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.

Project Management 05: Organizational Structure

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