- What is a Project ?
- What is Project Management?
- The Triple Constraint
- Managing Triple Constraint
- What is the Project Life Cycle?
- The Role and Characteristics of a Project Manager
- Project Managers Compared to Functional Managers
- Project Selection and the Organization
- Financial Measures for Selecting Projects
- Non-Financial Criteria for Selecting Projects
- Project Selection Process
- Project Structures Within Organizations
- Functional AKA Hierarchical Organization
- Pure Project Organization
- Matrix Organization
- What Structure Works Best?
According to the Project Management Institute: * "A project is a temporary endeavor undertaken to create a unique product, service, or result." Let's break down this definition into its components to understand further what a project is (and what it is not):
It is a temporary endeavor - what does that mean? It means that it isn't endless; it has a start date and an end date. Projects do not go on indefinitely. Activities that go on indefinitely are typically known as processes or operations.
It creates a unique product, service, or result, which we call deliverable. Unique means that it is unlike any other project. It may be similar to other projects but it is never identical to one. This is what distiguishes a project from process. A project is unique; a process is a repeatable and strives for consistency, standardization, and no deviation from standards. Deliverable means that it has a outcome: i.e. a new product, a new building, a merger of two companies, improved customer service, etc. The outcome may be a product, goods, or a service.
Furthermore, projects have defined...
The goals expected to be achieved. There can be technical goals (develop new technology), legal or political goals (to meet governmental regulations), and/or business goals (beating or eliminating competition). These objectives should be measurable.
All the work required to deliver the product or result and satisfy the objectives for which a project was undertaken at a level of quality expected by the customer. The scope includes all the deliverables required to meet the project objectives.
The planned cost of conducting the project; it includes human and physical resources.
The planned time to complete the project, as well as the Milestones along the way.
- Building a house
- Building a mobile application
- Developing a new product
- Improvement of a service (i.e. customer service, Six Sigma initiative)
Now that we've introduced the definition of a project, let's discuss some of the differences between projects and processes (or operations)
- Let say I'm working in the project department in a company of the renewable energy industry. In my company we will call it a project while the PV plants or Wind farms are under construction.
- As defined in the PMBOK Guide, it is temporary and it will deliver a unique product. Once we start producing and selling energy, the responsibility is transferred to the operations team who is will make sure that everything is running smoothly and consistently, according to the procedures already implemented in the company.
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Let's say an agency responsible for coordinating mitigation, response and recovery activities for several countries. The agency receives funding for mitigation initiatives or projects- These have specific objectives, timelines and scope. For example, projects can be geared towards improving Early Warning Systems or making schools safer (objectives). These projects can last anywhere between one year and 10 years (timeline) and the scope for implementation varies from one or two countries to all eighteen countries which fall under the agency.
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On the other hand, the agency has several internal processes which help its effectiveness. A key example would be monitoring and reporting using specialized software. This helps management staff to be aware of how other departments are performing and gives insight as to how the agency can improve on its operations. This happens on a continuous basis.
Project Management consists of the methods and tools used to deliver a project that meets its stated objectives. Sounds simple right? Objectives typically represent themselves in terms of cost, time, and scope (also known as the Triple Constraint). As long as we know the objectives, we should be able to meet them, right? It may come as a surprise to you, but often times projects fail to meet their objectives. It isn't so simple because the number of factors that must be controlled can, and often do, interact in unexpected ways. Consequently, the project becomes more complicated as the number of factors increases.
You've encountered projects in your personal life (remodeling a home), in your work (developing a new product for your company), or at school (getting a degree). When remodeling a home, you must watch and control the expenses; when developing a new product, you must monitor the number of features that are added to the product to meet cost expectations; and when getting a degree, you often have to manage your time commitments. Managing the expenses, managing the schedule, managing the amount of work, planning for problems, handling the risks, communicating critical information to all involved, leading a team - these are the activities of successful Project Management.
Whether complex or simple, high-budget or low-budget, lengthy or brief in time, all projects have the same three general objectives: meeting the scope (including quality criteria of the deliverables), meeting time constraints, and meeting cost boundaries. These three objectives are called the "Triple Constraint." We will refer to the Triple Constraint many times. These three constraints work together in an interesting fashion. They must always be kept in balance with each other - which is one of the biggest challenges that a Project Manager has.
