Main kinds of organization and consequences for project management

There is an infinite variety of types of organization, because every organization, like every person, is in some sense unique. However, it is useful to consider several different kinds of organization and their consequences for project management. To set the scene for doing that, let us first remind ourselves of the difference between a project and a process. A process is a continuing activity, in which key operations are repeated periodically. The process will continue indefinitely. Paradigm examples of processes are payroll, sales and marketing, and financial control and direction. Projects, in contrast, have definite start and end points, and are set up to achieve a specific purpose, after the attainment of which (or after the failure to attain which) they are shut down. The first and foremost distinction between kinds of organizations from the point of view of project management is between organizations that are in a sense nothing but a collection of projects, and organizations that exist to manage one or more processes[2]. We call these the projectized and the process-focused. (The PMBOK calls the latter non-projectized.) This is summarized in Figure 2.2, while Table 2.1 gives some examples of each kind to illustrate this difference.

Figure 2.2. A taxonomy of organizations with respect to their implications for project management

Table 2.1. Some typical examples of kinds of organizations that are projectized and of kinds that are process-focused, with respect to project management
Projectized Process-focused (non-projectized)
  • Oil and gas exploration.

  • Corporate finance.

  • Starting a new business.

  • New product development.

  • Transport charter services.

  • Legal representation bar.

  • Intelligence responses to major events, foreign intelligence.

  • PhD programmes.

  • Research and development, e.g. into drugs and medical treatments, or software and services development.

  • Expeditionary warfare, including mercenary and private military company assistance.

  • Outsourcing of local government services.

  • Property development.

  • Film production and entertainment product creation.

  • Oil and gas refining.

  • Capital markets trading.

  • Fund management.

  • Retailing and wholesaling.

  • Transport scheduled services.

  • Administration of justice.

  • Domestic intelligence and counter-intelligence.

  • Education primary to tertiary.

  • Hospital and GP surgery management.

  • Pharmaceutical sales.

  • Software sales, software maintenance.

  • Pensions administration.

  • Maintaining armed forces in peacetime.

  • Local government services.

  • Farming.

  • Distribution.

  • Entertainment promotion.

Note that some businesses are naturally projectized ones. Law firms and management consulting firms, for example, will often be in effect a portfolio of projects, legal cases in the case of law firms and consulting engagements in the case of management consultancies. Accounting firms, by contrast, will be of the other kind if they specialize in audit, as audit happens every year, follows the same pattern, and necessarily dovetails exactly into the previous iteration of the process. Note that there are many fields in which it will make sense to have a single company (one of many kinds of organization) straddling the two different kinds of activity. Take oil and gas, for example. Distributing gas and petrol to customers is definitely a non-projectized business, predominantly, whereas exploration is predominantly a projectized business. We qualify this with the word 'predominantly' in both cases because there are some projects in the business of oil and gas distribution, such as building a new refinery or running a sales campaign to attract new customers. And in exploring for new oil and gas fields, while each new exploration is a project, all oil and gas exploration projects have certain common features, such as the need for derricks, pipes, environmental PR, and careful control of naked lights at the well head. But the distinction holds: some kinds of business are naturally organized as projects, others are naturally organized as processes.

So what? From a project management point of view, trying to run a project in an organization that naturally understands projects is going to be easier than trying to run one in an organization that has no experience of projects. You need to know what experience of projects exists in your organization and especially in all the parts of it that your project will depend on. This should not be too difficult if you have been there some time, although the question is a useful lens through which to think about how things can be improved, but if you are setting up a project in a new organization, or a new part of your organization, it is a vital question.

Organizations that lack experience of project management are likely also to lack some of the basic processes and organizational assets that make projects easier to run. This will mean that compared to running the same project in an organization that does have such experience and assets, your project either will need extra budget to compensate, or will need to accept greater risk. For example, if you have run a highly successful project in a projectized business at a total cost of x, you will find that doing the same project on the same scale in a non-projectized business will cost more. One example of the kinds of things lacking might be systems or processes for project accounting, which will mean either hiring a project accountant into the team, training someone from the financial controller's function to do the job, or running the project without proper project accounting. A project accounting system is one of the elements included in a project management system.

Figure 2.3 sets out some types of functional organizational structure with their implications for project management.

Figure 2.3. Types of organizational structure and their implications for project management

(a) The functional organization in its purest form The functional organization in its purest form is a multidivisional business in which each division is completely independent of the others. Corporate management sets strategic direction for each division and allocates capital to each division on behalf of the owners, and holds each division to account. Divisions operate entirely independently from each other Implications for project management

  • Working within your own division is easy

  • Working outside your own division is hard

  • If your division does not understand projects, it will be difficult to get them to understand

  • Getting input and buy-in to your project from other divisions means communicating up and then down the organizational hierarchy

(b) The functional organization in weak matrix form The functional organization depicted here has divisions which operate independently, except that they no longer control their own support departments directly (Finance, HR, IT, Property Management, Legal, Planning, etc.). These support departments are now organized into a support division (usually but not always reporting to the Finance Director or CFO). The cost to the individual operating divisions is offset, the intention is more than offset, by the gains from pooling resources. At a day-to-day level this means that the frustration of IT saying 'No you can't have exactly the IT that you need in your division,' for example, is outweighed by cheaper overall IT and higher quality IT staff. In practice there is a spectrum of different degrees of centralizing resources; for example, divisions may retain direct control over 'Front office IT' but have to use a central resource for other IT such as infrastructure and networks Implications for project management

  • Similar to the functional organization, except

  • People understand cross-divisional working better, although cross-divisional politics can be a major frustration

  • Divisions contend for the same support resources, so your project may have to wait or make a strong case

  • The centralization or grouping together of support functions can reduce the length of the communication lines for getting input to your project, so making it easier

(c) One possible example of the pure form of the matrix organization The distinguishing feature of the matrix organization, in its pure form, is that the business lines have two bosses (or more) each. This may seem like a crazy idea, but it evolved as a response to critical problems in the complexity of modern business organizations and severe coordination and resource allocation constraints. In practice, one of the bosses on the organization chart tended by force of personality or power over more resources than the other to dominate the business line, and since its heyday in the 1960s, the pure form of matrix is tending to be abandoned and regarded as an impracticable idea. However, it is alive and well in many government sector organizations, and perhaps less unsuitable in that sector than in commercial organizations. Conceptually it is a useful model for the project manager to have in mind as an aid to understanding how new organizations might be structured even if they are not pure-form matrix ones Implications for project management

  • In theory your project will have good connectivity to many parts of the organization. In practice these connections may be weak or overloaded

  • In theory your project can get the authority it needs to work across the right parts of the organization, in practice you may end up competing for time, attention and other resources with many other projects who have the same authority

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Definitive Guide to Project Management. The Fast Track to Getting the Job Done on Time and on Budget
The Definitive Guide to Project Management: The fast track to getting the job done on time and on budget (2nd Edition)
ISBN: 0273710974
EAN: 2147483647
Year: 2007
Pages: 217
Authors: Sebastian Nokes

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