Lecture

Lecture 22

Strategy
Strategy Organisation
Organisation
and
and Culture
Culture

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Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 2–
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 Why
Why Project
Project Managers
Managers Need
Need to
to Understand
Understand
the
the Strategic
Strategic Management
Management Process
Process

• Changes in the organization’s mission and

strategy
– Project managers must respond to changes with
appropriate decisions about future projects and
adjustments to current projects.
– Project managers who understand their organization’s
strategy can become effective advocates of projects
aligned with the firm’s mission.

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 The
The Strategic
Strategic Management
Management Process:
Process:
An
An Overview
Overview
• Strategic Management
– Provides the theme and focus of the future direction
for the firm.
• Responding to changes in the external environment—
environmental scanning
• Allocating scarce resources of the firm to improve its
competitive position—internal responses to new action
programs
– Requires strong links among mission, goals,
objectives, strategy, and implementation.

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 Strategic
Strategic Management
Management Process
Process (cont’d)
(cont’d)
• Four of Activities of the Strategic Management
Process
1. Review and define the organizational mission.
2. Set long-range goals and objectives.
3. Analyze and formulate strategies to reach
objectives.
4. Implement strategies through projects

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 Strategic
Strategic
Management
Management
Process
Process

FIGURE 2.1

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 Characteristics
Characteristics of
of Objectives
Objectives

S Specific Be specific in targeting an objective

M Measurable Establish a measurable indicator(s) of progress

A Assignable Make the objective assignable to one person for

completion

R Realistic State what can realistically be done with available

resources

T Time related

EXHIBIT 2.1

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 Project
Project Portfolio
Portfolio Management
Management Problems
Problems
• The Implementation Gap
– The lack of understanding and consensus on strategy
among top management and middle-level (functional)
managers who independently implement the strategy.
• Organization Politics
– Project selection is based on the persuasiveness and
power of people advocating the projects.
• Resource Conflicts and Multitasking
– The multiproject environment creates interdependency
relationships of shared resources which results in the
starting, stopping, and restarting projects.

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 Benefits
Benefits of
of Project
Project Portfolio
Portfolio Management
Management
• Builds discipline into project selection process.
• Links project selection to strategic metrics.
• Prioritizes project proposals across a common set of
criteria, rather than on politics or emotion.
• Allocates resources to projects that align with strategic
direction.
• Balances risk across all projects.
• Justifies killing projects that do not support organization
strategy.
• Improves communication and supports agreement on
project goals.

EXHIBIT 2.2

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 Portfolio
Portfolio of
of Projects
Projects by
by Type
Type

FIGURE 2.2

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 AA Portfolio
Portfolio Management
Management System
System
• Selection Criteria
– Financial: payback, net present value (NPV), internal
rate of return (IRR)
– Non-financial: projects of strategic importance to the
firm.
• Multi-Weighted Scoring Models
– Use several weighted selection criteria to evaluate
project proposals.

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 Financial
Financial Models
Models
• The Payback Model
– Measures the time it will take to recover the project
investment.
– Shorter paybacks are more desirable.
– Emphasizes cash flows, a key factor in business.
– Limitations of payback:
• Ignores the time value of money.
• Assumes cash inflows for the investment period (and not
beyond).
• Does not consider profitability.

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 Financial
Financial Models
Models (cont’d)
(cont’d)
• The Net Present Value (NPV) model
– Uses management’s minimum desired rate-of-return
(discount rate) to compute the present value of all net
cash inflows.
• Positive NPV: the project meets the minimum desired rate of
return and is eligible for further consideration.
• Negative NPV: project is rejected.

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 Net
NetPresent
PresentValue
Value(NPV)
(NPV)and
andInternal
InternalRate
RateofofReturn
Return(IRR):
(IRR):
Example
ExampleComparing
ComparingTwoTwoProjects
Projects

EXHIBIT 2.3

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 Project
Project Screening
Screening Matrix
Matrix

FIGURE 2.3

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 Applying
Applying aa Selection
Selection Model
Model
• Project Classification
– Deciding how well a strategic or operations project fits
the organization’s strategy.
• Selecting a Model
– Applying a weighted scoring model to bring projects to
closer with the organization’s strategic goals.
• Reduces the number of wasteful projects
• Helps identify proper goals for projects
• Helps everyone involved understand how and why a project is
selected