Let's say you want to build a house. You want it to be a 3 bedroom house, to be built in 3 months and for no more than $170,000. You first have to design the house with a blueprint, or a plan, for the house you want. Then you have to determine what it will cost to purchase all the materials to build the house to the design. Then you need to ensure you have the proper staff with the proper skills to build the house in 3 months’ time. If you draw your blueprints, and find out to build your dream house, you need $200,000 in materials and labor, then you need to either pick cheaper materials, cheaper or less labor, or change your plan to be less elaborate, maybe build a smaller house, or a reduced scope. If you find your house will take 4 months to build, then you have to have the money in your budget to pay for the extra month of resources, or again, you need to look possibly, at a smaller house which is a reduction in scope, in order to stay within your budget. The Triple Constraint works much like a three legged stool. All three legs must be in balance for the stool to stand up straight and allow for a flat surface to sit on. If one leg gets shortened, the stool starts to tip, same if one leg gets longer than the others. The Triple Constraint works similarly - if one leg gets shortened or lengthened, typically the other two must accommodate or adjust in order to keep the stool in balance which in our case is to achieve the desired objective of the project. Effective Project Managers understand the impact that a change in one constraint has on the other two and manages this continually throughout the project to achieve the desired scope and quality.
Which constraint, of the Triple Constraint, is the most important for a Project Manager to manage? In theory, they are equally important, but on any particular project, one may be more important than another. A Project Manager must understand their customer and needs to know which of the Triple Constraints may be more important (i.e. meeting the schedule, meeting the budget, or delivering the scope). This becomes important when the Project Manager needs to find solutions to issues or risks encountered and needs to trade off a constraint to meet the project objectives.
Let's look at some examples. The image below represents the Triple Constraint.
Now let's look at what happens to the project if we have to change one of the constraints.
If your cost is decreased, and you must deliver in the same amount of time, then the impact would be to decrease the scope:
If your schedule is decreased, and you must provide the same deliverables, the impact would be to increase the cost:
If your scope is increased, then the impact would be to either increase the cost or increase the time (or both):
These examples don't cover every possibility that you might find yourself in as a Project Manager, however, they indicate the importance of recognizing that if one element of the Triple Constraint is impacted, then the two other elements of the Triple Constraint are likely also impacted. The Project Manager must be able to effectively identify these tradeoffs to ensure the best possible decision is made for the business, the customer, and the project.
As we mentioned earlier, all projects have a start and an end. Another way to acknowledge this is to say that all projects follow a life cycle of phases: Initiation, Planning, Execution and Closure. Our goal will be to review and explain how the project is managed throughout these life cycle phases.The concept of a "life cycle" is prevalent in today's business and technology climates. This concept has been applied to the development of most new products, especially software products. Also implicit in a "life cycle," is the notion of phases or stages that are completed in a specific order through the "life" of the project. Each project may go through the same "life cycle" phases, even though each project outcome will be unique. Projects begin with Initiation by defining the goals and objectives to be achieved. In Planning, the details of the project are identified as well as how the project will be carried out in order to meet the objectives. In Execution, the Project Plan is monitored and controlled to ensure that the actual work being delivered meets the planned scope, cost, and schedule. And lastly, the project is Closed where all deliverables are turned over the customer, and all project activities are completed. Project Closing also includes a post project review, complete with a collection of lessons learned, best practices, and improvements that can be made to the Project Management methods and tools for improved performance on future projects in the organization. During each life cycle phase, there are specific deliverables expected to be produced. These deliverables are based upon the project objectives and the ultimate project result. For example, if the project is to build a house, at the end of the Planning Phase it would be expected to have design blueprints for the house as well as a contract with a builder to build the house. During Execution, it would be expected that there would be interim key deliverables such as, the completion of the foundation, the completion of the framing, the completion of the roof, the completion of the walls, the completion of electrical and plumbing, and so forth. These deliverables are produced over the “life” of the project and are key to meeting the overall project goal of a beautiful new home. We will explore the entire Project Life Cycle together, beginning with Initiation and finishing with Project Closing.
The Project Manager and project team have one shared goal: to carry out the work of the project for the purpose of meeting the project's objectives. A standard project typically has the following major phases: Initiation, Planning, Execution (including monitoring and control), and Closure. Taken together, these phases represent the path a project takes from the beginning to its end and are generally referred to as the project "life cycle." The project life cycle described below is what is known as a Predictive Project Life Cycle.
