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10/23/2021

Project Management:
A Systems Approach to
Planning, Scheduling, and Controlling
Twelfth Edition

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Chapter Three
Organizational Structures

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

1
10/23/2021

Learning Outcomes
After careful studying this chapter You should be able to:
• Describe the different types of organizational structures
• Discuss some advantages and disadvantages of each
structure
• Explain in which structure the project manager
possesses the greatest amount of authority
• Clarify in which structure the project manager has the
least amount of authority
• Distinguish between the three types of matrix structures

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Restructuring Necessity
• The technology revolution (complexity and
variety of products, new materials and processes,
and the effects of massive research)
• Competition and the profit squeeze (saturated
markets, inflation of wage and material costs,
and production efficiency)
• The high cost of marketing
• The unpredictability of consumer demands (due
to high income, wide range of choices available,
and shifting tastes)
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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Traditional Weaknesses
• Management is satisfied with its technical skills,
but projects are not meeting time, cost, and
other project requirements.
• There is a high commitment to getting project
work done, but great fluctuations in how well
performance specifications are met.
• Highly talented specialists involved in the project
feel exploited and misused.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Traditional Weaknesses
(Continued)

• Particular technical groups or individuals


constantly blame each other for failure to
meet specifications or delivery dates.
• Projects are on time and to specifications, but
groups and individuals aren’t satisfied with
the achievement.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

3
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Questions
• To what extent does the task of organization call
for close control if it is to be performed
efficiently?
• What are the needs and attitudes of the people
performing the tasks? What are the likely effects
of control mechanisms on their motivation and
performance?
• What are the natural social groupings with which
people identify themselves? To what extent are
satisfying social relationships important in
relation to motivation and performance?
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Questions (continued)
• What aspect of the organization’s activities needs
to be closely integrated if the overall task is to be
achieved?
• What organizational measures can be developed
that will provide an appropriate measure of
control and integration of work activities, while at
the same time meeting the needs of people and
providing adequate motivation?

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

4
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Questions (continued)
• What environmental changes are likely to affect
the future trend of company operations? What
organizational measures can be taken to ensure
that the enterprise responds to these effectively?

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Classical Structure
Advantages
• Easier budgeting and cost control are possible.
• Better technical control is possible.
– Specialists can be grouped to share knowledge
and responsibility.
– Personnel can be used on many different
projects.
– All projects will benefit from the most
advanced technology (better utilization of
scarce personnel).
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

5
10/23/2021

Advantages (Continued)
• It provides flexibility in the use of manpower.
• It provides a broad manpower base to work with.
• It provides continuity in the functional
disciplines; policies, procedures, and lines of
responsibility are easily defined and
understandable.
• It readily admits mass production activities within
established specifications.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Advantages (Continued)
• It provides good control over personnel, since
each employee has one and only one person to
report to.
• Communication channels are vertical and well
established.
• Quick reaction capability exists, but may be
dependent upon the priorities of the functional
managers.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

6
10/23/2021

Classical Structure
Disadvantages
• No one individual is directly responsible for the
total project (i.e., no formal authority; committee
solutions).
• It does not provide the project-oriented
emphasis necessary to accomplish the project
tasks.
• Coordination becomes complex, and additional
lead time is required for approval of decisions.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Disadvantages (Continued)
• Decisions normally favor the strongest functional
groups.
• There is no customer focal point.
• Response to customer needs is slow.
• There is difficulty in pinpointing responsibility;
this is the result of little or no direct project
reporting, very little project-oriented planning,
and no project authority.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

7
10/23/2021

Disadvantages (Continued)
• Motivation and innovation are decreased.
• Ideas tend to be functionally oriented with little
regard for ongoing projects.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Functional Weaknesses
• Functional organizations tend to emphasize
the separate functional elements at the
expense of the whole organization.
• Under functional departmentation there is
no group that effectively integrates the
various functions of an organization and
monitors them from the “big picture
standpoint.”
• Functional organizations do not tend to
develop “general managers.”