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 Project
Project Proposals
Proposals
• Sources and Solicitation of Project Proposals
– Within the organization
– Request for proposal (RFP) from external sources
(contractors and vendors)
• Ranking Proposals and Selection of Projects
– Prioritizing requires discipline, accountability,
responsibility, constraints, reduced flexibility, and loss
of power.
• Managing the Portfolio
– Senior management input
– The priority team (project office) responsibilities

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 Major
Major Project
Project
Proposal
Proposal

FIGURE 2.4A

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 Risk
Risk
Analysis
Analysis

FIGURE 2.4B

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 Managing
Managing the
the Portfolio
Portfolio
• Senior Management Input
– Provide guidance in selecting criteria that are aligned
with the organization’s goals
– Decide how to balance available resources among
current projects
• The Priority Team Responsibilities or Equivalent
– Publish the priority of every project
– Ensure that the project selection process is open and
free of power politics.
– Reassess the organization’s goals and priorities
– Evaluate the progress of current projects

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 Project
Project Screening
Screening
Process
Process

FIGURE 2.5

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 Priority
Priority
Analysis
Analysis

FIGURE 2.6

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 Project
Project Portfolio
Portfolio Matrix
Matrix

FIGURE 2.7

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 Project
Project Portfolio
Portfolio Matrix
Matrix Dimensions
Dimensions
• Bread-and-butter projects
– Involve evolutionary improvements to current products and
services.
• Pearls
– Represent revolutionary commercial advances using proven
technical advances.
• Oysters
– Involve technological breakthroughs with high commercial
payoffs.
• White elephants
– Projects that at one time showed promise but are no longer
viable.

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 Key
Key Terms
Terms
Balanced scorecard
Implementation gap
Net present value
Payback
Organizational politics
Priority system
Priority team
Project portfolio
Project screening matrix
Sacred cow
Strategic management process
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 Project
Project Management
Management Structures
Structures
• Challenges to Organizing Projects
– The uniqueness and short duration of projects relative
to ongoing longer-term organizational activities
– The multidisciplinary and cross-functional nature of
projects creates authority and responsibility dilemmas.
• Choosing an Appropriate Project Management
Structure
– The best system balances
the needs of the project
with the needs of the
organization.

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 Project
Project Management
Management Structures
Structures
• Organizing Projects: Functional organization
– Different segments of the project are delegated to
respective functional units.
– Coordination is maintained through normal
management channels.
– Used when the interest of one functional area
dominates the project or one functional area has a
dominant interest in the project’s success.

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 Functional
Functional Organizations
Organizations

FIGURE 3.1

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 Functional
Functional Organization
Organization of
of Projects
Projects
• Advantages • Disadvantages
– No Structural Change – Lack of Focus
– Flexibility – Poor Integration
– In-Depth Expertise – Slow
– Easy Post-Project – Lack of Ownership
Transition

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 Project
Project Management
Management Structures
Structures (cont’d)
(cont’d)
• Organizing Projects: Dedicated Teams
– Teams operate as separate units under the leadership
of a full-time project manager.
– In a projectized organization where projects are the
dominant form of business, functional departments are
responsible for providing support for its teams.

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 Dedicated
Dedicated Project
Project Team
Team

FIGURE 3.2

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 Project
Project Organization:
Organization: Dedicated
Dedicated Team
Team
• Advantages • Disadvantages
– Simple – Expensive
– Fast – Internal Strife
– Cohesive – Limited Technological
Expertise
– Cross-Functional
Integration – Difficult Post-Project
Transition

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 Project
Project Organizational
Organizational Structure
Structure

FIGURE 3.3

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 Project
Project Management
Management Structures
Structures (cont’d)
(cont’d)
• Organizing Projects: Matrix Structure
– Hybrid organizational structure (matrix) is overlaid on
the normal functional structure.
• Two chains of command (functional and project)
• Project participants report simultaneously to both functional
and project managers.
– Matrix structure optimizes the use of resources.
• Allows for participation on multiple projects while performing
normal functional duties.
• Achieves a greater integration of expertise and project
requirements.

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 Matrix
Matrix Organization
Organization Structure
Structure

FIGURE 3.4

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 Division
Division of
of Project
Project Manager
Manager and and Functional
Functional
Manager
Manager Responsibilities
Responsibilities in
in aa Matrix
Matrix Structure
Structure

Project Manager Negotiated Issues Functional Manager

What has to be done? Who will do the task? How will it be done?

When should the task be done? Where will the task be done?

How much money is available to Why will the task be done? How will the project involvement
do the task? impact normal functional activities?