Typical Cost and Staffing Levels Across a Generic Project Life Cycle Structure
During the first of these phases, the Initiation Phase, the project objective or need is identified; this can be a business problem or opportunity that must be solved. The Project Manager is assigned. The project purpose, objectives and high level requirements are identified and captured in a Project Charter. This includes identifying the project Stakeholders and understanding their role in the project. The Project Charter serves as the basis for the approval of the project to move into the Planning Phase.
The next phase, the Planning Phase, is where the project solution is further developed in as much detail as possible and the steps necessary to meet the project's objective are planned. In this phase, the team identifies all of the work to be done. The project's activities and resource requirements are identified, along with the strategy for producing them. This is also referred to as "scope management." A Project Plan is created outlining the activities, dependencies, and timeframes. The Project Manager coordinates the preparation of a project budget by providing cost estimates for the labor, equipment, and materials costs. The budget is used to monitor and control cost expenditures during Project Execution.
Once the project team has identified the work, prepared the schedule, and estimated the costs, the three fundamental components of the planning process are complete. This is an excellent time to identify and try to deal with anything that might pose a threat to the successful completion of the project. This is called risk management. In risk management, "high-threat" potential problems are identified along with the action that is to be taken on each high-threat potential problem, either to reduce the probability that the problem will occur or to reduce the impact on the project if it does occur. This is also the time to document all project Stakeholders and establish a Communication Plan describing the information needed and the delivery method to be used to keep the Stakeholders informed. You will want to document your Resource Plan to identify the materials, supplies, services, and personnel required to ensure a successful project. The Resource Plan includes a Team Plan that documents the availability of the team and how you will create a positive team environment. You will also want to include a Procurement Plan if you plan to procure services or materials. Finally, you will want to document a Quality Plan, providing quality targets, assurance, and control measures, along with an Acceptance Plan, listing the criteria to be met to gain customer acceptance. At this point, the project would have been planned in detail and is ready to be executed.
During the third phase, the Execution Phase, the project plan is put into motion and the work of the project is performed. It is important to maintain control and communicate as needed during Execution. Progress is continuously monitored and appropriate adjustments are made and recorded as variances from the original plan. In any project, a Project Manager spends most of the time in this phase. During project execution, people are carrying out the activities, and progress information is being reported through regular team meetings. The Project Manager uses this information to maintain control over the direction of the project by comparing the progress reports with the project plan to measure the performance of the project activities and take corrective action as needed. The first course of action should always be to bring the project back on course (i.e., to return it to the original plan). If that cannot happen, the team should record variations from the original plan, and record and publish modifications to the plan. Throughout this step, Project Sponsors and other key Stakeholders should be kept informed of the project's status according to the agreed-on frequency and format of communication.
Status reports should always emphasize the anticipated end point in terms of cost, schedule, and quality of deliverables. Each project deliverable produced should be reviewed for quality and measured against the acceptance criteria. Once all of the deliverables have been produced and the customer has accepted the final solution, the project is ready for Closure.
During the final Closure Phase, or Completion Phase, the emphasis is on releasing the final deliverables to the customer, handing over project documentation to the business, terminating supplier contracts, releasing and reassigning project resources to other work or projects, and communicating the closure of the project to all Stakeholders. The last remaining step is to conduct lessons-learned studies in a post project review to examine what went well and what didn't. Through this type of analysis, the wisdom of experience is transferred back to the project organization, which will help future project teams.
Project Managers are found in all industries and types of work. Their job includes the management of the Triple Constraint as we have previously discussed. Their job is also to lead a project team and be effective in managing relationships and communications with everyone involved and affected by the project. There is a management component to being a Project Manager as schedules, scope, risk, quality, and budgets must all be managed. In addition, Project Managers need leadership skills as they lead a project team, negotiate contracts, resolve issues and problems, and meet expectations of Stakeholders. The ability to successfully negotiate with others for resources, time, and money can be critical to project success. The ability to lead a team of talented, strong-willed people is another key to success. Leadership requires leadership skills and behavioral skills (aka "soft skills").
It is important for the Project Manager to understand and be able to apply Project Management techniques and tools, to have a good sense of the organization's business goals, and maintain an accurate budget, but that is not enough. An effective, competent Project Manager needs excellent political, interpersonal, communication, leadership, and mediation skills.
One of the most important jobs of the Project Manager is to manage the risks inherent in the project. This means seriously thinking about what can go wrong with the project and creating backup plans to deal with the unexpected events. Constantly asking, "What if...?" This means:
- Having a plan in place to handle team conflict.