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

8
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Functional Weaknesses
(Continued)

• Functional organizations emphasize functional


relationships based on the vertical
organizational hierarchy.
• Functional organizations tend to fragment
other management processes.
• Functional organizations develop a strong
resistance to change.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Functional Weaknesses
(Continued)

• Functional segregation through the formal


organization process encourages conflict
among the various functions.
• The emphasis on the various operation
functions focuses attention on the internal
aspects and relations of the company to the
detriment of its external relations.
• Functional organizations tend to be closed
systems.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

9
10/23/2021

Which Structure Is Best for


Project Management?

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

The Classical Management Structure


General
Manager

Adminis-
Director Level Engineering Production Sales Marketing Admin.
tration

Division Level

Department Level

Section Level Functional Responsibility

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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Departmental Project Management

Division Manager

Department X Department Y Department Z

Project Leaders Project Leaders Project Leaders

Section Level Section Level Section Level

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Project Expeditor
ENGINEERING DIVISION

LIAISON PIPING HVAC CHEMICAL DRAFTING


DEPT.

legend
Formal authority/reporting flow
Informal authority/reporting flow

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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Project Coordinator
DIVISION MGR.
LEGEND
FORMAL FLOW
PROJECT MGR.
INFORMAL FLOW

DEPT. MANAGER DEPT. MANAGER

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Project Coordinator
Weaknesses
• Upper-level management was not ready to cope with
the problems arising from shared authority.
• Upper-level management was reluctant to relinquish
any of its power and authority to project managers.
• Line-staff project managers who reported to a
division head did not have any authority or control
over those portions of a project in other divisions;
that is, the project manager in the engineering
division could not direct activities in the
manufacturing division.
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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Pure Project Structure

General Manager

Project A Project B Project C


Manager Manager Manager

ENG. MFG. ENG. MFG. ENG. MFG.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Projectized Structure
Advantages
• It provides complete line authority over the project (i.e.,
strong control through a single project authority).
• The project participants work directly for the project
manager. Unprofitable product lines are easily identified
and can be eliminated.
• There are strong communications channels.
• Staffs can maintain expertise on a given project without
sharing key personnel.
• Very rapid reaction time.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

13
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Advantages (Continued)
• Personnel demonstrate loyalty to the project; better
morale with product identification.
• A focal point develops for out-of-company customer
relations.
• There is flexibility in determining time (schedule), cost,
and performance trade-offs.
• Interface management becomes easier as unit size is
decreased.
• Upper-level management maintains more free time for
executive decision making.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Projectized Structure
Disadvantages
• Cost of maintaining this form in a multiproduct
company would be prohibitive due to duplication of
effort, facilities, and personnel; inefficient usage.
• There is a tendency to retain personnel on a project
long after they are needed. Upper-level
management must balance workloads as projects
start up and are phased out.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

14
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Disadvantages (Continued)
• Technology suffers because, without strong
functional groups, outlook of the future to improve
company’s capabilities for new programs would be
hampered (i.e., no perpetuation of technology).
• Control of functional (i.e., organizational) specialists
requires top-level coordination.
• There is a lack of opportunities for technical
interchange between projects.
• There is a lack of career continuity and opportunities
for project personnel.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Matrix Development
• Participants must spend full time on the
project; this ensures a degree of loyalty.
• Horizontal as well as vertical channels must
exist for making commitments.
• There must be quick and effective methods
for conflict resolution.
• There must be good communication channels
and free access between managers.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

15
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Matrix Development
(Continued)

• All managers must have input into the


planning process.
• Both horizontally and vertically oriented
managers must be willing to negotiate for
resources.
• The horizontal line must be permitted to
operate as a separate entity except for
administrative purposes.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

The Matrix Management Structure


General
Manager

Engineering Operations Finance Others

Project Responsibility
Functional Responsibility

Project Mgr.
X

Project Mgr.
Y
Project Mgr.
Z

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

16
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Matrix Structure
Advantages
• The project manager maintains maximum
project control (through the line managers)
over all resources, including cost and
personnel.
• Policies and procedures can be set up
independently for each project, provided that
they do not contradict company policies and
procedures.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Matrix Structure
Advantages (Continued)
• The project manager has the authority to
commit company resources, provided that
scheduling does not cause conflicts with other
projects.
• Rapid responses are possible to change,
conflict resolution, and project needs.
• The functional organization exists primarily as
support for the project.
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

