PROJECT ORGANIZATION

 “PROJECT ORGANIZATION”
Project Organization is a structure that facilitates the co-
ordination and implementation of project activities. Its main
purpose is to create an environment that fosters (encourages)
interaction among the team members with a minimum
amount of disruptions, overlaps and conflict.
Organizational structure is concerned with the allocation of
task and establishment of authority-responsibility
relationship between the members of the organization.
Broadly speaking organizational structure can be of 3 types
- Functional Organization
- Product Organization
- Matrix Organization
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 “Functional Organization”
is the most basic and logical form of Organizational Structure.
Functional Organization brings together in one department
all those who are engaged in one activity or in one or more
related activities. Fig 1 depicts the structure of Functional
Organization.
The Manager (Mktg) for example will be responsible for
marketing of all the products manufactured by the firm.
- This type of organization structure is suitable for smaller
organizations that offer a limited line of products.
- As the organization grows by expanding its product line
or when the organization expands geographically, the
weakness of functional organization structure will
become apparent since controlling will become in-effective
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- another disadvantage of this structure is that it is difficult
to fix accountability and difficult to judge performance of
the members. Example: if a product fails Finance will
blame Production, Marketing will blame Finance etc.
Thus no department will assume responsibility.
“Product Organization”
For orgn with a large product line, the form of organizational
structure suitable is Product Organization Structure. Fig 2
depicts the structure of a Product Organization. The
advantage of product organization is that all the activities,
skills and expertise required to produce & market a particular
product (or a group of related products) are grouped together
under a single head. Fig 2 shows a line diagram of product
organization . Referring fig 2 we can observe that a manager
of a particular product is incharge of the activities relating to
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that product.
Example: Manager (Pharmaceutical products) will be
responsible for Production, Marketing, Research, financial
aspects, personnel requirement etc connected to
Pharmaceutical products produced by the firm.
Advantages
- Here the job can be co-ordinated better and a higher
level of performance can be achieved.
- the accountability of each division is clearly made known.
Disadvantage: is that
- Divisional heads may place the interests of their division
above overall interest of the organization. They will be
tempted to take short term gains of their division at the
expense of long term loss to the organization.
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“Matrix Organization”
is an attempt to combine the merits of Functional and Product
forms of organization.
- this form of organization is ideally suited for enterprise
that are “Project driven” i.e. Enterprise whose activities
centers around handling projects like Construction
Companies, Companies offering Turn- Key Projects, etc.
Fig 3 depicts a typical matrix structure of the Organization.
Let this organization undertake 3 different construction projects
concurrently. There are 3 project managers A,B,C who are
incharge of 3 different construction projects. Each Project
represents a “Pontential Profit Center” Hence each Proj Mgr has
the total responsibility & accountability for making his project a
success. In view of this, the Proj Mgr derives Power & Authority
directly from GM (or Chief Executive) of the organization. Each
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Functional Department is headed by a departmental head
whose responsibility is to maintain excellence in all the
projects.
In Matrix Organization, the Project Managers define what has
to be done ?
While the Functional Managers decide How to do it?
The basis of matrix form of organization is to create synergy
through mutually shared responsibility between project
managers and functional managers.
For successful functioning of the Matrix Organization
- the Project Mgr & Functional Mgr must co-ordinate with
each other and must be willing to negotiate for resources
keeping the overall interest of the organization in view.
- Both Functional & Project Manager must provide input to
the planning process.
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- though there are 2 lines of control (Vertical line of control
by the functional departments and horizontal line of
control from project Departments), the horizontal line of
control must be allowed to operate freely as a separate
entity except for administrative purpose.
Note: in a Matrix Organization the personnel working in the
project are under the control of their respective
Functional Managers and also under the control of
Project Managers. It is the responsibility of the Project
Manager to co-ordinate the efforts of persons working in
different functional departments towards reaching
project objectives.
- the persons continue to maintain their departmental
affiliation though they come under the control of both
functional & project managers
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Advantages of a Pure Matrix Form of Organization
- the Project Manager is able to have maximum control over
the project.
- There is sharing of authority and responsibility between Project
Managers and Functional Managers which result in synergy.
- Project Managers who are generalists (or technical
specialists) acquire knowledge about specific functional areas
while functional heads who are specialists in their areas
acquire all round knowledge about the project.
- The Project Manager is authorized to commit resources of the
organization for the project, the only condition that the
scheduling should not cause conflicts in resource sharing with
other on going projects.
- All the personnel are involved, motivated and are prepared to
face challenges.
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- Top management is freed from organizing and co-ordinating
resources and can hence devote more time attention for
planning.
- Resource utilization is optimized
Disadvantages of a Pure Matrix Form of Organization
- It is likely that the functional managers may become biased
which will create conflict and power struggles between
project department & functional department
- There is a danger / problem of dual reporting as the personnel
are under dual control of project & functional Managers
- Since each project wing operates independently, there are
chances of duplication of efforts.
- Managers & Employees are made more susceptible to role
ambiquity which result in more discussions than actions
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- It is costly to implement matrix organization since more
people than otherwise required are employed.
- Emergence of conflicts and resolution of conflicts will be a
continuous process and this may require the continuous
support of a person who is specialist in interpersonal
relationships and organizational development.
“ Modified Matrix Organization”
In a pure Matrix form of organization, the General Manager
(or the Chief Executive) of the orgn directly controls the
project managers as well as the functional managers. As the
orgn grows in size and as the number of projects handled by
the orgn increases, it will be difficult for GM to have direct
control over all the Proj
Proj.. Mgrs and Functional Mgrs
Mgrs. In order
to handle such a situation another form of organization
evolved to handle such a situation. Here the Project Managers
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report to Dir (Projects) with exclusive charge of projects
handled by the organization. The Dir (Projects) will report to
CEO and will control all projects. The CEO is freed from daily
routine of monitoring on-going projects. Fig -4 depicts a line
diagram of Matrix Organization in which Dir (Projects) has
control over all the project managers.
The role of Dir (Projects) is different from the role of Project
Managers. While Project Managers look after their respective
projects on their own merits, Dir (Proj
Projects
ects)) evaluates all the
projects under his control to see that they are in tune with
overall objectives of the organization.
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“ Pure Project Organization Structure”