- Having a plan in place to deal with a customer always wanting to make changes.
- Having a plan in place to mentor and coach poor performers on your team.
- Having a plan in place to deal with possible quality issues.
- Having a plan in place to develop a collaborative relationship with other managers.
As you can see, the role of the Project Manager goes far beyond their ability to manage a project schedule. The best project schedule in the world still won't help a Project Manager that has poor communication skills. With these skills in mind, let's take a look at the role of the Project Manager in contrast to other managers within an organization.
When we think of managers, usually we think of the functional manager or the department manager- the person who manages an organizational unit such as marketing, accounting & payroll, research, human resources,manufacturing, facilities, and so on. These units provide products or services to all areas of the organization, and usually specialize in producing one type of result, product, or service. Functional groups are also typically responsible for company operations within their specialization area. The manager of these functional units is usually a specialist in the function that the department represents.
On the other hand, a Project Manager is more of an integrator, working with and drawing people from across functional units. The Project Manager by necessity must use a broad approach; he or she collects skills and talents across functional departments and assembles a team of people and talents that will be used to tackle the project. The Project Manager does not need to be a specialist, although the members of his/her team must be.
As an integrator, the Project Manager faces demands that the functional manager never sees, such as:
- Resource allocation conflicts
- Motivating "borrowed" personnel
- Constantly making trade-offs between goals and constraints
- Working with new, untried, and possibly undeveloped technology
- Negotiating with people in the organization, at every level, who may or may not want to collaborate.
This is why Project Managers must have many competencies - as a manager, as a leader, as an employee, as a business person.
| Project Manager | Functional Manager | |
|---|---|---|
| Team | Integrate people across functional units (many specialized skills) | Oversee people within a functional unit (expert in a specialized product or service) |
| Key Tasks | Facilitator among stakeholders and project team | Facilitates communication among employees |
| Motivates "borrowed" personnel | Motivates direct reports | |
| Balance schedules, scope, risk, quality, and budgets | Ensures quality, cost, and due dates of employee's work is met | |
| Manages technology and resources | Manages employee performance |
One of the Project Manager's responsibilities is to ensure they have the proper team with the proper skills to execute the project. Whether the Project Manager is provided the ability to interview and select their team or their team is provided to them by Senior Management, it is still the Project Manager's responsibility to ensure they have all the necessary resources to be successful. This means ensuring they have the right team assembled to complete the work.
When deciding on the project team, the Project Manager must consider many elements of the project. The primary elements that a Project Manager must consider about their team are:
The location of the team. The size of the team, including number of resources and the skills needed, both technical and interpersonal. Considerations about the location of the team members have to do with the goals and objectives of the project If the project is a global project, then the team will likely have members from multiple physical locations. A team that is separated across multiple locations is called a virtual team. Virtual teams provide the ability to locate team members close to Stakeholders or customers and also to incorporate necessary geographical requirements, if needed. However, virtual teams are much more difficult to lead as the physical distance and lack of daily face-to-face contact makes establishing trust among the team more of a challenge. Co-located teams, or teams that work in the same location on a daily basis tend to be more productive and effective as they have more freedom in communication and can establish stronger relationship bonds.
In today's global economy, many companies are working across country boundaries to deliver their products and services, and as such, so must the Project Manager. Many Project Managers assume that they can manage a virtual project with the same techniques as they manage a co-located team but this will surely lead to disaster.
Project Managers must realize that the complexity of the project increases dramatically if executed in a virtual team environment compared to a similarly scoped project that is executed in a co-located environment. If the Project Manager does not plan for this in advance and ensure proper mechanisms for communication, team building, and sharing project information, then they will encounter severe challenges. In the virtual project, assuming that technology conquers all country boundaries is another route to failure. Email, texting, instant messaging they are all wonderful time savers, but killers in a virtual project. The Project Manager must take extra steps to ensure clear and consistent communications in a variety of forms the best form is some sort of face-to face-interaction whether it be via video conference or the occasional face-to-face meeting of the Project Manager and team. Virtual teams also benefit from clear structure organizationally as well as project based.
