The Organizational Context: Strategy, Structure, and Culture

1. The Organizational Context:Strategy, Structure, and Culture Chapter 2

2. Learning Goals • Understand how effective project management contributes to achieving strategic objectives. • Recognize three components of the corporate strategy model: formulation, implementation, and evaluation. • See the importance of identifying critical project stakeholders and managing them within the context of project development. • Recognize the strengths and weaknesses of three basic forms of organizational structure and their implications for managing projects.

3. Learning Goals • Understand how companies can change their structure into a “heavyweight project organization” structure to facilitate effective project management practices. • Identify the characteristics of three forms of project management office (PMO). • Understand key concepts of corporate culture and how cultures are formed. • Recognize the positive effects of a supportive organizational culture on project management practices versus those of a culture that works against project management.

4. Projects and Organizational Strategy Strategic management • The science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives. • Consists of: • Developing vision and mission statements • Formulating, implementing and evaluating business opportunities • Making cross functional decisions • Achieving objectives

5. Projects Reflect Strategy Projects are stepping stones of corporate strategy. The firm’s strategic vision is a driving force behind project development. Some examples include:

6. Mission Objectives Strategy Goals Programs Relationship of Strategic Elements Review Figure 2.2 page 36 for an example

7. Stakeholder Management Stakeholders are individuals or groups who have an active stake in the project and can potentially impact, either positively or negatively, its development. Sets of project stakeholders include: • Internal Stakeholders • Top management • Accounting • Other functional managers • Project team members • External Stakeholders • Clients • Competitors • Suppliers • Environmental, political, consumer, and other intervenorgroups

8. Stakeholder Register • Used to record stakeholders of the project • Useful to build communication plans

9. Stakeholder Analysis • Will inform you of the interests and influence of those involved in a project change. • Should show each person or group’s interest in the change, where interests converge, the level of influence, and who will have a voice in new developments. • Can be beneficial at the beginning of new projects and when projects change direction. Displayed in a stakeholder analysis grid See World Wildlife Foundation example at: http://assets.panda.org/downloads/1_1_stakeholder_analysis_11_01_05.pdf

10. Stakeholder Analysis Grid • Begin by making a list of anyone who has interest and influence over your project. i.e. investors, customers, general public, etc. • Use this list to weigh the interest and influence of each person. • Create the Matrix: (example - four levels per category) • Draw a box divided into four equal quadrants. • Divide each quadrant into fourths again. You should now have sixteen boxes. • Label down the left side starting at the top with “Significant Importance,” “Some Importance,” “Little Importance,” “No Importance.” • Label across the top starting at the left with “Significant influence,” “Some influence,” “Little influence,” “No influence.” • Organize your stakeholders according to importance and influence. • When you are done, your matrix will be a graphic display of who holds the most importance and influence (the group in the upper left-hand corner) and who holds the least amount of influence and importance (the group in the lower right-hand corner).

11. Parent Organization External Environment Other Functional Managers Project Manager Top Management Project Team Accountant Project Stakeholder Relationships Clients

12. Managing Stakeholders • Assess the environment - Is this low key or significant? • Identify the goals of the principal actors - What true goals do the stakeholders have? • Assess your own capabilities - What are your strengths and weaknesses? • Define the problem • Develop solutions - Try to cover as many stakeholder’s concerns as possible (80%). • Test and refine the solutions – it is an iterative process. The goal is to formulate strategies to identify and manage for positive results.

13. Identify Stakeholders Implement Stakeholder Management Strategy Gather Information on Stakeholders Project Management Team Predict Stakeholder Behavior Identify Stakeholder’s Mission Identify Stakeholder Strategy Determine Stakeholder Strengths & Weaknesses Project Stakeholder Management Cycle

14. Organizational Structure Consists of three key elements: • Designates formal reporting relationships • including the number of levels in the hierarchy • span of control of management • Groupings of: • individuals into departments • departments into the total organization • Functional? Geographic? Product type? Project based? • Design of systems to • ensure effective communication • coordination • integration of efforts across departments

15. Forms of Organization Structure • Functional organizations – groups people performing similar activities into departments • Project organizations – groups people into project teams on temporary assignments • Matrix organizations – creates a dual hierarchy in which functions and projects have equal prominence

16. A Functional Organizational Structure Board of Directors Board of Directors Board of Directors Silos of work Chief Executive Chief Executive Chief Executive Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Vice President of Marketing Marketing Marketing Production Production Production Production Finance Finance Finance Research Research Research New Product New Product Market Research Market Research Development Development Accounting Accounting Logistics Logistics Logistics Services Services Sales Sales Testing Testing Testing Outsourcing Outsourcing Outsourcing Contracting Contracting After Market After Market After Market Research Labs Research Labs Support Support Support Distribution Distribution Distribution Investments Investments Quality Quality Advertising Advertising Advertising Warehousing Warehousing Warehousing Employee Employee Benefits Benefits Manufacturing Manufacturing Manufacturing

