Projects are typically part of an organization that is larger than the project. Examples of organizations include corporations, government agencies, healthcare institutions, international bodies, professional associations, and others. Even when the project is external (joint ventures, partnering), the project will still be influenced by the organization or organizations that initiated it. The maturity of the organization with respect to its project management system, culture, style, organizational structure and project management office can also influence the project. The following sections describe key aspects of these larger organizational structures that are likely to influence the project.

For further information, see 2.3.02TS Organizational Characteristics (TenStep Supplemental Content)

Project-based organizations are those whose operations consist primarily of projects. These organizations fall into two categories:

• Organizations that derive their revenue primarily from performing projects for others under contract – architectural firms, engineering firms, consultants, construction contractors, and government contractors.

• Organizations that have adopted management by projects (Section 1.3). These organizations tend to have management systems in place to facilitate project management. For example, their financial systems are often specifically designed for accounting, tracking, and reporting on multiple, simultaneous projects.

Non-project-based organizations often may lack management systems designed to support project needs efficiently and effectively. The absence of project-oriented systems usually makes project management more difficult. In some cases, non-project-based organizations will have departments or other subunits that operate as project-based organizations with systems to support them. The project management team should be aware of how its organization’s structure and systems affect the project.

Most organizations have developed unique and describable cultures. These cultures are reflected in numerous factors, including, but not limited to:

• Shared values, norms, beliefs, and expectations

• Policies and procedures

• View of authority relationships

• Work ethic and work hours.

Organizational cultures often have a direct influence on the project. For example:

• A team proposing an unusual or high-risk approach is more likely to secure approval in an aggressive or entrepreneurial organization

• A project manager with a highly participative style is apt to encounter problems in a rigidly hierarchical organization, while a project manager with an authoritarian style will be equally challenged in a participative organization.

The structure of the performing organization often constrains the availability of resources in a spectrum from functional to projectized, with a variety of matrix structures in between. Figure 2-6 shows key project-related characteristics of the major types of organizational structures.

Figure 2-6. Organizational Structure Influences on Projects

The classic functional organization, shown in Figure 2-7, is a hierarchy where each employee has one clear superior. Staff members are grouped by specialty, such as production, marketing, engineering, and accounting at the top level. Engineering may be further subdivided into functional organizations that support the business of the larger organization, such as mechanical and electrical. Functional organizations still have projects, but the scope of the project is usually limited to the boundaries of the function. The engineering department in a functional organization will do its project work independent of the manufacturing or marketing departments. When new product development is undertaken in a purely functional organization, the design phase, often called a design project, includes only engineering department staff. Then, when questions about manufacturing arise, they are passed up the organizational hierarchy to the department head, who consults with the head of the manufacturing department. The engineering department head then passes the answer back down the hierarchy to the engineering functional manager.

Figure 2-7. Functional Organization

Figure 2-8. Projectized Organization

At the opposite end of the spectrum is the projectized organization, shown in Figure 2-8. In a projectized organization, team members are often collocated. Most of the organization’s resources are involved in project work, and project managers have a great deal of independence and authority. Projectized organizations often have organizational units called departments, but these groups either report directly to the project manager or provide support services to the various projects.

Figure 2-9. Weak Matrix Organization

Figure 2-10. Balanced Matrix Organization

Matrix organizations, as shown in Figures 2-9 through 2-11, are a blend of functional and projectized characteristics. Weak matrices maintain many of the characteristics of a functional organization and the project manager role is more that of a coordinator or expediter than that of a manager. In similar fashion, strong matrices have many of the characteristics of the projectized organization, and can have full-time project managers with considerable authority and full-time project administrative staff. While the balanced matrix organization recognizes the need for a project manager, it does not provide the project manager with the full authority over the project and project funding (Figure 2-6).

Figure 2-11. Strong Matrix Organization

Figure 2-12. Composite Organization

Most modern organizations involve all these structures at various levels, as shown in Figure 2-12 (Composite Organization). For example, even a fundamentally functional organization may create a special project team to handle a critical project. Such a team may have many of the characteristics of a project team in a projectized organization. The team may include full-time staff from different functional departments, may develop its own set of operating procedures and may operate outside the standard, formalized reporting structure.

See PMOStep Project Management Office Framework™ at www.PMOStep.com (TenStep, Inc. Content).

Many organizations realize the benefit of developing and implementing a PMO (Section 1.6.4). This is often true of those organizations employing a matrix organizational structure, and almost always true of those employing a projectized organizational structure, especially when the parent organization is involved with the simultaneous management of multiple and/or sequential projects.

A PMO can exist in any of the organizational structures, including those with a functional organization, with increasing likelihood of occurrence toward the rightmost columns in Figure 2-6.

A PMO’s function in an organization may range from an advisory influence, limited to the recommendation of specific policies and procedures on individual projects, to a formal grant of authority from executive management. In such cases, the PMO may, in turn, delegate its authority to the individual project manager. The project manager will have administrative support from the PMO either through dedicated staff or through a shared staff member. The project team members will either be dedicated to the project or might include staff members who are shared with other projects and, in turn, are managed by the PMO.

Project team members will report either directly to the project manager or, if shared, to the PMO. The project manager reports directly to the PMO. Additionally, the flexibility of the PMO’s centralized management can offer the project manager a greater opportunity for advancement within the organization. Specialty project team members can also be exposed to alternative project management career options in organizations with PMOs.

Note that if a PMO exists, Figure 2-8 would have an additional box, labeled PMO, between the project manager layer and the chief executive layer. Similarly in Figures 2-11 and 2-12, the “manager of project managers” would normally be the PMO manager, whereas in the other organizational structures (Figures 2-9 and 2-10), the PMO usually does not directly report to the chief executive.

The project management system is the set of tools, techniques, methodologies, resources, and procedures used to manage a project. It can be formal or informal and aids a project manager in effectively guiding a project to completion. The system is a set of processes and the related control functions that are consolidated and combined into a functioning, unified whole.

The project management plan describes how the project management system will be used. The project management system content will vary depending upon the application area, organizational influence, complexity of the project, and availability of existing systems. The organizational influences shape the system for executing projects within that organization. The system will adjust or adapt to accommodate any influence imposed by the organization.

If a PMO exists in the performing organization, one of the functions of the PMO would typically be to manage the project management system, in order to ensure consistency in application and continuity on the various projects being performed.

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