Organizationally, clearly defining roles and responsibilities and ensuring all project team members understand the project objective and their role in achieving the objective is key. Also providing an easy mechanism to share project information via shared knowledge repositories can be a great asset. And lastly, the Project Manager must learn and understand the expectations of behaviour in various cultures. The size of a team can have implications on its effectiveness. A smaller team comprised of individuals that can work full time on the project will be far more efficient than a larger team of individuals only working part time on your project. Sometimes part time personnel are needed on a project, however, where possible, full time resources can create a more collaborative and strengthened team. The Project Manager must select the right resources to get the work done.
An accountant can’t perform the work of a plumber, for example. Often times, Project Managers will have a choice of resources with various skill levels and experience. It is important to recognize when the expert may be needed on a critical portion of the project, and when a more junior resource will serve well doing more routine or known portions of the project work. In this way, the Project Manager can find a balance on the team that match the goals, objectives, and challenges of the project. It would be wonderful to have a team full of experts to help you deliver your project; however, experts usually cost more money. So, the Project Manager must also balance the skill and experience of the team with the budget available. Technical skills are not the only skills that a Project Manager should seek in their team members. The ability to work well with others, to collaborate, to communicate effectively, and to be a team player are all very necessary skills. You could have the most experienced and skilled person on your team to perform work, but if they can’t communicate or work well with the rest of the team, then conflicts and problems will arise. Once a project team is identified, the Project Manager’s job is not done. Throughout the life of the project, the Project Manager must skilfully guide the team to a successful delivery of the objectives. This is more than just a matter of assigning work. A team is a powerful concept when it works well together. However, if the team is in conflict or chaos, the entire project will suffer. It is the job of the Project Manager to provide a team environment that promotes communication, trust, and collaboration.
Projects can be initiated from many sources within an organization. Typically, an organization has more projects than they have resources to deliver them. So, they have a choice: to either try to get all the projects done with minimal resources and lengthen the time to achieve the benefits for every project, or they can narrow down the list of projects to those that will reap the greatest benefit to the clients, the business, and the employees. If the project list is narrowed, it allows an organization to properly staff for effective delivery. Project selection is the process used by companies to decide the best projects to implement. We will also be discussing the various types of organizations a project manager may operate within and the advantages and disadvantages that each structure brings.
In the workplace of today, managers increasingly use a project-approach to achieve business goals. Managers think strategically and employ the use of projects, teams, collaboration, empowered employees, and experimentation. Strategic management focuses on the major goals and objectives that will make a company successful. Sample strategies for an organization might include establishing a sales office in India within 2 years, releasing an innovative game console in the US prior to the holiday shopping season, or increasing gross margins by 10% in the next fiscal year. Strategic management is not "tactical." It does not focus on the day-to-day activities that are necessary to keep a company running. Rather, strategic management thinks at a high level and looks to the future and the big picture. The project-approach plays an important role in strategic management by providing a measured, structured way to reduce the uncertainty in strategic business activities. The business activities might include events like establishing a new marketing department, developing a new cosmetic product, launching an overseas sales office, building a manufacturing facility, constructing a new Research & Development building, revamping a sales campaign, and so on.
However, not all projects have the same benefits to an organization and their clients and that is where a project selection process becomes valuable. Project selection is the process of evaluating projects and choosing to implement those that are best aligned to the strategic goals of the organization and offer the most benefits to the organization, their clients, and their employees. When choosing which projects to implement, we would hope that an organization uses rational, logical decision criteria. Why go through all of this? Undoubtedly, there are many projects a company would want to launch, but as most companies have limited resources, they have two choices:
- Spread available resources across a large number of projects, resulting in a small number of resources working on each project and little to no progress made on each.
- Be selective about the projects they undertake so that each can be fully staffed and achieve their objectives in the desired time frame.
This means that there has to be a mechanism for evaluating the many projects that a company would like to launch, but can't afford to. We will start by defining the most common financial measures used to evaluate projects.
The most common financial measures used to evaluate projects are: Payback Period, Net Present Value, and Profitability Index. Each of these measures provide a view into the financial viability of a project based on different monetary approaches. The estimates used for these calculations are typically established and provided by the organization. For example, the finance department or a company's executives would know the cost of capital investments and can provide a project manager with the required rate of return that a project must be able to achieve in order for it to be considered profitable.
Organizations use these financial measures to prioritize projects as most organizations have limited resources with which to work. Those projects with better financial indicators would typically be prioritized higher than those with less attractive financials. This prioritization helps an organization to narrow down the list of projects they will initiate and those that may have to seek better options for viability.
