Project Management: Achieving

Competitive Advantage
Fifth Edition, Global Edition

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

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Learning Objectives (1 of 2)
2.1 Understand how effective project management
contributes to achieving strategic objectives.
2.2 Recognize three components of the corporate strategy
model: formulation, implementation, and evaluation.
2.3 See the importance of identifying critical project
stakeholders and managing them within the context of
project development.
2.4 Recognize the strengths and weaknesses of three
basic forms of organizational structure and their
implications for managing projects.

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Learning Objectives (2 of 2)
2.5 Identify the characteristics of three forms of a project
management office (PMO).
2.6 Understand key concepts of corporate culture and how
cultures are formed.

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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
• Making cross-functional decisions
• Achieving objectives

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Table 2.1 Projects Reflect Strategy
Strategy Project
Technical or operating initiatives (such as new distribution Construction of new plants or
strategies or decentralized plant operations) modernization of facilities
Development of products for greater market penetration New product development projects
and acceptance
New business processes for greater streamlining and Reengineering projects
efficiency
Changes in strategic direction or product portfolio New product lines
reconfiguration
Creation of new strategic alliances Negotiation with supply chain members
(including suppliers and distributors)
Matching or improving on competitors’ products and Reverse engineering projects
services
Improvement of cross-organizational communication and Enterprise I T efforts
efficiency in supply chain relationships
Promotion of cross-functional interaction, streamlining of Concurrent engineering projects
new product or service introduction, and improvement of
departmental coordination

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Figure 2.2 TOWS Matrix

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Stakeholder Management
Stakeholder analysis is a useful tool for demonstrating
some of the seemingly irresolvable conflicts that occur
through the planned creation and introduction of new
projects.
Project stakeholders are defined as all individuals or
groups who have an active stake in the project and can
potentially impact, either positively or negatively, its
development.

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Identifying Project Stakeholders
Internal Stakeholders External Stakeholders
• Top management • Clients
• Accountant • Competitors
• Other functional managers • Suppliers
• Project team members • Environmental, political,
consumer, and other
intervener groups

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Figure 2.3 Project Stakeholder
Relationships

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Managing Stakeholders
1. Assess the environment.
2. Identify the goals of the principal actors.
3. Assess your own capabilities.
4. Define the problem.
5. Develop solutions.
6. Test and refine the solutions.

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Organizational Structure
Consists of three key elements:
1. Designates formal reporting relationships
– number of levels in the hierarchy
– span of control The number of employees one person supervises.
2. Identifies groupings of
– individuals into departments
– departments into the total organization
3. Design of systems to ensure
– effective communication
– coordination
– integration across departments

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Forms of Organization Structure
• Functional organizations—group people performing
similar activities into departments
• Project organizations—group people into project
teams on temporary assignments
• Matrix organizations—create a dual hierarchy in which
functions and projects have equal prominence

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Figure 2.4 Example of a Functional
Organizational Structure

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Table 2.2 Strengths and Weaknesses of
Functional Structures
Strengths for Project Weaknesses for Project
Management Management
1. Projects developed within 1. Functional siloing makes it
basic functional structure require difficult to achieve cross-functional
no disruption or change to firm’s cooperation.
design.
2. Enables development of in- 2. Lack of customer focus.
depth knowledge and intellectual
capital.
3. Allows for standard career 3. Longer time to complete projects.
paths.
Blank 4. Varying interest or commitment.

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Figure 2.6 Example of a Project
Organizational Structure

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Table 2.3 Strengths and Weaknesses of
Project Structures

Strengths for Weaknesses for

Project Management Project Management
1. Project manager sole authority 1. Expensive to set up and
maintain teams
2. Improved communication 2. Chance of loyalty to the project
rather than the firm
3. Effective decision making 3. Difficult to maintain a pooled
supply of intellectual capital
4. Creation of project management 4. Team member concern about
experts future once project ends
5. Rapid response to market Blank
opportunities

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Figure 2.7 Example of a Matrix
Organizational Structure

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Table 2.4 Strengths and Weaknesses of
Matrix Structures

Strengths for Weaknesses for

Project Management Project Management
1. Suited to dynamic environments 1. Dual hierarchies mean
two bosses
2. Equal emphasis on project 2. Negotiation required in
management and functional order to share resources
efficiency
3. Promotes coordination across 3. Workers caught between
functional units competing project and
functional demands
4. Maximizes scarce resources Blank

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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

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Figure 2.8 Managers’ Perceptions of Effectiveness of
Various Structures on Project Success

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Project Management Offices
Centralized units that oversee or improve the management
of projects
Resource centers for:
• Technical details
• Expertise
• Repository
• Center for excellence

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Figure 2.9 Alternative Levels of Project
Offices

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 Project Management Office
Forms of PMOs and Control
Three forms of PMOs, varying with degrees of control and
influence include:
• Supportive—low control; consultative and provide PM
resources and training
• Controlling—moderate control; requires compliance to
adopted PM standards/processes
• Directive—high control; directly manages projects

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Models of PMOs
In addition to the forms of PMO and varying levels of
control, there are models of PMOs with various purposes
for companies:
• Weather station—monitoring and tracking
• Control tower—project management is a skill to be
protected and supported
• Resource pool—maintain and provide a cadre of skilled
project professionals

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PMO Control Tower
• Performs four functions:
– Establishes standards for managing projects
– Consults on how to follow these standards
– Enforces the standards
– Improves the standards

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Organizational Culture
• Unwritten
• Rules of behavior
• Held by some subset of the organization
• Taught to all new members

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Key Factors That Affect Culture
Development
• Technology
• Environment
• Geographical location
• Reward systems
• Rules and procedures
• Key organizational members
• Critical incidents

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Organizational Culture: Effects on Project
Management
• Departmental interaction
• Employee commitment to goals
• Project planning
• Performance evaluation

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