How well has the total project Is the task satisfactorily How well has the functional
been done? completed? input been integrated?

TABLE 3.1

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 Different
Different Matrix
Matrix Forms
Forms
• Functional (also Weak or Lightweight) Form
– Matrices in which the authority of the functional manager
predominates and the project manager has indirect
authority.
• Balance (or Middleweight) Form
– The traditional matrix form in which the project manager
sets the overall plan and the functional manager
determines how work to be done.
• Strong (Heavyweight) Form
– Resembles a project team in which the project manager
has broader control and functional departments act as
subcontractors to the project.

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 Project
Project Organization:
Organization: Matrix
Matrix Form
Form
• Advantages • Disadvantages
– Efficient – Dysfunctional Conflict
– Strong Project Focus – Infighting
– Easier Post-Project – Stressful
Transition
– Slow
– Flexible

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 Project
Project Management
Management Structures
Structures (cont’d)
(cont’d)
• Organizing Projects: Network Organizations
– An alliance of several organizations for the purpose of
creating products or services.
• A “hub” or “core” firm with strong core competencies
outsources key activities to a collaborative cluster of satellite
organizations.

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 Mountain
Mountain Bicycle
Bicycle Network
Network Project
Project

FIGURE 3.5

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 Project
Project Organization:
Organization: Network
Network Form
Form
• Advantages • Disadvantages
– Cost Reduction – Coordination of
Breakdowns
– High Level of
Expertise – Loss of Control
– Flexible – Conflict

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 Choosing
Choosing the
the Appropriate
Appropriate Project
Project
Management
Management Structure
Structure
• Organization (Form) Considerations
– How important is the project to the firm’s success?
– What percentage of core work involves projects?
– What level of resources (human and physical) are
available?

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 Choosing
Choosing the
the Appropriate
Appropriate Project
Project
Management
Management Structure
Structure (cont’d)
(cont’d)
• Project Considerations
– Size of project
– Strategic importance
– Novelty and need for innovation
– Need for integration (number of departments involved)
– Environmental complexity (number of external
interfaces)
– Budget and time constraints
– Stability of resource requirements

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 Organizational
Organizational Culture
Culture
• Organizational Culture Defined
– A system of shared norms, beliefs, values, and
assumptions which bind people together, thereby
creating shared meanings.
– The “personality” of the organization that sets it apart
from other organizations.
• Provides a sense of identify to its members.
• Helps legitimize the management system of the organization.
• Clarifies and reinforces standards of behavior.

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 Key
KeyDimensions
Dimensions Defining
Definingan
anOrganization’s
Organization’sCulture
Culture

FIGURE 3.7

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 Identifying
Identifying Cultural
Cultural Characteristics
Characteristics
• Study the physical characteristics of an
organization.
• Read about the organization.
• Observe how people interact within the
organization.
• Interpret stories and folklore surrounding the
organization.

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 Organizational
Organizational Culture
Culture Diagnosis
Diagnosis Worksheet
Worksheet

FIGURE 3.8

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 Implications
Implications of
of Organizational
Organizational Culture
Culture
for
for Organizing
Organizing Projects
Projects
• Challenges for Project Managers in Navigating
Organizational Cultures
– Interacting with the culture and subcultures of the
parent organization
– Interacting with the project’s clients or customer
organizations
– Interacting with other organizations
connected to the project

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 Cultural
Cultural Dimensions
Dimensionsofofan
anOrganization
OrganizationSupportive
Supportive
of
ofProject
ProjectManagement
Management

FIGURE 3.9

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 Mechanisms
Mechanismsfor
forSustaining
SustainingOrganizational
OrganizationalCulture
Culture

FIGURE A3.1

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 Key
Key Terms
Terms

Balanced matrix
Dedicated project team
Strong matrix
Matrix
Organizational culture
Weak matrix
Projectitis
Projectized organization
Network organization

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 Strategy
Strategy and
and Culture
Culture in
in Projects
Projects
• Six reasons to kill a project

• http://www.builderau.com.au/strategy/projectmanagement/soa/Six-reasons-to-kill-a-pr
oject/0,339028292,320265943,00.htm

• The Challenge of Enthusiasm, Diversity, Culture and Values in Global Project

Management.

http://www.youtube.com/watch?v=uOuRGFlDxl8&feature=player_embedded
• International Projects – South korean experience – Culture Video
• http://www.youtube.com/watch?v=RrbIcJEQKVg&feature=related

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