It is important to note that the financial measures we have discussed (Payback Period, Net Present Value, and Profitability Index). For example, if the cash flow estimates are not accurate, such as the initial investment is underestimated or the cash inflows are overestimated, this can have a serious impact on the accuracy of the financial measures such as Payback Period, Profitability, and NPV because if you look at the calculation, The Payback Period calculates how long it will take to return the initial investment of the project. The formula for Payback Period is the initial investment divided by the periodic cash flow.
Dividing by annual cash flow gives you the payback time in years. The shorter the Payback Period, the quicker an organization can achieve financial benefits.
For example, if you invest $10,000 in a new product and take in $1000 a year in cash related to the product, it will take you ten years to get back your initial investment. Ten years times 1000 equals 10,000. The drawback of using Payback Period as a reliable means for determining the financial benefit of a project is that it does not take into account the time value of money. Because we know that over time the value of money deflates, any project that stretches across multiple years should consider using financial calculations that consider the time value of money.
Net Present Value and Profitability Index both consider that the value of money decreases over time. The value of ten dollars received in five years is less than if you receive ten dollars today.
Net Present Value, or NPV, determines the difference of the initial investment and the value of the cash inflows over time, considering a rate of return and the time value of money. The formula for NPV is shown here,
where the initial cash investment represented as a negative plus the sum from time period i to T of the cash inflows divided by the quantity 1 plus the required rate of return raised to the ith power. Let's look at an example.
Our project has an initial investment of $100,000. The annual cash inflow is $35,000 a year for five years. The required rate of return is 15%. The Net Present Value, or NPV, formula would be as follows.
For the next step, we will round to the nearest whole number. This gives us
An NPV value of zero indicates that the project will return enough money to meet the organization's required rate of return. Any value above zero will indicate that the organization can achieve an even higher rate of return than what is required. An NPV that is negative indicates that the organization will never get a return on the money invested and should consider not pursuing that project. In our example, the NPV is above zero, so there will be a higher rate of return than what was required.
Profitability Index is similar to NPV in that it also considers the time value of money in its calculation. Profitability Index is expressed in the form of a ratio. That is, the ratio of the present value of cash inflows to the initial investment.
The formula for Profitability Index is the present value of future cash flows divided by the initial investment required. The present value of future cash flows is the same as part of the formula used for the net present value.
For a finalized Profitability Index, if we round to one decimal place. A ratio of greater than one is a sign that the project will return financial benefits to the organization. If the ratio is less than one, this means the NPV is also less than zero, which means the organization should consider not pursuing that project.
As such The estimates used to conduct the financial viability must be done with great care so as to make them as accurate as possible. Wherever possible, experts' opinions, past project histories, and even computer simulations should be used to verify the estimates are as accurate as possible.
Although organizations will use financials to determine the viability of selecting a project, financial measures are not the only criteria that an organization should consider when investing money in a project. There are non-financial criteria that should be considered. Sometimes, non-financial criteria may drive an organization to select a project with less than desirable financial measures. Some examples are:
- To meet new government or legal regulations. For example, a new law that requires the business to implement a new process or modify/upgrade their existing equipment to not be in violation of the law.
- To gain competitive advantage. For example, to launch a new product ahead of a competitor, or to invest in research and development projects to maintain or increase market share.
- To invest in new technologies or processes. For example, to implement the latest technology in the organization to improve the efficiency and productivity of their workers, or to improve an existing process in the organization that would create cost savings in future years.
Typically, organizations use a combination of both financial and non-financial criteria to determine the best projects to select. A typical project selection process would likely include the following steps:
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Business plan identifies project opportunities aligned to the organization's strategy OR an employee has an idea for a project and reviews it with their management team for concurrence to proceed and get allocated funding.
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Management submits project information on a standardized form. This form typically includes basic level business criteria such as the project goals and deliverables, project purpose, the business reason or business problem addressed by the project, and general information about the project cash outflow, inflow, and market potential.
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Project Portfolio team reviews the project suggestions and pre-selects projects based on a set of criteria that best matches the strategic plans of the organization.
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Projects undergo additional feasibility studies to confirm viability and confirm the financial and non-financial benefits. This typically includes a review of the project resource requirements.
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A final set of projects is prioritized and selected with Project Managers assigned to begin Project Initiation. Once the finalized projects are selected, they are incorporated into the organization's Project Portfolio which typically undergoes regular reviews by management to ensure that the portfolio as a whole contains the projects necessary for the overall success of the organization.