17
10/23/2021

Matrix Structure
Advantages (Continued)
• Each person has a “home” after project
completion. People are susceptible to
motivation and end-item identification. Each
person can be shown a career path.
• Because key people can be shared, the program
cost is minimized. People can work on a variety
of problems: that is, better people control is
possible.
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Matrix Structure
Advantages (Continued)
• A strong technical base can be developed, and
much more time can be devoted to complex
problem solving. Knowledge is available for all
projects on an equal basis.
• Conflicts are minimal, and those requiring
hierarchical referral are more easily resolved.
• There is a better balance between time, cost
and performance.
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

18
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Matrix Structure
Advantages (Continued)
• Rapid development of specialists and
generalists occurs.
• Authority and responsibility are shared.
• Stress is distributed among the team (and the
functional managers).

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Matrix Structure
Disadvantages
• Multidimensional information flow
• Multidimensional work flow
• Dual reporting
• Continuously changing priorities
• Management goals different from project goals
• Potential for continuous conflict and conflict
resolution
• Difficulty in monitoring and control
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

19
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Matrix Structure
Disadvantages (Continued)
• Company-wide, the organizational structure is
not cost-effective because more people than
necessary are required, especially administrative.
• Each project organization operates
independently. Care must be taken that
duplication of efforts does not occur.
• More effort and time are needed initially to
define policies and procedures, compared to the
traditional organizational form.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Matrix Structure
Disadvantages (Continued)
• Functional managers may be biased, favoring
their own set of priorities.
• The balance of power between the project and
functional organizations must be watched.
• The balance of time, cost and performance must
be monitored.
• Although rapid response time is possible for
individual problem resolution, the reaction time
can become quite slow.
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

20
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Matrix Structure
Disadvantages (Continued)
• Employees and managers are more susceptible to
role ambiguity than in the traditional
organizational form.
• Conflicts and their resolution may be a
continuous process (possibly requiring support of
an organizational specialist).
• People do not feel they have any control over
their own destiny when continuously reporting to
multiple managers.
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

The Matrix Management Structure


(With a Director of Project Management)
General Manager

Director: Director: Director: Director:


Project Mgmt. Engineering Manufacturing Finance/Admin.

Project Mgr. X

Project Mgr. Y

Project Mgr. Z

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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THE OUT-OF-CONTROL MATRIX


When a matrix appears to be out of control
executives tend to revert to classical management.
This results in:

 Reduced authority for the project manager


 All project decision-making performed at executive levels
 Increase in executive meddling in projects
 Creation of endless job description manuals

This can often be prevented by asking for


authority/responsibility clarification and using a
responsibility assignment matrix (RAM).
Excerpted from Project Management 12E
by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Balancing Technical and Human Skills

Technical Skills
High

Low
Human Skills

Junior Senior Supervisor Middle Senior President


Team Member Team Member Manager Officer

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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The Multidimensional Matrix

Time, Dimension, or Space

Note: Each slice could be a different country.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Project vs. Functional Influences

Project Influence
in Decision Making
Relative Influence

Functional Influence Dual Influence


In Decision Making

Functional Matrix Project


Organization Organization Organization

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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Factors for Selecting an


Organizational Form
• Project size
• Project length
• Project management experience
• Philosophy and visibility of executives
• Project location
• Available resources
• Unique aspects of the project

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Strategic Business Unit


Project Management
SBU SBU SBU
Ford GM Chrysler
Programs Programs Programs

Program
Managers

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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SBU Project Management


Using Platform Management

SBU SBU SBU


SBU
Platform Program
Project Managers
Management

Platform

Platform

Platform

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

Excerpted from Project Management 12E


by Harold Kerzner. Copyright 2017 by John
Wiley & Sons, Inc. All rights reserved.

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