Fig -5 depicts a line diagram of Pure Project Organization

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“ Pure Project Organization Structure”
A Pure Project Organization Structure is one in which the
Project Manager is in total control of all the departments. This
form of Organization structure is suited if the organization
has a complex project whose resources requirements are
large.. In such situations, all the resources required for the
large
project are left at the disposal of the project Manager. The
Project Manager has the complete authority and full control
over all resources (both physical and human resources)
assigned to the project.
- Every project is treated as a separate entity and all the
functional departments required for the project (like
design, engg., procurement, research, production depts.)
are formed and assigned to the project manager for his
overall control.
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- thus a Pure Project Organization is more or less like an
Autonomous Division of the Organization headed by a
Project Manager.
- under this form of organization, Functional Heads and
other personnel who are qualified and inclined towards a
specific project can be dedicated to that project without
having to share their services to other projects of the
organization and this will ensure better work
performance
Main HURDLES in Pure Project Organization are:
- It is costly affair for Parent Organization as separate
human & physical resources are assigned and
maintained for each project
- there are chances of keeping the resources idle, since the
resources are acquired in advance even before
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the project materializes and also the manpower will remain idle
on completion of the project, until they are employed on a
different project.
- There will be under utilization of resources- top management
should keep watch on the different project schedules and
optimize resource utilization
“Selection of Project Organization Structure”
We have seen above the 5 major Organizational Structure. The
next question that arises is how to choose an organizational
structure suitable for the given project.
i/ For a “Project Driven“ enterprise the Matrix form of
organizational structure is the best suited. This is because the
main activity of such enterprise is project implementation and
new projects are taken up once on-going project/projects are
completed. The construction companies and companies under
taking turnkey projects are the orgn that can be benefitted by
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Matrix Organizational Structure since the resources would be
put to effective and optimum use.
ii/ the “Functional Organizational Structure” is suitable for
stable and repetitive environments. e.g. a project involving
construction of 5000 similar houses can be handled by a
functional organization structure effectively.
iii/other organizations that are not “project driven” also come
across situations where they are to manage projects. e.g
consider an enterprise engaged in the production of a heavy
m/cery that proposes to expand its manufacturing facilities.
Construction of addl buildings, purchase & erection of new
m/cery, acquisition of new technical know-how etc. may form
part of the expn
expn.. plan
plan. Thus the expn plan is a new project for
existing orgn. Any orgn will try to utilize the existing resources
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as far as possible to implement the new project. Hence, it can be
said in general terms that the project organizational structure is
to be chosen in such a way that it satisfies the requirements of
the project management and it does not disturb the
organizational structure of the parent organization.
Iv/Pure Project Organizational structure and Matrix organizational
structure work better for the control of human resources and
hence these structures are more suited for labour intensive
projects.
v/ Projects involving high complexity and requiring huge resources
can be better handled by a pure project organization structure
Note: Project management involves integrating the activities
accross functional boundaries and ultimately it is the top
management that decides the authority structure that
will control the mechanism
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