Organizations that utilize a process such as the one described above typically will not allow rogue projects to be initiated within departments or functional units as this will dilute the resource pool as well as possibly invest money in projects with less than desirable returns. Although these types of rogue projects can and do exist, the more disciplined the organization is in utilizing a project selection and Project Portfolio management process, the less likely these types of projects will exist.
Projects operate within organizations and as such, not all project structures are the same. Just as organizations have different structures, so do projects. Businesses and corporations are organized in various ways. Sometimes this is structured with a traditional organization-functional, hierarchical, or vertical. In this type of structure there are functional heads or department heads that manage a specific function in the organization (finance, engineering, manufacturing, purchasing). Organizations can also be organized by strategic business units (product line or customer base), geographic location (North American region, African region, etc.), type of customer (consumer, commercial, governmental, educational, etc.), or some combination of the above.
Usually, we find three different types of project structures within organizations in which Projects and Project Managers must operate. They are Functional, Matrix, and Pure Project. Functional organizations are also called Traditional, Hierarchical, or Vertical organizations.
Most military organizations are organized using a traditional organization. In a structure such as shown below, the function or
The project manager in the functional structure is typically the functional manager that has the majority of the resources to deliver the project, or there is a project analyst or coordinator assigned to work across the functions. There are typically part-time resources in such a structure that share their time between operations work and project work.
In the illustration shown, the shaded area represents the percentage of the resource working on a project. The project analyst is 100% allocated to the project, but the software engineer and quality assurance tester are only allocated 50% to the project. And the product engineer and quality assurance auditor are only allocated 25% to the project. Each person reports to their functional manager. The benefits of this structure is that it is fairly simple and provides easy access to the resources needed to perform the work on the project. The disadvantages of working in the structure for delivery of a project is that the more functions involved, the more difficult it is to coordinate across the functions, as well as finding the right priority of work so that the project work gets the attention needed and resources are not distracted with operational work. These structures are good when projects are mostly contained within one functional area. One of the important things to remember is that if you are a project analyst or coordinator in a functional organization structure, you will have little to no authority in making project decisions or managing the project budget and resources. The resources, budget, and authority are controlled by the functional managers. As a project analyst or coordinator in the functional organization structure, you will have to use many different types of soft skills and networking to get the resources you may require for your project to be successful. And you will always be competing against operational priorities supported by the same resources.
The pure project, or projectized organization, is a structure where every activity is treated as a project and every activity is conducted by a project team. Pure project organizations are a complete opposite from the traditional hierarchical functional structure. If you are a project manager in a pure project organizational structure, you have full authority. In pure project organizations, the project manager will control the resources and budget. Project work is organized by project instead of by functional unit.
In this illustration, you see that all the resource boxes are shaded, meaning all the resources on the project are full-time. They are dedicated to the project, and they report directly to the project manager instead of a functional manager. Their boss is the project manager and all they work on are the project deliverables. This structure is particularly suitable for long-term multiyear projects that require dedicated effort to deliver a complex product or service that needs focused effort to complete. In this structure, the project manager has full authority. It is a simple structure and there is significant team comradery created, as the whole team is dedicated and focused on achieving the project goals and objectives.
There are some disadvantages in this structure, however. Since the resources are dedicated to this project, that means they can't be made available to other projects that might also need that skill set. So each project team would need to have their own tester or their own engineer as opposed to sharing resources across multiple projects. In addition, since projects are temporary, they have a start and an end. At the end of the project, all the resources on the project must find other project work to move to. This can be a very stressful time for the team and does consume a large amount of the project manager's time in helping their team find other positions within the organization.
A Typical Matrix Organization Structure
The matrix organization tries to take advantages of some aspects from both the pure project and functional organizational structures. The matrix organization will have traditional, functional units,and projects will draw team members from across the functions.There are various levels of matrix organizations. A weak matrix organization takes on more characteristics of a functional organizational structure. A strong matrix organization will resemble more of a pure project organizational structure.In the matrix structure you see elements from both the functional structure and pure project structure.
There is typically a full-time project manager that reports to either a program manager or,perhaps, a higher-level functional manager.They have some full-time resources, shown above as fully-shaded resource boxes, such as the project manager, product engineer, and software engineer. They also have some part-time resources that work for them on the project, such as the quality assurance auditor, and quality assurance tester. Notice, however, the solid line reporting structure for the functional resources, such as the engineers, still report to their boss, the engineering manager. They also report along the line to the project manager, meaning, they have functional responsibility to their boss, the engineering manager, and they also report to the project manager for project-related activities.So, a key characteristic of a matrix structure is that resources have two bosses: their functional manager and their project manager.