17. Functional Structure for Project Management

18. A Project Organization Structure

19. Project Structure for Project Management

20. A Matrix Organization Structure • Seeks a balance between the functional and project organizations

21. Matrix Structures for Project Management

22. Organizational Structure Influences on Projects -PMBok 2004

23. Heavyweight Project Organizations Organizations can sometimes gain tremendous benefit from creating a fully-dedicated project organization Lockheed Corporation’s “Skunkworks” • Project manager authority expanded • Functional alignment abandoned in favor of market opportunism • Focus on external customer

24. Project Management Offices (PMO) • Centralized units that oversee or improve the management of projects • Resource centers for: • Support with technical details • Expertise • Central repository for lessons learned • Center for excellence

25. Forms of PMOs • Weather station • used only to monitor and track projects • Resource pool • maintain and provide a group of skilled project professionals • Control tower • project management is a skill to be protected and supported • focuses on establishing standards, consulting/enforcing, and improving project management skills

26. Organizational Culture The unwrittenrules of behavior, or norms, that are used to shape and guide behavior,is shared by some subset of organization members and is taught to all new members of the company. Key factors that affect culture development • Technology level • Business environment • Geographical location • Reward systems • Rules and procedures • Key organizational members • Critical incidents Have you heard of “The Toyota Way?”

27. Key Factors That Affect Culture Development

28. Culture Affects Project Management Success • Departmental interaction • Employee commitment to goals • Project planning • Performance evaluation • Attitudes

29. TRADITION • Start with a cage containing five apes. • In the cage, hang a banana on a string and put stairs under it. Before long, an ape will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the apes with cold water. After a while, another ape makes an attempt with the same result - all the apes are sprayed with cold water. This continues through several more attempts. • Pretty soon, when another ape tries to climb the stairs, the other apes all try to prevent it. Now, turn off the cold water. Remove one ape from the cage and replace it with a new one. The new ape sees the banana and wants to climb the stairs. To his horror, all of the other apes attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted. • Next, remove another of the original five apes and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm. Again, replace a third original ape with a new one. The new one makes it to the stairs and is attacked as well. Two of the four apes that beat him have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest ape.  • After replacing the fourth and fifth original apes, all the apes, which have been sprayed with cold water, have been replaced. Nevertheless, no ape ever again approaches the stairs. Why not? Because that's the way they've always done it and that's the way it's always been around here. • And that's how company policy begins....

30. Chapter 2 Review and Discussion • The chapter suggests that a definition of strategic management includes four components: • Developing a strategic vision and sense of mission • Formulating, implementing, and evaluating • Cross-functional decisions • Achieving its objectives Discuss how each of these four elements are important to understanding the challenge of strategic project management. How do projects serve to allow an organization to realize each of these three components of strategic management? • Discuss the difference between organizational objectives and strategies. • Your company is planning to construct a nuclear power plant in Oregon. Why is stakeholder analysis important as a precondition of the decision whether or not to follow through with such a plan? • Consider a medium-sized company that has decided to begin using project management in a wide variety of its operations. As part of their operational shift, they are going to adopt a project management office (PMO) somewhere within their organization. Make an argument for the type of PMO they should be adopting (weather station, control tower, or resource pool). What are some of the key decision criteria that will help them determine which model makes the most sense?

31. Chapter 2 Review and Discussion • What are some of the key organizational elements that can affect the development and maintenance of a supportive organizational culture? As a consultant, what advice would you give to a functional organization that was seeking to move from an old, adversarial culture, where the various departments actively resisted helping each other, to one that encourages “project thinking” and cross-functional cooperation? • You are a member of the senior management staff at XYZ Corporation. You have historically been using a functional structure set up with five departments: finance, human resources, marketing, production, and engineering. • Create a drawing of your simplified functional structure, identifying the five departments. • Assume you have decided to move to a project structure. What might be some of the environmental pressures that would contribute to your belief that it is necessary to alter the structure? • With the project structure, you have four projects currently ongoing: stereo equipment, instrumentation and testing equipment, optical scanners, and defense communications. Draw the new structure that creates these four projects as part of the organizational chart.

32. In-class exercise: “Good Answers” is Growing • Your task: • In your groups, prepare a two-minute briefing for the class to identify the project and what you see as the key elements your project will have to address. Include a discussion of aspects of Good Answers’ operations that would not be part of the project but rather are part of Good Answers’ general procedures. • Specifically, address the following questions: • What is the project in this scenario? • Who are the stakeholders? Create a stakeholder matrix. • What are some of the main issues that you will need to address in this project?