget assigns resources to the project manager for purchases from the functional departments. Making up such a budget takes careful work during long-range and annual planning. Regular updating of the matrix plan and budget are also necessary. Survival techniques in the matrix A common picture of the project coordinator in a matrix organization is of a frustrated diplomat struggling to cajole the functional departments into performing the work on schedule and within budget. His position is difficult, but the following approaches can help: 1. It is important to have a charter from top management defining responsibilities and authority for the project manager as well as the role of the functional departments. 2. The project coordinator or manager must anticipate conflicts in the matrix. Conflict is inevitable with dual authority, but it can be constructively channeled. 3. Since conflict is inevitable, it is important to take positive steps to develop teamwork. Regular lunches 8

Project Management Quarterly. Vol. VIII, No.1, March 1977. Reprinted with permission

or social gatherings help to foster a team spirit. In recent years the behavioral sciences have developed a number of specific techniques for alleviating or using conflict effectively. Training programs for matrix managers should include experiences with such techniques. 4. The project coordinators main power comes from the approved objectives, plans, and budgets for the project. Use these documents to hold departments to their commitments. 5. It is vital that the functional department heads be committed to the plans and schedules for the project as well as the lower-level task leaders. Functional managers should review and sign off on these documents. 6. It is usually best to avoid direct conflict with the functional department heads. The matrix manager should use his boss when a situation threatens to get out of hand. 7. It is important to remember that the project coordinator is concerned with what is to be done, not how. Use a management-by-objectives approach and do not supervise the functional departments (Figure 4) too closely. 8. Many of the problems of matrix management flow from the uncertainty inherent in the project environment. By definition, a project is, to some extent, a new effort. Careful and continuous planning can help reduce uncertainty. No one perfect organizational structure for managing projects exists. The functional, the project, and the different matrix structures all have strengths and weaknesses. The final choice should come after weighing various factors in the nature of the task, the needs of the organization, and the environment of the project. The functional structure will work for many projects in many organizations, especially if lateral communications can be improved through integrating mechanisms and procedures short of hiring a matrix coordinator. When a matrix approach is chosen, the entire organization must put a good deal of effort into it to make it work. In particular, the project coordinator or project manager in the matrix must be carefully chosen and trained. His interpersonal skills are more important than his technical knowledge. In many situations, a project organization may appear to be the simplest solution from the viewpoint of the project manager. However, the functional managers or top management may not find it to be the best long-range or most strategic decision. Robert Youker