If the project manager is given more control over such things as the budget and resources, then the matrix is considered strong. If the functional managers maintain control over the budget and resources, the matrix is considered weak. A balance matrix has more of an equally-shared responsibility between the functional and project manager. The matrix structure has become very common in organizations as it provides the greatest flexibility to organizations in the use of their resources. This structure can be used for both short or long-term projects, and projects that require coordination across multiple functional areas. As you may guess, this structure pulls in the advantages of both the functional and pure project structures. The advantages of such a structure is that it allows for greater sharing of resources across projects, while still maintaining a project focus and shared responsibility for project success. However, this structure also comes with its disadvantages as well. Most employees don't favor having more than one boss. It can create work conflicts and stressful situations if this is not well coordinated.
You will notice that none of the structures we have looked at are perfect - they each have advantages and disadvantages. The key is to match the right structure to the needs, goals, and objectives of the project. The organization should consider such elements such as:
- The length of the project: unless the project is contained to a single functional unit, long term projects are best served with a strong matrix or pure project structure.
- How many functional areas need to be engaged: the more functional areas that need to be engaged, the more advantageous the matrix or pure project structure will be.
- The dedicated (full time) project resources needed (including if a dedicated Project Manager is needed): dedicated (full time) project resources are best served in a strong matrix or pure project structure.
- The complexity of the project: the more complex a project, the more flexibility is needed in the structure, so a matrix or pure project structure would be best.
- The technical or functional depth of the project: for technically deep and functionally specific projects, the functional or weak matrix would be best.
In larger organizations, it is very common to see elements of all 3 organizational structures for projects. The structures are adjusted for each project to meet the needs of that project. When a Project Manager initiates a project, one element they should determine quickly is the type of structure they believe will best fit the needs of the project. In this way, they can work with management and the Project Sponsor to ensure the correct structure is utilized so as not to create an undue burden on the Project Manager to deliver the project.
Many companies use a specialized organizational structure to support Project Managers and projects within the company. This structure is called a Project Management Office (PMO) or Project Office (PO). The PMO structure has been implemented in many companies in an effort to improve the overall success rate of projects. Their primary purpose is to provide support to the projects and Project Managers within an organization.
A PMO can provide a wide variety of support options to projects including:
- Own and provide support for the organization's Project Management methods and processes.
- Provide Project Management expertise and coaching.
- Provide Project Management education for the organization.
- Provide project auditing.
- Support the organization's project tools and techniques.
- Serve as a repository for best practices.
- Provide standards for reporting and measuring project progress.
- Facilitate project reviews with Senior Management.
- Assist with resource allocations across projects.
- Assist with project selection and support the Project Portfolio management process.
When organizations establish a PMO they often times are striving to standardize the Project Management practice, methodology, and tools across the entire company. PMOs have become quite popular as projects have become more and more complex to deliver in our global economy. However, the success rate of PMOs is quite varied.
The ultimate goal of a PMO is to provide value to the organization, the projects, and the Project Managers. And although Project Management has accepted methods based on the standards from such organizations as the Project Management Institute, there are no industry standard structures, functions, or goals of a PMO. Organizations that utilize PMOs design them specifically for the functions and projects within that organization. As you might expect, because of this variation, some PMOs are much more effective than others. The closer the alignment of PMO objectives to the strategy and goals of the organization, the more likely the PMO can be successful.
NOTE: So far we have reviewed the project selection process and the various organization structures that projects can operate in.Once an organization selects their portfolio of projects, they must initiate the projects. Now we will explore how to initiate a project in detail. The first phase in the project lifecycle is initiation. In this phase, the project manager learns the objectives of the project, the business reasons for which it was selected, information about project deliverables, timeline, and budget,and gains approval to proceed with the project. We will also explore a key initiation deliverable called the Project Charter.The initiation phase is an important phase to the project because it lays the foundation for the reasons the project is undertaken and the primary business benefits and goals the project is expected to achieve. The initiation phase solidifies these elements and ensures all stakeholders are in agreement about the reasons and objectives for the project. It also serves as an acknowledgement by management of the resources required to deliver the project, including the budget, the schedule, and the scope.